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Australia's big postwar scheme was the Snowy Mountains Scheme, a series of dams for hydro-electricity and irrigation, which was highly successful. This confirmed faith in the capacity of the state to do Big Things, which lasted until the era of neoliberalism, which we imported from the UK.

https://www.themonthly.com.au/issue/2021/september/1630418400/john-quiggin/dismembering-government

As the failures of privatisation become evident, Australians are revertiing to our traditional view of the state as a "vast public utiltity" (the sardonic description of a free-market critic).

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It was also about water in a very dry continent so the room for mis-dis-info and paranoia was less open.

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One limitation of this idea is that some of the big projects the state has been proposed to lead in our times are not amenable to "dipping the toes before jumping in the pool", particularly in the case of civil infrastructure. Things like building new nuclear reactors* and long-distance rail are not going to yield any significant part of the expected benefits before full, 100% completion of the project, and thus only the costs side can be assessed early on; if you build a Metro network, the first lines don't realize their full ridership potential until subsequent lines start to really unlock the power of connectivity. The case of nuclear reactors, in particular, is one where an optionality mindset is detrimental: if you don't credibly commit to build a bunch of them with a single design, one-off cost overruns and limited stimulation of the supporting industry will very likely kill the project financially. It's a Yoda-class project: you either do it or don't, there is no "trying".

* Unless the new "small modular nuclear reactors" companies manage to deliver, of course.

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The correct position, then, is that the private sector bears the cost risk and the public sector bears the benefit risk. That's where we seem to have ended up after a few decades of failed experiments with privatisation and PPPs.

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Oct 24Liked by Dan Davies

I have just been to a conference at MIT that was to a very large extent about the question "when can you stop an experiment early, whether because it is going badly and a potential disaster, or because it is going well and you want to deploy it without delay?" and it strikes me British governments are very very bad at answering this question. When they do pilot something, they very rarely move to scale it up at all quickly if it works well, and when they do adopt something, they are very very unwilling to stop or reverse it even in the rare cases where they're willing to admit error.

Also they quite often adopt things straight into deployment at scale without experimenting first, and also they tend to do experiments that lead nowhere because they're done not in order to learn anything but as a substitute for real action/a sop to whoever proposed it. ("There's no budget to do it, but perhaps we could do a pilot.")

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Universal Credit is exhibit A; there was a considerable base of experience with the core idea but when the stars aligned it was totally ignored in a gadarene rush for scale, and now it's here but almost universally accepted to have been a disaster, there is officially No Going Back.

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"continuing to do something stupid"

*cough* AI *cough*

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«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.»

But to me these discussions seem to be rather weird if not hypocritical because since Thatcher and Blair the UK state has had a big-time industrial policy to interfere in the markets spending fantastic amounts of public money (Treasury and BoE) to subsidize massively the finance and property industries, the "national champions" of neoliberalism.

That involved many hundreds billions plus an exceptionally favorable regulatory and policy environment, far more than British Coal or British Leyland etc. ever received.

While constantly criticizing the idea of an industrial strategy to support workers and their wages, the UK governing class has actually run for decades a huge industrial strategy to support finance and property hustlers and their profits.

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«the UK state has had a big-time industrial policy to interfere in the markets spending fantastic amounts of public money (Treasury and BoE) to subsidize massively the finance and property industries, the "national champions"»

The Economist: “Britain will one day wake up to discover that it has lost one of the world's most successful business clusters, and the best hope the next generation has of earning a decent living”

Frances Coppola: “RBS was deeply insolvent. Rescuing it cost the U.K. Government £45bn, and RBS has lost a further £58bn since. Nearly ten years after the crisis, it is still in majority public ownership.”

Niels Jensen: “The Bank of England estimates that as much as 14% of all UK home loans are either delinquent or in some sort of forbearance process. Nobody really talks about this because nobody wants property prices to fall out of bed. Can we handle the truth?”

George Osborne: “A credible fiscal plan allows you to have a looser monetary policy than would otherwise be the case. My approach is to be fiscally conservative but monetarily active.”

George Osborne: “Hopefully we will get a little housing boom and everyone will be happy as property values go up”

Bloomberg: “Green signaled for a microphone and asked a deceptively straightforward question: What did Cameron think of the anticorruption work of the SFO — an agency set up precisely to investigate and prosecute high-level corporate crime? Cameron, a genteel Etonian with more than his share of the erudition required for high office in the U.K., was somehow tongue-tied. “The SFO, yes, I do support its work,” he stammered, pausing for several seconds. But there seemed to be a but, and Cameron began to hedge. “As prime minister, you do feel a responsibility for wanting British business to get out there and win orders and succeed,” he said, adding, “so sometimes there are frustrations and worries and concerns.” To anyone unversed in the folkways of official Britain, the Green-Cameron exchange would seem strange. It’s hard to imagine a U.S. president, Donald Trump aside, being asked if he supported the FBI — let alone responding that it ought to think about the commercial damage when it goes after suspected criminals. [...] From the perspective of Britain’s leaders, Green’s success is — how shall one put this — inconvenient.”

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That was my intuition on reading this piece. If you wanted to deliver the Groundnut scheme you’d gather initial info by getting people on the ground in relevant countries. You’d then develop one or more pilots run locally not from London & you’d scale where appropriate learning from small, manageable setbacks. One of the big changes in the last 50 years is that all the institutional knowledge on how to do phase 1 (ie develop hypothesis) has been snatched by management consultants. Then the next bit - the self organising teams running pilots bit - is the problem faced by any big institution that has hit the plateau & tries to micro manage declining share from the centre. They get very tight when they need to loosen. It’s really about confidence. You need to have loads of stuff running across different scales that is moving from issue tree>hypothesis>pilot>feedback>decision but that’s about institutional knowledge + mindset.

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«If you wanted to deliver the Groundnut scheme you’d gather initial info by getting people on the ground in relevant countries.»

Countries with successful industrial policies do not pick *individual* projects or businesses as likely winners, they generically support *whole sectors* that are known to be winners because they have been winners in other countries.

https://www.bradford-delong.com/2020/11/1220-intro-video-neoliberalisms-bankruptcy-econ-115-f-2020.html

“* Neoliberalism's failure to even understand the rapidly growing developmental-state economies of East Asia

* Over and over again we heard from neoliberals that the governments could not “pick winners”

* But especially if you were a follower country, it was very clear what industries needed to grow

* Developmental states that focused their subsidies on successful exporters ran no risk of subsidizing inefficient rent-seekers

* Yet running a successful developmental state was not easy...”

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"That men do not learn very much from the lessons of history is the most important of all the lessons that history has to teach." - Aldous Huxley

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I'm currently re-reading Barbara Tuchman's "The March of Folly", and have just finished the section on Britain's wilful ejection of the American colonies from 1771 to 1781.

Wrapping up, Tuchman writes (p. 286 of the Sphere/Abacus 1984 paperback): " ....Finally, it came down to attitude."

"The attitude was of a sense of superiority so dense as to be impenetrable. A feeling of this kind leads to ignorance of the world and of others because it suppresses curiosity."

Very little has changed since the 1770s in the British civil service. Still an impenetrable sense of superiority, still utterly unjustified.

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Re: civil servants being too cautious. I think that here there is an implicit leftist case for "running government like a business". If there is a significant rate differential between Blue Chip companies and govt debt then the govt should do more projects (with borrowed money) until the rates are near parity.

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I'll Be Nuts, You'll Be Nuts

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Interesting to consider how strongly this culture influenced the deeply counterproductive attempt to turn HS2 into "Birmingham to Old Oak"

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I think this is right but also harder to fix than suggested here. As an American the constraint is that you wouldn't be able to defend at a congressional hearing after it failed, and this constraint makes lots of things worse. But there doesn't seem to be a way around this.

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I’m not entirely convinced. “Don’t throw good money after bad” is a principle it’s depressing not to see followed in public policy, but the civil service view that the way to avoid betting on losing cards is not to play poker has validity. And as I think we both know very well, the private sector is also dominated by people who interview well - it’s the worst thing you can say about anybody. But as a career banks analyst, I’m surprised that in discussing the Groundnut Scheme you didn’t mention the First Rule of Bank Investing: never buy shares in a bank with “Agr” in its name. (The 2nd rule is never buy financial start ups with a colour in their name.)

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I feel your pain. But the state isn't always irrationally risk-averse. It can handle little risks just fine, even if the odds against success are long. Consider basic research projects. The problem is--as you pointed out--who within the state makes the decision. In basic research, the job of the state is to mostly to select the peer reviewers who actually make the risky decisions. That works pretty well, except in those unusual cases where a single decision involves so much money that the political process is directly involved--such as the infamous Superexpensive Superconducting Collider.

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Who got the money? Did it at least go anywhere useful?

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Hmm. The missing piece here is, how many of those boondoggles *have been* canceled in the intervening decades after The Basic Stuff Was Done? In other words, some actor getting a proposal and then running a few tests that would have killed the groundnut? Is this so much cheaper and easier now that these projects never even pass the Great Filter? The bar for "doable" being largely identical to the "awesome" bar, and that bar keeps shooting ever higher?

How you'd begin to answer this question, I've no idea.

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