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Cameron can head off future UKIP-style protest movements by embracing state capitalism

international business times | 15 MAY 2015

The rise of UKIP and other fringe parties has been a major headache for David Cameron. Here's how he can stop it happening again.

Across the world, few people are happy with their government these days. Voter turnout is low, fringe parties are gaining support and protest movements are common. You only have to look at the UK, where turnout in the last election was just 66% (and that was an 18-year high), and parties such as UKIP, the Greens and the SNP have gained huge traction over the last couple of years.

The general unpopularity of government might not matter much if voters wanted little from the state. But they continue to want and need more and more. The result is a toxic mixture: dependency on government on the one hand, and disdain for government on the other. The dependency forces governments to over expand and over burden themselves, while the disdain robs governments of their legitimacy and turns every setback into a crisis.

Yet government can improve and, throughout history, has pursued successful change. Western governments have historically leveraged the power of technology and the force of ideas to make effective change. They now face some significant challenges in dealing with the crises which have been brewing since the 1970s and there is a need to develop the next cycle of government. However, that may not necessarily follow the traditional Western model of liberal democracy.

That is because Western countries will need to tackle the increasingly unsustainable debt burden as a result of the financial crisis and the subsequent global recession, alongside a decline in the working-age population. They have also failed to respond to the rapid development of information technology and harness the full potential of the digital revolution, or create new models of governance to interact more effectively with citizens.

In contrast, the modernising authoritarianism pursued by Asian countries such as China and Singapore has been very successful. Other countries are even further ahead when it comes to innovation in government, most notably Singapore, which has created what is arguably the world's most effective administrative machine.

The Singaporean government recruits the best prospects to work in public service, and those who reach the top of the bureaucracy are richly rewarded with pay packages of as much as $2 million a year and with guaranteed jobs in the private sector after they leave government.

Singaporeans pay 20% of their salaries into the government-run Central Provident Fund, with employers contributing another 15.5%. This compulsory savings account serves as a retirement pension and also allows Singaporeans to pay for housing, health care, and higher education.

So the next cycle of government should reflect on a new model of government that directly challenges the current Western belief in free markets and democracy. It will mean that government needs to engage in "state capitalism".

To remain stable and prosperous and to maintain their positions as global leaders, European countries and the United States will have to embrace the goal of smaller, more efficient government. At the moment, governments do some things badly. They need to do fewer things and do them well. The Western democratic state is ripe for a transformation that would build on some of the achievements of the revolution of the 1980s and 1990s. Reagan and Thatcher stopped the state from doing many things which it needed to stop doing such as running energy companies, transportation and telecommunications firms.

We need an evolution of the current government model which:

  • Gets Government out of the business of providing mature services such as education
  • Gets Government out of badly picking winners in the private sector through market-distorting subsidies and regulations
  • Gets Governments to make sure that public largesse helps the poor and not the already well-off

The twenty-first century is sure to be shaped by ever-fiercer competition between states to figure out which innovations in governing yield the best results. The democracies of Europe still enjoy a significant advantage in terms of wealth and political stability. But they need to summon the sort of intellectual and political energy that, for the past four centuries, has kept it ahead in the global race to reinvent the state for this next evolution of Government.

The message to our political leaders is a difficult one. They need to be open to ideas, learn from others and understand that good government matters and that their traditional model of understanding Government has to change.

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