Welcome to the Free Cities podcast. My name is Timothy Allen and this is the official podcast
of the Free Cities Foundation.
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Look in the show notes for a link to that. Right. Today's episode, well, it's with a gentleman by
the name of Michael Minnelli. He's a British scientist, economist and accountant known for
being the chairman of ZN, I think a little better known as the Sheriff of the City of London,
2019 to 2021, and probably most notable, at least in my eyes, he was the 695th Lord Mayor
of the City of London. Yes, I know. Sorry to those of you from the US. I'm fully aware that
the American mind cannot comprehend that fact, but you're going to go and have to deal with it.
Yes, we have very old things over here on the other side of the pond. I'm jesting, but ironically,
Michael is American-born, and as you will hear, still retains much of his US accent. I met him
in London a couple of weeks ago, and we discussed, amongst other things, the City of London, of course,
It's history and governance, the concept of private cities and free zones, regulation and the roles of government and the free market.
And the best part for me, wicked problems and dilemma analysis.
Now, if you're not sure what dilemma analysis or wicked problems are, here's a quick 101 to prepare you for what's to come.
They're both strategies for dealing with problems.
Dilemma analysis is about choosing between difficult but defined moral options.
Wicked problems involve deep complexity with no clear boundaries or permanent solutions.
A couple of examples that really helped me.
Dilemma analysis.
A doctor must decide whether to respect a patient's autonomy or break confidentiality to prevent harm.
That's a good one.
Wicked problem, climate change, poverty, health care reform, urban planning, or as Michael says, governance.
He believes governance is one of the biggest wicked problems of our time.
And I think I would agree with him.
Many thanks to Michael for hosting me in the Square Mile.
The pleasure was all mine, Michael.
Many thanks also to Christopher Almanis, ANT, CB, Bullish Mike, Cousin Vinny, Dovidas, Matthias.
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That's an episode only available to subscribers.
But above all else, as a subscriber, you will get that warm, fuzzy feeling inside that you're supporting our work and mission here at the Free Cities podcast.
Many thanks to you all. Right. Time for the conversation now.
Oh, I forgot to mention I'm in Latvia.
I'm here to do another round of interviews at and around the Honey Badger Conference.
Loads of great stuff coming up.
Look out for those over the next few months. Right, the conversation is coming. You've arrived at the gate. Now pay your toll and enter the city. Find a quiet spot, sit back, relax and enjoy my conversation with Michael Minelli.
right um michael i think um i it's very hard to know where to start actually because
we are a podcast interested in free cities free zones etc etc and there are so many ways to
approach that from where you are as far as i can tell i mean i haven't done a huge amount of
delving into your backstory but enough to make me realize that there are a number of ways to
approach this i think that the the best one for me and the easiest one was to come at it from the
and i found this in very interesting that you you were the 695th lord mayor of london is that right
That's right.
Which in itself is quite astonishing.
I'm not sure I know any organisations that have 695 former people in charge, maybe.
I mean, the City of London must be one of the, on a, on a, what was certainly one of the oldest currently existing special economic zones.
Would you call it a special, special economic zone?
I mean, what was the original purpose behind the City of London?
When you go right back in history, was it something that just formed naturally, as you would expect a group of people in one place deciding, okay, we need to create a system here?
The formation of the City of London is lost to some degree in a history that is not very well recorded and also quite a bit lost in legend.
So sometimes the legends overrun the facts.
if you were to look at its age i would argue it is probably the oldest continuous democracy in the
world and the the the other crowd who might have a go and say it's they would be the tin vault in
douglas on the isle of man and there are different versions of how much this had to do with anglo
Saxons and Vikings and all sorts of craziness. But what probably distinguishes the city of London
was the ability to use the old Roman walls. So London itself was founded, if I get it right,
AD 42. The Romans come over, Boudicca burns them down a decade later, but they persist.
And the Romans leave in 400 AD. And we don't know why they left. And again, their arguments that
They were absorbed in the native population and a few leaders left and their arguments
say they kind of left en masse.
But the most important thing is that the city of London itself was unoccupied.
So the city of London constitutes just over 677 acres.
We don't have that much land, so we pay attention to 1.2 square miles is another way of looking
at it and 2.2 or something square kilometers.
Anyway, there are arguments again about that.
but the old Roman walls extended from what we would see today as Blackfriars to the Tower of London and then up and around what is called London Wall still The modern city largely follows that pattern
It's a little bit extended from outside that initial wall, but not by very much.
Are the gates Roman?
The gates were Roman, yep.
And again, arguments about the numbers of gates.
Some would say five, some would say seven.
but Alder's Gate, Bishop's Gate, Alt Gate without the other, New Gate which was put in well after the Romans, hence New, and so on.
So you've got the gate system, the walls all set up roughly around the 200s.
The Romans had a wooden palisade and then they went down to Maidstone and Kent and barges would come up and they built the wall itself.
When London was unoccupied, and the archaeological evidence is really clear, 200 years of no occupation from 400 to 600, the people such as they were were occupying what we would today call Fleet Street, which was then called London Vic or London Port.
And I don't know, to me it looked probably a bit like a science fiction film set, Planet of the Apes or something, that there were all these temples overgrown and people sort of scurrying in the walls, but they stayed out.
And then suddenly, for reasons we don't understand, they moved almost en masse at 600 in and set up 25 wards and Beatles to run those wards.
And then, again, there are arguments on this.
The earliest would claim that sometime around 640 AD, we began electing sheriffs to hang over a pair of sheriffs following the Roman consular model of two consuls.
That's one argument.
Some people would say the sheriffs came later.
And this is where I say legend overruns things.
So you'll hear things that the word sheriff comes from shire, reeve, which means a shire, and reeve is a tax collector.
But that would imply there was a king to have a shire.
And, of course, the city of London isn't a shire anyway.
Some people would point to the fact that the ancient word shire means just any kind of habitation.
So the habitation tax collector, which is probably what I would buy into, is the most likely.
But the term sheriff originates again.
Then something emerged as well, something called the Court of Hustings, which was an original meeting outdoors and related to the Saxons had a concept of folk moots that the people should get together.
And again, arguments about how often, but probably about twice a year and have a folk moot where they would sort of shout things out and talk things through.
So we've got records, particularly like of the folk moots and the Hustings going back to the 7800s.
So we know that they were around.
Then we have the concept of aldermen for the wards. Again, some history tests, and a lot of these texts were done off of legend as opposed to primary research, would say the aldermen didn't really emerge until roughly the 1100s.
Again, that seems rather inconsistent.
My best guess would be that the aldermen emerged around the 900s, and sometime around
the year 1000 to 1100, we had a court of common council.
The reason I'm agonizing over this is there's a particular date that everybody knows in
English history, which is 1066.
This is when William I enters the country, comes up to the walls of the city with, we
We estimate about 6,000 men having landed at Hastings with possibly 8,000.
Beats Harold, comes up to the city, and he meets 20,000 people on the wall.
And he decides this is not a battle he wants to fight.
And he leaves basically the city alone.
He trots around.
He actually goes, believe it or not, to Runnymede at one point.
So don't confuse that with King John.
But Runnymede was quite a popular place to stop and do your monarchical rights.
And then he goes up to Birkhamstead.
And so it's all quite a mess. But he comes back in 1067 and negotiates a treaty with the city, which we call the Charter of William I, because he never conquered the city. This then leads to a lot of tussles with the monarchy. And I'm hardly a monarchical historian, but we have a treaty of 1132, 1189. A lot of people focus on 1215, the Magna Carta, but with reference to the city, the Magna Carta merely says the city will keep all of her rights.
and that. So the concept of an independent city-state is probably far too strong,
but there certainly was enough tension that they were allowed to elect their own sheriffs,
they were allowed to raise their own taxes, but to pay them over as well, and to set a lot of the
trade rights. Now again, this wouldn't be particularly astounding, except that London
has always been 20-25% of English GDP. So you've got this very large city-state.
And you might say, well, what about York? What about Bristol? What about Manchester,
Birmingham? Pick your place. Truth is, I think that there were certain problems with these.
The English system was very, very centralized. The French system was very centralized.
And both of these systems didn't lead to the establishment of independent cities. I think
London just by virtue of size and history had been able to kind of hold its own.
which is in contrast for example to the holy roman empire the hanseatic league the northern
italian city states which were you know proper city states but you know london had its own
militia in fact we still have a police force today because we always had our own militia
and we are what's called incorporated by prescription from time immemorial that's our
legal status so we're allowed to do anything we can prove that we did before the time of
Richard the Lionheart. So that's a kind of an encapsulated version of it. But to say city-state
is far too strong to assert your rights, if they did exist even in law, would be unrealistic in
the modern era. So it is slightly anachronistic, but it does give us a little bit of freedom of
movement. And I think that's particularly important because in a centralized system like
the British system, it's actually difficult to relate to other cities. And having the city of
London, which is four times larger than the next European city, able to link up directly with other
cities around the world is a good thing and gives Britain, you know, an extra degree of freedom
and diplomacy. So to get it straight, because I like to, I want to formulate a sort of a picture
of this in my mind, was when the city of London was uninhabited for that 200 year period, were the
Were people living where they were living?
Were they also within the boundary of,
was there a walled boundary?
Like why weren't they using the city of London?
That seems to.
Well, so they were living at broadly,
basically what we would today call fleet streets.
So they kind of moved to the West
and they clearly were using a port,
the fleet to do the port work that they did.
A lot of curiosity as to whether or not
London Bridge had always been a block.
You couldn't get north of London Bridge
with the sailing ship anyway.
sorry I'm saying not north you couldn't get west of London Bridge with a sailing ship so it was
always a bit of a block there so this is a kind of a it's it's a very misty period between 400 and
600. Why weren't they using the walls? Well this is where you get into medieval defenses and again
I'm not a Tudor historian I'm not a medieval historian I'm not a military historian but the
way that it's been explained to me when you've got a walled city it's actually hard to defend if you
have sufficient numbers of people because somebody kind of just comes in the backside while you're
sort of trying to defend the front side. And one of the legends about the 20,000 people on the wall
is that the sheriffs got out old women and things and put armor on them and they were all up on the
walls roaring, you know. And from where William was, it's just a lot of people. But if he'd only
seen sort of a third of the wall occupied. He might have been tempted to split forces,
go around, divide them. And that's where it gets to become hard.
And still trying to get this vision in my mind, what was the population of London area at that
point? Are we talking about when you say that the conurbation moved to Fleet Street, for example,
was that just that area and then nothing else? Or was it a case of London was relatively sprawling,
not as much obviously anywhere near what it is today, but was it obvious when the City of London was re-inhabited
that it was a separate place to the growing city of the rest of London, if you see what I mean?
Yes, it does appear that people left London Vic by and large and moved into the city, therefore leaving it empty.
And this comes back if you look at a lot of the maps from 1066 onwards.
You'll see there's this little sliver strip connecting London with the palaces at Westminster and not much else.
So they had pretty much moved back in.
Equally, though, you're talking about very small populations here.
They could put 20 adults on the wall which would imply at best 30 as the population of the city in 1066 The city population is running at around 30 as late as the early 1500s In fact the largest city in Europe in the early 1500s
was Antwerp with about 100,000.
And do you happen to know if it was a conscious decision
to maintain the city of London as the city of London
while the rest of London as a whole grew
and became political and became, you know, all those things?
There were a number of things, particularly throughout the 1700s as the city walls started to become very, very occupied, when there were discussions with central government back and forth.
And you had various factions saying we should be the governing body of London as it expands into villages outside.
And others who said strictly let's stick to the city.
That second group sticking strictly to the city won out.
you could argue it was a bad thing. You know, a lot of people like to make land grabs. I certainly
see that on television a lot these days, you know, expanding is a good thing. There's another
argument that in a centralized nation, it's very difficult to maintain a power center in the
capital. It just leads to conflict. So take America and Washington, D.C. It's very difficult
for Washington to establish something, whereas mayors of New York or Chicago or LA can establish
positions of power.
But to have two powerful people in a single city frequently leads to trouble.
So I think restricting the city was probably a realistic outcome for London.
And you can see some of the struggles that London has had over the years with the precursor
of the GLA and Ken Livingston, and then later Boris Johnson and Sadiq Khan. These are complicated
positions when the Parliament is sitting there in the Capitol at the same time.
So what is the day-to-day relationship between the City of London and London then on the whole?
I mean, I lived in London for eight years. I worked on Fleet Street. I worked for a newspaper.
and we i it was you know i thought i knew quite a lot about london and i knew there was a for
example a private police force here because whenever we were here i was a photographer
there was and there was private land that was i remember people thinking well that shouldn't be
private land you know that's a walkway i should i should be out of you know so there's a lot of
mystery about it and the corporation of london and what it means etc etc so what is the actual
day-to-day relationship between, you know, say.
Well, I've always described the City of London as a democratic workers in residence, cooperative.
We really kind of control the area.
And so concepts of private probably don't apply in the way that you just implied, but
that they're owned by the corporation.
Yes.
But that's a body that is representing those people who work in the city and the 8,000
residents.
So those who have the vote.
And again, this is an interesting bit about as a workers' cooperative and all those structures
I spoke about, hustings and folkments and all that, the Anglo-Saxons really had this
concept of people had a right to vote.
But they focused typically on economically productive people.
So the early franchise didn't come to you because you had property, which is again a
modern notion that if I have property, then I get the vote.
In fact, there it was, well, you can have property and not get the vote.
You would be unlikely to have property though if you weren't economically productive, so
the two came together.
But you could be economically productive without property and get the vote.
And it was really the were you usefully contributing that got you the vote.
And that was kind of important.
It was still today.
So our workers have the vote.
It's a complicated system with one in 10 votes per worker as opposed to residents with a
full vote.
But broadly, that's the concept.
And I go through that because that then leads you into a discussion on this idea of public and private, even with the police force.
So the police force, I'm not trying to play games here, you know, it's there to support the workers and residents who are in the city.
It's not a private force.
Whereas, for example, we have private security forces out at Canary Wharf, but that's a private security force, not a police force.
and our police force is therefore public.
Relations.
Well, relations with London, wider London, are very, very good.
We host a government dinner every year for all 32 boroughs,
and Sadiq Khan, whoever is the mayor of London, is the primary person.
Speaking alongside the Lord Mayor,
we raise quite substantial amounts of tax money,
well over a billion on our land,
And we give, I believe last count was 90% of that goes or over 90% goes to other boroughs.
So a lot of the stuff that people say the city is very rich and it's ceremonial and it pays for ceremonies.
I wouldn't claim you're rich, but we do have ceremonies and we do have medieval funds that we're spending on that.
But actually as a local government, the local government functions.
So we are not a local government.
We have local authority powers.
But those powers are exercised well within the tax break.
We benchmark ourselves and give the surplus, because we don't have as many schools, we have very few roads.
So we benchmark ourselves in that, and that is then given into the general pot for London.
It's an often unremarked point that we actually do hand those monies out.
Personal relations, honestly, I like Sadiq Khan, and I wouldn't claim that we're talking to each other every day or anything,
but get on very well with them when I was Lord Mayor.
I understand. Well, I know that my predecessor did well, and I assume my successor is doing well.
So relations are really quite smooth because everybody wants to help greater London. We were
big supporters when Ken Livingston wanted to get his bikes going. We were enormous supporters of
Crossrail, putting in seed money to help get that going. So, you know, our interests and the interests
of greater London are almost always very closely aligned. But Sadiq has a very different set of
powers because of the way that the GLA has been constructed with the other boroughs.
Anyway, I'm probably at the end.
This is probably something for Tony Travers, who's the great LSE professional in London.
I'm fascinated because it's a bit of an anomaly, I suppose, really, to think in terms of
the city of London being a separate entity.
I think it's interesting because, like you mentioned that if you show productivity,
you have a vote here if you're a resident, right?
What do you vote on?
And do people vote?
I mean, do people who live in houses here
go and vote on things and stuff here?
Yes, very much so.
Well, the majority of it,
I can't recall us ever holding a referendum.
It was certainly not in my time, perhaps,
and some historian will correct me.
But no, you're typically voting for your common councillor,
your alderman.
This used to be an annual thing to vote for common council and aldermen are elected for
six years in kind of a senatorial type system.
In fact, aldermen are really elected for life legally, but we make a pledge that we will
stand down every six years for reelection rather than having to run a new bill through
parliament.
And we've adhered to that for, I forget, something like 30 or 40 years.
The common councilors used to be elected every single year, but that changed a few years back
Now they're elected every four years.
Again, every year was getting a bit silly.
So elections are very big in the city, and I think we've calmed them down to the point
that they now make sense.
Every four years is about right.
So that's what the residents are doing.
The wards themselves are quite tiny.
So I have in my ward of Broad Street, three common counselors.
There's a hundred common counselors in total.
So that would work out to be four per ward plus one alderman.
So three is a little bit smaller than average.
I think the largest one has 10, next one down eight.
So you can kind of get some feel for the range of voters in it.
And that roughly, in my case, equates to between around just under 25,000 workers and I think about 26 residents.
So I have what's called a business ward.
And then there are other wards where the residents are more numerous.
And so you get a flavor there.
I, of course, you know, in running for office, I'm really going on things.
therefore probably of more interest to the business person which is rubbish, crime,
bicycles that are in the way or violating the law. Obviously they'd like to have their taxes
and rates reduced but they're not onerous so that actually doesn't come up as much as you might think
it did. And then they're very interested and this is where the city begins to establish its unique
character. The workers are very interested in what we're doing to represent and build business.
What are we doing with incubators?
What are we doing with international trade delegations What are we doing on regulation and financial services or AI or whatever So they want to see us promoting the city that way The residents are
you know, typical residents. They want to make sure they're living in a clean environment. So
even as an alderman, you do quite a bit. Things like what takes up my time, rubbish. A lot of my
time is taken up on noise problems, light problems, people blocking light on each other.
I've had issues to do with broadband, broadband, broadband, you know, to be the world's capital
city and to have what I think I would describe as mediocre broadband is not the finest.
We had a lot of problems with shredder vans over the years. These are vans that drive into the city
and insist that they're doing on-site shredding, which means they pull up on the footpath and then
they start their engine up. I call them, you know, kind of portable particulate polluters
because they come in and when they should just take the stuff out and shred it outside. But
the law firm or whatever says, you know, you must shred it on site. So we have a lot of these kinds
of little things. And then of course we, the city does manage a lot of wider things. So we manage
800 acres up at Hampstead Heath. We manage Epping Forest, the walls of dairy. There are a lot of
little bits of Bob's around the country, which the city has volunteered to manage our support
over the centuries. And those two come up. And so we have a very rich panoply of things to do.
What about things like regulations, though? I mean, do you have any kind of regulatory autonomy?
In the...
I mean, say you mentioned the businesses are often obviously very interested in what you're
doing for business. Can you adapt regulation of the wider British or English regulation?
The strict answer is it depends. So under the original Markets Act, I think it was at six and
a quarter miles or six miles and 345 pace or something like that. The idea was that a farmer
could go to market in the city, and this would be regulated.
So you could walk in, sell some stuff, and come home.
That was the deal.
And the city had a monopoly on the regulation of all markets in that area.
Now, today, that extends to Smithfield, Billingsgate,
and New Spitalfields, which is just inside that.
And so, therefore, we're regulating fish.
were regulating beef, chicken, and meats,
and were regulating fruit and veg in those markets.
But there was a time when those markets were everything.
Now, you'll say, well, technically you're regulating them,
but they're not that vital, is what some might argue.
That did extend in the olden days into a variety of other areas,
which got very confusing.
For example, the early stock exchanges,
a lot of the things that went on in the Royal Exchange, the original insurance markets.
And a lot of this, when I came to the city in the 80s, very early 80s, was run through what were
called SROs, self-regulatory organizations. So Lloyd's was one because it runs the markets for
insurance. It's not an insurer, it runs the markets for it. But there were ones for the
independent financial advisors, for the stockbrokers, for the pensions providers.
This was swept away in 1998 from memory in a long debate running when labor took power in 1997 and wanted to create a unitary financial services regulator.
financial services being just under 40% of what we do, that clearly is a large chunk of our
regulatory remit. If we had thought that we could do it because these were markets within
a day's walk or half a day's walk, fine. In truth, it's worked out as a kind of a
very much a national thing. So our work in regulation in financial services is mostly
focused on lobbying for things we think are for the good of the industry or the good of the country.
And that's a different thing than the idea that we are the regulator, which in days gone by, we did have a role in regulation, but that's over a generation ago.
So you wouldn't find, for example, NatWest, someone in one of the buildings, one of the companies having slightly different regulatory powers.
Is that something that people wonder about?
I mean, presumably the opportunity legally might be there if you looked into it, if you really looked into it.
But better than anywhere.
Very slim.
But I think where this leads us to is what is regulation?
Because a lot of people seem to focus on regulation as solely a government prerogative.
and if you've really been tuned into this we've been running these markets for hundreds of years
and so self-forming markets do not need national regulation and i and i point repeatedly to what i
call community-enforced standards markets which are what the srls were the self-regulatory
organizations had good and bad and there'll be people out there muttering uh oh you know this
guy's going on but he's forgotten about maxwell and the pension scandal no i haven't there were
scandals under the SROs, but there's some pretty big scandals that go on today.
So I could go about RBS, GRG, I could go on about PPI.
So the form of regulation is intriguing, but when you look at a variety of areas even more
deeply, so if you take, for example, food safety, maritime sector, petroleum products,
A lot of areas are handled by the ISO standard system, which has within it quite a rich grouping.
So I call it community-enforced standards markets because these tend to arise because people in an industry want to have a good industry.
And there's a tension there between wanting to keep the cowboys out and having standards that are too high that you can't make money.
And the best people to interpret that in many cases are the people in the industry.
So take food safety. So you're eating prawns from Vietnam that have been shipped across the world. Well, there was a lab in Vietnam that tested them. Then they were packaged according to international standards. Then they were transported and they needed to be refrigerated to particular standards. And the people who did that met a standard for transportation under temperature and blah, blah, blah. And then they came here and then they were on your supermarket shelf and then you bought them with a sell-by date and the contents of where they came from.
Now, the way that the governments run that is they say you will adhere to the ISO standards.
If you break them and we find out, then all heck will break loose, which is fair enough.
There are criminal and civil sanctions for breaking those rules.
However, the government regulatory element of it is actually to let those standards evolve.
So if there's a new standard for labeling or there's a new standard for determining colors on prawns where your pink prawns are no longer pink because they've outlawed the coloring agent or whatever, that's all being done largely through the international system, not by the British government.
And the British government, quite rightly, adds to that a layer of food inspectors and
all, but they're sampling.
They're trying to make sure, in essence, that the private auditors who are also in the system
are doing their job.
So the system consists of a body of standards run typically through the WTO and ISO, but
sometimes originating as national standards.
In Britain, we have BS standards.
The aspiration for most BS standards is that they will become an international standard or merge with other ones.
Then the standards are separate from the inspectors, and the inspectors are of two types.
There are the accreditors, typically one accreditation agency per nation.
Here is the United Kingdom Accreditation Service, and I'm not executive on that.
And then we have certifiers.
So the accreditor is not allowed to check people to the standard.
the accreditor is only allowed to check that the certifier is good for certifying.
Why is that? Because we want to keep competition in the system.
And so we will often have many certifiers for one line.
And there are many specialist lines, you know, asbestos removal,
I mentioned petroleum products, electrical products, grading systems for roadworks.
We have 800 certification bodies in Britain.
And then those rely on laboratories,
which we also accredit, and there are about 3,500 of those
is one reasonably good estimate.
But as the accreditation body, we are quite tight.
We're only about 350 people,
because we're just making sure these people
are competent to do the checking,
and then they go out and do all the checking
in a competitive environment, which industry appreciates,
because it's unlike a government inspector,
when the government inspectors do come in
areas and there are certain areas where government inspectors come in they just tell you how much
they're going to charge you that's tough um well i mean i think the the common sort of the lay person
would see regulation as something the government does to business so you're saying on the whole
the market is is is generating these things in its own self-interest it's a i've actually i think
the average person thought of that i've had unfortunately i'm the lay person and i just
assume that it's some conniving government telling me what to do and what I can and can't do.
And again, it depends on the business year. And so if you're running a security
thing, supplying nightclubs and pubs as security guards, you will know that you've got to get them
all certified and authorized. Well, that's all private sector stuff. The government has said,
we'd like to make sure that security guards are authorized and happy to deal with that system.
Corgi gas, for some of you are older people, you might remember.
I do remember, yeah.
That was a private sector system.
A few cowboys, so to speak, had blown up some tower blocks,
and the gas industry said, if we don't get this under control, nobody's going to buy gas.
Isn't it true in maritime law as well?
It's all generated by the market, and it's all enforced by...
I know it would be enforced by the flag of the ship, wouldn't it?
Really.
It's really enforced by the harbour master.
No, but I mean, I often, we talk a lot about cruise ships on this podcast because they're
a really interesting model of a private city, basically.
They are a floaty private city.
And as a result, it's a brilliant example because nobody goes onto a cruise ship thinking they're
They're walking into a private governance model and they don't actually care who's in charge.
They care they're getting a good service from the ship, which is basically.
And as a result, the ship doesn't want to kill anyone, doesn't want to hurt anyone, doesn't want to, you know.
And the regulations adhere to that.
But there's no one, you know, there's no one walking around the ship making sure XYZ is happening.
It's a really interesting example of basically what a lot of people in the free cities movement would like to see on land more.
That kind of free market city.
Well, we could talk in a minute or two about how they could promote that because I would promote that.
But I would argue that they haven't quite understood how regulation already works.
Now, on a cruise ship, that's a really interesting area.
Well, ships in general are very interesting.
so the international maritime organization the IMO is based here in London it's the only UN
entity based in the UK as its headquarters remember it has no navy it has no coast guard
so it's a good talking shop where people get together and discuss the issues that they face
and what they want to do and it can only move as fast as the average not the slowest member but
And it's made great strides, in my opinion, on areas like low sulfur, on fuel efficiency, on reducing maritime noise for cetaceans.
It's actually done a lot, but it's got to talk.
And then they typically work through standards.
But who enforces those standards?
And it is really mostly the harbor master.
So when you go into a harbor, a typical ship like one of your cruise ships will probably have about 50 or 60 certificates of various forms.
There'll be a load line exemption on the techniques of the vessel, whether the vessel complies with maritime safety rules, riding rules, moments, all that.
There will be food safety because there's food on board.
So they'll have various certificates showing that they have been audited typically by a private sector organization.
that is internationally recognized.
So the BSI could do it for any ship,
SGS, Yarsley, Bureau of Veritas,
TUV, and Deutschland.
So these will come on.
And the harbormaster, it's up to the harbormaster
to decide whether she or he accepts such a certificate.
And they accept it from a credible organization.
Certificate is typically backed up with insurance,
which they also wish to see.
So the insurer says to the ship,
I'm not insuring you if you don't meet the standards,
but I'm an insurer.
I don't know how to run a kitchen.
So just meet the food safety standards and the inspections on that.
And that's the enforcement.
So when you're on the high seas, yes, there's nobody walking around on deck.
Or let me be more accurate, nobody needs to walk around on deck.
Of course, a proper ship does actually have a lot of inspectors on board who make sure that things are being done the right way in fire safety, fire inspection, man overboard drills, lifeboat drills, et cetera.
And the system is, therefore, largely private.
But a ship is absolutely useless if you can't get into a port.
So the harbormasters really do have a lot of control, and they don't want to let you
into a port if you're going to be dumping a bunch of sick people, or you're going to
be discharging waste into their harbor, or if you're so badly crude that you smash into
other ships.
This is just a harbormaster's nightmare.
So it's they who say, you can't come in until you've met all of the international standards.
Also, unlike other cities, land-based cities, they face the problem of people leaving very, very easily and choosing another city as well or choosing another ship because there's plenty of them.
I mean, I really love it as a model.
It's beautiful because it has all the characteristics of me personally,
how I would like to see cities competing with each other.
Ease of coming and going so that there's a pressure there to be a good city.
And at the same time, having regulations which are derived from keeping people happy, basically.
Well, you know, I've got a fairly strong IT background.
and people in IT would say, oh, this never happens in IT. But it does. I mean, things are inspected
before they leave the shop. We have the CE mark for all of the kit and equipment. But when you
look at the kind of, there's a whole set of standards where you want to plug into a network
and you can only plug into the network if you meet its protocol. I see you've got a Bitcoin pin on.
So, you know, a Bitcoin pin is a pretty good example. You could, I'm going to write my own
Bitcoin system and tell Bitcoin what to do. Well, that's sweet, but it's not going to get you very
far. So a lot of the CIT standards, you can't do something if you don't meet that standard.
I might argue you'd be better to call that a protocol because the protocol sort of is take
it or leave it. There's just no way to participate in the system unless you do it. And the standards
tend to need a bit more auditing because people are tempted to cheat, cut a little bit, put
too much water in your prawns or color them with something that you didn't want to actually eat if
you knew what it was. So it's that kind of a system. And it's protocol on the one hand is
tough. You'll just have to follow it whether you like it or not. Standard is kind of,
we got to make sure you follow it. Well, I say the problem with protocols,
it's not a problem with protocols. In the sense of free cities and the idea of
independent jurisdictions, at the moment, it's very difficult to decide to create a new protocol
and try it out, which is one of the issues we talk about so much on this podcast. What is your
opinion on the idea of private cities, for example? Do you know about Prospera,
usually? Are you in favor or against? Do you think it's a good, bad idea?
I'm not in favor. I'm not against. I don't know enough about protocol to comment on it,
But I did, for example, mention Canary Wharf earlier.
You know, that's a good example.
There are lots of gated communities.
So there's a whole spectrum of kind of, I run a little extra security force to keep my neighborhood safe.
And we all voluntarily pay up a bit to this is an isolated area and I'm in charge of it.
And I'm responsible for all the planning and things.
I've got no qualms.
I'm really into experimentation.
And I feel one of the problems we're facing in the world is the increasing over-centralization of many forces and how do we engage local democracy.
Now, I've got no specific answers to that.
I've long been a proponent of land value tax, but that's because I believe that it's a better way to look at taxation and keeping the tax revenues local, but also encouraging the locals to make the most of it, which has always been the problem.
I mean, in Britain, we're running, I forget the exact number, but I know it's over 90% and I believe well over 90% of the funds that local governments raise are given to the central government.
And then they get back according to a formula.
Not very motivational in terms of trying to improve your local area to increase your tax take.
And this is the sort of area where land value tax begins to really play.
I think the city of London does exhibit elements of land value tax I trying to remember how much of the city we own I think it probably around the 10 mark But the idea has always been I think the city strategy that we want
to create prosperity, which is why we work so hard with businesses. Because if you don't
have prosperity, you don't have anything. Once you've got that prosperity, how do you
reinvest it? Well, I think you reinvest it in two ways. One is improving the physical
environment, and the second is improving the business environment so that you attract more
business and more people.
And then we believe strongly in the idea that you're sharing that prosperity around.
So we do a lot on charity work, City Bridges Trust, and the delivery companies give away,
I think it's 85 million a year.
The city gives away another significant sum.
So we're looking at well around the 150 million mark, something like that, of funds dispersed
to try and help those who are not as well off.
So it's a good virtuous system.
And then within that, even though we are a city,
I would argue we have four things on our mind.
One is the rule of law.
Second one is defense and security.
Third is access to talent and skills.
And the fourth one is open and fair trade.
You know, a city-state tends to follow
traditional economic liberal principles
and likes things like you want property rights, you want free speech, you want individual rights,
but those in turn imply control, keeping government at a reasonable level.
I'm not saying small government or large government, but definitely not just government for its own sake.
Then moving on to open and fair trade very much comes out of that and free movement.
So you've got kind of three what I'd call ethical principles,
the individual rights free speech and property rights and those then imply economic principles
now in our case if i go back to the four that i mentioned earlier as i started let me reverse
defense and security never forget it a lot of people do you know and you know your your um
cruise ship you know needs to repel borders there's got to be a way to do it uh in our case
it's fairly obvious. People don't bring money to a war zone. But in addition to that, they don't
bring money to a cybersecurity hazard either. So we do use our police force, and our police force
is in fact the national cyber and national anti-fraud element. So those are important to us,
and we're prepared to spend on that. Second thing is on the rule of law. Again,
a bit like regulation. For most people, this means a judge in a courtroom.
Well, that's certainly the case in criminal, but when you come to civil, in fact, going
near a courtroom is a bad thing.
Commercial people really don't want to go near courtrooms if they can avoid it.
So the very tail end of that is seen in the courtroom, but there are a lot of disputes.
And those are typically handled through arbitration, mediation, conciliation from time to time,
expert determination.
These things are settled out of court, not because there's a court case, but just settled
long before the court cases arise.
So it's a huge thing.
And then there's just a general environment that you need of my word is my bond.
Do you really want to do business in a place where every time somebody says something to
you, they're up to something?
So it actually benefits everybody to have a certain level of norms.
I hate to use the word trust because that's a very loaded word.
But I know I can rely on both things here, and I'll just be a little careful as opposed
to I'm so careful that I never actually can contract a deal with anyone because I can't
trust anyone, then the whole of commerce collapses.
So we want that.
I think access to talent and skills speaks for itself, and open and fair trade, there's
no point in doing it.
And I sum all that up as treating all comers fairly.
But you're at the whim of the, in terms of all those things, you are at the whim of the
government, not yourself, your own government.
If you want to attract new business, for example, there is a limit to what you can do.
You can make the place nice, you can make it secure, but you can't attract people in
the same way that, say, something like Prospera could.
has a system where you can choose from OEC direct regulations throughout the world. You're here,
you're stuck with the UK regulations, you have to do it that way. So what does that actually mean
in real time? How is it that you attract people to the city particularly? How is that different
from the government giving incentives for business to come to the UK in general, say, for example?
in a realistic sense there are going to be conflicts and there are and you know good one
would be on immigration so we would like we don't want open access but we definitely want access to
the talent skills that we need and once we've decided we need so and so and she's out of
bulgaria and we need her to work here we we all whinge if there's any kind of paperwork or cost
to it that's outrageous how should i be doing this but but in truth there are going to be
conflicts here. Secondly, as I mentioned earlier, we are able to lobby and negotiate with central
government, and it's in central government's interest for us to be healthy. So it's not like
it's quite a battle or anything like that. It's just people have different priorities. The
government's got priorities on keeping boat people out. It's got a national zeitgeist of making sure
that people feel that they're being treated fairly. So it's a process of negotiation,
and I think, bluntly, Prospero, when it gets bigger, we'll start to find that those problems
will arise as well. So when it comes to us locally attracting business, well, clearly we're not doing
it on actually having lower taxes or anything, but we're doing it on our adherence to those four
principles. So we do a lot on arbitration, mediation, and civil, much more than I think
people realize. There's a whole court system up at Rawls. The London Chamber of Commerce runs the
the Chamber of Arbitration and Mediation.
So at that level, we're doing quite a bit on the rule of law.
I mentioned the police, but also our emphasis on cyber essentials, all sorts of things that
we do to try and lock down there.
So we're doing a lot.
We're also doing a heck of a lot on trying to improve the built environment, which takes
time.
But one of the great things I'm very proud of is over the last 15, 20 years, we've seen
the re-emergence of many of the little old alleyways.
Well, the re-emergence of alleyways,
they may not be the same old ones,
that you can now walk through the city.
It's more permeable.
And then we have many plans to increase that.
One of the other things we do a lot of is,
my theme last year's Lord Mayor was Connect to Prosper,
trying to celebrate the many connections that we make.
So we like to make more connections.
So even things like the permeable areas,
you and I run into each other in an alley,
hey, Tim, good to see you. What's happening? And we try and increase that. We have the livery
company movement, which is 50,000 strong, making sure people meet at that level. We support all
sorts of clubs and associations. We hold conferences, Gloria, our Innovate Finance
conferences, our tech conferences, et cetera. Level 39 over at Canary Wharf was half funded
by the city because we wanted to increase the connectivity on fintech. So we're always doing
things to make people meet each other. And all those make London a very attractive place.
I can genuinely vouch that a lot of people who've left London for other places have come back
because it just lacks the vibrancy. Maybe the taxes are a bit high, maybe it's a little dirty,
but you know what? I miss the buzz. And I'm sick and tired of kind of going from office block to
office block for a formal meeting and not actually meeting anybody or having new things in my life.
It's that novelty and new connections that we try and foster. So there's a lot that we can and do do.
as an entity here in the centre.
I've still got loads of questions about the City of London,
but I want to move on because I think we're going to end up
speaking for too long on that particular subject,
and I'm sure I've heard you talk about this kind of stuff before.
But something that I did find interesting
and that I'd never heard of before is,
and Peter mentioned this to me in the context of what you do here.
It's ZN, right?
yeah and he he he described this phrase dilemma analysis which i'd never heard of before can you
talk a little bit about that and what it what it is what it means and yeah and then i'm gonna and
then depending on what you say i want to ask you some questions about um it was i'd never heard of
it before um so i think when i looked it up as well it was also called um it had another name but
But maybe you could explain it in terms of dilemma analysis.
Well, yeah, you can start with dilemmas, and you can move on to trilemmas and quadrilemmas
and all sorts of things.
Yeah I think Xion very much was set up 30 years ago 31 years ago and it was set up as a commercial think tank to try and go out and find problems to solve that would keep us all busy and interested We had no shortage So we done a lot in the climate change space
We've done a lot on funding of SMEs.
We've done a lot on developing countries' growth.
We're probably most famous these days for running three fairly large indices.
One is called the Smart Centers Index.
and this is looking at how commercial centers are good at taking advantage of ideas and innovation
and deploying technology. So it's not smart cities in the sense of, you know, are the traffic lights
wired operating? It's much more about smart centers. And we have our global financial centers
index, which is looking at how good the center is for deploying finance and taking advantage of new
financial products, and the two overlap a lot. And we have our global green finance index,
which is looking at that specific area.
We're currently looking at a new creative services industry as well.
And so our advice tends to be to go into centres.
We track about 140 cities and advise them on how to improve what they're doing.
So it's quite related, oddly, mentally to the work that I do individually at the corporation.
But the ideas behind what Peter called dilemma analysis,
which was that there are certain problems which the solution to which is not apparent because there are conflicting things working against each other.
Is that a good way to describe it?
Yeah, it is.
We would probably term those wicked problems.
Yes, wicked problems.
That was the other, yes.
But wicked as in, not as in evil.
Wicked just because hard to crack.
Nor the Wizard of Oz or anything.
No, it's wicked.
The term originated in two sectors. One was aerospace, and the other was actually urban planning in the 50s and 60s in America.
And those are the two areas where they realized that there are a lot of problems that are messy, aggressive, and circular.
And it's a bit like the old Irish expression, I wouldn't start from here to get there.
You know, it's this, you know, what do I do? And we've got tons of democracy and local democracy we spoke about.
earlier, new types of voting systems, how to handle poverty.
You know, I look at the 17 Sustainable Development Goals and go, well, there's a whole list of
things the world would like to solve.
So we're not sure to them.
How do you deal with that though?
Well, we wrote a book 10 years ago called The Price of Fish, which was all about how
to solve wicked problems in economics.
we took for our basis of it was
we'd seen Feynman's Easy Pieces series
where he tries to teach physics simply.
And there was a lovely piece of work done by a physicist,
David Deutsch, called The Fabric of Reality.
And David Deutsch said that the Greeks had a concept of a man,
and it was a man, could know everything.
What did that mean?
well, it didn't mean he knew the name of every chicken in every village.
It was more that he had a series of mental tools that allowed him to look at the world and analyze situations.
Now, the Greek's tools may have been a little bit crude.
Why, oh great Tim, is there thunder?
It's because of the thunder god, Michael.
Well, that was a good explanation.
So there was that.
But David then went off onto physics and obviously being into quantum mechanics.
Quantum mechanics is one of the disciplines.
But interestingly, he picked epistemology, computational, theory, and evolution as the other three.
So if you understood those four, he felt you could look at physics.
And I thought that was a great approach.
And I said, what would it be for economics?
And so we had a good look at it.
And I did a series of 29 lectures on it.
It's your listeners are welcome to go to Gresham College and see.
But I chose choice, choice theory.
How do we make decisions?
Economics was equivalent to his kind of quantum mechanics.
All the basic stuff's about supply and demand and positional goods and all that.
Evolution really stands up.
You've got to look and say, once I get these entities there, what are they likely to do to maximize?
their lifespan to persist in going, and what are they going to do in terms of spawning new things?
So very good point, very good overlap. And the last one was systems theory. Now systems theory
is if I was to pick one area that people aren't taught enough in school, and it wouldn't require
much, is a very advanced set of techniques for analyzing complex situations and decomposing them.
And it's from systems theory, largely the chaos theory came and from chaos theory came
complexity theory.
And this is ways that people try and look at an environment to take a railway system.
Our railways are running late, Tim, fix them.
Where do you start?
So you've got to start breaking it down to, well, there's tracks and there's delays and
there's maintenance.
And that's probably what's causing.
Hang on.
Let me look at the timetable.
Could the timetable change to all that?
Would it change if we had faster trains?
Would it change if I could stop the passengers boarding too late so they weren't halting
the trains?
You get into, oh my gosh, there's a lot of things.
Just answer simple question of how do you make the trains run on time?
And systems theory helps you, gives you a set of very simple tools to decompose that.
So, I mean, when I looked into it very briefly, I couldn't help thinking that what, say for
example, a lot of people in the Free Cities movement, what they're trying to solve is very
much a wicked problem. But it's the problem of governance and the way that we're governed,
or the way that a place lays out its own rules. And democracy comes up a lot because democracy is
not the democratic process, at least the one we see currently. A lot of people vote on something
that gets someone into power that then creates rules.
In that process, quite a few people are disenfranchised
because they were, just by the fact they were born in a country,
suddenly now something is happening in their country
that they are probably not a part of.
And one of the ways you solve that is in the private city, for example,
like a cruise ship, you say, well, here's a contract, sign it,
this is the rules, abide by the rules.
If you don't like these rules, there's another one over there.
There's another city state over there or another free city over there.
You could go and use that.
It certainly is a very wicked problem, the problem of governance.
And I would say probably, from my perspective at least, where we're at in the moment is, I think there are a lot of people unhappy.
It seems at least in my world, maybe I've probably skewed in one direction.
But maybe if I went out on the street and said, do you like the way you're being governed to the average person here?
They probably don't think about it, in all honesty, but amongst people that do think about it, it's a wicked problem.
And so how would you go about solving it?
See, my response would be, okay, there's an easy way to begin the process of solving that, and that's create a market of governance.
We don't really have a very obvious market in governance at the moment.
You could move to another country, but the governance model is often roughly the same.
Or you could go somewhere where you really don't want to go, where they've got a terrible governance model.
So how would you go about solving that?
And I'd be interested to know what you think might be a good solution if you would sort of...
Wow. Details, details.
You're absolutely correct.
Governance is very much a wicked problem.
and I would argue it's one of the biggest problems of the day.
One thing I have muttered is
it would be really good to have an ISO standard
for good governance.
They'd never let it happen.
Well, ISO would, but the idea...
That's what I mean.
Yeah, but ISO would allow it to happen,
but, you know, who would...
They wouldn't enforce it.
Would the mayor of New York accept that he was being shut up?
Well, it's more like who would enforce it
because we're relying on them to enforce it on themselves.
You could in terms of attractiveness, you could say, hey, we're a well-governed town,
and we've had people in to audit us on it, and we know what the international standard is,
and we meet it. Many standards start that way. That's what I mean. They're community-enforced
standards markets. They're not government-enforced, that was my point earlier. And the way to start
that is through a bit of competition. So if there's a competitive environment, people then
often reach out for standards, but let's park that one for now, that it's one.
The second thing is is there a lot of anger and frustration out What was that film Network in 1970 I mad as hell and I not gonna take it anymore I think there is actually quite a bit of that around at the moment in quite a number of countries
Not all, by the way, but quite a few countries. I was at a breakfast a few weeks ago where some
champ stood up at a club and ranted on for five minutes at a politician who's not in power.
And he wasn't being nasty. He was just frustrated. Why can't we get potholes? Why are schools not
functioning. Why are you? And so there's a lot of that going on at the moment. And that probably is
an indicator of, is it more or less, or are we just cranky old men? Who knows? But I would have
argued there does seem to be a fairly high degree of tension. What could be done about it?
Well, I think the first thing is, I pick on three things if you don't mind. The first one is
democracy itself. Is voting every four or five years, depending on what your system is,
really democracy? I mean, how involved are you? You know, you said democracy is we vote people
into power. Well, is it? I thought it was being involved in things. Now, how could we be more
involved? So I would encourage your listeners to explore, but maybe not wholly adopt, things like
liquid democracy and the pirate parties, where, you know, the idea in these, as I express, I'm not
sure they would express it this way, is that we have transferable votes for the formulation of
policy in the parties. So you're an expert on the environment. I'm an expert on oil trading.
I will do the petrochemical thing. You give me your vote. I give you my vote
for the environment. You give me your vote for chemical trading. We create the policies.
So you walk into an environmental meeting and say, we're going to, I don't know,
ban air conditioners, whatever, whatever's on your mind. And you've got 10,000 votes,
but that's the policy, then we vote on the policy as a whole. And again, I might have transferable
votes. So everybody's actually being involved in the formations of the policies. Whereas at the
moment we have kind of a strange situation where we vote people into office and then they kind of
tell us what their policies are, but they try and put them in a supposedly some type of statement
of what their policies are before they get into office, their manifesto, but they try and be as
vague as possible. And then they shift ground. So, you know, it's actually putting it on the
front foot. The second thing is, you know, being involved in democracy, if you're more frustrated
now, well, we'll join a political party and political party membership, as you know, is
through the floor. So am I going to, who am I going to blame? I'm not going to blame anybody,
but I think we should perhaps pay more attention to working with the parties before the vote.
And I think the parties could do a lot more things like liquid democracy,
people's assemblies to engage people beforehand in how they're doing policies rather than,
well, we won't say what our policy is because if we did, somebody might attack it and then we won't
get into office. And the key thing is to get into power. I disagree. The key thing is not to get
into power. The key thing is to have good policies for the nation or the state or the city. So that's
one element. Second element is there's a popular kind of approach, which I, you know, if only
Xi Jinping were running this place, or in the old days, at least Mussolini made the
trains run on time.
Actually, Mussolini didn't.
The trains were running on time before him.
In fact, they deteriorated slightly, well, very, very rapidly at the tail end, but slightly
under his rule.
But what I think people are admiring is the consistency of a dictator.
Once a dictator's made up his or her mind, they tend to follow that through.
whereas in democracy we're very good at making a decision you know we get up every morning and make
a different decision and that's the problem so the solution to some of that is inaction and it's
before people's eyes if they'll look we face this on the climate change front with a lot of flip
flopping and i wrote a paper over 20 years ago on what i call policy performance bonds so these
were bonds whose interest rates rose if it turned out that people hadn't managed to meet
their own policy.
Now, before I try and make myself sound like a genius, I'm just extending an idea that Margaret
Thatcher had in 82 when she created inflation-linked bonds.
So her inflation-linked bonds, if she said inflation was going to be 2% and it was 4%,
then you got 2% on the bond in addition to whatever the coupon rate was.
She had to do that because nobody in Europe believed that Britain would actually repay.
They'd never repaid in full.
It had always been, you know, lend us a hundred pounds and we'll repay you in, you know, 60 pounds worth of pounds, even though it's a hundred pounds back.
And so there was a lot of frustration about that.
And she, she created those.
And I just said, that's clearly extensible.
And we've seen a very interesting policy performance bond in Malaysia where the interest rate on the bond goes up if they don't improve education in the state.
So again, going back to these city states, if you've made a promise, how are you backing
it up?
Now, the greatest success we had was in March 22, the government of Chile issued such a
bond for climate purposes.
A 20-year bond based on targets eight years out, which was therefore 2030.
The two targets were a reduction in greenhouse gas emissions from, I think it was 112.3 megatons
to 95 megatons and an increase in renewables in the grid from 45% to 60.
So if they don't make that on a straight line to 2030 and from 2030 for another 12 years,
they pay a higher interest rate.
So now I'm like, okay, the government of Chile means this.
When I would traditionally have invested in the energy sector in Chile, I would have maybe
put 50% in renewables and 50% in fossil fuels.
But it's pretty clear the government of Chile doesn't want fossil fuels.
But I still don't fully trust the government, so I'll buy a little bit of the bond, you see.
Or I'll buy a lot of the bond or whatever.
So it becomes the proper hedge for the government policy, which if you think about it in this kind of wicked solutions,
massive, aggressive, and circular, it actually encourages you to go, wait a minute, the government must mean this.
So you actually accelerate the government policy because everybody's like, no way they're going to change this.
So you begin to see a rapid bit.
As I say, that was a $2 billion issue, $2 billion in March 22.
And they've issued many subsequent issues since with varying targets and things like that.
Now, that's putting your money where your mouth is.
And I think a lot of that starts to solve some of this democratic flip-flopping of choice all the time.
And, of course, it also raises, wait a minute, you wanted a 20-year policy, right?
And you thought you would just do it when you got out of bed?
No, so you're forcing the decisions to be made big time.
And so people are less inclined just to make a snap decision because a snap decision on that's there.
It also does a lot of good alignment of government timeframes and infrastructure and business timeframes because governments make all these statements.
You know, we're going to have heat pumps.
No, we're not.
We're going to only have EV vehicles.
No, we're not.
And these sort of flip-flops really hurt business because business is running on a 20 to 25-year
timeframe.
So if government wants people to make 20 to 25-year decisions, then it should too.
And I think you could see that at city, state, and national levels.
And it is happening.
These bonds have come out in Chile, Uruguay has copied them, Thailand issued an environmental
one in November.
And I think it will happen.
Yeah, I mean, the problem is, like you say, the flip-flopping happens because the system
now works with a strategy of the important thing is to be in power, not the important
thing is to have a particular policy.
So it becomes a game of winning the election and nothing else.
And as a result, on the whole, and you can say whatever you want to win the election
these days it appears and then almost i mean america's just happened in america as well so
many people who thought oh trump's come relatively that's a fresh i some fresh ideas happening and
lo and behold when government actually kicked in and the truth came then all that stuff goes out
the window all the reducing the size of government maybe keep the spending down that sounds great
But then when the reality of running a massive country kicks in, it's like, no, actually, let's have another trillion dollar bill.
Why not?
Just don't tell anyone.
But I often wonder whether it's just a function of the size of all this stuff.
Because the other thing, obviously, that a lot of us are into is decentralizing things down to a bit like what you've got here.
You've got a smaller.
Well, no, but I mean, in the city, you're a small jurisdiction.
in a way. And that's really much easier to keep everyone... The democratic system, I think,
works much better on a small scale like this. Or even possibly on a scale like this, really,
in a place where people, probably less political, they just want
a good service. They're like, is it good here? You know, are people running this place well?
Okay. Then really, then I'll just let them do that. Am I making money? I'm a merchant. I'm
working here within these walls. Is my business doing well? Is everyone happy? Are we, are we,
are the, you know, my morals, are the morals of the people in charge? Are they, are they good as
well. But once you try and scale that up to even the size of the UK, I think, it becomes difficult,
I think. Well, the size matters, and I would agree with that. And this comes up constantly
in discussions that I have globally. What's the right size? There's a particularly interesting
book written by a friend of mine, James Bryding. We went to high school together, and James is
Swiss, and he wrote a book called Too Big to Fail about six years ago. He wouldn't explain it like
this, but I will, because he's not on the program. Fair enough, he looks at eight countries who are
small, the largest being the Netherlands with 17 million. Obviously, Switzerland is in there with
nine point whatever million. I won't get them all, but Denmark, Sweden, Ireland, Singapore. He left
Norway out because everybody said, oh, Norway is just rich. But he said, these are countries,
and I want to measure how well they do. And the measures that he picked were the educational system,
the healthcare system, the environment, the infrastructure, and how they treated the
disadvantaged and the elderly. And there are metrics for these internationally. They're
slightly imperfect because they're qualitative measures to some degree. But you know if you've
We've been to any of those.
They beat the heck out of Germany, France, Spain, Italy, Britain.
They also beat the heck out of America because everybody's focused on this GDP number.
And the way I express Jim's book, which I don't think appears anywhere in there, is this raises the fundamental question.
What are the economies of scale of the nation state?
So supposedly, as you get bigger, you should be more efficient.
It should be easier to run the place.
None of this, oh, it's so hard to run a large place.
Why is a small place so well run?
Latvia, 1.3 million people, more unicorns per capita, a fully automated governmental system.
Somehow 1.3 million people are operating a system that we 67 million have been unable to afford.
So, you know, parse that one.
You can see some of the difficulties.
Now, then you move on to the other side.
Well, hang on.
Let's take this to the extreme.
and frankly we should be operating groups of 50 or whatever.
There is a lot of corruption.
The city, bluntly, had a bad reputation,
particularly in the 1700s and early 1800s,
as being corrupt.
We have the corrupt boroughs of Britain,
well of England actually strictly, but anyway.
So you've got this tension.
Some of this comes back to looking at
some of the other federal nations.
So Germany is a very good example, 16 Lender,
I think 3,000 gomenda.
Italy is not so decentral.
Spain has got tensions because it's got a regional decentralization.
Canada, Australia, and then, of course, we come to America,
which Britons tend to fixate as their comparator for reasons.
But in America, there's a high degree of risk tolerance
for people failing in governments at county and state level.
And in Britain, there's a kind of no postcode lottery.
and Thatcher, you can tell that, you know, I look at her in the round, nevertheless was one of those
politicians who believed that there was a lot of corruption going on locally and the best thing to
do was to centralize it. So with decentralization comes risk of variance in performance and
potential local corruption. But without decentralization, you lose any engagement
to the population at a level that they can effectively do anything. I often think that
the Brexit vote was due to people mystically desiring more decentralization. It wasn't
warm beer and spitfires they were voting for. I think they were voting for Mid-Victoriana. That
was something along the lines of, hey, there are young women dying in childbirth. What are we going
to do about it? Well, Tim, we're going to go set up a maternity hospital here in Manchester,
because we would do it.
We had that sort of motivation
and freedom of maneuver to play that game.
And I think people were looking for that
a little bit in Britain.
I think there are some other countries
where they are looking for a bit more centralization.
When you say that the risk in decentralization
is corruption,
I would argue that that's a better way
to deal with corruption though
because it's limited to a smaller geographic area or a smaller place.
The same goes for, a lot of people say,
well, if you have too much decentralized, you have a lot of warring factions.
And I would say, well, that's better than two massive states warring against each other,
which also happens.
You know, I'd rather see small battles between states
than the US front decide to fight China for example which is basically the alternative So I don know I would still say on paper at least because it hard to find contemporary examples of this
where you would find lots and lots of quite small competing places.
Well, I agree with you, I guess, even on the corruption point.
I was sort of more explaining that when you fragment, you're going to create a lot more opportunities.
And that leads to the notion of competition.
So a good place that runs, and I'll give Jim his due, and I lived there for a little bit,
is Switzerland.
The amount of decentralization in Switzerland, and that's the other thing that you encounter
in Britain when you talk about Switzerland.
Well, there are only 9 million people we can't learn from.
I'm like, well, actually, given the way that they're performing, I think we could.
Yes, well, it doesn't matter.
It's very inefficient.
Well, it's not inefficient because it engages people.
So you've got 26 cantons.
You've got the Swiss system.
You've got the referenda going at the Cantonal level and the national level.
Britons only kind of wake up when there's a national Swiss referendum.
But the local stuff is very, very, very vibrant.
But there's competition.
And everybody is ferociously passionate about their local area, the group that they come from, and all that.
Now, that competition, they've got in balance.
You can obviously have competitions.
It's out of control.
but competition is important but competition equally means you've got to know the rules of
the game and so where i would go is that most of the countries that have decentralized well
have thought about it very hard they tend to have a written constitution and it tends to be
something along the lines of this is national right this is state this is local and then we
carve the units up whereas uh you know here we've we've done it by the history of of wales scotland
Northern Ireland. So we are, you know, when you talk to me, well, we've already done devolution.
Yeah, but that was like 10% of the population. The other 90% haven't been decentralized.
So there's a lot of structural issues in setting up, but you need competition,
but to have competition be good, you've got to have very clear rules so that people are fighting
to evolve better systems as opposed to fighting each other entity to entity.
Also, of course, Switzerland has a really feel-good tax code, let's say.
Isn't it right that they can decide where their tax money goes and they can decide to
withhold it from certain parts of the economy, parts of the government?
Is that true?
No.
Oh, have I misheard that?
Yeah, yeah.
There's a tiny bit of maneuvering on a few areas, but nothing of...
I just know some people that really love that about
The key thing though is that your local canton taxes, see?
So the share taken by the federal government is actually quite low.
So if you make your local canton more efficient, you will pay a lower tax rate.
So that's good competition.
And this is a time when we've got places like the OECD saying, oh, there should be a unified
international tax.
I mean, my problem has always been that human beings are apes and we do really well when
we balance competition and cooperation. And as I said earlier, the competition needs to be focused
on improvement as opposed to taking each other down. That's it. And there are ways of structuring
that. But we also cooperate. And so we need to get both of those right. And in the case of Switzerland,
it's better than average for sure. And it turns up in the numbers.
um yeah and it's also probably true i would say at least in my experience i live in a very
close-knit community let's say in a sparsely populated part of the country but the ability
that by scaling down and decentralizing the governance structure means that you tend to
have face-to-face contact more with the people that you're actually governing with alongside or
who are governing you and that makes a massive difference a massive difference if you're
plonked in the washington and you're talking about someone in ohio you don't actually i don't think
it's even feasible to care to honestly care like i don't i don't think it's a is a bad thing i just
don't think you can care i don't think you really can but when it's your neighbor or when it's
someone that you can go and knock on their door actually and things like that it makes governance
works really well that way because people respond and we know this from the internet you can say all
kinds of stuff on the internet but you try saying that someone's face you don't you don't and once
again it's a function of scale like we've got this i don't know i i'm i'm very much i would love to see
thousands of competing switzerland's even smaller than switzerland are all over the place i think it
be phenomenal because we now live in this world where you can vote with your feet quite easily.
Moving from place to place is the easiest it's probably ever been in the history of the world,
I would imagine. Really, because moving from Herefordshire to London used to be a big deal,
but now people go to Dubai for the weekend.
Well I agree with you on the difficulty of having empathy with 350 million people or 1 3 billion people or whatever I mean it ludicrous to claim that Theoretically you can I think I can feel something for large
numbers of deaths, but that's about it. However, just to extend the competition point to one element,
government is arguably getting now across the OECD running just under 40% of GDP.
In Britain it's running at 44%.
Operationally, and again it depends on whether you count health workers in, local government
workers in, I would off the cuff say about 20% of people really work for government.
Because of that 40% a lot of it is transfers to handle some of the imbalances in the system.
Now, why am I going up this route?
We use competition to increase efficiency in all sorts of walks of life.
You wouldn't watch an Olympics where people weren't competing.
You wouldn't watch the football.
We know that competition gets the best out of people.
That's why we celebrate the Olympians, how supreme they are.
Why did they work 18 hours a day and take supplements and live in poverty for four years to win a gold medal?
You know, it's competition works.
So why doesn't competition apply to government?
And this is why I believe the tax thing is important, because it doesn't mean low taxes
are a good thing.
It means what I want to see is value for money.
So I can have a high tax regime with high quality infrastructure, a low tax regime with
low quality infrastructure.
Basically, I get what I pay for.
The other thing I definitely don't want is low quality infrastructure and a high tax
regime, you see. Now that's the kind of structural element to it. But equally, there are things,
I put this into a lecture years ago, why don't I have passport office A and passport office B?
Oh, but you don't understand we need standards. We can have standards. I can have a common ledger
that both passport offices share to say, Tim got a passport for me, so I'm not issuing one
extra. That's all doable. But competing on the operational service,
driver license authorities actually lots of areas of government if you think it should be done in
government then can it also be done in a competitive way um i think i have a much more crude opinion
on that and i and it's that um with the monopoly on violence the incentive is taken away to compete
and then it gets
it's compounding over time
as more unproductive people
are attracted to a position of power
and all the merchants end up leaving
all the actual entrepreneurs
actually the people that add value
end up leaving
and the whole thing collapses
and that's the life cycle of
I don't know
I think in a practical way though
there's a lot that government could do
And a lot of this was tried and continues to be tried, to be fair.
I remember we had in the 90s when we had a whole bunch of privatizations throughout the
80s and early 90s.
And in the 90s, I think it was 1994, there was a government white paper on the civil service,
which had a beautiful title called Continuity and Change, which is kind of, you want to
have both.
But there was also at that time something called prior options.
The cabinet office did do this.
And in fact, I did one on an agency.
For agencies, you were supposed to see, did this thing need to be done at all?
If it needed to be done, did it need to be done by government?
If it needed to be done, it needed to be done by government.
Were there ways of involving the private sector?
And the funny bit about this prior options, it was off of a single memo written to the cabinet office in 92 for memory.
But it was very, very cogent and coherent.
And I followed that with one agency and the MOD.
And it wasn't a bad framework.
But once it is going to be done in government, I would add that little, could it be done competitively?
Because when you say could it be done by the private sector, unless you're going to establish another monopoly, and that's often done as well.
We have a tendency to give out, in my opinion, contracts that are too big.
Why?
Because if we centralize a contract, we'll save money.
But we never seem to save the money and nobody ever goes back and looks at it.
And I've long been a proponent that when you're doing some outsourcing, if you've got the
scale to do it as two or perhaps even three, do it because they will compete with each
other.
And there's some good examples of large organizations.
I can't name, but one big retailer in Britain did that with escalators and lifts.
They said to three companies, well, they said to multiple companies, we're offering a tender, but for one third of the estate.
And then they got the three who'd won together and said, you have to cooperate.
If he's failing, one of the three, if A, B, and C are together and B is not doing so well, you, A, and C, need to help him and tell him how you're achieving better results than he is, or we'll replace him.
And are you sure you want us to replace him So it started a kind of lovely bit of competition you know competition and cooperation in that environment So there are creative ways of doing it And back to governance I know we got time yet
Last question.
Just to end on a high note, let's say.
Do you have a preferred level of governance?
Do you have a preferred?
We were talking about, I mean, you're just there, like, as in the free market, how much should the free market solve our problems?
and what would be the correct role of government? Someone who is in that position of power,
what did you see as your correct position? Were there times when you thought, actually,
that's not really a job for a government, that's the job for the free market? And what's
the job? What is the actual job for the government?
Hmm.
It's funny because I gave a lecture which ended on Goldilocks government, neither too
much nor too right.
You know, what's the meter?
So it's an excellent question and I addressed it 20 years ago and I'm trying to remember
what I said then.
No.
But no, it is a pretty good question.
I think the real question is, is there any operational service delivery role that government should do?
And I would push that to the extreme.
Okay.
But when I look at things that nonprofit organizations do, they typically do four things.
The first thing is they develop a sense of community.
the second thing that they do is they deliver direct services
the third thing that they do is that they try effectively to change systems and the last one
they try and do is expand frontiers so let me give you an example let's imagine we're a blind
charity like rnib and rnib does do this there's a sense of community we're both blind and i you
I could use a little bit of support here.
And they get people together.
They have chat lines and talks.
And, you know, there's a community.
I think government can do that.
But that's equally done by churches and faith communities
and livery companies and whatever associations you want.
And I believe government doesn't need to do that.
There is a sense of national community
when there's a national tragedy.
But I sometimes think government does too much.
So it now becomes a, the nation is doing everything,
when actually it could be much more decentralized and local.
The second area is, as I said, it was delivering services.
And the RNIB does that.
They will sell you watches for the blind and canes and all that.
They'll deliver meals to people who need them.
So there's that level.
Government does not need to do that.
That's exactly what the private sector is for.
And back to that old trope about the Russians asking who controls the bread deliveries in London
and the answer being nobody.
So you can do that.
Third level up is changing systems.
That I think could be as much as 50% government.
That's where the policies are in.
But that's government in the sense of government
plus the democratic system, plus think tanks,
plus people are thinking,
how would I change the systems back to systems theory
to make something a lot more efficient
and useful and interesting?
The last bit is expanding frontiers.
And here, this would typically be research.
And again, going back to RNIB, they do research on preventing blindness, ameliorating blindness, causes of blindness.
You know, it's all good stuff.
I personally, despite having been in research, believe that government has a role there in terms of funding education that's huge.
providing common expensive facilities like wind tunnels or hydro tanks or you know CERN
accelerators that kind of thing where that's actually very very helpful I don't believe
government is particularly good at blue sky research but it can definitely sustain it so
you know as I cut through those four areas I hope that gives you a flavor that to me it's a rich
question, but it requires a lot of self-discipline. Back to that cabinet office memo on prior options.
Does it need to be done here? Okay, maybe it does a little bit. If so, how much can be done by the
private sector? We need to push that envelope a lot. That does lead to some troubling areas
in many cases. Is the health sector a private or public question? Would I go for a wholly private
police force? That's an interesting question as well. So these are questions for us to have honest
debates on. And in a sense, it turns, you want an upbeat ending, you know, we are where we are,
isn't too bad. It's just, we are frustrating ourselves because quite rightly, we want to improve.
Michael, thank you very much indeed for spending a few, nearly an hour and a half.
Sorry to keep you so long. I'd love to carry on. I've still got a million and one questions,
but many, many thanks indeed.
Most welcome, Tim.
Really nice to chat with you guys.