Stirring the pot

So the cat’s out of the bag, and the Welsh Government (through their Deputy Economy Minister, Llanelli AM Lee Waters) has admitted what everyone apart from Labour, Plaid Cymru and the Liberal Democrats have known for years – they don’t know what they’re doing and they’re making it up as they go along.

Results of the vote in the Senedd on 25th May, where Plaid Cymru, the Liberal Democrats and Dafydd El vigorously defended Labour’s handling of the Welsh economy and voted against the Conservatives’ motion.

It would easy in such circumstances to crow triumphantly and throw stones. Plaid Cymru has lost no time in doing so. But of all people they, along with the Liberal Democrats, should look out for falling glass. It’s exactly a month since both Plaid and the Lib Dems vigorously defended Labour’s economic record, voting monolithically against a Conservative motion stating the bleedin’ obvious, namely “The Welsh economy has stagnated since devolution” (although even that’s generous compared to Waters’s own assessment of the situation).

It would be even easier to rush forward with master plans for how we’d do things differently, but I think everyone would be better off taking a step back, thinking carefully about what Waters actually said, and asking what the fundamental issues are.

A plaintive cry

Of everything that Waters is reported as having said, these words are to me the most poignant: you can almost hear a tone of exasperation in the words themselves:

“Everybody is making it up as we go along – and let’s just be honest about that. We’ve thrown all the orthodox tools we can think of at growing the economy in the conventional way, and we’ve achieved static GDP over 20 years.

“The levels of GVA per head now are the same they were in 1999. And that’s not from a lack of trying. There’s no failure on the part of ministers and civil servants. Boy, have they tried!”

In other words, ‘we’ve done everything we can think of, and it hasn’t worked. We don’t know what we should do next, we just know it should be something different from what we’ve done so far.’

Check your premises

Alisa Zinovyevna Rosenbaum (1905-1982), the Russian-Jewish-American novelist better known as Ayn Rand.

I love reading novels, and I love America (having spent ten happy years working there), but I rarely get on with American novels. With the likes of Updike and Steinbeck I typically get about halfway through the book before I conclude that I have no further interest in whether any of the dull cast of characters live or die, and then put the book down.

Two storming exceptions to this are the books of Doug Wilson and Ayn Rand. In Ayn Rand’s magnum opus, ‘Atlas Shrugged‘, she has a character called Prof. Hugh Akston, a brilliant scientist and philosopher who works as a short-order cook in a diner. When asked why he had deserted his glittering academic career to do that job – something which on the face of it made no sense at all – his response was simply “Contradictions cannot exist. Whenever you think that you are facing a contradiction, check your premises. You will find that one of them is wrong.” In other words, if something doesn’t make sense to you, it’s because you’re making an assumption that isn’t true.

It’s obvious from Waters’s quote what his premises are: he assumes that there’s something that government can do, something which, if done just right, will have the desired effect – economic growth. All that’s needed is to find out what that thing is, and do it. Then everything will turn out well.

But what if that’s wrong? What if there isn’t anything government can do? Or worse, what if anything the government tries to do only makes things worse?

Ronald Reagan, President of the Screen Actors’ Guild from 1947-52 and 1959-1960; President of the USA from 1981-1989

Another famous American, this time a retired film actor rather than a novelist, once said:

“The nine most terrifying words in the English language are “I’m from the government, and I’m here to help.””

Ronald Reagan was vilified by the political Left on both sides of the Atlantic throughout his presidency; anything that gets said about Donald Trump nowadays is mild compared to what people used to say about Reagan. Yet the US economy boomed under his presidency and the West won the Cold War without a shot being fired.

A lesson from the kitchen

Waters’s comments were made from The Clink, the restaurant inside Cardiff Prison where inmates learn valuable life skills which will fit them well for life outside.

Cookery lessons for socialists: Le Manoir aux Quat’Saisons in Oxfordshire, favoured cookery school for Guardian journalists

Meanwhile at the Labour Party’s house journal, The Guardian, other important lessons have been learned in kitchens. There, horny-handed daughter-of-the-soil Zoe Williams relates a lesson that she learned when she spent a day on a cookery course at Le Manoir aux Quat’Saisons in Oxfordshire (currently £385 for a day’s tuition):

“Roughly a third of the eye-poppingly expensive day was spent teaching us how to make light and dark chicken stock. The kitchenerati of the Cotswolds were incensed, because it seemed so basic, so low-skill, so non-interventionist. They kept poking it and stirring it as it was simmering. In the end, the chef put a pan of boiling water next to it on the stove and said: “If you absolutely can’t see a pan without wanting to stir it, stir that one.”

There, in a nutshell, is the problem with the Welsh government’s approach to the Welsh economy over the last 20 years. They can’t resist poking, prodding, stirring, anything to make it look like they’re doing something even if they’ve got no idea what it is or why they’re doing it.

After I returned from my ten years in Silicon Valley, I started a technology business in Wales: initially based in the OpTIC Technium in St. Asaph, and then in Wrexham. After numerous investors based in Oxford, Cambridge and London had told me that they’d invest if I were based down there but wouldn’t invest in a Welsh company, I fell into the hands of Finance Wales (now renamed the Development Bank of Wales).

Oh my.

They poked, they prodded, they stirred. It seemed like every month there was some new initiative, some new business support scheme that I was supposed to apply to for grant money, and each time the rules were subtly different from the last time. Each injection of cash came with strict stipulations as to how it was to be spent, usually on senior managers and consultants (picked by Finance Wales) who were paid vastly more than I was for not doing very much, while I was crying out for engineers who could help me get the technology matured and ready for market. How they didn’t kill the company stone dead I don’t know.

When they eventually pulled the plug on us, we spun the company into Swansea University, where I initially had an excellent support team – all of whom have since been suspended as part of the developing scandal there (and I’m convinced every one of them is blameless). Determined not to let my other investors down, the company survives: I still spend about a day and half a week, unpaid, pushing it forward. Meanwhile, the job that puts food on the table for the Morris family is with another Silicon Valley company which now has a software technology centre in Wrexham. I persuaded them to locate there, and we employ an excellent team of young software developers. The Welsh government don’t even know about it and haven’t given a penny of subsidy, and can’t interfere. Long may that remain so.

My own experience can be related many times over by companies large and small across Wales. It’s just an extraordinarily difficult place to do business, and heaven help you if you fall into the hands of Welsh Government Business Support.

A better recipe

Governments are brilliant. They can do things that no other type of organisation can or should:

  • They can provide a stable macroeconomic environment with the right levels of money supply and inflation, so that the value of goods and services remains predictable over the long term.
  • They can provide a reliable and transparent legal system – free of corruption – that ensures everyone’s legitimate interests are protected, contracts can be enforced, and customers and staff are treated fairly.
  • They can ensure a safe and stable environment in which businesses and individuals do not need to worry about physical threats to their security or the forced seizure of their assets.
  • They can guarantee the provision of proper infrastructure: roads, railways, telecommunications, reliable water and power supplies.
  • They can facilitate the provision of a healthy, well-educated workforce, in which people’s backgrounds – whatever their race, social class, economic situation, religion or whatever – do not impede their access to high-quality education and healthcare services.
  • They can ensure businesses are free to procure the raw materials and services that they need from the best suppliers in the world, wherever they may be located, and to sell their products to customers across the world, with minimal friction due to customs procedures or tariffs.
  • They can provide a simple and fair tax and benefits environment where people have the security to take risks with confidence, and get to enjoy their fair share of the benefits when they succeed. A citizens’ income and a flat tax, for example.

Governments that do those things can be confident that economic growth will follow. It’s when they overreach themselves, and start interfering in the minutiae of daily business decisions, that problems occur. It doesn’t help business, but it does cost money, which drives up taxes (and/or deficits) and drags the whole economy down.

The man who made Hong Kong – Sir John James Cowperthwaite – and how he made it.

When governments go beyond a certain point, a law of diminishing returns sets in and they quickly start doing more harm than good. Someone who understood this very well was the mellifluously-named Sir John James Cowperthwaite. While Lee Kwan Yew was performing an economic miracle in 1960s Singapore, Cowperthwaite was doing the same thing in Hong Kong. He refused to compile GDP statistics arguing that such data was not useful to managing an economy and would lead to officials meddling in the economy.[1] He was once asked what the key thing was that poor countries could do to improve their growth. He replied: “They should abolish the office of national statistics.”[2] It’s widely held that it was Cowperthwaite’s policies that helped Kong Kong to develop within a generation from one of the poorest places on earth to one of the most prosperous.

Cowperthwaite took these principles much further than even I would advocate in today’s Wales. What worked in 1960s Hong Kong can’t be transferred lock, stock and barrel to 2020s Wales, but there are lessons to be heeded. Some people call this ‘Liberalism’ (in the old Gladstonian sense), others ‘conservatism’ (note the small ‘c’), but the Conservative Party has never implemented it in Wales, not even in the 1980s under Margaret Thatcher: the monolithic power of the Labour Party and the Trade Union movement was just too great even then.

The tragedy

That, stated plainly, is the tragedy of the Welsh economy. It has been in a rut for decades, and things are getting worse, but all the Welsh government can do is poke and prod. The only policies ever likely to turn it around are conservative ones – yet the Conservative Party will never be trusted to deliver them, even if they had the will.

It will take a party which is Welsh to its core but international in outlook, led not by career politicians but by people who know how the world works. At the moment the only party which looks remotely like that is Gwlad. We are looking forward to joining battle with Waters and his colleagues in Llanelli and across Wales, when the Senedd elections come round in 2021.

2 thoughts on “Stirring the pot

  1. The issues you relate sound to me like the actions of a puppet parliament which has no control over the levers of macroeconomics and wider development, so to be seen to be doing something undertakes the sort of fine-grained, low-level meddling you describe. As for the investors approached from the south of England and their refusal to invest in Wales, I’d assume their (correct) perception that their preferred geographical target of investment is where most of the dynamism, innovation, wealth and opportunity lies on this island played no small part. Funnily enough, it’s also where the seat of power has been based for centuries – perhaps these meddling governments can meddle for the better when and where it suits them?

    1. Your point about “fine-grained, low-level meddling” is spot-on. Lacking the power to do anything useful, and the courage to do nothing at all, they tinker about doing stuff that’s actively harmful.

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