‘Economic growth… is not just about individual well-being, it’s not just about prosperity, it’s also about the ability of Western democracies to scale up their defence budgets. It’s about our ability to outproduce our adversaries.’
Are Nimbys a threat to national security? Britain’s inability to build houses and infrastructure is rightly at the heart of our domestic political debate. Dalibor Rohac thinks it needs to be seen as a geopolitical failing as well.
This week on The Capitalist, I sat down with Rohac, incoming director of research at Globsec, to discuss his new book ‘Unshackled: How Economic Growth Can Defeat the World’s Dictators’. We also discussed how to defend Western institutions while still building fast, what Mancur Olson can tell us about vetocracy, whether letting China into the WTO was a mistake and why chasing foreign students out of American universities is an own goal.
Rohac’s argument is that the accumulated sludge of special interests and regulatory stasis which reduces growth and stops houses and reservoirs being built has serious security implications – such as the shortfall in defence production across the West. Free markets can deliver in ways that more centralised systems cannot, but only if the shackles are taken off.
He remains an optimist, on the grounds that free societies have a remarkable power for self-correction. But who will stand up as a new champion of the Western order? A new Reagan or Thatcher may be harder to find.
Below, you’ll find some short excerpts from our conversation.
Marc Sidwell
Editor, CapX
Why growth is a geopolitical issue:
‘This book emerged in my mind after Russia’s full-scale invasion of Ukraine in 2022. I was puzzled by two things. First of all, I was puzzled by the fact that the collective West – the EU, the UK, the US – have been quite ineffective in trying to build a broad-based coalition of countries that could hold Russia accountable and apply sanctions. From Indonesia to India to South Africa to Brazil, much of the so-called Global South just decided to sit this one out. And secondly, I was stunned by the fact how Russia, despite all of its economic and demographic and other weaknesses, has been able to outproduce us when it came to the defence industrial base in many sectors. To this day we are sort of struggling to restock stockpiles of artillery shells, high-precision missiles and many other weapons. And I was trying to think about the drivers of this kind of fecklessness, this lack of effectiveness on the part of the West. And I think fundamentally the reason boils down to the fact that we’ve done a whole lot to squander our soft and economic power in recent years and decades. Economic growth is a strategic variable. It’s not just about individual well-being, it’s not just about prosperity, it’s also about the ability of Western democracies to scale up their defence budgets. It’s about our ability to outproduce our adversaries.’
Nimbyism blocks more than new homes:
‘What my book tries to argue is that there is something that could be described as Nimbyism, broadly understood – the collective assortment of vetocracy and regulatory stasis which has been pervasive throughout our economies. That is the same thing that prevents housing from being built in the Bay Area, that drives the cost of infrastructure projects to astronomic heights, that prevents us from adding new capacity in electricity generation. And that’s the same force that also makes it very difficult to produce artillery shells at scale. Obviously the specifics will differ country to country. I think one way of understanding the problem is by going to the great economist and social theorist Mancur Olson and his theory of special interests and distributional coalitions – how those add up over time to a system in which it is very difficult to get anything done, and in which these overlapping distributional coalitions effectively paralyse the economy. He calls this process institutional ossification, and he then argues that it takes a big crisis to shake those interest groups off.’
On populism’s own goals:
‘One of the greatest strengths of the United States during the Cold War era has been its ability to leverage international talent and inward migration – the whole generation of wartime European refugees that settled in America. I think that should have been one of our strengths in this new Cold War against China or Russia or Iran. Everybody is trying to get to the West. And today the administration is busy trying to chase away students who are trying to come to the United States, is trying to kick out researchers at universities, putting its hostility towards international talent on display. And that’s very much an own goal that I see very little justification for. It’s driven by this populist impulse, but channelled in a very unhelpful direction. And I think the same could be said about our trade policy, or lack thereof. We should be building broad-based coalitions – for our allies and for ourselves – to build alternatives to a dependence on Chinese supply chains. We are doing the exact opposite.’
What defines the West?:
‘To me, the West is not a geographic category. It’s not a category that could be defined ethnically or racially. To me this is a category that’s defined primarily through institutions. Countries that embrace liberal democracy and a free market economy, to me, fall into this basket. And I think that makes them naturally very like-minded and aligned in some fundamental ways. We can debate that as an empirical proposition, but I think the intuitive case for this is quite strong. The empirics of democracies not fighting wars between each other is also quite compelling.’
On the hidden power of free societies:
‘At a very basic general level, I have a great deal of faith in the self-correcting ability of free societies. We can discuss things, we can see what has failed, what works, we can learn from past mistakes. I think that’s the biggest advantage that we in the United States and in Europe and the UK have over the unfree societies. I mean, Vladimir Putin can’t really get himself out of this war in Ukraine that he started. We have the ability to reconsider. Very often when you look to the past, it’s been the same administrations, the same political leaders who drove into the ditch that then changed course and shifted trajectories. The big push for deregulation started in the 70s under President Carter, and so on and so forth. So in a sufficiently long sweep of history, I’m optimistic. ... Insofar as America remains a free society, it can basically get itself out of any hole it’s in, no matter how deep.’
Do we need a new Thatcher or Reagan?:
‘I mean, it is very hard to look up to similar examples today. One of the challenges of the present moment is that our voters in the present information ecosystem get tired of incumbents very quickly, no matter how well-intentioned or thoughtful they might be. And I wonder whether we’ll see a new generation of Thatcher or Reagan-like leadership. But history suggests that we need it. It will be very hard to make any headway without.’
