Reading note: Failed State

Sam Freedman | Failed State (2024)

Sam Freedman’s Failed State is an economic history consisting 80 per cent of analysis of the Whitehall apparatus, and 20 per cent musing about his own misadventures on the inside of the British government decision making.

The result works - but you do really have to care about the ‘infrastructure’ layer of government to get through it.

Luckily for Freedman… I do.

The primary narrative of the book is that consecutive decisions throughout government have compounded over the past four decades, and the current paralysis is a patchwork of unresolved issues.

The book opens:

What I wanted to get across was that Johnson and Truss, and other recent self-inflicted wounds, were not the cause of our problems but merely symptoms. Over the past forty years a series of trends - centralisation, loss of effective scrutiny, and a superfast media cycle - have weakened our institutions to the point where any government, however full of clever or well-intentioned people, would struggle.

This is an important lead in. The Tories cop a pretty harsh critique by Freedman for most of their decisions throughout 2000’s. I kept coming back to thinking how much of this was ‘baked’ and how much was a series of poor choices. There’s a bit of column A for sure, but as we’ll find out, a hefty portion of column B.

The quirks of Westminster

It was news to me that the professionalisation of politics has been such a recent phenomenon in the UK. Freedman writes:

Yet, in reality, most MPs work far harder than they ever have before. Up until the 1990s, it was, for the majority, a part-time role, almost a hobby for some. Since then, it has transformed into a profession of its own, with extremely long and intense hours.

The days of long lunches and smokey cigar rooms with the odd nip into the House of Commons seem almost unimaginable. Trying to practice law in the mornings then fulfil the duties of a MP in the afternoon is almost comical to consider in 2025 - at least for any MP with Ministerial ambition.

Freedman notes this is probably a good thing:

Constituents get a much more engaged and active service, on average, than in previous generations. MPs work harder, drink less (though still too much) and have more of a sense of vocation.

Feeding The Grid

The infiltration of media management to the political process is ubiquitous across Western governments. However, Freedman explains in the UK there’s a formalised structure to this ‘random announcement generator’.

The Grid was first introduced by Alastair Campbell in 1997, as a day-to-day plan for coordinating government communications across different departments. But it quickly evolved into a way of controlling policy from the centre. A process designed as a way to sequence announcements to provide a steady diet of news quickly became a permanent hungry beast, demanding more and more policy from ministers and their advisors.

There’s a big part of this that becomes circular:

Increasingly the tactics have remained but the strategy has gone. It is a self-reinforcing problem. The more effort governments put into generating tactical announcements, and finding on-message ministers, the less scope there is for policy-making and long-term thinking. This panics central government into wanting more tactical announcements.

Freedman provides a personal anecdote that this policy on the run approach often comes with less than 12-hours notice:

These ‘night before’ phone calls from the Treasury are dreaded across Whitehall.

This chapter was probably my favourite of the book - for the sheer absurdity that everyone recognises, but fails to attempt to change.

What should we expect from local government?

When I first moved to the UK in 2025, I struggled to get my head around the role of local government. More specifically, ‘what on earth does Council do with all this tax they collect!?’. Turns out, a fair bit.

Local government has changed dramatically since Thatcher. Freedman writes:

The shift towards a much looser approach to managing the economy and the substantial reduction in state-owned assets created the space for central government to focus more on the delivery of public services. And here Thatcher, and most of her colleagues, felt local government was doing a bad job at high cost to the taxpayer.

This view was coloured by the increasing politicisation of local government. In 1965, only 50 per cent of councils were controlled by a party, or a coalition of parties, and independent councillors were commonplace. By the mid-1980s it was 84 per cent. In urban areas, those councils tenses to be controlled by Labour, and many cities, including London, were controlled by the Left of Labour. These authorities were explicitly included on her list of the ‘enemy within’ in a speech made to party colleagues in 1984.

The erosion of local government (often from a political agenda) is a recurring theme.

Incentives have become misaligned over time.

Running a large economy from Downing St is a fools errand that Whitehall is yet to acknowledge. Unfortunately I don’t see a revamp of the responsibility (or fiscal powers) of local government anytime soon.

Productivity (…ahh that little thing)

Calling the UK economy ‘unproductive’ may be true in a relative sense, but it fundamentally misses the spatial problem. Freedman explains:

It is well known that the UK’s productivity is lower than other large developed countries and has been for some time - it’s a common concern aired by politicians and commentators as a leading cause of our woes. It is less well known that the south-east of England is more productive than most other countries but the rest of Britain is far less so. In 2015 a worker in the south-east was 7 per cent more productive than the average German, but elsewhere they were 22 per cent less productive.

The how and why of this is complex… but Freedman assigns (partial) blame in a novel direction.

The absence of any regional or sub regional tier of government with the ability or incentives to develop local economies is a major cause of Britain’s economic weakness compared to our competitors.

Freedman continues:

But it all links back to centralisation. With local government given so little room for manoeuvre, highly unstable funding and little incentive too grow, due to their inability to create local taxes, they can’t do much to grow their economy. Nor can they improve their public services, which can draw investment and people to their area.

Blaming Thatcher era policies for today’s productivity woes seems a stretch too far. Although… there is certainly some evidence in that direction.

Outsourcing and privitisation continues (at a cost)

When punters refer to a ‘broken UK’, often their first namedrop is a privatised state service. Think hospitals, prisons, and immigration to name a few.

To be fair to the economics behind privatisation theory, Freedman develops principles for when the model can work:

The core principle of contracting out is that competition will lead to innovation and lower cost than doing it yourself. This is true enough when certain conditions are met. Firstly, there needs to be many organisations, public or private, who can provide the service to generate genuine competition on both price and quality. Secondly, it needs to be relatively easy to measure where the service you want has been delivered to an acceptable standard. Thirdly, government needs to be able to hand over most of the risk of failure - if the taxpayer is still on the hook for picking up the costs if things to wrong then the premium paid to private firms is not justified.

The trouble is, the exact things governments want to outsource (which are normally both difficult politically sensitive) don’t fit these rules. Freedman gives an example:

Take a specialist activity like running immigration processing. There is no existing market. That means there are few plausible bidders outside of a handful of huge multinational outsourcing firms whole sole purpose is to win new contracts, almost regardless of what they are for.

The above issues are compounded by the private equity model:

By 2019 three of the four largest providers - representing by themselves 10 per cent of all care home beds nationally - were private-equity backed.

And unsurprisingly, this model has a certain rhyme and rhythm:

The standard model for these private equity firms is to load up companies with debt, slash costs, and then sell on to another buyer.

This is one area where the UK needs urgent, long term, and ideally bi-partisan policy reform. Many of these services either support or protect the nations must vulnerable.

Feeding these contracts into a profit extraction machine is not only bad procurement policy, but alarming social policy too.