In the late 1950s and early 1960s, two politicians brought new countries into being. Julius Nyerere became the first president of Tanzania, and Lee Kuan Yew the first prime minister of self-governing Singapore. The countries were separated by almost 5,000 miles of ocean but their leaders’ projects were similar. Both ruled with conspicuous integrity. Both built administrations staffed by highly capable civil servants who were powerful but accountable. Both worked to instil a new sense of national identity, which they used to persuade their citizens to accept a lean state while they invested heavily in its future.
Nyerere and Lee may have been equally competent and astute but, as the economist Paul Collier notes, they differed in the investments they made. Singapore went into finance, Tanzania put its resources into more traditional industry. This was enough to send their countries in very different directions. In a single generation Singaporeans went from widespread poverty to enjoying the second-highest GDP per capita in the world, while Tanzania slumped back into corruption and poverty. Singapore joined the developed world; Tanzania was left behind.
Britain is both of these countries. It is a highly successful services economy that enjoys the fruits of global markets, and a dysfunctional post-industrial state starved of investment and locked in a self-reinforcing cycle of decline. Both Britains have their own identity: a progressive, multicultural society, and a once-great land that has gone to the dogs. On 4 July one of these countries will vote for change, and the other will vote for Reform.
Movement between the two Britains is rare. A young man who grows up in an affluent part of London is six times as likely to join the top 40 per cent of earners as a young woman who grows up on a rough estate in Sheffield. “In terms of life chances,” writes Collier, “Britain has become one of the most unequal countries in the world.”
Who made it this way? Partly the two Britains have diverged as a result of the same economic luck that favoured Singapore and foiled Tanzania, but these effects have been magnified by the political elite. The Treasury, as Collier describes it, is both exceptionally powerful and almost entirely composed of middle-class Oxbridge graduates, hired young and tasked with taking far-reaching decisions on behalf of communities of which they have almost no experience.
Decades of allowing the country to be run as UK plc, a dogmatic insistence on business cases and the need for public investment to follow private investment, have split Britain in two. Consequently, as Collier notes, schools and hospitals in the most impoverished areas suffer the deepest cuts to funding, while public money is thrown at the areas that perform well. Such perverse outcomes are consistent with the brutal logic of market fundamentalism, which holds that if a place is deprived enough, its people will leave and their labour and capital will be allocated more efficiently elsewhere.
Were this not infuriating enough, Collier describes the devastation wrought by the Treasury’s preference for economic theory over accounting reality. The department’s “hermetic paranoia against expertise” allowed it to be easily outmatched by multinational oil companies, for example, which have for decades paid about three times as much tax on Norway’s oil as they do on the same resource taken from beneath Britain’s part of the North Sea. Norway’s finance ministry is far smaller, but it was prepared to hire 40 accountants rather than thousands of PPE graduates. In administering taxes on Norway’s oil properly, these accountants have helped to build the largest sovereign wealth fund in the world.
Left Behind is partly an account of the damage done by a phantasm: homo economicus, the rational, self-interested and perfectly informed inhabitant of economic models. No such person exists, and yet homo economicus has wielded a power beyond that of most heads of state, reshaping and dividing Britain and other countries. For Collier this is also reason to hope, however: if ideas can send a place spiralling down, they can also be the means by which they spiral up.
This is as much a book about social psychology and the power of ideas as it is about economics. Nations are always works in progress, history is never over. For an incoming government, this should be required reading.
Left Behind: A New Economics for Neglected Place
Paul Collier
Allen Lane, 304pp, £25
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