Snippets 7: A chance to replace the Tories; mass nonpayment of bills; Chinese 'engineers of the soul' on western decadénce; Deep State insight; airpower in UKR...

“If the value system collapses, how can the social system be sustained?” Wang Huning, adviser to Xi.

A few snippets below on:

• Dangerous academics on nuclear escalation

• Tories imploding, a chance to replace them

• Chances of mass non-payment of bills in Britain

• Culture Wars: Strauss & Chinese ‘engineers of the soul’ on Western decadénce

• Deep State insight

• Airpower: lessons from UKR

• Growth and business tax / investment

• Central Banks & inflation

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Dangerous academics on nuclear escalation

The internet is full of academics arguing ‘It’s overwhelmingly likely…’, ‘it’s inconceivable…’ in the context of UKR, escalation, NATO, and nuclear war.

Everybody should remember — history is full of examples of experts thinking ‘it would be so foolish for state X to do Y that it’s overwhelmingly unlikely’, then X does Y, and years later we read archives and realise the people at the time were deluded. Errors over escalation, deterrence and enemy psychology are normal.

How likely is it that Britain would:

• Form an alliance with France viz Germany.

• For years have essentially no serious discussion between senior Cabinet ministers and the military about what Britain would actually do if Belgium were invaded. A fortiori there was no serious planning with France at the political level.

• Hit an escalating crisis and still not discuss crucial issues, like ‘will we issue an ultimatum on Belgium and if so how will we enforce it’, at the start.

• Give massively confusing signals to all key players.

• Get to a situation where (we discovered after the war) Wilhelm II and his advisers were literally toasting with champagne their successful avoidance of British involvement, only to be horror-struck when told while celebrating that ‘Britain will fight for Belgium’ etc.

• Britain ends up in a war over Belgium partly because it fails to convince Germany it will fight a war over Belgium and only issues the ultimatum after it’s too late to make a difference.

• Whitehall then has to bodge plans for how to fight such a war because of no proper defence planning.

Seem ‘inconceivable’?

This is what happened in 1914. And it meant a century of assets built since victory over Napoleon were ploughed into French mud, a generation decimated, our position in the world massively and permanently weakened, Europe pushed towards fascism and communism…

Long after the Cuban crisis we discovered that Castro was encouraging nuclear war even though he knew Cuba would be totally destroyed because he thought it was worth it! And senior political and military people today routinely peddle myths about Cuba and other nuclear near misses, especially the ‘JFK went eyeball to eyeball and they blinked’ myth, that appeals to those neocons who were so disastrously wrong about Iraq and Afghanistan ‘nation-building’/colonialism.

It’s easy to imagine escalation between Russia and NATO that looks much less crazy than what happened in summer 1914.

This time the consequences would be thousands of Aushcwitz’s.

Be highly sceptical of academic theorising, which often features Baroque chains of assumption built on assumption built on dodgy psychology.

Many senior academics seem not to know crucial history, not to have read Payne’s books on how wrong nuclear thinking was in the Cold War, and to be hugely overconfident in their assumptions on ‘what Putin must be thinking’. And of course many of them were confidently making bad predictions right up to the invasion. Security academics seem on average roughly as reliable as public health experts — i.e not reliable. Some senior academics on Twitter quickly act like the worst sort of journalists, twisting everything to fit their theories and denouncing anybody who questions Boris’ competence to deal with nuclear issues as ‘pro-Putin’.

After 20 years of discussion and thousands of papers about Putin and NATO, now a large fraction of them pretend that NATO is nothing to do with anything!

They struggle to hold contradictory thoughts in their head. E.g:

• Talk of expanding NATO to UKR was stupid AND it doesn’t justify Putin’s/Russia’s behaviour.

• NATO influence in UKR was a reason for invasion AND Putin has a general desire to reconstitute the old Russian lands that exists independently of NATO behaviour.

• Western stupidity contributed to the disaster AND it may have happened even if we’d handled things much better.

• We should have been much tougher on Putin for 20 years — as I said, very unpopularly in SW1 for 20 years — AND UKR borders are the wrong red line to draw.

Normally duff academic theorising has close to no effect but here it affects hacks and MPs scrabbling around for speeches and interviews to give…

Tories imploding, a chance to replace them

1. Members vote quickly after receiving the form so this could all be over in ~2 weeks, not 5.

2. Both campaigns show how far the Tory Party is from either a) engagement with what’s really important in the world, b) how the public think. The Party is self-destructively focused on weird subsets of itself and the old media. In Colonel Boyd’s terms it’s screwed its own OODA loops and cannot orient itself to reality.

3. I said after Boris blew up that it was 50-50 whether his replacement would be even worse. It’s now maybe 70-80%.

4. Unless LT blows up, she’ll be the next PM. Her message has landed better. RS’s message isn’t landing as it needs to given her lead.

5. There is no way she’ll be able to assemble the team and make the structural changes needed to control the government. No PM has in 30 years. The best chance to do it was summer 2020 when the core of the state had collapsed and senior officials throughout No10 and Cabinet Office a) knew huge changes were needed, b) assumed they were coming, and c) supported radical change. Instead of seizing the moment, Boris threw it away. LT will come in un-elected (which affects how officials deal with her, as it did with Boris in 2019) amid multiple systems failures. Even if she miraculously tries to control the government (she never tried to control her departments), she won’t be able to. Radical things officials don’t like will get parked on the slow train of ‘reviews’ and other process delays until summer 2023 after which Whitehall will stop all sorts of things and start planning its extended pre-election seminars, holidays etc.

6. I wrote a couple weeks ago that RS’s campaign seemed misconceived. He defined the focus as tax then rejected reversing the disastrous September decision to break the manifesto pledge. Tax was the wrong focus. Then he chose the wrong side of the argument. He then tried to run as if ‘fiscal conservatism’ was the crucial issue (only in corners of SW1). Then this week he changed tack with an offer to cut VAT, which the media used to scream u-turn.

7. I wrote that Dowden running the campaign was a signal that Rishi was approaching this with a cautious mindset that could spell disaster for him. Since then he’s run a Cameroon-Establishment campaign. But the party and country remain desperate for a change of direction. Huge change beat ‘steady as she goes’ in 2016; huge change, rather than a normal Tory government, was fundamental to success in 2019; and ‘time for change’ will be the Labour message in 2024 after 14 years of mostly failure and stagnation. Huge change is desired across the country now as people look at how almost everything seems to be failing. Boris wasted the two years since the biggest opportunity for change since 1945 in summer 2020. This is coming home to roost. People are desperate.

8. I haven’t spoken to RS since the day I left No10. I don’t speak to people running the campaign so my insight is limited. My impression talking to people who do talk to his campaign and to officials who worked with RS since I left is: a) he really has come to believe that the crucial thing for the next PM is to do what senior HMT officials want, hence his focus on ‘balancing the books’ and fiscal conservatism rather than explaining a vivid plan for how the country can generate new knowledge, companies, growth, productivity, skills etc; b) the dominant influences on him are the HMT official view plus Dowden, Hague, Osborne et al; c) these influences are reinforcing his true instincts — he’s not being persuaded against his instincts, he’s listening to them because he agrees with them. (Cf. here for why HMT power must be broken to make serious progress on many problems.)

9. This Cameroon-Establishment does not, I think, understand post-Brexit opinion nor is it good at public communication. Their natural world is the world of Parliament and London. I said a month ago that you could see coming two bad strategies for the Tories — 1) a faux incoherent Thatcherism embraced by the ERG, 2) a Cameroon-HMT-Establishment story embraced by much of the party. LT picked (1), RS picked (2). Neither is optimal for members or country but (1) is more popular with members than (2). Members and the country really want the Vote Leave plan but the MPs/SW1 find it too weird and anyway they don’t care about productivity, science, startups, skills etc. If they did the entire story of the past decade would be radically different. Rachel Wolf tried to explain some of this HERE but the MPs don’t want to hear.

10. What could RS have said on tax? Given what I’ve written over the past 18 months re this, I’d have said something like: ‘I opposed breaking the manifesto guarantee. Unless you have effectively no real choice, politicians shouldn’t break election guarantees like that. We didn’t need to do that. We could have saved money elsewhere to fund the NHS and social care. The PM wouldn’t do that. I tried to persuade him and lost. If I’m PM, I will reverse all the tax rises immediately. I’ll pay for this by eliminating all the ways the tax system unfairly and unjustifiably gives the wealthiest people in the country perks [e.g the pension allowances for the wealthiest, which in 2020 we started work on]. This means the wealthiest 1% paying for the post-covid NHS crisis and to cut taxes for normal families facing nightmare bills. That’s fair. But tax isn’t the most important issue, far more important are…’ The wording could obviously be improved but this general argument would work with Tory members and the general public, though neither the ERG nor Cameroons/One Nation would like it.

11. Tax is not what either the members or public care about most, by a long way. They care about inflation, energy and the collapsing NHS/A&E much, much more than tax. Neither candidate has articulated credible answers.

12. Tax isn’t even the most important aspect of the debate on growth! But again neither candidate thinks it worthwhile to focus on this. E.g Westminster finds skills/apprenticeships the most boring issue, the public thinks it’s really important. I brought Alison Wolf into No10 to work on it. She’s made progress despite Boris’s boredom and HMT suspicion/hostility. Neither candidate has made much of this. Members and the country would love it. The media would yawn.

13. A significant chunk of the Cameroon-Establishment clearly thinks that ‘fiscal responsibility’, and attacks on ‘magic money trees’ and ‘unfunded promises’, will/should be a crucial part of the 2024 election. (Cf. Forsyth’s column today: Rishi was his best man, he speaks all the time to Osborne/Gove.) This is crackers. Any Tory pretending in 2024 that the crucial dividing line is fiscal rectitude and ‘being good guardians of public money’ after the Party’s disastrous record since 2010 needs their head examined. E.g 1) They’ve comprehensively failed (not even tried seriously) to control and change the culture of vast waste in Whitehall. 2) Vote Leave are the only people in SW1 (outside parts of the deep state) interested in procurement reform where hundreds of billions could have been saved. Tories have consistently ignored this, even after the pandemic made it a dramatic news story and gave them a huge opportunity and we actually started to change this in 2020. They deliberately stopped talking and thinking about it. This shows how serious they really are as ‘guardians of public money’. 3) The 2024 election is on course to be about their comprehensive failure across public services, productivity, Whitehall and on and on. The idea that saying ‘after 14 years this election is about … fiscal responsibility’ is delusional. 4) And it’s even more deluded given … they’ve broken the manifesto ‘no tax rises’ guarantee (which I inserted in the manifesto in order to try to leverage their self-interest to stop them raising taxes)!! They’ve rendered their own promises on fiscal responsibility worthless and the Cameroons who want to focus on this issue are also supporting breaking the guarantee! Crackers. 5) And furlough showed there IS a ‘magic money tree’! The real issue is ‘what do you prioritise?’ With the NHS/A&E decimated, babble about magic money trees is a one-way ticket to a rout.

14. A large fraction of the members still don’t realise RS risked his career to support Vote Leave in 2016 while LT sucked up to Cameron and Osborne. He should have landed this message with members from the start. Those talking to the campaign tell me ‘he had to keep the Remain and One Nation MPs on board so he couldn’t, our MPs insisted on keeping quiet on Brexit…’ This is unconvincing and points to deeper problems.

15. My impression is that Establishment Tories assumed LT would blow up. Some are now panicking. If LT does not blow up (enough) and wins, the MPs will blame the campaign staff (many of whom know the Establishment advice to RS has been consistently wrong since last year) and forget the role of their own advice. I.e people who knew the problems will be blamed by those who deepened the problems.

16. By Christmas, after months of hellish stories on the NHS, bills, further failure on all sorts, the panic will likely be intense. MPs will turn to yet another round of conspiracies over no confidence letters. The ERG and Cameroons will start thinking of the future battle for control after the 2024 meltdown.

17. I think 2023-24 could be the best chance since the 1850s(?) to bury the Tory Party and replace it. Instead of the ERG/Cameroon ‘Kemi or Tug’ nightmare discussions, and all the predictable horrific dinner parties going around in circles, it would be far higher value to think: what to do in 2023 to build something that after the 2024 election could speak to the country, depressed after the campaign though largely happy to see the Tories out, in a completely different way with different people? LT could hit the ground at terminal velocity. If you’re going to spend years out of power building something, why not start afresh rather than with a hated old brand with rotten MPs and infrastructure? Why try to rebuild a brand that millions of people hate and would never support in any circumstances, especially after the Boris-Truss experience?It always seems like ‘not the right time’, as in summer 2019, but this feels like the best chance since the 19th Century.

18. I’ve already got people, including MPs, getting in touch about this startup. People can sense the deluge coming. I’ll write specifically about this possibility in a few weeks.

19. Even if LT blows up and RS wins, it will not vindicate the logic of the Cameroons re tax and fiscal conservatism. It will prove LT is a human handgrenade which we already know.

Chances of mass nonpayment of bills & other unrest?

James Frayne is good at doing focus groups.

It’s interesting he’s picking up threats of non-payment of bills.

I’ve picked up similar straws in the wind in discussion with ‘working class’ people.

Over the years there have been many analyses, sometimes for intelligence services, of how much disruption has to happen before a wave of protests causes chaos.

E.g in the 2008 financial crisis there were fears of cashpoints stopping, people suddenly unable to buy basics.

In spring 2020, it was easy to imagine that a) half a million deaths (predicted on graphs put to the PM March 2020) plus b) the total overwhelming of the NHS for weeks such that, for example, there would be no ambulance and healthcare for people in car crashes nor any normal hospital care, combined with c) the police force hit by covid — and so on and on as failure cascaded — would cause a breakdown of order. This was fundamentally why the PM started swerving on Saturday 14 March towards accelerating action — it wasn’t just covid, it was the feeling that crucial institutions (already feeling very wobbly) and social order could quickly collapse.

I’ve watched many times now the cycle of:

• starting to see something coming (e.g Brexit result 2016, covid Plan A collapse 2020, Putin/energy/supply chains 2021)

• watching SW1 focus on other things and unable to see/hear

• the evidence mounting

• intelligent people outside SW1 starting to prepare

• evidence mounting

• people starting to scream at SW1

• people can’t understand why SW1 isn’t hearing

• people scream louder at SW1

• then suddenly, too late to stop a lot of things going wrong, the SW1 herd picks up the clamour and shifts from ignoring it to chaos, the Non-Player Characters get ‘software patches’ (‘masks are bad… err masks are good’), pundits start ‘explaining’ the new thing as if they saw it coming...

I wrote a few weeks ago about the combination of problems we can see with:

• energy prices rising to record levels across Europe

• people unable to pay bills

• companies going bust

• manufacturing getting shut down

• other supply chain pressures (e.g China / covid)

• most MPs demanding further escalation in UKR

• Puting squeezing Europe’s balls, particularly via gas to Germany, because of long-term bad policy leaving it vulnerable

• growing panic in Europe…

I’ve got a feeling that if a few people who understood campaigns started organising a network to spread the message ‘STOP PAYING BILLS’, it could catch fire. And it could catch fire organically without organisation. And SW1 would panic.

Threats count for little when people cannot look after their families. People won’t starve. If you can’t afford energy and food, then you keep eating and stop paying energy bills. Some will try to organise others to do the same.

If we all stop paying around here, what can they do? They can’t send us all to jail. We can’t afford to pay so we should try to get others to do the same and pressure London, mebbe they’ll have to let us all off…

This logic is rational. Usually this problem (bills) doesn’t breach some hard-to-determine critical threshold. But the quality of the British state’s contingency planning for emergencies has been terrible for many years and the steps we started in summer 2020 to improve this have been largely abandoned. Probably nobody will know where this threshold is until it’s crossed and it’s too late. Is anybody in 70 Whitehall or elsewhere even looking for this threshold, given the collapse of the Cabinet Office and the exodus of able people?

Sometimes in history these actions cascade rapidly out of control. We saw this with food prices in 1848 and the Arab Spring in 2011.

And we have Boris in No10 trying to pack in fun things like flying jets in his last weeks as PM. He didn’t take his job seriously when he had it so we can be sure he won’t now he’s lost it. He will not be diligently working through summer in sweltering COBR meetings on such problems and even if he did he’d fail…

Look how badly Westminster’s disastrous handling of energy over decades is kicking in:

On July 20, surging electricity demand collided with a bottleneck in the grid, leaving the eastern part of the British capital briefly short of power. Only by paying a record high £9,724.54 (about $11,685) per megawatt hour — more than 5,000% higher than the typical price — did the UK avoid homes and businesses going dark…

The payments, nonetheless, highlight desperation: buying across the channel was, for 60 minutes or so, the only option to balance the system. If Belgium had not helped, the grid would had been forced to “undertake demand control and disconnect homes from electricity,” says a grid spokesperson…

Last year, the UK paid just under £1,600 per megawatt hour on one day to import electricity and avert a short squeeze. On July 18, it paid just over £2,000, which became the record. Two days later, the price went to nearly £10,000. The pattern is clear. At some point, even sky-high prices won’t be enough. Then, a blackout would belatedly lay bare the consequences of our under-investing ways. (Javier Blas)

So this winter we have a distinct possibility of both blackouts and mass refusal to pay bills — for energy that may not even be available…

Seem too crazy?

Doesn’t seem nearly as crazy as many things that happened in 2020.

A system that in March 2020 could try to stick to shipping PPE for the NHS from China (‘the rules Dominic’), taking months, when the crisis was clearly arriving in a ~3 weeks, is capable of anything…

I’ll try to think of some Tetlock-questions for this and put some numbers on them.

Culture Wars: Strauss & Chinese ‘engineers of the soul’ on Western decadénce

That which makes institutions is despised, hated, rejected: whenever the word ‘authority’ is so much as heard one believes oneself in danger of a new slavery. The decadénce in the valuating instinct of our politicians, our political parties, goes so deep that they instinctively prefer that which leads to dissolution, that which hastens the end. (Nietzsche, Beyond Good & Evil)

Leo Strauss was a rarity, an important original 20th Century thinker who influenced other influential academics (e.g Allan Bloom) and many practical people who worked at senior levels in government. His lectures on Nietzsche are here, highly recommended.

This article discusses the highly interesting fact that Strauss is now more studied in China than in the west.

In the early 1990s Liu Xiaofeng was in America and got into Strauss. He shifted people and resources in China to the study of Strauss. More of Strauss’s writing is now available in Chinese than English as they are ahead on lecture transcripts and other materials.

We don’t have good sight of what the Chinese make of it given the rarity of experts in western philosophy who are also fluent in English, German, ancient Greek, and Chinese.

In the 1980s, Xiaofeng and Gan Yang, classmates at Peking University, started an influential book series introducing Nietzsche and Heidegger.

After Tiananmen in 1989, Gan started a PhD in Chicago where he studied with Allan Bloom. Gan founded the first liberal arts college in China to take the ‘great books model’ seriously, required undergraduates learn Classical Chinese, Ancient Greek, and Latin, then he established a liberal arts college in one of China’s most prestigious universities, Tsinghua University.

While Gan has exerted the greater influence on China’s institutions, his old classmate Liu Xiaofeng is more prolific, widely read, and controversial. In one of his most famous books, Delivering and Dallying, he charges China’s three great intellectual traditions (Confucianism, Buddhism, and Daoism) with nihilism, by which he means that the traditional moral systems of China rejected a theistic, suprahuman basis for absolute values and never developed beyond belief in the moral essence of man to a more robust doctrine of sin. Against this he contrasts the “Judeo-Christian spirit” which is able to contend with nihilism because in it “man is very tiny and humble, he cannot rely on his own nature, he cannot be proud, since all self-reliant and self-glorifying people can only bring suffering and sin to mankind.” Chinese nihilism is both deeper and more durable than Western nihilism, he claims, since it is rooted in the doctrinal tradition of Confucianism, which has resisted interpreting mankind as needful of help from without…

His “Unifying the Three Traditions” lecture, which he delivered at Tsinghua University in 2005, has gained near default acceptance as the true cultural task among Chinese intellectuals. The task is to weave Confucianism, Maoism, and Dengism (capitalism) together, or to marry tradition, social justice, and market reforms. Gan’s formulation has appeared in the speeches of Chairman Xi Jinping, who believes the three traditions belong to a unified continuity in China’s history and civilization…

His concern is inspired by Eliot’s Wasteland. “Modernity has transformed the West into a spiritual wasteland, a cultural wasteland.” He warned that China, if it embraces Western modernity, could become a “culture desert” of the sort described by Eliot. The idea that the modern, not the ancient, West has problems from which China should distance itself has become a throughline in Gan’s work since his return…

In language strongly reminiscent of Heidegger, Gan assails globalization as a leveling, distance destroying, modern plague. “[Because] airlines have shortened distances and electronic information and the internet have progressed even further to make distance disappear, all places, all people, all things are simultaneous and contemporary. There is no ‘tradition’, nor any care to have one, hence no modernity that even stands in opposition to tradition.”

This connects to the piece I wrote earlier this year on Dan Wang’s excellent work on China.

It also connects to possibly the most powerful person you haven’t heard of, Wang Huning, adviser to Xi.

His thesis traced the development of the Western concept of national sovereignty since antiquity and compared it with Chinese concepts. Wang was interested in culture and values, and the challenges of individualism and consumerism — controversial concepts in Marxist China.

Echoing Nietzsche, he said ‘we must create core values… We must combine the flexibility of [China’s] traditional values with the modern spirit [both Western and Marxist].’

In 1988 he visited America, driving from city to city seeing homelessness and crime, and wrote America Against America (1991).

• America has an “unstoppable undercurrent of crisis”, rich v poor, white v black, democratic v oligarchic power, rights v responsibilities.

• All driven by radical, nihilistic individualism which has ‘disintegrated’ the family.

• “Nihilism has become the American way, which is a fatal shock to cultural development and the American spirit”.

• He quotes approvingly from The Closing of the American Mind.

• Growing tension between Enlightenment liberal rationalism and a “younger generation ignorant of traditional Western values” and actively rejecting its cultural inheritance.

• “If the value system collapses, how can the social system be sustained?”

After returning home he opposed liberalisation and argued for a culturally unified and strong central state, a blend of:

• Socialism

• Traditional Chinese Confucian values and Legalist political thought

• Maximalist Western ideas of state sovereignty and power plus nationalism

Together these would bring a synthesis for long-term stability and growth immune to Western liberalism.

Jiang promoted him from university to the CCP’s Central Policy Research Office, amid the highest echelons of power

In 2020 much of what Wang discussed 20 years earlier exploded in America. But the ‘unstoppable undercurrent of crisis’ has partly hopped to China where many of the same problems have emerged:

• inequality

• ‘atomization’

• low social trust

• centuries of communal extended family life upended in a generation, elderly reliant on the state

• huge cost of educating kids

• fertility collapse

• youth ‘nihilism’, priced out of homes, opting out of the rat race…

Recently, as I wrote earlier this year (cf. Dan Wang piece), Xi has significantly changed the direction fo China policy. He is enforcing a set of policies pushing China in a different direction including inter alia:

• Campaign against rich/poor gap widening

• Anti-monopoly investigations of tech firms

• Stricter data rules for tech firms

• IPOs limited, companies told to improve labour conditions

• Killed off the private tutoring sector overnight

• Capped property rental price increases

• Celebrities like Zhao Wei have disappeared

• Minors banned from video games (‘spiritual opium’) for more than three hours per week

• LGBT groups scrubbed from internet, anti ‘sissy stars’

• Abortion restrictions tightened

Western media has little interest in crucial internal China debates. Interesting information is ‘at the edge’ (e.g Dan Wang).

Deep State insights

The Institute for Government (IfG) does some ok/good things but generally is very bad for the country.

It defends broken institutions and encourages MPs to think in ways that guarantee continued dysfunction.

Often these former mandarins are inadvertently very revealing.

12 years ago Robin Butler, former Cabinet Secretary, gave evidence to a House of Lords committee on the civil service and Cabinet Office. I tried to get Boris to read a few paragraphs of it, e.g the quotes below, but he just burbled ‘Cabinet Office, what the fuck IS the Cabinet Office?’ Don’t worry PM, just avoid one-to-ones with the Cabinet Secretary and say ‘I agree with Dom’…

If MPs read it they’d understand a lot more why they struggle to get things done.

Exhibit A. The Cabinet Office is not there to deliver for the PM.

I think none of us saw the Cabinet Office as the instrument to deliver what the PM wants. We did not see it as an executive body that was to deliver the will of the Prime Minister. (Butler)

Exhibit B.

Ultimately the Prime Minister’s power lies in advising the Queen on the exercise of the Royal Prerogative, for instance on appointments, and on chairing meetings and being able to sum them up. I think those are the two main real powers that Prime Ministers have and I do not see [Prime Ministers] as being some kind of central control tower which simply instructs the rest of the machine what to do. (Wilson, former CABSEC)

So, first, according to a former Cabinet Secretary, the PM can ‘sum up’ a meeting but after that whether anything really happens is and should be largely up to others, the Cabinet Office is not there to enforce the PM’s will on Whitehall.

Second, how exactly does this ‘chairing and suming up’ work practically? It connects to a point I’ve made before, which you’ll never see discussed in SW1 — ‘chairman’s notes’. No10/CABOFF ministerial meetings are usually literally scripted. Each minister reads out notes written by officials (few spad teams grip this process properly). The PM sums up the discussion with ‘chairman’s notes’ that are pre-drafted. The ministers yap away as they wish but unless something very unusual happens, the PM sums up in accordance with the script written before the discussion.

How did we enforce our plans on Brexit? Partly…

A) Spads participated in drafting chairman’s notes (and after a while Oliver Lewis and David Frost wrote them) and B) I insisted on ‘live’ action points written during XS/XO meetings that were then agreed by officials and spads immediately at the end so we could immediately force action (i.e no lengthy process of waiting for official minutes then email chains arguing over them for days). This meant the real arguments almost always were not in front of the PM, nor in the XS meetings, but between officials and spads in pre-meetings and post-meetings. (One of the first things I did in No10 was speak to the Cabinet Secretary and agree the creation of XS and XO, two Cabinet committees for ‘strategy’ and ‘operations’. Brexit and collective responsibility were handled via these, not via full Cabinet.)

This is the sort of battle over real power that happens deep in the deep state and almost never emerges into the light. It’s a bureaucratic process battle that then affects all the object-level battles. I have had close to zero sucess in getting MPs or journalists interested in how these things work.

Can you imagine an organisation like Apple or Amazon being run like this, where the participants are content to be non-player characters just for the status of being in the room?!

Exhibit C. Look at how Butler described the pros of the current system post-Thatcher's unification of Cabinet Secretary and head of the civil service — Machiavellian deep state control of appointments.

The second reason [to keep the Cabinet Secretary as head of civil service], I am afraid, is a more Machiavellian one, which is that to have some influence and control of the senior appointments gives the Cabinet Secretary ... some leverage over government departments.

Again, as I’ve said many times, real power comes in controlling appointments. ‘People, ideas, machines — in that order!’ This fundamental fact sits in the middle of all discussion on competence and failure in government yet is essentially ignored.

In all the millions of words of political news you see, you will see effectively no discussion of this subject. Even when things blow up and ministers are grilled, they babble about ‘getting a grip’ but the single most important part of ‘getting a grip’ is replacing duffers with great people and this is a) never raised by journalists interviewing the minister, and b) the minister themselves almost never actually engages with this subject, even though their own career may hang in the balance! Whitehall has trained MPs like Pavlovian dogs — they will even go on TV defending ‘the impartial civil service’ after their career has been flushed down the toilet because a useless DG can’t perform and nobody will replace them.

A recent IfG report is also revealing. The author is generally terrible — he had the nerve in 2021 to write that the civil service had held up well ‘operationally’ in covid, which was like saying in 1942 ‘the defence of Singapore was an operational triumph’.

1. ‘Ministers should be holding their officials to account for the outcomes their departments achieve, not the way they manage the civil service to deliver them.’ As I’ve remarked many times, officials want ministers/spads nowhere near management decisions and particularly nowhere near personnel decisions. Don’t worry your pretty little heads about management, minister, look here’s a lovely interview for you — is the standard Sir Humphrey attitude. But a) the entire culture of ministers not thinking about operations and management, and separating thought on policy from the details of management/operations, has been a long-term disaster responsible for debacle after debacle and no learning/adaptation to these debacles, and b) when things fail, personnel decisions are central to fixing failure. This was critical in 2019 on Brexit and in 2020 on covid. It’s always critical. See above.

2. ‘Two direct and simple chains of command are needed [in No10]: one from the prime minister to his political chief of staff and then to the special advisers across No.10; the other from the cabinet secretary to the No.10 permanent secretary, to Johnson’s principal private secretary and then the remainder of the Downing Street staff. This is a well-tested and simple model to align the political and civil service functions of No.10.’

Notice that in this model, the No10 Permanent Secretary and PM’s PPS are managed by the Cabinet Secretary, and the PM’s ‘chief of staff’ is literally not ‘chief of staff’. This is why I refused to take this title. It’s bad management in principle to give yourself a fake job title. It was telling that in summer/autumn 2020, both the PM and some officials tried to ‘buy me off / shut me up’ by saying ‘Dom you should really have the title chief of staff’.

Me: ‘I’m very happy to be actually chief of staff in the James Baker first term Reagan model, is that what you’re suggesting, or do you mean the private office all still answer to Martin and chief of staff carries on as a Potemkin title?’ Yup, thought so…

The system is set up so that formally someone like me (senior spad) cannot tell the most junior official to do practically anything or manage any process or remove any people. Everything is court-like informality depending on personal relations and courtiers’ sniff of power.

Continuing this traditional system guarantees turf wars, distrust, sub-optimal management of No10 at best.

The rabbit warren of No10 already encourages a court-like scurrying of spads and officials into separate rooms to plot intrigues against each other. It’s a terrible, depressing, time-wasting way for the centre of power to work. Yes Boris made this 10X worse than it had to be by deliberately encouraging everybody to distrust and fight each other — on his ‘chaos means everybody has to look to me’ principle.

But it’s inherent in the system. People like the IfG want MPs and hacks to think ‘oh this was all because of Boris being a wrong un, not respecting institutions, if a proper conservative takes over the system will be fine again’. A thousand times NO. The system is dysfunctional by design. It doesn’t matter if you had Steve Jobs or Andy Groves themselves as PM, it could not work — you cannot manage things optimally if you have two different staff systems around the leader of the country without clear lines of authority and responsibility especially when one set of staff look for promotions to a bureaucracy that may regard the PM’s plans as a disaster for their bureaucracy.

The traditional system has been justified with the Platonic lie that ‘an impartial civil service recruits and promotes the best people’. This is a bad joke. It didn’t work 50 years ago when the calibre of people was much higher and we had people like Michael Quinlan writing Thinking About Nuclear Weapons. Now that so many of the most able go to the worlds of money, maths, computers, tech, VC/PE, hedge funds etc, and Whitehall pushes out most of its best young people and promotes the worst HR horrors, it’s even more of a charade.

The chances of this changing are <1% whoever is next PM. The very best that can be expected of No10 management performance is: not awful, about as good as its best under Thatcher, which as Hoskyns explains at length was also dysfunctional relative to what great organisations can do, and Mrs T also shied away from facing this. With Truss, we’ll get farce then collapse.

NB. Many officials think this is acceptable because they think it is much better to have sub-optimal management but officials in control than optimal management with an integrated team where political people are managing officials. Part of the problem with SW1 discussion is everyone is bored with these detailed issues therefore these explicit tradeoffs are never discussed or even thought about.

And to add another layer of difficulty — when you have people like Trump, Truss or Boris in charge, do you actually want a high performance government machine, or do you want to just survive with the deep state hopefully controlling their worst instincts?

Airpower: lessons from UKR

Keith Dear is one of the few people in the country who knows the true detailed numbers on MoD budgets. This group includes nobody in the Cabinet.

He wrote about airpower and lessons from UKR.

Main points:

• A recent Telegraph article was disgraceful spin from MoD implying that a lesson from UKR is that pre-war beliefs about how drones and AI would become much more important fast were … false!

• ‘It is almost impossible to see how this is a lesson from Ukraine.  And indeed the article presents no evidence in support of this argument.’

• UKR has used various kinds of drones, including very cheap commercial ones, to ‘fulfil three of the four roles of airpower, to a greater or lesser extent: (1) intelligence, surveillance and reconnaissance, (2) attack, and (3) air mobility…  While the final role – control of the air – is being achieved by their ground-based air defence systems.’

• ‘Larger air mobility – big transport aircraft – has been denied to both sides by the surface-to-air threat.  Helicopters and transport aircraft can only operate a great many miles from the front lines, because of modern surface-to-air missile systems, and the vulnerability of logistics hubs to attack. Logistics are all having to move by land.  There is no reason to expect this to be different in a major conventional war in which the UK was directly participating. Perhaps the future of air mobility is uncrewed, where more risk can be taken with delivery.  Certainly … uncrewed systems could do much more for logistics than they are currently.  Overall, Ukraine’s success with relatively low-cost drones holds up an unflattering mirror to our pilot-dominated, expensive NATO air forces.’

• The need for training of pilots is a major bottleneck that drones dont’t have.

• ‘There are more cost effective ways to fight an air war than deploying jets, for example, through a mix of surface-to-air weapons, lower-cost drones, space-based surveillance (commercial and otherwise), the use of precision-guided artillery, cruise missiles and long-range fires’.

• ‘It is almost impossible to conclude that the war has proved that current air combat technology still requires a highly trained human sitting in a cockpit.  The related assertion that Air Forces have been incautiously racing towards a fully autonomous pilotless future is equally open to contest – there is a reasonable argument that uncrewed systems have been severely underinvested in for decades by pilot-led Air Forces.’

The fact that the MoD is spinning that UKR shows that drones may be less important tells you all you need to know about the disastrous incentives inside MoD and the services. Also NB. we were told in No10 that tests of drones had been cheated over the years so they could keep claiming FCAS should be ‘optionally manned’. The evidence supposedly supporting ‘optionally manned’ is classified at an extremely high level and is many years out of date. I discussed with the then Permanent Secretary (now NS advisor) having this evidence reviewed including by top ML experts. I bet this has not happened.

Freedman update on UKR

I won’t go further into UKR generally this week but I see Lawrence Freedman says in his latest blog:

Put simply, Ukraine needs a breakthrough in the next couple of months. The risk for Kyiv is not that Western governments will suddenly terminate financial and military assistance but that they will start to explore with Moscow peace terms that would fall far short of Ukraine’s objectives.

Freedman says that the best sketches of what a negotiated deal look like are also ‘totally unrealistic’.

Even if this represented a desirable outcome (in my view it would be a recipe for continuing and chronic instability in Europe) it is not going to happen. [NB. As I said before, ‘chronic instability in Europe’ is the future anyway for years, it’s wrong/unrealistic to frame the desired goal of ‘UKR wins’ as also implying ‘instability ends’!) As I explained in an earlier post Ukrainians will not accept any deal that requires them to ‘relinquish considerable territory’. Yet though such a deal would represent at least a partial victory for Russia, it is also not something that Moscow is proposing.

One of the curiosities of the current situation is that while one might assume that Moscow would jump at the chance to secure tangible gains, especially as these could be jeopardised if Ukraine makes military progress, it has shown no interest in doing so. Instead of assuming that Ukraine is the only reluctant partner in negotiations and that Russia is waiting to sit down and talk we therefore need to look at what Russian leaders have actually been proposing…

After a period in which it seemed as if the fight was stuck in a groove and threatening to turn into a long attritional slog it may be about to enter a dynamic period. If this does not happen, and there is little movement, the harsh weather of winter will be matched by tough choices about the future conduct of the war.

Nutshell: Russia is going to squeeze Europe on energy over winter, UKR needs to show progress or else Europe may collapse and start looking for a deal.

In his description of this core issue, LF now sounds quite like what I’ve been saying.

I’m not following the military side closely but my hunch remains that UKR will not push Russia back to January borders by winter and by then Europe will be in serious trouble with voters desperate over their bills…

Growth and business tax / investment

One of the things on our 2020 list was to bring in a system of ‘full expensing’ for businesses, i.e business can write-off any capital expenses upfront in full. A brilliant adviser to Sunak, Mike Webb (who was also the critical person on OneWeb), pushed it hard.

HMT did bring in a temporary 130% super-deduction. But the original idea would be a permanent 100% deduction. The US adopted this system in 2017. Research suggests it is a strongly pro-growth change.

I don’t know why it’s still a proposal instead of done. Normal HMT conservatism? Example of fiscal rules pushing against sensible policy?

I haven’t noticed any of the candidates saying ‘I’ll do this’. Why not?

Sam Dumitriu says the new PM should fix business rates by transforming rates into a business land-tax: 

Not all pro-investment changes cost the exchequer. Few taxes inspire debates as intense as business rates, but the problem is that the debates focus on the wrong issues. Instead of focusing on levelling the playing field between bricks and mortar and online, we should be looking at how manufacturers who invest in new plants and machinery are penalised by higher rates bills. If rates were levied on underlying land values instead of property values, it would ensure that manufacturers struggling with high energy costs aren’t punished when they install a new energy efficient cooling system. As land values are highest in London and the South-East, the change would have the added benefit of rebalancing the UK’s economy.

Persuasive but I don’t understand this area.

An absolute no-brainer seems to be slashing the high marginal tax rate of the UC taper (55p/100). Again I’ve not seeny any candidate say this.

[Ryan Bourne says this, which I don’t understand. All I mean is why can’t the marginal tax rate be lowered (given one doesn’t care about the ‘cost’ to HMT)?]

Ryan Bourne @MrRBourne

@Dominic2306 not sure lowering the taper necessarily a "no brainer" - the lower the taper, the more people who face *a* taper. You lower the highest marginal tax rate but extend the number of people under that elevated marginal tax rate further up the income scale. + cost obviously.

Central banks and inflation

Dario Perkins blog.

• ‘Officials feel utterly embarrassed about their “transitory” call in 2021, and you should never ignore the human element in policymaking.’

• ‘The authorities are prepared to suffer a recession now because they fear a much worse recession in the future if price stability is lost.’

• ‘The BIS’s latest report on the danger of a “new paradigm” in global inflation clearly strikes at central bankers’ worst fears. It explains, clearly and with lots of fabulous charts, why the authorities are suddenly more hawkish than anyone could have imagined 12 months ago.’

• BIS thinks high inflation becomes self-reinforcing.

• Maybe BIS is wrong but ‘it is clear that the BIS message resonates with central banks. They believe monetary policy is what “anchors” the low-inflation regime and if the authorities lose control, the “costs of transitioning away from the high-inflation regime would be extreme”. Rather ominously for financial markets, the BIS concludes: “Central banks fully understand that the long-term benefits [of safeguarding price stability] far outweigh any short-term costs – credibility is too precious an asset to be put at risk.” This suggests that a policy pivot is far away…’

Remember last October I said — No10/HMT/central banks are saying inflation is transitory, on general principle we should assume the experts are wrong again.

I’ve no confidence in the Bank of England governor. It was clear from the start he was a dud. I tried to torpedo his appointment and have someone like Haldane appointed but, having torpedoed Saj’s previous candidate, Boris was too feeble to annoy Saj again. Such is how we are governed, MPs hopeless at ‘difficult’ conversations agree on inoffensive duffers for crucial roles.

How much expertise is there really in CBs if they make such errors as ‘transitory’?

An interesting blog on the last euro crisis and what Draghi did to get over it.

The same author wrote recently on the new euro crisis underway and the possibilities for a ‘a full scale run on Eurozone sovereigns’ starting with Italy. There are ideas to handle the problems but they all collide with the fundamental lacunae in the euro’s creation and the political problems these create:

The political battle is likely enormous, however. Any viable solution hands huge fiscal power away from member states to an new European debt agency.

It is always the role of the ECB. It determines the fate of nations. How can it address the risk of a sovereign run and at the same time tighten monetary policy? I can see no alternative to some form of direct spread-targeting…

A policy along these lines seems unavoidable, or there is a high probability that sovereign runs ensue…

But perhaps the main risk is that the ECB becomes the market-maker of one of the world’s largest bond markets, BTPs. This is a risk worth taking. The alternative is too grim to contemplate.

CHARTS

Eurozone gas price, Germany 1-year ahead power

EUR natural gas, sustained monthly average rises to records

French power prices fresh high

Cash levels at highest levels since 2001

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