Tanked

Footnotes to myself

For a while now I’ve kept extensive reading notes, most of which never make it into anything I write. This series is an attempt to use that surplus; more like annotated marginalia than a review. Enjoy!

Tanked, by Paul Wallace

Britain is heading into a massive fiscal crisis, which has prompted me to take a slightly less dismissive approach to non-right economics, if only because we are going to be governed by them for the next few years.

I picked this up because I knew I would probably disagree with it, but sometimes it’s important to challenge your priors. I was pleasantly surprised at the amount I did agree with, but there was still enough I disagreed with to reassure me I hadn’t gone completely off the rails.

However we define debt, it's important to bear in mind the other side of the national balance sheet. That can be grasped through looking at 'net worth', a broad measure of government assets minus liabilities. If Britain had over the decades built new infrastructure to match the scale of its debt then the ratio to GDP would have been healthier, because that would have promoted higher growth. But the reverse was true.

The British state had not only piled on debt but also underinvested across the board. Figures for public sector net worth showed it moving into negative territory in the 2010s, with overall indebtedness increasingly exceeding the total value of the public realm, counting physical assets such as highways and hospitals as well as the full range of financial assets held by the state. International comparisons published by the OBR in late 2021 showed Britain in an unfavourable light: among twenty-four advanced economies it had the most negative net worth as a share of GDP

I agree with this, and not spending large amounts on infrastructure during austerity - when borrowing capital was particularly cheap - was one of the big criticisms I made in my three-part series. I think a lot of the mismanagement, missed opportunities and political choices of austerity helped massively to constrain our politics today - particularly in fiscal terms.

According to the OECD, just 18 per cent of twenty-five-sixty-tour-year-olds in Britain had vocational qualifications in 2019. This was far below Germany's 53 per cent and considerably lower than the 33 per cent average among European countries. This weakness was longstanding. The National Institute of Economic and Social Research (NIESR) laid bare in the early 1980s the disparities between Britain and Germany in equipping their workforces with skills. Thanks to their solid grounding through apprenticeship-based training, German workers were able to suggest and carry out improvements that raised efficiency. By contrast, British managers were often having to firefight problems daily because there were fewer workers technically equipped to prevent them in the first place - or deal with them when they did happen. Revisiting that pioneering research in 2018, the NIESR stressed the continuing salience of inadequate skills in holding down productivity in Britain.

A good society, writes David Goodhart, holds with equal weight work done with the head, heart and the hands. One wonders if that society wouldn’t be more prosperous, too.