Bad Politics
Within the space of two days, Barack "Time for Change" Obama won the presidential election in the USA and the International Monetary Fund predicted the UK would be the worst hit of developed economies in the forthcoming recession.
Most of the people who voted for Mr Obama seem to have very little idea what he will actually do when he becomes president. All they know is that 'things will get better' because he said so. That's the trouble with politics. Politicians stand up and say things as though they really know what they're talking about, but it's important to remember that it's all guesswork. When an engineer says "the bridge will stand" or "the plane will fly" they are normally right because they've proved it by calculation. Not so in politics. When Gordon Brown says "no more boom and bust" (as he did until quite recently) he has no idea if it's true. He simply hopes we'll believe it because he's the Prime Minister and he said so.
Wishful thinking: an election manifesto
The Labour Party Manifesto 2005 (Download PDF) says on page 15: "Forward to increased prosperity, not back to boom and bust. Our economic policies will build on the platform of stability and growth… entrenching a low-debt high-employment economy… our economic record has finally laid rest the view that Labour could not be trusted with the economy." And then on page 16: "The longest period of uninterrupted economic growth in modern times has enabled the Government to deliver the longest period of sustained investment in public services for a generation."
Much of the rest of the manifesto – for education, crime and security, health, pensions, and employment – relies on the economy being what Labour said it was: prosperous, in exactly the same way that when an engineer says the bridge will stand he relies on the fact that it has solid foundations. But a politician is not the same as an professional engineer. Engineers deal in facts, politicians in wishful thinking. Even so, it's surprising that Gordon Brown, after all his years as Chancellor of the Exchequer, was apparently oblivious of the fact that the British and world economies were far from healthy and would eventually come close to collapse.
Someone who worked in the City of London for over a decade commented recently: "During the chancellor's pre-Budget report and the opposition's response, there were alternate gasps of disbelief and jeers of contempt across our trading floor. It's utterly bewildering how our political system has managed to put such innumerates, however well-meaning, in charge of our economy."
Hands-on amateurs
Politicians in government are rarely expert in their chosen field. They move from Department to Department, and each time, they pretend to be 'professionals' with the knowledge and expertise to do what is necessary to make things better. The public has come to expect this (though we tend to be cynical about their competence and motives). And this is where the problem lies. Politicians are expected to know too much, so they pretend – and perhaps believe – that they really are professional experts. The solution to this unfortunate state of affairs is for politicians to go back to being amateurs, like in the old days when Ministers spent their afternoons on the golf course and their weekends yachting and hunting. Then the professionals can get on with actually running the country.
Here, we can look to the Local Government model of administration which in the UK has usually worked well, and still does. Of course this local model can't simply be transposed to the national level but it operates according to some interesting principles.
To begin with, local Councillors are laypeople. All they have to do is represent the public. This is mostly their wards but they also serve on Committees and some become the chair of a Committee. But even the chair is allowed to be a dunce. It's the professional officers who work for the Councils who are expected to have the brains to make things work – all they need is political guidance. Then the Councillors can go home to their constituents. So at Government level this transposes to more reliance on the Civil Service and less on the House of Commons, and with it, more accountability for the Civil Service. How many citizens can name the head of a Government Department?
And we should scrap big general elections and do it the Council way instead, in which one third of MPs stand for re-election each year: the whole Government on a three year rolling programme. Five years in office is way too long a period to trust to a single bunch of buffoons in this fast-moving age. Yes, this would be an excellent system, as Local Government elections are less about the ideology of the political party in power and more about the competence of the administration. After all, the old battle lines of Right and Left are irrelevant today. What we really need is competence – people like engineers, who actually know what they're talking about.
So, a light touch on the helm from politicians (who need to know only the difference between good and bad) and professional administration of the country by an Executive made up of people with brains and who don't go around saying things they cannot prove.
Read why politicians hardly ever say: "I don't know."
Experts don't even know
But to be fair to politicians, macroeconomics is far more complex and unpredictable than engineering, or for that matter: national security. Most nations have a security service and armed forces to protect themselves from their enemies, so why don't they have the something similar for their economies? In the UK this is apprently left to the Bank of England, the Financial Services Authority, and the Treasury – or something. And it didn't work. The first sign of real trouble ahead seems to have come with the collapse of Northern Rock in September 2007 when the bank found itself over-exposed to something known as subprime mortgages, and the British Government, badly caught out, was forced to inject large sums of our money into its nationalisation.
It's surprising that no-one – at least with any government influence – predicted this, and that the warning signs that other much bigger bubbles were about to burst (for example the price of credit default swaps) weren't seen until it was too late to prevent the crunch and subsequent onset of recession. And a lot of other things that now seem as obvious to the 'man in the street' as they were to Warren Buffett over five years ago.
To return to Barack Obama, Americans should perhaps be encouraged by the brilliance of his election campaign, irrespective of whether they actually voted for him or agree with his policies (whatever they are). Let's see how he brings in the experts. It's not so easy to imagine Mr Obama being caught out by another Lehmans, or the more natural kind of hurricane.
