May 30, 2014 6:19 pm

‘The Fourth Revolution: The Global Race to Reinvent the State’, by John Micklethwait and Adrian Wooldridge

The Fourth Revolution: The Global Race to Reinvent the State, by John Micklethwait and Adrian Wooldridge, Allen Lane RRP£20/Penguin Press RRP$27.95, 320 pages

Germany’s Angela Merkel has a favourite set of statistics. The 28 nations of the European Union account for 7 per cent of the world’s population, 25 per cent of output and 50 per cent of welfare spending. The implication is clear enough. If Europe is to compete with the rising economic powers of the east and south, it will have to shrink the state.

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Philip Stephens

John Micklethwait and Adrian Wooldridge take up the theme with gusto in The Fourth Revolution. Citing Merkel with approval, they carry the baton for freer markets, further privatisation and a smaller state – with implications more radical than any likely to be considered by the most reform-minded of German chancellors.

The authors’ argument is familiar enough. The sclerotic democracies of the west are being outpaced by leaner, often autocratic, competitors. If the west wants to prosper, it should learn from the small-state dynamism of the rising rest.

The book’s opening pages are unequivocal. The rich nations – the US and Japan as well as Europe – suffer from “elephantitis”. “Supersized” government is an omnipresent nanny. “The sensible, law-abiding Englishman cannot pass through an hour”, they write, “without noticing the existence of the state.”

 

Hmmm. I must confess I have not come across the suffocating hand of government while writing this review. But, as befits the editor and management editor of a magazine as sure of its free-market liberalism as the Economist, Micklethwait and Wooldridge start with unshakeable conviction and marshal the evidence accordingly. They sometimes get carried away. An unkind description of this approach would be one of policy-based evidence-making.

Their account of the vicissitudes of government certainly has sweep, beginning with the insights of Thomas Hobbes’s Leviathan and the coming of age of European states (the first revolution), journeying through the small-state liberalism of Victorian England (the second) and lamenting the path to big government of the postwar period (the third).

The heroes are standard-bearers of individual freedom such as John Stuart Mill, Jeremy Bentham and Thomas Paine; the villains, the apostles of government-is-good-for-you such as Sidney and Beatrice Webb, John Maynard Keynes and William Beveridge.

The case is elegantly made, with big-picture philosophy and political economy punctuated by colourful detours into the world’s rising economies. We meet the young mandarins in Shanghai who plan to reclaim China’s once unrivalled reputation for efficient administration, and the medical entrepreneurs in Bangalore pioneering better, and cheaper, approaches to open-heart surgery.

As for the west, the global financial crash and subsequent recession have provided the authors with plenty of ammunition. Debt levels are high almost everywhere. Political gridlock has left the US with an unsustainable fiscal position and a chronic lack of investment in basic infrastructure. European governments are battling simultaneously large deficits and sky-high unemployment.

The success of populist parties of the right in the recent European elections would also seem to point to the constraints imposed by democracy even on governments keen to slim down the state. Ageing populations consuming more healthcare and expecting more welfare are unlikely to become any less demanding.

The authors’ evangelical fervour, however, is a distorting prism. For reasons that are not quite clear, they see the great social revolution of the 1960s as somehow the fault of big government. Many would consider that civil rights in the US, greater equality for women and homosexuals, and the assault on establishment elites advanced rather than set back the cause of individual freedom.

There is an occasional hankering after authoritarianism. Singapore, a curious but recurring favourite of small “l” liberals, is preferred over California, whose dysfunctional government provides “the ultimate example of the perils of democracy”. But wasn’t California the cradle of the technology revolution?

The authors are right that the west needs to adapt. In some cases this will mean harnessing new technology to the provision of public services and, in many, it requires a rethinking of welfare provision. But size is not everything – witness the success of Europe’s Nordic states. What matters is effectiveness.

The European voters who turned out in their millions for anti-establishment parties were neither protesting against an over-mighty state nor, by and large, demanding higher spending and taxes. The targets of their wrath were governments and an EU that had failed to protect them from economic and social insecurity.

The story of the times is not so much of the supersized state but of governments gravely weakened by the power shifts inherent in globalisation. Porous borders, sprawling multinationals, digital communications and growing cross-border trade and travel have greatly reduced the capacity of governments to provide for the security of their citizens. There is the real challenge of the age.

Philip Stephens is an FT columnist

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