The British state is suffering from a crisis of legitimacy. This is not a theatrical claim, but the inevitable conclusion one reaches when examining the foundations of its authority. While its legitimacy is not lost, it is clearly diminished – especially when compared with the confidence of the early 2000s or the 1950s (before Suez).
A legitimate state rests on three foundations: a clear vision of what it exists to do – and what it should leave alone; decision-making that is reasonable and perceived to reflect the will of the people in an appropriate way; and a continuing, demonstrable belief, repeatedly confirmed, that the state and its institutions are effective – that things work.
These conditions are not met today, for three main reasons. First, the institutional architecture of the British state is very old. Any system is subject to a natural tendency towards disorder unless it is continuously renewed with fresh energy – the second law of thermodynamics applies to the world of politics as well.
Second, the complete decentralisation of the production and consumption of news and other forms of information now stands in stark contrast to a highly centralised state. Any system – in nature as in politics – must match the complexity of its environment to remain effective. The British state, by no means alone in this predicament, is plainly failing to do so. The first law of cybernetics, or Ashby’s Law of Requisite Variety, applies here, too.
Third, the great financial crisis of 2007-09 not only terminally discredited the ‘State as Computer’ – the model of government that sought to regulate private activities in pursuit of public ends rather than let the latter be one natural consequence of the former – but also exposed deep-seated structural weaknesses in the British economy that high leverage had long concealed.
A very old, highly centralised state has since met its reckoning because in a period of low growth, representative government, subject to adverse selection when we wish to hold it accountable every day rather than every 4-5 years, has become less compatible with the real-time demands for participation by a more decentralised electorate. This tension is made more acute by the long-lasting and painful economic consequences of the global financial crisis. They have raised the financial stakes in a battle over the true source of sovereignty in the British state.
What is surprising is how many critics of the ‘dysfunctional British state’ seem to believe that if only different people – better civil servants, smarter politicians, perhaps they themselves – were in charge, the ship could be steered back on course. Perhaps this is less an argument than a reflex – the conservatism of critics reluctant to give up their belief in the eternal solidity of British institutions, coupled with a rather generous view of their own capacity to lead.
In truth, this moment offers an opportunity to reimagine the role and structure of the state to address the three origins of its crisis of legitimacy. Replacing politicians is not enough; we must also change the machinery of the state – what it looks like – so that it can perform its redefined functions more effectively.
To begin with, we need to clarify what the state is for. It should do a few things well, rather than many things badly. Such a functionally small state would focus on managing extreme risks in three core areas: providing a world-class education throughout people’s lives; operating an integrated health and social care insurance system (yes, you read this correctly: an insurance-based system); and running a long-term investment programme to generate retirement incomes from high-value scientific and technological businesses.
These programs would involve, in whole or in part, direct co-investment by its beneficiaries via hypothecated funding structures – health & social care insurance contributions, for example, or retirement income contributions. Critics of ring-fenced funding arrangements have long ignored the political benefits of such programs. It is worth reconsidering them as an alternative to the ‘one-pot-of-money-for-everything’ model that has long defined the British fiscal state.
The nature of these three core areas of state competence – education, health and investment, all complex, idiosyncratic pools of information and service requirements – call for maximum decentralisation in provision. If legalistic ultra-centralisation has been the problem, it can’t also be the solution. A programme of reform should begin by decentralising decision-making, funding and accountability – granting smaller ‘mini-states’ genuine fiscal autonomy and allowing experimentation in service provision, regulation and taxation.
The task of the centre – call it the ‘Maxi-State’ – should be to provide reinsurance capital to these mini-states and manage certain extreme risks and those parts of the investment program that benefit from the economies of scale of a centralised organisation. Alongside such a distribution of power, this new state would also reorganise many of its regulatory functions – the bodies that today combine legislative and executive authority in a way that is often difficult to trace back to their democratic source in parliament. Instead, bespoke self-insurance structures should become more common: arrangements in which firms assume primary regulatory responsibilities and stand behind it through industry-wide mutual guarantee schemes. A banking system operating without the backing of the state, but almost certainly its own mutual deposit insurance, would be an obvious candidate; a liberalised construction and planning system another.
A more decentralised state of this kind would require a reconfiguration of parliament to make it more legitimate and representative. This could be achieved by making the House of Commons the sole chamber, and by introducing an electoral system that combines first-past-the-post and proportional systems, giving each citizen in effect two votes, one as residents of their own regional ‘Mini-State’, one as citizens of the United Kingdom, the ‘Maxi-State’. Parliament constituted in this way should operate as a genuine legislative assembly, especially if it – and not the government – is in control of the order book. This would rebalance the power between the legislative and the executive (for those areas not delegated to the regional Mini-States) and ensure a more sophisticated a form of representation.
A second reform would be the introduction of proactive referendums – mechanisms allowing citizens to overturn or propose new legislation, provided sufficient support is secured for their initiative. If the current crisis of the British state stems in part from a mismatch between authorisation, representation and participation, then such referendums would give people the chance occasionally to act as if they were the state, bringing these three dimensions of the management of power into a more balanced equilibrium.
Such a state would have a clearly defined purpose and a good, effective decision-making process. It would be more effective for that reason. A few other changes to how the state is funded could further strengthen its effectiveness – by supporting growth – and therefore its legitimacy. Replacing income tax with consumption taxation, corporate profit with revenue taxes and property with land value tax, would not only support large-scale capital investments – the single most-important economic imperative for the future, especially in the UK – but also reduce the need for an expansive revenue-management apparatus.
The reward for such clarity of purpose and effectiveness would be real, substantive legitimacy – the foundation of any state. This new state would form a more intricate and decentralised web of decision-making and authority – one more attuned and responsive to a decentralised world. Those who believe that the defining feature of sovereignty is undiluted decision-making power need not worry: such authority would endure, but it would generally be more widely distributed, just as the state’s citizens are. In matters that demand unity – war, foreign policy, other national emergencies – it would remain firmly centralised.
I believe such a state would deliver higher growth and more value to its citizens than the centralised version which has served Britain for a long time. Yet times change, and it may now be time to reconsider a machinery of a form of government whose historical lifespan is drawing to a close.
Andreas Wesemann’s latest book, ‘After the Leviathan: A Vision for a Future State’, can be purchased here.
