To Increase Economic Growth Simply Hang The Bureaucracy

There will be places luckier than others

The lucky places will be those - like Britain - still well equipped with a surfeit of stout lampposts. For this is the necessary equipment to increase economic growth. Two little stories to illustrate:

Meta open-sources many of its AI technologies, including its state-of-the-art Llama large language models, and public institutions and researchers are already using these models to speed up medical research and preserve languages. With more open-source developers than America has, Europe is particularly well placed to make the most of this open-source AI wave. Yet its fragmented regulatory structure, riddled with inconsistent implementation, is hampering innovation and holding back developers. Instead of clear rules that inform and guide how companies do business across the continent, our industry faces overlapping regulations and inconsistent guidance on how to comply with them. Without urgent changes, European businesses, academics and others risk missing out on the next wave of technology investment and economic-growth opportunities.

Now of course that’s Zucks talking his own book. But as our own ex-Deputy Prime Minister points out:

Unfortunately, our plans to train our AI models to understand the EU’s rich cultural, social and historical contributions remain paused while EU regulators remain unable to agree how the law should be applied. As Mark and Daniel Ek, CEO of Spotify, recently warned, the EU risks falling behind because of incoherent and complex regulation

Regulation slows things down. That’s the important part to grasp here. And we need only that too. Regulation slows things down.

We also get this from Elon Musk’s SpaceX:

The Starship and Super Heavy vehicles for Flight 5 have been ready to launch since the first week of August. The flight test will include our most ambitious objective yet: attempt to return the Super Heavy booster to the launch site and catch it in mid-air.

This will be a singularly novel operation in the history of rocketry. SpaceX engineers have spent years preparing and months testing for the booster catch attempt, with technicians pouring tens of thousands of hours into building the infrastructure to maximize our chances for success. Every test comes with risk, especially those seeking to do something for the first time. SpaceX goes to the maximum extent possible on every flight to ensure that while we are accepting risk to our own hardware, we accept no compromises when it comes to ensuring public safety.

It's understandable that such a unique operation would require additional time to analyze from a licensing perspective. Unfortunately, instead of focusing resources on critical safety analysis and collaborating on rational safeguards to protect both the public and the environment, the licensing process has been repeatedly derailed by issues ranging from the frivolous to the patently absurd. At times, these roadblocks have been driven by false and misleading reporting, built on bad-faith hysterics from online detractors or special interest groups who have presented poorly constructed science as fact.

We recently received a launch license date estimate of late November from the FAA, the government agency responsible for licensing Starship flight tests. This is a more than two-month delay to the previously communicated date of mid-September. This delay was not based on a new safety concern, but instead driven by superfluous environmental analysis. The four open environmental issues are illustrative of the difficulties launch companies face in the current regulatory environment for launch and reentry licensing.

Regulation causes delay. Pissant regulation causes extensive delay even.

And now something that should be obvious but isn’t. Economic growth is doing new things. Or, at least, in a market economy that’s what most of economic growth is. As in that Bob Solow estimate, last century some 20% of market economy economic growth came from just doing more of the same old thing. Digging up more rock to make more iron to make machines to dig up more rock. 100% of Soviet growth came from the same process. More inputs being used to do more of the same ol’, same ‘ol.

The other 80% of market economy growth came from productivity improvements. That’s doing new things, or doing old things in new ways. That’s the bit that regulation can - will - slow down if you need to gain permission to make the changes.

The speed of economic growth is, therefore, the speed at which people may do these new things. Of course, some of it will be the speed at which people wish to do new things. But equally some of it will be the speed at which people are allowed to do new things.

OK, so, what’s one of the big complaints at present? That economic growth is too slow. That is, the speed at which people do these new things, or old things in new ways, is too slow. Because, as above, that’s what economic growth is.

The bureaucracy, the regulation, is specifically slowing the growth by increasing the time taken to do something new. No, it’s not possible to claim that it still happens therefore it doesn’t matter. It happens more slowly - therefore growth is slower. Which is exactly the problem of course.

Almost as an aside, if we got back to 3% per annum real GDP growth - those halcyon post war days - then all of our grander economic problems would be solved. The national debt as a percentage of GDP would start to fall like a stone. Tax receipts are heavily weighted in favour of the extra bit of GDP after all. The marginal tax take on the last £ of GDP, or of the new £ of GDP, is very much higher than the average tax take across all GDP after all. We’d then be able to afford pensions and winter heating payments and all the rest.

It’s bureaucracy, bureaucrats, stealing that bright future from us.

So, welcome to our new political overlords.

You know it makes sense.