I’m a great believer in it being systems which go wrong, not individuals who nominally control them. Russian style socialism didn’t fail because Brezhnev, or Andropov, were in charge, the Soviet system failed because the Soviet system was a shite manner of trying to organise the world. Pol Pot may well have directed the Khmer Rouge but that death of a third of the population or whatever was because an attempted return to rural peasantry will kill a third of the population. That it is directed to happen might well be the result of the individual idiot gaining power. But the failure is the result of what is attempted, not who is directing it.
At which point Mutti in Germany:
A masterful manager, always working from the best available evidence, and presiding over an economic powerhouse. Over the 16 years she has been in power, German Chancellor Angela Merkel has always received glowing write-ups in the international press. And yet the floods over the last weekend have highlighted a more uncomfortable truth. The German state is increasingly dysfunctional, its infrastructure is crumbling, and its economy remains rooted in the past.
Of course, any country can be hit by extreme weather. The floods over the weekend affected Belgium almost as badly, while the UK’s record is hardly anything to be proud of. And yet the scale of the devastation in western Germany is unprecedented in Europe, and comes on the back of a chaotic vaccination programme, and disastrous infrastructure projects. All of those reflect a Chancellor who has postponed tough decisions, been obsessed with controlling debt, and pursued a mercantilist economic policy that prioritises industrial exports over anything else.
Merkel can be blamed for the system, yes. But not for the failure of the system. The point being that whoever was in charge of the current German system would face exactly the same problems.
The problem can be described by borrowing from William Baumol. Who insisted there was a significant difference between innovation and invention. In his definitions innovation is the incremental sharpening, improvement, of something that already exists. Large companies, extant organisations, are often very good at this. Factories that do exist tend to become more efficient over time. No one quite knows why but they do, several percentage points a year. Peeps in them just get more efficient at whatever they’re doing. This tends to happen whether someone is driving productivity change or not.
Invention is a different thing, this is the creation of something new. This is something that large organisations (and it’s easy enough to see Baumol meaning both government and large corporations here) simply aren’t good at. Sure, it happens occasionally but more often by mistake than anything else. It’s the two deluded idiots in the garage that make the new thing that changes the world.
To borrow this. The German economy is indeed highly efficient. It has a plethora of small and innovative companies – the Mittelstand. But here’s the problem, the German economy is efficient at doing what the German economy does slightly better each year. What it’s not good at is doing new things.
That highly detailed ordnung thing, the system of bank finance rather than equity, the co-decision making with the unions and on and on. It’s just great at fine tuning extant processes. It’s terrible at even accommodating, let alone encouraging, new things.
The German economic model produces efficiency, quite so, so we cannot say that it produces stasis in productivity. But it does produce stasis in the structure, rather than the efficiency of extant processes. And, well, given that over the long term it’s the new things we do that matter, not how much better we do the old, this is something of a systemic problem, isn’t it?