Comment: What the UK can learn from the Chinese approach to infrastructure
Professor Sir Keith Burnett, Vice Chancellor of the University of Sheffield, explores how Friedrich Hayek's economic theories on markets and personal freedom can help us understand how best to meet the nation's industrial and infrastructural needs.
by Professor Sir Keith Burnett, Vice-Chancellor of the University of Sheffield, published in The Financial Times 14 September 2015
One night in 1942, a man sat vigilant on the roof of King’s College, Cambridge, tasked with scanning the skies for German bombers.
The lookout, a 42-year-old man, was well acquainted with the tyrannical form of political organisation Britain’s enemies wanted to impose. Friedrich Hayek, who as a young man had served on the Italian front in World War One, had then returned to Vienna to find his hometown devastated by crippling inflation.
Hayek’s experience was that centrally planned economies, such as Vienna prior to Anschluss, not only led to hyperinflation, but made them a target for totalitarian rule, as Austria’s eventual Anschluss with Germany proved. His searching critique, The Road to Serfdom, published in 1944, would go on to inspire a generation of economists and politicians.
The question is whether, by reaching a public consensus on the industrial and infrastructural needs of the nation – a common purpose – we are taking steps down the low ‘road to serfdom’ or actually developing the undergirding conditions in which markets can provide consumers with what they need at a fair cost.
However influential Hayek continues to be, glib, present-day readings of his words ignore the lens through which he examined the specific social conditions of his time. To apply the same lens without being situationally aware would be catastrophic.
Those who reach too quickly for a market approach, but only go halfway, mistakenly attribute our markets with the power to redirect the resources we need, dulling our senses to impending problems.
This is reflected in today’s landscape, defined as it is by short-termism and a tendency to delay the procurement of the major infrastructural projects our country needs, as a result of an abandonment of long-term planning to the free market.
Hayek concerned himself not solely with economics and markets but with the freedom of individuals. He promised that the free market would deliver what the consumer needed at a fair cost – energy, transport and other infrastructure are vital for this.
In this context, I admire China’s approach to infrastructure investment, for in their economy there is no fear of taking the risks that are needed to get major projects off the ground, in addition to the reliable and committed investors to fund the work in the long term.
The pay off is that today you can travel aboard the Shanghai-Beijing high-speed railway, which was completed within four years. Yet closer to home, it will be 2026 before one of our 225mph trains reaches HS2’s terminus in the North of England.
Similarly, we have reached the point where no consensus can be reached on the right way to equip ourselves with the next generation of power-generating capabilities, as EDF’s protracted and far-reaching search for investors in its delayed Hinkley Point C development shows.
Despite the best intentions, policy-makers’ short-term approach can all-too-easily endanger the quality of the services they are trying to improve.
The open democratic process has historically prevented us from creating a completely free market for the NHS, for schools and universities and for our defence capabilities. Government is forced by public opinion to move away from a free market and to speak disingenuously instead of ‘consumer choice’ mixed with huge doses of regulation – state intervention by another name.
Politicians are left trying to control the speed of the car by hanging on to the needle, in Hayek’s words. So begins the descent into control, endangering freedoms and security of the nation.
Governments cannot govern by regulation and continue to claim that they are serving the consumers’ free choice.
But let’s expand on that; in some instances, governments can only serve consumers’ free choice by committing to major projects through central planning. What we can learn from China is that economic growth and civil prosperity cannot be delivered without tasking private companies with major infrastructure projects.
In order to achieve this, we need to be fearless. As Hayek noted, the security and happiness of our nation and its peace with our neighbours hangs in the balance.