The only problem with central planning is that it is always done badly

From Chartbook 252 How "Broken Britain" might reconverge: Notes from the Economy 2030 Inquiry. by Adam Tooze.  

I enjoy Tooze's Chartbook for its unusual focus on data behind ideas but I had not ever quite focused on how much of a central planner he comes across as.  This article is a useful summary of the noted report and, more broadly, the crisis of low productivity in Britain over the past several decades.  Tooze comes across very much as part of the Mandarin class and as someone whose clear intelligence is undermined by the bromides and shibboleths of the public intellectual.  

His diagnostics and recommendations in this piece reek of 1970s British central planning.  Focusing on capital flows and human capital deficits and tactical policies where the government can direct investments to address market failures.  

And there is no doubt that the governing class of Britain since the second world war has been distinctly subpar.  Other than Thatcher's efforts, virtually every government has been at best focused on treating trauma wounds (loss of empire, demotion from world power, loss of manufacturing base, disinvestment, etc.) with bandaids.  

While Tooze correctly acknowledges low productivity as the core issue of Britain's economic ills, his diagnosis of why there is low productivity is shallow, focusing on tactical government policies rather than on strategic systems.  

Thatcher's efforts at structural market reforms (privatization, deregulation, etc.) were undermined by succeeding Conservative leaders and completely reversed by New Labour in the late nineties, the beginning of the most recent sharp reduction in productivity as acknowledged by Tooze.  

If we compare the UK not to Italy, but to the more high-performing European economies and the US, deconvergence amounts to c. 20 percent. The break came not with Brexit but in 2008/9 under New Labour, with the financial crisis. If real wage growth in Britain had continued on the pre-crisis trend, earnings would now be almost 40 percent higher than their current level. 

And, as Scotty used to say, "If my grandmother had wheels, she'd be a wagon."

Here is where Tooze comes off the rails.  

As to the underlying causes, though there is a lot of talk in Britain about a surfeit of education, in fact Britain suffers from a lack of human capital, especially in middle and lower skilled occupations.

Human capital formation is not encouraged by the fact that wages are low and the premium commanded by graduates everywhere outside London has fallen, signalling that the local economy cannot make particularly good use of high-skilled labour.

[snip]

If we ask why labour productivity is not higher, the obvious culprit is inadequate investment. Overall the British economy has long lived with low rates of investment in both the public and private sectors. So this factor will not by itself explain the emergence of stagnation since 2008. But it compounds all of Britain’s other problems. At some point the chickens come home to roost.

[snip]

Given the massive investment in and expansion of higher education in Britain in the 2000s by both Blair and Brown, it seems surprising to hear about a lack of human capital.  The investment was indisputably there.  Why was it not translated into valuable productivity.  Almost certainly because it was a huge malinvestment by central planners.  My vague recollection is that Britain went from 5-10% receiving a college education to nearly fifty percent in the space of a decade.  

Too many students taking on too much debt to receive too many degrees in low-quality education credentials in too many fields with low demand.  That will bring down your productivity.  That is what seems to have happened as best I can tell from the data.  

Inadequate investment was not the problem.  Bad investment in education was the problem.

Compounded by another New Labour set of policies Tooze does not discuss.  Massive immigration, still a crippling issue for the British economy today.

An influx of cheap foreign skilled labor can indeed be a boon to a national economy under the right circumstances.  But Britain in the 2000s under Labour was stagnating.  Opening the borders to large immigration undermined the entire market price signal mechanism which guide individual investment decisions.  

Blair has indicated that he opened the borders for electoral reasons (expected immigrants to vote for Labour) rather than primarily for economic reasons but the economy is where the open borders impact has been the greatest.

Coming our of the deindustrialization and economic doldrums of Britain in the 1970s-2000s, Britain already suffered from poor labor market effectiveness.  Thatcher's policies of privatization freed up massive amounts of labor from low productivity (indeed, negative productivity, i.e. subsidized) activities such as coal mining into a labor market that was already anemic.

Blair and Brown then dealt the second blow by opening the borders to the legendary Polish plumber.  Why invest in a career in productive and profitable, plumbing, electrical, and mechanical work (remunerative blue collar labor which costs money to train in) when those skills could be cheaply imported from the continent?  

A generation of destroyed blue collar labor market was extended to a second generation of destruction by New Labour.

The knock out punch was then delivered with the higher education New Labour policies.  Suddenly, standards were reduced so that anyone could get a college degree but at the cost of incurring massive debt, further exacerbated by receiving degrees in programs not in demand by the market.

Britain has not under-invested in human capital.  It has two generations of misinvesting in human capital.  First through bad education policies which increased supply where there was no demand.  Then by destroying the market signaling mechanism (through immigration).  Finally by killing any entrepreneurial spark by overtaxing and overregulation all activities.  

Tooze's recommendations are to continue the central planning, just to do it better.  The reality is of course to free up the market signaling mechanism, for both labor and investment, by reducing the amount of central planning.