The Thatcherite mantra of the 1980s “There is no alternative” ended up creating inequalities that echo to this day. Paul Collier argues that a key reason why no alternatives were put forward had to do with the centralised power of an exclusionary, short-termist Treasury. This continues to be a problem today, and explains why policies like Levelling Up have failed. Devolution and stronger local governments are the solution.
Paul Collier will be talking about his latest book Left Behind: A New Economics for Neglected Places at the LSE Festival on June 13.
Since the 1980s and the arrival of Thatcherism, entire communities around Britain have been humiliated, falling far behind the communities of success. New inequalities of geography and religion have compounded older ones of race and gender. Between them, they have hardened into wrecked life-chances: young people born into distressed communities have drastically worse chances of future success than those born into privilege. Left Behind measures these differences, which are wider in Britain that anywhere else in Europe, and in some respects worse than America. Even by their late 20s, those born into privilege have a sixfold better chance of a fortunate life than those born into misfortune, and that difference is likely to widen as their careers diverge.
People trapped in distress often despair. They then become easy prey for political charlatans selling hopeful fantasies. Britain has been fertile ground for them, from Boris Johnson to Momentum, but in that it is no different from other societies in which large groups of people have been left behind. Where Britain is distinctive is why so little was done to offset emerging inequalities.
By the time Tony Blair brought the Labour party back from the political wilderness, it had quietly accepted the main tenets of Thatcherism.
America is the prime example of a downward spiral in which the mega-rich have used their wealth to wield political power, and then used their power to entrench their wealth through a myriad of tax loopholes. South Africa is a well-studied example of a different downward spiral in which the ANC political elite, starting with fine intentions and major achievements, gradually succumbed used their power to run patronage networks. These gradually reversed the gains in per capita incomes. The downward spiral is exemplified by Jacob Zuma and the Gupta brothers. Britain was not immune from either of these malevolent influences: it has its low-tax lobbying rich (hello “non-doms”), and it has its patronage networks of corrupt privilege (hello partners in the Magic Circle law firms).
But at its core, Thatcherism was an idea: an economic ideology. It emerged from the economic and political turmoil of the mid-1970s, which dethroned the reigning Keynesian consensus. The new ideology was sold to voters as “TINA” – There Is No Alternative, and in truth Britain’s left failed to offer one that was both hopeful and credible. By the time Tony Blair brought the Labour party back from the political wilderness, it had quietly accepted the main tenets of Thatcherism and sought only to soften its consequences through modest redistributions from rich to poor.
Yet TINA was false: there was a credible-yet-hopeful alternative readily apparent from experience elsewhere. In simplified form, Britain suffered from a distinctively dysfunctional Whitehall bureaucracy. This was exceptionally centralised in the Treasury which was exceptionally short-termist, fixated on annual budgeting, and most dangerously, it was exceptionally arrogant and socially exclusive. Its arrogance left it unwilling to contemplate the possibility that its ideas were wrong. Its social exclusivity, exceptional even by the standards of other Whitehall departments, left its staff detached from distressed communities. Between them, arrogance and exclusivity frustrated the normal process by which an organisation gradually learns from its failures.
The life-chances of each generation other than the privileged are getting worse.
Failures abounded, but the Treasury has diagnosed them as being due to insufficient control: from 1980 onwards, it has progressively imposed stronger centralised powers over local government. The process has continued since 2019: Whitehall has increased its staffing by 25 per cent. What major sector other than Whitehall bureaucracy has expanded its workforce by that much since Covid? To “take back control”, the Treasury tightened time scales for determining whether money transferred to local communities has been well-spent. An example is the “Levelling Up” policy, announced by Michael Gove as the government’s “flagship programme”. Its purpose was to enable the regions outside the South-East to catch up. Yet that programme was given only a tiny budget by the Treasury, and we now know that most of even that piddling sum has never been released because most proposals from the regions were vetoed. This was the flagship that never left port. It rapidly became an organised deception: the appearance of a programme with no intention of implementing it. I know about it because I was announced as an official (pro bono) advisor to the Department.
Around the world beyond little England, some societies have avoided creating distressed communities.
As the Treasury “took back control” over the regions, it intensified the fundamental problem of over-centralisation. Unsurprisingly, this profound misdiagnosis has accentuated the divergence of distressed communities from the privileged and damaged major parts of our economy. In consequence, the life-chances of each generation other than the privileged are getting worse. I was a baby-boomer: at the same age, generation X are measurably worse off than us, being less likely to own their own home, and less likely to have a well-paying job. The millennials are worse off than either of us; and while it’s a little early to track generation Z, I am anxious for my kids, all within that cohort. My generation ran Britain when TINA became entrenched: we owe younger generations an apology, I don’t hear it coming from our politicians during this campaign.
In my most fearful moments, I worry that Keir Starmer will cling to that centralised power. I hope he rises above temptation.
The main message of Left Behind is not angry but hopeful. Around the world beyond little England, some societies have avoided creating distressed communities. More encouragingly for voters, among the thousands of communities that were once distressed, many have discovered how to catch up. We can learn from them. Which takes me to a proposal that should be at the core of this election: we need a clear commitment to devolve. Local governments should be accountable not to the Treasury but to their citizens. Britain’s local governments lack capacity but until we devolve, they will never acquire it. Elsewhere in Europe, where powers are devolved, capacities are correspondingly greater. In my most fearful moments, I worry that Keir Starmer will cling to that centralised power. I hope he rises above temptation.
All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science.
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