Slogans can provide politicians with useful ways of signalling policy objectives. The “tough on crime, and tough on the causes of crime” slogan used by New Labour is a case in point: the substantive message conveyed comes from the conjunctive ‘and’.
The slogan “securonomics” is but a single word, with no conjunction linking different policy domains. Without further development, it conveys rather little information about future conduct of economic policy other than a vague sense that security of supply (of whatever) is to be given a higher weight than previously. By implication, that points to a proclivity toward risk mitigation of some (unspecified) sort or other.
But economic life is full of risks, and that’s not a bad thing per se. It’s a source of incentives, motivations for discovery and adaptation in the face of changing circumstances. It might be described as a driver of economic progress. There are, therefore, some basic trade-offs to consider.
One reading of the sentiment conveyed is that there should be a shift to greater reliance on domestic segments of supply chains and lesser reliance on overseas segments. However, risks to security of supply can emerge from domestic origins. The coal miner’s strike of the 1980s, NHS failures to supply, Covid lockdowns, current disruptions to rail services and the like have British, not foreign, origins.
These cited examples have something in common: they are characterised by the existence and use of monopoly power at some or other point in a supply chain, and this could be a pointer to a more principled development of the securonomics slogan.
The potential harms caused by monopoly power are well known, though all too frequently forgotten or ignored, and all too frequently created and/or sustained by the state itself. One of the chief demerits of such concentrated economic power is arbitrariness, a major source of disruptive risk in economic life.
So, policies flowing from a greater priority given to security of supply could (potentially) be classically liberal, characterised by an antipathy to the perils of dependence on supply chains vulnerable to abuses of market power by their holders, whoever and wherever they are.
Market participants, of course, have their own incentives to avoid becoming heavily dependent on a particular supplier or buyer, but their focus tends to be a relatively narrow one, on the immediately direct connections between themselves and the relevant counterparties. Thus, buyers might be comforted by the existence of several, competing suppliers for their business, but blind to a situation in which all those suppliers are themselves dependent to a significant extent on a dominant supplier operating in some or other related market.
Economic and policy analysis of risks has tended to follow a similarly, narrow-focused approach, often relying on a partial equilibrium analysis that proceeds on ceteris paribus assumptions. An economy is, however, a complex, massively interconnected, highly adaptive system that’s constantly in a state of flux. The effects of perturbations (such as a supply disruption), even small perturbations, cannot safely be assumed to be localised.
Risks can percolate through a vast network of interconnections in complex ways and their greatest harms do not necessarily accumulate in the immediate locality of the source of a disruption. Perturbing an eco-system is not like throwing a stone into a pond and watching the amplitude of the waves decrease as distance from the point of perturbation increases. Bigger effects can eventuate at more distant locations.
The relevant risk diffusion processes are generally not well addressed by current economic policies and policy-making structures, even in sectoral sub-systems where their significance is easiest to spot. For example, there was strong familiarity with financial contagion issues before the 2008 crash, but that did not prevent the crash happening; and blind eyes were turned to the socio-economic implications of Covid lockdowns. In both cases, the costs imposed on the public were huge.
The giving of more attention to this severe deficiency in economic governance could be a highly favourable, development pathway from the initial slogan. The big challenges ahead would then lie in the answering the ‘how to’ questions. For example, how can the (currently missing) capacity required for sustained attention to risk diffusion issues in general, and to risks associated with substantial market power at specific, identifiable points in supply chains in particular, be developed and maintained?
We have set out preliminary answers to such questions in other papers and blogs, based on the proposition that a radical reshaping of the ‘network topology’ of government is required. Unfortunately, a beam in the eye of government is always much more difficult for it to spot than the motes in the eyes of others.