David Henderson: Plus Ca Change...

THEN: In 1985 I gave the BBC Reith Lectures, and the text formed the basis for a book published by Blackwell in 1986 entitled Innocence and Design: The Influence of Economic ideas on Policy’. In the book, I argued that there were ‘extensive areas of policy in which the beliefs and perceptions that influence governments and public opinion alike are unrelated to the characteristic ways of thinking of professional economists, and have changed little down the centuries. These are the ideas of do-it-yourself economics’ [DIYE].

Chapter 3 of the book features energy policies in particular. It is headed ‘Needs, Centralism and Autarchy’. Here are a few short excerpts from it.‘Unreflecting centralism [which I identified as one of the characteristic elements of DIYE] has two mutually supporting elements. One is the disposition to assume that outcomes have to be planned and decided by governments. Second is the tendency to think of governments and states as the principal, or even the only, actors on the economic scene, and to attribute to them roles and functions which are not necessarily theirs’ (p. 36).‘A few years ago ... a former senior British government official, Peter Vinter, observed that “As a nation we have not yet succeeded in setting up an effective nuclear reactor construction company”. I think his point is a fair one, and perhaps he would say the same today.  But why should it be the collective responsibility of “we as a nation” to establish a nuclear reactor construction company? Why should such a company, if indeed there is a place for it, not emerge from the impersonal competitive selection process of markets...?’ (p.38)‘One reason for centralism, which applies in energy policy and a number of other fields, is the uncritical acceptance of essentialist ideas. In the case of energy, each country is perceived as having needs which must be met, and each national government as having an inescapable responsibility to anticipate and provide for those needs. In the more rustic treatments of these questions, reference is made to a possible ‘energy gap’ which the government has to ensure is bridged. Even in more sophisticated official presentations, governments usually appear as indispensable providers. Here again is David Howell, from his period as Secretary of State for Energy:

“The Government, in my view, must ensure that we have enough energy in the future to heat our homes and power our industries. Failure to achieve this could mean lower living standards for us all and a very severe constraint on our society”.

So essentialism leads naturally to unreflecting centralism­. Also here in its place on the DIYE stage is Micawber’s dichotomy: either we-as-a-nation have enough energy, or we do not. But who is to say how much is enough?  You will search in vain in official White Papers and statistical publications for figures showing national energy needs, for the simple reason that the concept can be neither defined nor measured. If you ask someone who uses the term what are the current or prospective energy needs of the United Kingdom, the only answer you will get is a figure which relates to demand – in other words, to actual or prospective purchases of energy products. Demand is identified with needs, for no better reason than that energy, like food, is cast in the [DIYE] soap opera script as essential’. (pp. 40-41)NOW* Here is the Department of Energy and Climate Change, as of September 2012. The opening sentence of a covering note for an official animation entitled ‘The Energy Challenge’ reads:

“As a nation we need to decide how the UK is going to power itself”

* On 27 March, 2013, in launching the government’s Nuclear Industry Strategy report, Vince Cable, Secretary of State for Business, Innovation and Skills, said that

“nuclear power has the potential to play an increasing role in meeting the UK’s future energy needs”.  

THEN

In May 1976 I gave an inaugural lecture at University College London. I offered a mid-term cost-benefit analysis of what I termed ‘two British errors’: one was the Concorde programme, and the other the UK Second Nuclear Power programme.  In a subsequent radio talk, I suggested that these might be seen as ‘two of the three worst civil investment projects in the history of mankind’. Since then I have learned of other ventures which could be viewed as equally ill-starred; and one of these is the British fast (nuclear) reactor programme. The programme was finally brought to an end after nearly half a century of fruitless public expenditure, leaving behind it only further heavy and still-continuing commitments of expenditure for reactor decommissioning and site cleaning.In the Reith Lectures, I said:

‘The history of British nuclear power programmes over the past 30 years [from 1955] provides a depressing example of unreflecting centralism in action – stoutly reinforced, I might add, by other forms of DIYE’ (p. 39)

From today’s perspective, 30 years appears as too short a period to quote.

Over the decades, successive nuclear programmes were adopted by both Labour and Conservative governments, and secured broad cross-party support.NOWIn view of this history of misguided official ‘strategies’ and costly failures, the following claim came as a surprise. It is made in the opening paragraph of the Ministerial Foreword, signed by Vince Cable and Ed Davey, to the just-published report, Nuclear Industrial Strategy -The UK’s Nuclear Future. (Italics added).

‘The UK was the first country successfully to develop, deliver and safely operate nuclear power stations, meeting all the scientific, technological and industrial challenges that this involved. We can now look back on nearly sixty years of successful and, above all, safe exploitation of low-carbon nuclear power which has also enhanced our energy security’.

It is to be feared that the officials and ministers who chose and approved this form of words actually believed it to be true.THENThe extent of past failure in British nuclear power programmes largely resulted from the fact that responsibility for those programmes rested with government departments and public corporations: in particular, what was then the Atomic Energy Authority has a lot to answer for. A continuing feature was the uncritical acceptance, by governments, media and public opinion, of official scientific advice.NOWPrivatisation of the electricity supply industry, and stripping the Atomic Energy Authority of virtually all its former functions and powers, have made it impossible for the mistakes of the past to be replicated.  However, current and prospective policies to deal (supposedly) with climate change have created a whole new dimension of state involvement and direction. Old-style unreflecting centralism still holds sway; and once again, it is linked to uncritical treatment of ‘the science’. But these elements are now reflected, not in ambitious investments by public corporations, but in an array of costly interventionist measures designed to shape and direct the conduct of households and private businesses.The measures in question, and what is thought to be their rationale, have been endorsed by past Conservative and Labour governments, as well as the present Coalition. They have secured continuing cross-party support.David Henderson30 March, 2013Professor David Henderson was formerly Head of the Economics and Statistics Department of the Organisation for Economic Cooperation and Development (OECD) in Paris. He is the chairman of the GWPF's Academic Advisory Council.