June 24, 2020 - 7:00am
I think I might have just read the best essay to come out of the Covid crisis so far. It’s by Bruno Maçães in Foreign Policy magazine. He argues that the response to the pandemic has revolutionised our understanding of the economy and that, as a result, a whole new era of politics is dawning.
Imagine if some of your organs were to suddenly shut down — say, your liver, kidneys, spleen and lymphatic system. Would you expect the rest of you to carry on for very long? No, is the obvious answer. However, three months ago we shut down many of the key components and connections of the economy, and yet the whole system has not crashed.
Indeed, we’ve seen both the private and public sectors adapting at speed. Maçães describes how supply chains and essential services have been re-engineered, almost overnight, to enable us to keep going despite the extraordinary restrictions of lockdown.
In the 20th century, we came to see the economy as like a biological organism — i.e. highly complex, but the result of spontaneous organisation and undirected evolutionary processes. The complexity that results is therefore hard to unpick and reconfigure, because it wasn’t consciously designed to be so. Certainly, living things resist our attempts to genetically engineer them — the more we discover about genetics the more obstacles we find to our meddling.
But as the lockdown period demonstrates, the 21st century economy is more like a machine that can be rebuilt and reconfigured — the biological metaphor is out of date. Indeed, Maçães speaks of a “programmable” economy. This is often literally the case, given the ever-growing extent to which we can manage complex systems in real time through IT and advanced logistics.
So given the remarkable achievements of the last three months, the question now is ‘what else should we do?’:
Join the discussion
Join like minded readers that support our journalism by becoming a paid subscriber
To join the discussion in the comments, become a paid subscriber.
Join like minded readers that support our journalism, read unlimited articles and enjoy other subscriber-only benefits.
SubscribeSo the capitalist system is proving to be quite flexible in the face of large areas of the economy being closed down by the government. That’s an argument for less government, not more.
Just what I was thinking William – looks like we need re-education!!
Well, not really since the Western Capitalist system married the Chinese State system some time ago. Any flexibility you are observing is the result of a complex hybrid world.
I think what’s being said is that when the chips are down western governments don’t turn to hands-off capitalistic ideology, they turn towards the alternative.That happened during the GFC and it’s happening now.
What is the role of government if not to intercede in a crisis. And, when it is perceived to do so in an effective manner, it shows it’s value outside of a crisis as well.
So, what has gone badly? The outsourcing of state functions that should never have been handed to profiteering players.
What has gone well? Governments have protected people’s jobs and millions are not out queuing at food banks. All because the magic money tree that was found during the GFC has been uncovered yet again.
This will be the learning of the people and it is why politicians will have to pivot away from market solutions for state problems. They will no longer be able to shy away from the fact that the state has a job to do and it involves active management not simply the administration of tendering processes.
A centralist approach to programming the economy would be disastrous.
Whilst the stimulus for this change has come from state(s), all the individual decisions made by each and every company and part of industry have led to making up what changed – and why many things have worked far better than predicted.
A state can (and should, within reason) set the parameters, but the strength lies in businesses and individuals making decisions at a business to business level.
People just adapt their ways of working and are more flexible than we realise.
Yes.
I just wonder how many times the Socialist model has to be tried and fail before some people stop suggesting it has merit and can work this time if we really, really do it properly and wish really hard.
Agree A S, in attempting to construct a narrative to support a political POV it’s expedient to ignore certain key facts.
Facts like the temporary nature of these measures or their horrendous cost.
Pretty desperate stuff.
‘…spontaneous organisation and undirected evolutionary processes’.
Because the market is a place of discovery – and exchange of information, millions of bits of knowledge, and all knowledge is local and cannot be known by a central authority nor can it keep up with all the constantly changing outcomes.
Government shut down, was out of the way, so all the agents in the private sector could use their local knowledge, knowledge of how they could cope with, adapt to, see what they needed to do, make the best of the circumstances of Lockdown and get on with it unhindered by the bureaucratic goon-squad.
State leviathan the NHS performed poorly, failure to keep proper inventory of needed equipment, failure to have ‘surge’ capacity, failing to treat routine cases, many of whom will suffer and die, evicting patients to carry disease into the most vulnerable population groups, failed to set up and carry out a testing regime, and £11,8 million later, declared its track & trace app a failure and used the private sector app, already available.
How it can be construed that central planning and control Instead of decentralised, free market activity, has been validated by the Lockdown, when all the evidence indicates the contrary, is not evident.
Yes, because compared with the corner shops and supermarkets, the NHS has performed really efficiently and just proved beyond all reasonable doubt that Socialism and the planned economy are superior to market forces. The building of mass cheap housing can occur almost over night, like the Nightingale Hospitals and everyone will want to move in, just where the Govt. chooses. What could go wrong?
Being kind, I assume you are being ironic. But your question leaves me uncertain, as I expect it does many a reader.
An even better example is how wonderfully efficiently schools, particularly their teachers, have been to reengineer themselves for online teaching, use open spaces and other locations to bring children back to school instantly, and releasing their hard-pressed parents to go back to work. No harm done to any kid’s education in the process.
Multiply for every service provided direct by Whitehall – the newly nationalised train service being another stellar example of Robert Fortescue-Smythe OBE from Gerrards Cross running his Hornby train set for us all from the Department for Transport.
And, no, I’m not being ironic either.
There are lots of worthwhile insights that can be drawn from the ambiguity of this offering.
Perhaps the comment is best read as a capitalist’s cry for help. Now we’ve seen how the state can do good, god knows what the little people will now expect.
The post war government-led building efforts shows that housing can appear when the choice is made. The NHS is efficient and this is a bad thing. When it falls short it does so because of this efficiency and the relatively low cost of running such a no-contingency, no-flex system.
What could go wrong Alison?
We no longer accept food banks as inevitable. We wake up to the causes that allow charity shops to displace your favorite corner shops. We expect more from our NHS not less. We expect everyone to have the dignity of their own home and simply refuse to accept homelessness as a given.
In short, the nightmare is that we keep expecting the government to be a force for good.
I guess the upside is that the old and comfortable will refuse to pay.
In attempting to move the metaphor away from organic to digital, I feel the FP article misses the point. The economy is not a single computer program, or an AI.
The economy is a network.
This distinction is important because networks are still made up of individual nodes. From a central or social planning perspective, what you can do is more limited because you don’t necessarily have direct access to those nodes, only to interfere with their connection to other nodes.
This is what happened during lockdown. A huge number of nodes were removed from the network entirely. The remaining nodes simply hoovered up connections to whatever other nodes were left standing and reorganised in the most efficient way they could.
And hoovered up is exactly the term: the biggest nodes got bigger, as they were more important to connect to. Amazon was already the largest player in online purchasing and delivery, and it only solidified that position as everyone not used to online shopping jumped to the first place they could think of to start. This bigness and centrality of connection also points out that many of the nodes we most want to interfere with for social purposes”like shipping and its effects on the environment”are the most disruptive when changed. That’s why we left them alone during lockdown, because without them we really would have been in trouble.
What central planning and direct node interference that was done”such as the furlough scheme in the UK”proved to be difficult to estimate and predict, resulting in horrendous underestimations of demand and overestimations of the effectiveness of its ability to keep companies alive. To me, this doesn’t point to arguments about “how well our new tools are used”, but rather that these specific tools still simply are not available to a central planner in any useful sense.
I am in agreement that we can and should aim to use government policy to direct the network to purposes that suit us as societies. However, I don’t think we have the level of control that “reprogrammable economy” suggests we do.
Oh love, could you and I with Fate conspire
To grasp this sorry scheme of things entire ““
Would we not shatter it to bits, and then
Re-mould it closer to the heart’s desire.
Not sure I could do it. Robespierre was sure. Lenin and Stalin were. Hitler, Che and Mao were. John Pilger found a man who was.
Their moulding was not really close to the heart’s desire. Maybe today’s equivalents will do better. They seem sure they can.
Chris, UnHerd should give you your own column. I know I would read it.
excellent response Chris
Of course, Omar Khayyam (or Fitzgerald – the translation is not really very close to the Persian original) understood, in phrasing that quatrain, that precisely what we could not do was conspire with Fate – that the “sorry scheme of things” was the human condition. At the same time, knowing that we shouldn’t shatter things to bits doesn’t mean that we can do nothing at all to re-mould them, carefully and gently, in the hope of slight improvement.
Unless you truly believe we live in a deterministic world, every day our actions matter.
If states have any worthwhile purpose, it is to improve the sorry scheme of things.Grasping them is a different matter and, as you point out, history has shown that to be a less than worthy ambition.
“However, three months ago we shut down many of the key components and connections of the economy, and yet the whole system has not crashed.”
This hasn’t factored in the unimaginably massive pile of cash that’s been handed out to keep things running. A pile of cash that will have to be paid back. We’ve simply swapped one immediate disaster for a future one we think we will be better placed to mitigate against.
“So, should we give statist central planning another try?”
It’s never worked before and always ends in corruption, shortages and misery, but this time it’ll work, I’m sure. This is a zombie idea that just refuses to die.
Who do you think it needs to be paid back to? Who do you think the government is borrowing from?
Conflating state control with proportionate state action is the sign of a weak argument.
This is the most awful drivel.
It’s a bit like pointing out that, when you walk off a cliff, your forward motion continues uninterrupted.
Or that the ability to swim half-a-length underwater proves that you’re adapted to aquatic life.
It may take some time for the effects of this lockdown to be felt, but felt they will surely be.
And they won’t be pleasant![[
The economy was not restructured by any policy or group, it restructured itself to cope with the situation. It will continue to restructure itself as the situation evolves. All Boris needs to do is set the headmarks and all Rishi needs to do is make sure there is enough money in ordinary peoples’ pockets and let the economy sort itself out. It won’t be a V shaped recovery, because it is not a V shaped situation, however overall it will be a tick shape. There will be a significant element of Darwinism in the sort of businesses that survive and, just like the rise of the mammals after the extinction of the dinosaurs, there will be new sorts of businesses which thrive. This does rely to some extent on not being under the dead hand of bureaucracy or ending up being a football to be kicked around in a game of petty party politics. Hopefully with a decent Tory majority and BREXIT freeing us from the EU nightmare, we will have 4.5 years when we can show what our diverse population can do when it puts its mind to it
Do you really take this stuff seriously Peter.
If it ain’t broke fix it till it is. Genius!
The thrust of this essay and, in particular, the ideas from Bruno brought to mind a pertinent quote from Roger Scruton:
“Intellectuals are naturally attracted by the idea of a planned society, in the belief that they will be in charge of it.”
“• Roger Scruton, Fools, Frauds and Firebrands: Thinkers of the New Left
I have to wonder what planet the author is on. “three months ago we shut down many of the key components and connections of the economy, and yet the whole system has not crashed.” – Not yet maybe although look at some of the economic and employment figures already and prepare for much worse to come, Just because capitalists have adapted eg supermarkets maintaining the food supply chain where the state hasn’t eg the NHS’s multiple failures, doesn’t mean this self inflicted crisis is no big deal and governments can just wish things away. And the last two examples of self harm were caused by government actions, the housing crisis by untrammelled mass immigration and the 5G fiasco by years of wrong headed policy on China. I’ve read some pointless nonsense by this author but this takes the biscuit
The biological metaphor is a favourite of free marketeers because it implies that the economy functions by itself. I’ve lost count of the number of times I’ve read columnists describe a regulated economy as “sclerotic”. The obvious answer, surely, is that the state should behave like a doctor, leaving the economy alone when it functions well, ready to prescribe medicine when it stutters, ready to operate when it’s in crisis. The state did this very effectively, sensibly and with appropriate caution, in the twenty or twenty-five after World War II, when, with the help of gentle medical care, the wounded body of modern Western Europe healed and grew.
Resuscitated, it must be said by huge dollops of American largesse, which some of the recipients continue to resent even to this day.
I also disagree that the state “acted sensibly, with appropriate caution” etc. It certainly didn’t in the UK, particularly under both Atlee and Wilson, to name but two.
However you are on firmer ground with France and Germany, both of whom outshone the UK.
Unfortunately the German miracle, which made her a veritable paragon of virtue, has now been permanently shattered by the catastrophic Emissions Scandal(s). How could they do that after the legacy of ZyclonB? Was Berlin really oblivious to this skullduggery? We shall never know.
Perhaps the Enarques will save France, but the omens look bad.