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12 July 2017

How competition can save the West

by Robert Colvile

Originally published by CapX.

What are the biggest challenges facing the West? Inequality? Debt? An ageing population? Disillusioned young people? Russia? Terrorism? Cyber-crime? The rise of China? Donald Trump? A lack of basic moral fibre?

Last Wednesday, CapX was one of the partners supporting the latest Atlantic Dinner, a series of high-level discussions about the opportunities and threats we collectively face. And inevitably, much of the talk from the guests concerned the many things that seem to have gone wrong.

Coming the day after the Margaret Thatcher Conference on Security, in which Henry Kissinger and others analysed the many troubles confronting the world in general and the West in particular, it meant that the last few days have been accompanied (at least for me) by a background drumbeat of civilisational doom.

But there’s actually a case that the answer to the many of our problems is surprisingly simple.

CapX’s guest of honour at the dinner was Lord Lawson of Blaby, the former Chancellor (whom we interviewed for the first episode of our podcast, Free Exchange).

He pointed out that in many respects, the world isn’t in such a bad place at all. The rise of China, for example, is the result of millions upon millions of people being lifted out of poverty – as part of a process that has seen global inequality, and global suffering, shrink markedly.

But Lord Lawson made another point. In explaining to the table why he believed in Brexit, he said that for him, the key benefit wasn’t free trade – a good thing though that is. It was the ability to carry out the kind of deregulatory reforms that will spur enterprise and job creation, which the EU currently prevents.

One of the questions that vexes diplomats and strategists is how to defend and preserve Western values. Often, they refer back to the great leaders who championed them – to Reagan, who insisted (as Lord Saatchi wrote recently on CapX) that “America must never allow itself to be put in a position of moral inferiority”. And to Thatcher, who insisted that the West “rests upon distinctive values and virtues, ideas and ideals, and above all upon a common experience of liberty”.

But it’s not just Thatcher and Reagan who talked about values. Gordon Brown did too. The reason they are remembered, and he isn’t, is their impact on one value in particular: the long-term rate of growth.

In the 1980s, the West had confidence not just because it had inspiring leaders, but because it was living up to its economic potential. And I couldn’t help reflecting, as I listened to the speakers at the Atlantic Dinner – Kenneth Weinstein of the Hudson Institute, Baroness Neville-Jones, representatives of the New York Times, Youthonomics and other distinguished voices – that there’d be a lot less talk about threats to the West if growth were licking along at 3 per cent again.

Which brings me to one of the other issues that dominated the conversation – and indeed was the theme of Henry Kissinger’s speech to the Thatcher conference. Namely, the role of the nation-state.

There is a feeling among many people that the nation-state is passé. Almost embarrassing. Support for nationalism is collapsing among the young, they point out: even backing your national football team is far less popular than it used to be (and not just in England, with its sorry tournament record).

It’s not just a young thing, or a left-wing thing, or even a Remain thing. The great challenges of the age, many people argue, can only be solved by concerted international action. Want to confront Putin? You need a united Europe and united West. Want to enhance trade? You need supranational rules and supply chains and courts. Want to tame the tech giants? Only pan-national regulators have the muscle to stand up to them.

But here’s the thing. The reason the West became rich in the first place wasn’t because of a sense of shared purpose, but because of competition. In the great stagnant empires of the East, innovation was discouraged. In Europe, it was embraced – not because it made us richer, but because it enabled one kingdom to get better at conquering the others.

A better way of putting this than “competition”, perhaps, is “diversity”. With its multiplicity of polities, Europe – almost accidentally – ended up trying new and different things. Some didn’t work. Others were crushed by neighbours. But others – in places like Venice or the Dutch Republic – succeeded beyond their inventors’ wildest dreams. And when that Dutch model was exported to Britain in the Glorious Revolution, arguably the most successful corporate takeover in history, it sparked the most extraordinary explosion of wealth the world has ever seen.

Which brings us back to Lord Lawson. It was his efforts to deregulate Britain’s economy, alongside Margaret Thatcher and many others, that brought us several decades of sustained prosperity. And the problem with regarding such efforts as simple 20th-century solutions in a complex 21st-century world, as some do, is that a system based on international cooperation – such as the EU – offers even less little scope for any kind of flexibility and experiment.

In short, rather than embarking on a shared Western endeavour to preserve (or restore) our collective greatness, why don’t we focus on what we know works? Namely, letting each country – or, indeed, each bit of each country – try new and different ways to make its own economy grow. That process should naturally have a bias towards the principles of free markets and free trade, because we know, from example after example, that they are the best way to deliver prosperity.

In a world of grand challenges, it is always tempting to insist on grand solutions. We might be better off instead with a little more healthy competition.

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