What not to dare

Flags on Regent Street. Photo © Ad Meskens / Wikimedia Commons

The terrifying, chaotic incompetence of the last ten days in the UK is characteristic of a failing state, says Andrew Levi – a veteran of numerous hair-raising disintegrations of order around the world – in a long read.

Feeling able to pretend we’re immune from such disaster is a luxury only available because, imperfect though they may be, we possess trusted, competent national and international institutions, processes and rules, backed by immense economic and military might, which keep us safe.

Ignoring or attempting to trash them, is a recipe for cataclysm.

Change is always an essential part of long-term success, in business and in government. Stupid change, led by stupid people, isn’t.

Sir Humphrey, NASA, and Harvard Business School

In one of the sharpest exchanges in Yes Minister, the 1980s comedy-cum-mockumentary about the inner workings of the UK government, top civil servant Sir Humphrey Appleby tells his shocked minister, Jim Hacker: “If you are going to do this damned silly thing, don’t do it in this dammed silly way”.

There’s a profound lesson in that for all leadership teams, those who work with them and those who rely on them. Obviously, try hard to get things right. Substance matters. But so does process.

Even if you have the most brilliant insight, get the execution of the idea wrong and you’re almost certainly toast – along with thousands or, in the case of government, many millions, of others.

Conversely, if you insist on doing something which is dumb – at least, according to those who are supposed to know – have the sense to get the process right. The damage you’ll cause (assuming the experts were correct in the first place) will be greatly mitigated. And if by some chance you turned out to be right (or lucky), you won’t suffer the fate of the ‘great idea, terrible handling’ brigade.

Sitting in a classroom at the Harvard Business School some years back, I contemplated my role in the destruction of many lives, billions of dollars, reputations, and a whole NASA space programme: the Challenger space shuttle disaster. I was badly shaken. It still gives me the heebie-jeebies.

I hadn’t really caused the awful event. But I had been part of a simulation which tested senior executives’ ability to deal with an exactly analogous situation.

We failed dismally, more or less replicating what actually happened with Challenger. All the necessary information was there. Experts repeatedly told senior leaders there was a big risk of disaster and why. The political impetus not to delay launch was great. ‘Helpful’ data took priority, ‘unhelpful’ information was undermined or ignored. Launch. Bang. Disaster.

Fish in an ocean

Like fish swimming in an ocean, we neither acknowledge nor understand the life-support system in which we swim. For the fish, that’s just the way it is. For us, someone has to maintain and operate the institutions, procedures and rules. Care about them. Respect them. Protect them from attack or disintegration.

‘Someone’ is in fact many thousands, in an international context millions, of officials, lawyers, academic experts and the like, working in a framework overseen by political leaders who, in a democracy, come and go according to electoral processes which themselves have to be protected and nurtured.

To the overconfident, impatient simpleton – we’ve got used to them in what has passed for an ‘elite’ in recent years – such straightforwardly obvious, rather conservative observations appear as the emanations of “the international hectoring classes like the IMF, the European Commission, the Mark Carneys and the Gordon Browns, the editorial board of the Financial Times and The Economist, the whole ghastly crew that thinks that the West inevitably faces stagnation and decline”, as Lord Frost of Allenton put it in the 30 September 2022 Daily Telegraph.

I mention him because he has the experience to know better but has developed – perhaps through lack of a suitable Ferrari at an age when that can make an important difference to an ego contemplating its own mortality – a temperament more akin to a Maoist or a Jonestown cultist.

Lord Frost is far from alone.

These human marine specimens who hate the constraints of their institutional ocean rail against the implied prohibition on reckless rolling of the dice to achieve radical change, objecting that it means no meaningful change at all is permitted. It’s as though they think that if we had, over the centuries, exhibited the prudent caution we have grown to require (or at least expect) in modern governance, we would all still be living in an absolute monarchy practising serfdom. In fact that’s pretty much what they say in private.

They indulge one brain numbing fallacy after another. The list is as long as a giant conger eel, and the arguments used just as slippery.

“Something must be done”, they say. “Here is something. Therefore it must be done”. This, by the way, is no joke: it is a close paraphrase of a direct quote from the Chancellor of the Exchequer, as reported in The Times, justifying his recent ‘mini-budget’ actions which sparked financial market chaos.

Or they follow Arthur Laffer, an American economist who advised presidents Nixon, Ford and Reagan. One afternoon in 1974, knowing that zero per cent tax rates produce zero revenue, and noting that a 100 per cent tax rate tends to do the same (because everyone makes sure they limit their taxable income to a level below which it kicks in), he drew a curve showing maximum revenue somewhere between the two extremes, and zero at each end.

“Ah” say our slick agents of change, “we are at a point on the ‘Laffer Curve’ where reducing tax rates will increase revenue. We must therefore cut taxes for the good of the country!”

They would like you to believe that they know where we are on the ‘Laffer Curve’ at any given time. But, dear reader, they do not. What they do know is how to present nonsense as fact and, by an extraordinary coincidence, almost invariably focus their tax-cutting zeal on those already best off.

The Lord Frosts of this world, wielding their Little Red Book of ‘anti-defeatist’ thoughts, want to drain the ocean, even boil it or fill it with acid (as long as they have escaped first). Anything to be rid of the constraints it places on their desire to be free, leave the ocean, and soar, flapping their fins, high into the glorious heavens, which their fellow fish are too unimaginative and fearful to conquer.

In other words, “to do things differently”.

1945 and all that

Looking back centuries, even millennia, there is a very long history of states failing.

The stability and effectiveness of institutions critically influences the good functioning and survival of states. Geographical and environmental factors play a role, sometimes decisive. Advanced technology, involving the extraction and productive deployment of enormous quantities of energy, is fundamental to the exercise of great economic, political and military power – particularly since the industrial revolution. But if the institutions degrade or collapse, so does the state and all it represents.

The more that extraordinarily potent productive, transport, telecommunications and military technologies have spanned and interconnected the globe, the greater has been the need for international economic, political and security structures – based on rules, implicitly or explicitly enforced, ultimately, by those with the power to do so – to intermediate often competing underlying interests and behaviours.

It isn’t inevitable that such a system exists or can be relied upon. In the absence of something close to a Utopia (some would no doubt see it in dystopian terms) of genuine world government, it depends on a pre-eminent power being able to guarantee that, when extreme circumstances require it, security and economic stability will be maintained. And ensuring – through cajoling, pushing, assisting – that states involved in the system will act in ways which, to the greatest extent possible, avoid such guarantees needing to be called upon in the first place.

Since 1945, of course, that pre-eminent power has been the USA. In the European context it has guaranteed security both through NATO, and by supporting and co-operating with efforts at European integration, primarily in economic areas, but also in (largely non-military) security.

States or groups of states which have set themselves up as potential competitors to, or disruptors of, the US-led system have been firmly, sometimes brutally, contained or confronted. Others, seen as peripheral, have often been neglected, with dire consequences for their populations.

Those, such as the UK, or Germany, or Japan, which have had a highly privileged position in the US-led system, have benefited to an extraordinary degree – something that’s barely understood or acknowledged by their political classes, or populations. Ironically, those who understand that reality best are often those who feel guilt about it, coupled with anger at the frequently harsh consequences – particularly for the peripheral states – of the USA’s exercise of economic and military power.

Delusions of sovereignty

The modern conception of sovereignty is heavily influenced by the Treaty of Westphalia which, in 1648, ended the devastating Thirty Years War and gave countless princes, dukes and petty despots near tyrannical power over their fiefdoms, free from outside interference.

Such sovereignty was always qualified in practice by the realities of the needs and power of neighbours and others. But the principle pervades our thinking (not just in the UK) and to some extent our law.

The US-led system, in which we are so deeply embedded, allows for such sovereignty: up to a point. That point is the one at which it becomes a serious problem either for the USA itself, or for a key part of the edifice the USA has constructed, and which it shields and leads.

At that point, sometimes hard to define in advance, but very obvious when it is reached, sovereignty is mere theory: little more than dangerous delusion.

How not to fail

Margaret Thatcher claimed “you can’t buck the market”. What she didn’t say was that the market system in which the UK operated (and still does) is a US post-1945 construct, adapted over the years. And you can’t buck the USA’s will – not without the likelihood of very severe consequences. The generation which experienced the Suez crisis saw a flash of that, in a military context, but also in a financial one: the USA used its power over the international monetary system at the time to help force the UK into line.

So, for a country like the UK, in our era, the first rule of how not to fail is not to cross a US red line. Or, if you do, cross right back and never do it again.

But that assumes that the UK is a country like, well, the UK we’re used to – or think we’re used to. One where more or less civilised, predictable political, financial, judicial and related processes reliably function. Where significant change, when it happens, is sufficiently accepted as constitutionally permissible and for practical purposes tolerable, that it doesn’t give rise to destabilising opposition, or to other impacts which could endanger the sustainable continuation of the vital functions of the state.

There is no guarantee that the UK remains that way.

Indeed, for many who live in UK communities and under circumstances which are marked by state neglect, that in any case isn’t their experience – a morally unjustifiable situation, but also one which increases the chances of generalised UK state failure. The system needs to be nurtured and improved at all levels, across all communities, or face erosion and ultimate collapse.

If ‘improvement’ involves substantial, rapid change, there is a much heightened risk of chaotic failure. If the change is less major, or slower, those risks are greatly diminished, although they aren’t ruled out: indeed, some of the worst historical outcomes, such as the creation of the Third Reich, have been engineered in large part by patient efforts to undermine the existing system from within, exploiting its weaknesses.

Whether major or minor, fast or slow, the highest levels of expertise and political skill are required to make attempted improvements safely. This is doubly important when the underlying risks – typically, to financial stability, or to national security – are particularly high.

So far, so good. But what if your change bumps up against the interests of international partners, or the USA itself?

We have part of the answer already: don’t endanger US interests.

But the other side of that coin is that we need the co-operation of our international partners – the USA of course, but very much the EU, both as individual countries and collectively, and others – in order that our own state doesn’t fail and, better, that it can prosper.

Damaging or even breaking financial, economic, trade, or security arrangements with our European neighbours, for example, destabilises and endangers our state. The EU falling into crisis – say, due to poor regulation in the banking sector – is very likely badly to damage the UK, both indirectly (businesses trading with the EU will experience worse conditions), and directly (the UK banking system may be exposed to bad debt from EU banks). We can fail because of the failures of others. If we’re on the outside looking in, rather than on the inside helping chart the best way forward, we are in the worst of worlds: exposed and helpless.

Buck Brexit

Brexit has been an attempted bucking of the US system outlined above. As Brexit kicked off, the USA, internally, experienced its own (continuing) attempt to buck its own system. That provided a large space in which what has amounted to a British state failure project could be pursued with relative ease and freedom.

The UK’s internal checks and balances proved inadequate to the task of self-correcting. And, as I write, a straight politico-ideological line can be drawn between that failure in 2016 and subsequently, and the near implosion of the UK financial system – and with it, the country – on Wednesday 28 September 2022 when, the Financial Times reported, 90 per cent of UK pension funds came within hours of obliteration. (A similar, slightly wigglier, line can be drawn from 1975, when Margaret Thatcher became Conservative Party leader, to the Brexitist movement and one fateful day in June 2016).

The incoming UK Prime Minister and Chancellor of the Exchequer decided to pursue what they believed to be a mould-breaking economic and fiscal approach. In doing so they for the most part ignored the institutional structures and processes which accompany UK government budgetary and related decision-making. Worse, they subverted them, discarding even the pretence of cabinet government, and undermining the credibility of the Bank of England by means of sly briefings and overt hints signalling doubts about its mandate and the current arrangements for its independence. Kicking out the top civil servant at the Treasury was a reckless act of vandalism, not least because he was the key government figure able to communicate on a trusted, confidential basis with the most important financial market participants – those whose understanding of, and confidence in, government policy are essential to avoiding precisely the kind of near-existential melt-down we saw in the wake of what many now quip was not a ‘mini-budget’ but a ‘special fiscal operation’. When City grandees are comparing you to a genocidal dictator, you’re getting something wrong as Chancellor.

There should always be room for robust debate and challenge of the substance of important government proposals. There is, however, no reasonable basis to accept, or entertain the thought of, wildly trashing institutional arrangements, rules and procedures which provide the foundation for a well-functioning financial system: a necessary (though by no means sufficient) condition for the state to succeed.

Titanic collapse

So far, for millions, the sound of the impact has been like “the tearing of calico, nothing more” (as the Titanic’s fireman described the sound caused by hitting the iceberg). “Surely such a vessel cannot sink” they say. Others already foresee the terrifying outcome. Then it happens and they see people “swarming like bees, only to fall” as the “ship rises into the sky, until it reaches a 65 or 70 degree angle”.

These quotes, lightly adapted from eye-witness accounts of the sinking of the Titanic, express well the air of unreality about the UK in autumn 2022.

We are closer to catastrophic state failure than we have been in the entire US-led, post-1945 era. Outside forces are at play – including, as is the case also for the USA itself, Germany and others, concerted, sustained military intelligence attack from Russia. But the UK has self-harmed in ways almost impossible to comprehend for their seriousness and the clownish, malignant incompetence of the arrogant, ignorant, vacuous, venal politicians and other actors involved.

As Sir Humphrey would surely say, a series of damned silly things has been attempted in a series of damned silly ways. The combination is highly likely to be fatal for the state, and disastrous for the population.

Unless we change tack.

This is one case where rapid change has become essential, in the national interest. At the very top of His Majesty’s Government. At the Treasury. And across the Cabinet as a whole.

Can’t we just … you know, forget about the bit of difficulty we’ve had, and carry on as though nothing too bad happened?

Well, to subvert an infamous intervention in the 2016 EU referendum campaign: I think the people of this country have had enough of Brexitists, ‘libertarian’ propagandists and assorted fools, backed by organisations with acronyms, saying that they know what is best and getting it consistently wrong.

So the answer is simple.

“No, Prime Minister”.