shadow of the groundnut

institutional memory and the power of giving up

I’m tentatively beginning to work on a proposal for another book, which means clearing my desk space of lots of material from the last one.  And in doing so, I’ve been reminded that although it doesn’t appear in The Unaccountability Machine at all, at one point in time it seemed very important to me to discuss the contribution to industrial policy of the humble peanut.

Not sure how familiar American readers might be with this episode, but in British discussions of government capability, industrial policy and the ability of the state to drive development, there is a gravitational pull which ensures that eventually, somebody is going to mention the Tanganyika Groundnut Scheme.

In capsule, it goes – postwar rationing – shortage of vegetable oil – idea to develop agriculture in East African colonies – baobab trees extremely hard to  clear – soil not very suitable for groundnuts – insufficient rain – too much rain – eventual abandonment with writeoff of the modern equivalent of £1bn at a time when the UK really, really couldn’t afford to be losing foreign exchange. It kind of put the nail in the coffin of the idea that overseas possessions could be turned into earners for the British state, and certainly tightened the lid on the Attlee government’s electoral chances.

There are plenty of histories and lessons learned exercises, with the lessons going from “groundnuts grow well in West Africa, not East Africa” to “get a proper survey done before you start any agricultural megaprojects” by way of “don’t appoint political cronies to administer big commercial ventures that they don’t understand”.  The reason that I was planning on including it in the book, though, is that it was one of the last hurrahs of the age of personal accountability.  All the big decisions (including various decisions not to abandon the thing when scientific advisors were screaming at them to do so) were taken by individual human beings, most of whom carried the can for doing so and bore significant personal professional and political consequences.

I worry, though, that the wrong lessons were learned, and that coming when it did, the Groundnut Scheme psychologically scarred the British civil service.  It might have caused them to carry outdated attitudes from the age of personal responsibility into the age of industrial decision making, and even to be a component of the complex of institutional neuroses that go by the name of “treasury brain”.

We joke in the banking industry that financial crises always happen pretty much exactly when the last person who remembers the previous one has retired.  There’s a shocking amount of truth to this proverb, to be honest – every generation seems to have to learn for itself that “open ended investment companies with complex capital structures always end up selling people risks that they don’t understand” or “it is not possible to systematically make money by buying assets from the people who originated them”.  But the civil service seems to have too much bloody institutional memory – it hasn’t necessarily got over the failure of the plan to grow peanuts in Tanzania, 75 years ago.

If we look at the lessons learned, how many of them are really relevant?  The practical ones about agriculture are completely ingrained – surveys are easier, planning processes are more institutionalised, and in my view it’s absolutely inconceivable that anyone could go ahead with anything in as much ignorance today.  But I guess it could be argued against this point that all the projects are much more complicated too – anything that’s worth doing at scale has to be done in a certain amount of ignorance of what might go wrong.

The political “lessons” are more or less insurmountable – in this unfortunate world, we have to live with the fact that big projects are going to be led by people who come across well at interview, and that this is very much less than perfectly correlated with ability to do the job.

But the really crucial lesson would be “if something is going wrong, review whether it is viable and don’t hesitate to reverse course; abandoning a failed idea early is a good thing which should be to your credit”.  Instead, the UK policy structure seemed to learn “don’t attempt anything big, because if it fails you will be blamed”. 

At one point I thought I was going to try to defend the proposition that “any system of industrial policy which couldn’t deliver the Groundnut Scheme is too risk averse”.  I think that’s wrong, though – the proper criterion for starting projects ought to be something like “any system which can’t deliver an idea at least as bad as the Groundnut Scheme is too risk averse”.  But the real lesson ought to be that the big failure of the scheme was not in doing something stupid, but continuing to do something stupid.

And that’s might be the source of the cultural cringe that state organisations have about investment compared to the private sector.  It’s true that a private company couldn’t have done the Groundnut Scheme, because it would have run out of cash and investment.  But I think that’s the only real advantage, albeit that it’s a big one.  A state venture with really functional stop-loss arrangements shouldn’t be at a disadvantage.  And, of course, this suggests that the modern idea of using the state to “de-risk” large projects isn’t going to work – rather than incorporating the best features of private enterprise, it’s taking away the big cognitive advantage that that they have.