Scenarios for 2030

What does success look like for the wealthy countries?

This text considers the nature of economic, social and institutional success for the old, wealthy countries. Some care is needed with prescriptive work of this sort. Thirty years ago, many saw Sweden as a social and economic model to follow. Twenty years ago, the world seemed Asian - or anyway Japanese - and Germany was lauded for converging on many Japanese business practices. A decade ago, all was American, or perhaps e-American. The poll at last week's workshop thought that, once again, Sweden had come the model for the future!

In summary, three things needed to be brought into balance in order to predispose a rich, demographically-old country towards continued success. First, its commerce has to gear up to a world of fast renewal. The two crucial elements required for this to happen are a distinctive skill set amongst senior managers, and the embedding of firms into networks that make knowledge and skills accessible to them. Second, the society of such a country has to change in two fundamental ways. First, people needed both to take responsibility for and gain access to the tools of perpetual self-improvement and adaptation. Second, it seems unavoidable that the relationship between such people and their state should shift to a more directive, sometimes frankly coercive mode in those areas where evidence pointed to things that could be done to improve individual lives. One participants called this the 'social equivalent of the highway code', much as speed limits curtail individual freedoms for collective benefits. All this had to be set against a background of demographic change and of limited state resources.

The third area in which change was needed was in the mechanisms of government. It is likely that the machinery that is most in need co change are the systems of political representation, and that they are the least likely to receive it. In brief, the a political and administrative structure that predisposes a nation to success is likely to be one which realises the importance of the effective processing of information. It draws on the best sources of knowledge when forming policy, and does this in a way that limits distractions from these. It takes advice. It separates its decision-taking structures into reasonably homogeneous blocks, where the definition of the block's domain is set by the nature of the problems that it has to solve. The managers of each block has explicit tasks set for it, for which it is accountable. Communication is as important as access to information. Many such blocks - and layers of blocks, for problems iterate at different levels of scale - are required to communicate amongst each other, with the effectiveness of this being itself under separate management. The inner core of the nation's government is itself segmented by task, with at least one component of it being charged only with ensuring that process and information flows run smoothly.

The multidimensional nature of 'success'.

What we mean by 'success' is, of course, predicated on a great deal more than aggregate economic activity. People who feel that their society is a success look as much to the absence of impediments, turbulence and dissent as they do to fast economic performance. Indeed, fast economic change can cause at least some sections of society to feel that things are getting worse. However, the established wealthy nations are likely to be faced with extremely intense competition and by rapid technical and other changes within commerce. Those societies which are most able to absorb these changes - and able to do so without generating undue social dissent - that are those which will be amongst those best able to prosper.

If money does not buy happiness, poverty, unemployment, fear of crime, disease and persecution certainly generate its opposite. Most list of freedoms start with "freedoms from" and then graduate towards the "freedoms to". Statistical assessments of the factors which bring about high levels of reported happiness across nations are necessarily crude. However, about two thirds of international and inter-group differences can be explained by three elements: the freedoms 'from' disease and other restatements of the condition of poverty (30% of the variation), the positive freedoms that are associated with secure employment, a happy family life and disposable income (around 20% of the variance) and a term that relates to a society's ease with itself, and the perceived state of the world (around 10% of the variation.)

The figure shows some of the data for over forty nations. Self-assessed contentment rises with income per capita, but with much scatter and an early plateau. It is plainly as easy to be happy in middle income as it is to be contented and rich, at least in aggregate. However, the next panel shows assessed happiness against self-assessed adequacy of household income. Here, the relationship is much stronger, and also essentially decoupled from absolute levels of income per capita: contentment stems less from what you earn than the match to the expectations which you may have about this and, perhaps, the relative status which you enjoy. The final panel shows that despite the statistical relationship between personal content and the perceived "state of the world", rich countries seem to be innately pessimistic. Their inhabitants are likely to see the world as a more disturbing place than do those who live poor nations.

A happy society has a collective sense of 'how things work' that appears to be reflected in events, sees economic improvement that social and institutional structures can match, and senses an absence of threats, blockages, failure and dissent. Success is multidimensional, and some of these dimensions set limits for others. As we have seen elsewhere, activity along some of these dimensions set constraints on what can be done on the others. We invest in social goods such as old age support so that the entire fabric of society is able to support long term growth.

Economic success: swift renewal.

Increased competition places pressure upon commerce. Some of this pressure comes from within, arising from the actions of shareholders and consumers, from competitors and regulators. Other forces are essentially transnational comprising, for example, technology. Such forces can lead to actions which are socially disruptive, and states may take measures to lessen or prevent these. However, such measures tend to lessen the capacity of nations to adapt themselves to further change, closing down options and - in extreme situations - leading towards an economic crisis in which something - the currency, the policies, the nation's relative status - has to give way. By contrast, nations which can keep up with competition have a far wider range of options open to them: they can, for example, finance support or transition programs for those in distress. Above all, they are addressing the situation on terms of equality, rather than admitting that they are harried by it.

Increased competition can, in fact, be managed in only two ways if a society is not to lose its relative position. Either it must renew itself so as to face the challenge on its own terms, or it must retreat behind protective barriers and hope that the threat will somehow abate, or perhaps take additional measures to ensure that it does do so. Renewal must be swift, sure and pervasive; and it must work with and renew the social and institutional factors which can create friction if they are neglected. There are essentially two features to such renewal: productivity within the existing corpus of activity, and innovation. These place new demands on the rest of society.

The figure is reproduced from elsewhere, and shows the recycling of factors - labour, capital - which is innate in productivity growth. Productivity growth will accelerate such recycling unless output rises faster that productivity, which may be hard to achieve in a highly competitive world. That is, people will find that their jobs last for a short period.

People will, therefore, need to renew their skills as much as companies need to renew their productivity. This is as true for finding new jobs - as evidenced by the diagram - as it is for making a valued contribution to the one that they already hold. Truly flexible, self-education people may well 'migrate' within a company structure as much as they move between organisations. However, in place of the once-standard crawl up the corporate hierarchy, what occurs today are much more lateral moves.

Renewing skills

There are two sweeping issues of policy: the nature of the new, managerial skills which are needed and how these are identified and delivered; and the question of who is to pay for this to happen.

Skill gaps and the skill portfolio.

The formal professions tend to develop individuals into narrow specialties- from junior doctor to consultant cardiologist focused on one aspect of heart disease - such that the bounds to and lack of knowledge is self-explanatory. Training for such people has, traditionally, followed the "cannon" model, such that an initial blast of education places them in a ballistic trajectory along which additional learning is virtually automatic.

Commercial management, by contrast, follows exactly the opposite path, in that initial skills are rather narrow, and eventual demands are very broad. What a person needs to know is neither confined to a clear domain of interest nor very evident to the individual in advance of their knowing it. Not only do they need to learn continuously, but they need to learn things which they are unable to define for themselves. A rigorous approach to this issue would match the explicit skill needs of a job to the actual skill portfolio of an individual or group of individuals, and create situations in which these skills were transferred or developed and after which the transfer was tested and reinforced.

One extremely important aspect of the skill set that is needed for 'agile' commerce are the social skills that are displayed by individuals and by groups, and the social make-up of those groups. We have discussed the idea of there being three distinct 'cores' to the company here: that core competencies that face customers, undertake product innovation and manage productive infrastructure are socially quite different, operate to different time scales and are motivated by distinct balances between overlapping and mutually-independent sets of criteria for success. By contrast, here we have discussed three distinct management styles: the pyramidal hierarchy in which the CEO is the deity over a pantheon of subordinates, the model of governance that uses overlapping tiles of responsibility that is so typical of European companies, and the emerging idea of the process-driven board, in which it is the custodianship of processes rather than domains which defines accountability.

Each of these structures are plainly very different in what they demand of an individual by way of their personal skills and their ability to operate as a member of the team. Whereas a person could remain within one social system in previous careers, today they are exposed to multiple systems either simultaneously or in quick succession, and they need to be able to recognise and navigate these currents. Value systems - what constitutes a valid outcome - vary enormously from one domain to another. When one is innovating, the group is both defining a 'space' within which an answer is going to be located (for whom, at what price, facing what competition, made-distributed-protected-maintained how?) and also arrive at a solution that lies within this. When one is optimising, the objective space is well-defined, and the issue is intolerance of dissonant detail and the relentless drive for optimisation. These demand different values and approaches, but also different rules of engagement for the team and rewards to it.

Senior staff are always going to be thrown from one social situation to another, and need to adapt accordingly. Increasingly, however, the needs for 'joined up thinking' in issues of productivity and innovation mean that these cannot be pushed off to isolated groups. Indeed, the once-dominant but remote optimizers and researchers were a very poor response to the se issues. A much wider range of people are being asked to collaborate in strategy, innovation and option generation. Comparatively junior staff are now the antennae of the organisation. If one is being exposed to both situations in the course of a working day, not only does one need different skills but also the ability to recognise what is appropriate to a given situation, and matching recognition by one's peers and superiors as to how the game is to be played. All of this takes re-organisation, much better communication, appropriate and complex accountabilities, performance indicators and rewards: all commonplaces of commerce, but as yet neither harnessed to purpose nor supplied with the skills that are needed. As the figure below shows us, there is no obvious correlation between the amount of money spent on innovation and the results which flow from manufacturing. Much more complex - and usually social - issues are in play.

Who is to pay for training?

Training is costly. The state pays for much of the initial phase in most industrial countries, and commerce tends to pay for further development. Individual cash investment in their own skills is relatively rare, and then on safe bets such as professional accreditation or alleged meal tickets, such as the MBA. Corporate training is often more of a rite of passage than a focused effort to assess an individual and to give them what they need. In addition, giving a person training which delivers a formal qualification is often to increase their cost to the organisation or, if the firm will not pay the going rate, a means to lose them to the labour market.

The figure shows that the amount of adult training which is delivered varies widely amongst nations and, no doubt, within sectors. It is plainly in the national interests to maximise the match between skills in the labour pool and the demand for those skills. The lags which are entailed make it essential to handle this in a forward-looking way, to at least some degree training people for what will be needed, not what is currently required. For the reasons already discussed, commerce and individuals either will not or cannot do this: there is a market failure which states can rectify with regulation which prescribes best practice and requires compliance with this. Naturally, we have only the sketchiest notion of what such best practice looks like at present, but winners in the information economy will grasp these answers more quickly than those nations which lag behind.

New styles of operations for renewal

The agile, complexity-managing, information-intense economies of successful nations will operate in ways which are rather different to the success stories of the past.

Issues of scale are less relevant than access to complex infrastructure, some of it tangible - in the sense of there being trusted and accessible suppliers, partners, advisors in the cluster with which the organisation deals - whilst other parts are less tangible, being to do with trust, with the implicit rules of the game and with the predictability of the operating environment. We have discussed trust elsewhere.
Very small enterprises are complex things for capital markets to address. Some 80% of trades on the NYSE involve companies which collectively sum to less than 10% of the total book value of US companies. The rest are too much effort to assess, and supposedly too volatile to fit with automated trading. This is convenient for traders, but is a dereliction of what capital markets are supposed to do for society: provide capital. Venture capital is small compared to the need, is often unduly rapacious in its demands - essentially, it often manages its risks badly by failing to focus sufficiently - and it is uninterested in start up activities. Retail banking is also unwilling to bankroll non-traditional activities which, perfectly understandably, it does not understand. Somehow, however, new businesses struggle into existence, their growth often tied to chance encounters with former entrepreneurs who understand the issue. The figure shows both the gulf that exists between seed funding and the money needed for expansion, and also national differences in the priority given to this by capital markets.

Once again, if we knew the answer to this issue, we would have implemented it; but it remains a major obstacle on the path from idea to action. Capital is not in short supply, but the ability to deliver what is in effect micro-finance without the paraphernalia of business incubators is a skill which has yet to be generalised. National attitudes to entrepreneurship are also very distinctive: 8% of Japanese regarded a business start up as an honourable occupation, and 20% said that they would consider doing this. A vanishing small proportion have in fact done so. By contrast, other nations take a more robust view - although the majority in almost all of them see starting a company as something which is vaguely dishonourable, astonishingly - and a modest proportion have actually done so. The figure gives some national statistics.

Using and accounting for knowledge

Knowledge can be seen as an inexhaustible resource - in that copying it costs nothing - or as an intensely fragile source of comparative advantage - in that copying it costs nothing. There are two ways in which knowledge can generate commercial advantage.

First, it can be embodied in a clear product - software, a molecule - which it is easy to copy but which is protected by intellectual property rights that are respected. This is broadly accepted within the industrial powers, but widely flouted elsewhere. In a closely connected world, the expectation that the fruit of huge investments can be stolen with impunity implies that less will be invested in future if those expectations are fulfilled. Some degree of mitigation - and increased margin - can be achieved by embedding a service component into the product, whether renewals and upgrades in software or training and the like in other packages. This is, however, a marginal solution for many manufactured products. A recent development is the emergence of NGOs who demand that Western governments and companies should waive their IP for humanitarian reasons. This is not an intelligent move, and other means of delivering the same outcome should be considered.
Second, networks of knowledgeable people can be induced to generate innovations and productivity improvements rapidly. Such structures, whether clusters of companies, universities and others, or simply large commercial organisations, act as an endless spring of new potential. They cannot easily be replicated or re-located. However, as discussed above, they represent an investment that has been made in many dimensions - in research, in institutional growth and trust-based relationships, in human resource - and this investment cannot falter or the well will run dry.

A corollary of the importance of human and institutional networks is that a given item of knowledge and skill has a value that varies with the context in which it is found. There seems no policy consensus on the value of research as an act in its own right, as the figure shows. There is no unified trend in public or private expenditure per worker, and even within countries, the trend is dissonant everywhere by Japan.

Factually, however, we know that investment in science and technology has delivered double digit rates of return. Who reaps these rewards is not necessarily the investor, however. For example, science which is done in the US has been as much exploited in other nations as it has by its US investors. The US government has given the world an immense present, the value of which varies in direct proportion to a nation's ability to exploit this knowledge. Equally, as has been evidenced in the former Soviet Union, highly skilled people - engineers, scientists - have little economic value when the context that made use of them has evaporated. They become highly trained taxi drivers.

There is, therefore, no 'bean counting' approach to accounting for the value of knowledge and skills that may reside in companies. The machinery for exploitation is valueless without the raw material on which to work, but the knowledge, unharnessed, is also without value. Companies which reduced their costs by either outsourcing or terminating their ability to harvest knowledge that exists in public domain - or which have ceased to generate proprietary knowledge - will be able to compete only on the grounds of productivity, using industry-standard ideas and equipment. A short spurt of cash generation will be followed by a long - or perhaps abrupt - period of relative decline.

Companies do not need complex accounting for knowledge or intangibles in order to justify expenditure that leads to new responses to the marketplace. Oil companies may sometime abuse the way that they account for their oil reserves. Such accounting, even when done excellently, is nevertheless based on judgment. Investment in drilling for oil is also based on judgemental and geological evidence. That there is no abstract set of rules that guarantees anything to investors. Investors take it on faith and past record that a given company is good at doing what they do. In just the same way, a company which spends money on insight and human resource is betting shareholders' funds on its ability to increase productivity in the core business and to extend that core through innovation and by entering new markets. These are not balance sheet items, semi-mystical 'intangibles', but the source of the difference between 'market' and 'book' valuation.

New scaling laws

There is an additional set of disciplines at work which have not yet been widely recognised. These are to do with the innate dynamics of networks, and particularly networks as they apply to anything which processes information, as applies to much of the knowledge economy.

One notable research finding about networks - whether of knowledge or of physical interactions - is that they have universal properties. These are to do with how connections change with scale. There are two kinds of network: the scaling and scale free network. The former becomes exponentially more complex as it becomes larger, whilst the other retains the same "topology" at all levels of scale. In plain language, if one imagines zooming into a network - lets us say of towns and roads on a map - then one would expect a repeating pattern of blobs - towns, aggregations of complexity - and lines, or roads connecting these. As you get closer, so individual 'blobs' open up to reveal their inner connections. A scale free network looks the same at any level of zoom, so that a blob - a node - remains connected to other nodes in much the same way. This is absolutely not true of scaling networks, which are simpler at high levels of zoom, and much more complicated as one zooms out - that is to say, as more nodes are added to them.

It must be emphasised that this is not the complexity that comes to a system simply by virtue of having more members. The scaling network cannot be understood as simply a lot of the same thing, repeated much as are grains of grit in a sand pile, but rather as something which has a structure which has its own architecture, a set of relationships which change at various levels of scale, and which must be understood in those terms. Vehicle traffic is not just "lots of cars" to the network manager, but a system that has dynamics that have to be managed in their own right. Scaling networks have implications for potential clashes amongst information which is circulating within such a network. It is much harder to write one huge fault-free computer program than it is to complete ten smaller programs, each a tenth of its size. This is, in fact, the exact inverse of the law of economies of scale, and it is an important structural force with which we are just beginning to grapple. It lies behind the tendency to break operating units which use knowledge into small entities, and to handle software engineering in terms of objects and modules.

Summary: We have reviewed a range of forces and factors which predispose to success. Much of what has been said has a familiar ring to it, for the commercial centres of the industrial societies are well along the pathway to realising these outcomes. Familiar or no, it also has to be said that precious little has been done to create an integrated response to these issues, and that current policies are extremely heterogeneous. We "enter the future backward", to be sure, yet it is hard to pick out unifying policy trends in the footsteps that we have left behind us. Additionally, the rapid pace at which they are doing this is concealed under the conservative approach which all take to national accounts. If I put rubbish in a bin, that counts for nothing; but if someone is paid to pick up my litter, then this does appear, and also influences other social indicators to the good. Yet is there greater value in the second outcome? Nations which learn how to get by and accomplish a great deal with minimal fuss will see less activity in their national accounts, perhaps, than those which have to administer every step, and achieve less. This is particularly true when broad measures of what constitutes success are taken into account. This is, of course, where we started this text, and it is time to turn to the other two concomitants of success: the quality and liberty implicit in social and public life.

Social success: the citizen renewed.

Attitudes to citizenship changed enormously in the Twentieth century. At its beginning, nationalism was at its height and people were urged to think less of 'what your country could do for you than what you could do for your country'. In liberal states, elites were to direct the masses both for their own good and for profit, some of it collective. The masses needed to be controlled and managed, and at the same time 'improved'. In less liberal societies, the people were at the disposition of the state, and were to be deployed as the state saw fit in order to achieve great things.

We have, by and large, grown out of this. The state used to be synonymous with a chunk of geography that enclosed almost anything of any importance. What France did and what affected France was largely bound up within its borders. Foreign ideas, threats and opportunities such as trade were of limited importance. Today, by contrast, the communities and ideas with which people engage are either extremely local or highly delocalised. Few engage with "France" the entity, but rather with a set of discrete social spheres - work, local facilities - that are not at all interconnected, and with entertainment, goods, ideas and tasks that come from outside of France. This has a number of consequences.

The former primacy of the state over the individual is replaced with the view that the state is the manager of a backdrop against which life is to be lived. In some ways, the voter's approach to government is similar to the shareholder's view of a board - that there are clear ways of governing well, that the executive should be allowed to get on with it so long as they follow good practice, that they should be existed when they fail to deliver. It is not too much to say that at least one task of the state to deliver 'voter advantage', much in the sense that boards are expected to focus on the maximisation of shareholder value from the resources that they command.
There is a reasonably clear view of what constitutes 'good management' by the state. Nevertheless, national priorities differ and nations pursue different styles. The results are often broadly equivalent: Sweden, the US and Canada have followed quite distinct patterns of public spending and social policy, but delivered much the same growth rate for generations. Others have made choices which have not delivered the same economic results, but which satisfy their 'narrative' of who they are. (See here for more on narratives and national identity.)
Nationalism is far from lost, but is strongly tempered. There are two kinds of national interest that are in play, one related to international affairs, the other to narrative and identity, as previously discussed. (Rejectionist nations feel that their narrative is being disrupted by social influences that flow from outside the nation, but we shall ignore them for present purposes.) The realm of international relations is, in effect, the last bastion of early Twentieth century attitudes, in which elites pronounce on National Interests and go to war, attack others' economies with trade limitations and the like. What constitute true national interests - with, for example, the issues of competitiveness that were discussed in the previous section - are often swept aside in the face of relatively modest - or, indeed, non-existent - threats.
Nationalism aside, the new synthesis which is emerging is that the state is for the citizen, and that there are no second class citizens wherever the state impinges. That is, the state can less and less take sides where minorities differ from the run of the society, but neither can minorities be allowed to dictate to the rest. The upshot is both less clarity and much more complex decision-taking. Uniform policing means fairness, but it also means the same weight applied to groups who find the least contact with the law deeply disturbing and those who go out looking for a policeman to challenge. Uniform schooling may hold back the best in the interests of fairness. Uniform social security penalises those who save and behave responsibly, and licenses those who run into debt or fail to exercise self-control with their finances, health or family.
Evidence-based medicine has striven to define the interventions which work from those which do not, to great effect. This idea has been extended to social policy - and, indeed, has begun to be applied across the board as state spending has come under increasing pressure. Much as we feel that we understand monetary and fiscal policy and its relationship to sound money and stable government, so more or less formal rules are beginning to emerge. These are prescriptive as to what policies should be followed in order to arrive at the desired outcome. This ties political hands, much as monetary policy is now delegated to central banks, as a technology and not a political issue. It creates convergence between nations, in that the only distinctions are on the goals, not the means of achieving them. It is, however, a force which is also increasingly prescriptive about social policy.
As we have seen elsewhere, the state faces a huge squeeze in the issue of care in old age. It will have to cut down spending on other forms of social intervention if it is to balance its books, yet voters - and the needs of a competitive commerce - will demand the same or better services. The stress on it to be more productive will be unrelenting and it will, increasingly, tend to adopt measures which are proven to work.

This will have two outcomes. One, already discussed, is a much more prescriptive approach to what is done, and to the uniformity with which it is done. Does one need a hundred separate university courses that teach chemistry, or could one have one uniform optimised course? Should not all hospitals or schools be managed the same and deliver exactly the same results as each other?

Second, intervention is likely to be aimed less at support - the goal of post-war policy in most nations developing welfare programs - but rather at helping (or inducing) people to make a transition to self-help. This is particularly true around issues of unemployment and disability, where efforts are focused on making the person able to care for themselves. The Australia, New Zealand and the US have taken particularly strong lines on this, with limited periods of intense support being used to boost people into self-sufficiency. Britain and other European countries are beginning to follow similar lines. Once again, however, for the best of motives, the state is becoming prescriptive and directive. People who fall outside the net of the normal - an increasingly widely caste net - may expect to be subject to interventions: intervention on behalf of children, interventions in adult health maintenance aimed at the obese, alcohol abusers, even people who work too long or too hard.

Renewal through better health

Health technology may have a considerable impact on both national success and what a government has to do for its people. If people are able to work for a few more years, then many issues of pension funding disappear. If the chronic illnesses that are prevalent in the developing countries are mitigated - tuberculosis, malaria, the hepatitis group, HIV, schistosomiasis - then they will feel an equivalent social and economic stimulus.

An area where advances will be of particular importance is that of mental disabilities. Depression, for example, is the fourth greatest source of DALYs (disability adjusted life years) according to the WHO, and the second greatest amongst people aged 15-44. Overall, this and other neuro-psychiatric problems such as schizophrenia accounted for 24% of the DALYs in this group. Roughly a quarter of the US population are currently receiving some form of psychotropic medication. Due to population aging, some ten percent of the population could be expected have some form of dementia by 2030. If it proves possible to tackle the root causes of these disorders, then this conveys huge social (and economic) advantages. Equivalent things can be said about degenerative disorders, from maculitis - causing blindness - to cancers and autoimmune diseases such as arthritis. We can be virtually certain that such advances will be made, and that much more profound and subtle interventions also become possible, altering 'difficult' personalities to a more tractable ("constructive") state, assisting cognitive tasks such as learning, concentration and muscular coordination, and perhaps even with matters such as social relations and individual drives, values and areas of interest.

The citizen of 2030 may well have many more choices open to them, therefore, but they will also be faced with many more constraints. One set of these will be driven by the state, for the reasons just rehearsed. A range of self-disciplines will be enforced upon the individual, who will be hugely much more subject to tracking and surveillance that has hitherto been possible, This need not be sinister, as it will probably operate in the mode of due cause, due process. Nevertheless, the state's data miners will be able to define the individual much as an entomologist defines an insect specimen when the need presents itself. The state will operate under reciprocal scrutiny and constraint.

Managing our interactions

The other limitation on the citizen is their individual impingement on each other's interest. It is notorious that three quarters of civil disputes are between neighbours. In the age of elites, those able to exercise a gentleman's prerogatives of choice were insulated from each other by large numbers of people who had no such choice. Elaborate systems governed how the elite interacted amongst themselves: formal courtesies, codes of honour, duels. When everyone is a member of the elite, however, societies develop what the Dutch charmingly call 'large toes'. It is easy to offend, and every careless interaction has the potential for litigation and difficulties. Consider the assumptions behind a PG Woodhouse novel - arrogant Aunts, Drones Club members stealing policemen's helmets - and place these in the dour world of prescriptive policy described above; and the smiles wear thin. Jeeves would sue.

We may, therefore, live in a world in which we have to watch our step much more than hitherto. Anonymity and privacy are frail things, and our actions will stick with us, summing into a reputation which essential strangers can access without much difficulty. We shall have a huge range of choices open to us, but shall have to be careful how we exercise these. We shall be more responsible for our own actions, but when we behave irresponsibly, people will know and the state may well have instructions for us, or intervene in our family life, our expenditure patterns or the permissions that we need in order to exercise some of the options.

Institutional success: the agile monolith

There is, of course, a long and complex paper already in place about this crucial topic. You can review it here. Rather than repeat this, we shall quote the summaries that were given of the five main chapters.

On the key challenge, managing complexity:
Complexity is innate to the industrial economies, and the capacity to manage it will define those groups, societies and industries which do well. The distinct domains of social, commercial and public interpretation of events will become more interconnected. How this will evolve is unknowable, but there is plainly much potential for misalignment and friction. The positive potential which exists for those groups who take a fruitful approach is, however, very great, and the remainder of this essay looks at the potential shape of what this might be.

On 'getting to clarity':
Policy options move through discrete stages in each of which the way in which they are thought about, who is concerned with them and what criteria are applied to them vary with the type of issue and the state of maturity of it. We have noted that there are some strong and natural forces which set out to blow the more contentious of these processes off line. Finally, it is evident that decision-takers prefer to be able to focus on what they know well, and to do it better, rather than to take on new things.

On dispute settlement:
A society which is good at solving problems is one that has a good, shared understanding of 'how things work', but is also not locked into a frozen assertion of this. Such a nation is good at managing multiple viewpoints, where this management prevents loud voices drowning debate. Conflict management is addressed by reaching to the fundamentals where dissent is grounded and finding new ways of speaking about the problem area. Societies which are good at solving problems seem to allocate the management of issues where the consensus is strong to delegated authority, but also maintain mechanisms to avoid these becoming elite 'priesthoods'. Such groups will become extremely expert and perhaps inward looking. It is characteristic for them to begin to drive their service with an eye to what it is most technically sweet or simply efficient to do, leading to customer alienation and other forms of solipsism. It is essential that they are networked both with peer organisations and with the public. As we shall see, however, achieving this is a difficult task.

On trust and party politics:
the machinery of elective democratic politics has not kept up with the need for sophistication in policy creation. Traditional party politics drew up in lines along deep social faults, and elections took the place of battles over these. Current issues are too multi-dimensional, too complex and often too expert to be captured in a party brand. Issues of personality and competence have replaced the battle of ideas. However, the policy machinery has not found an adequate substitute and political platforms are increasingly devoid of anything but generic ideas and slogans. The quality of people who put themselves forward for public service and the consequent selection process for leaders is at best dubious. Perhaps much of these complaints were always true, but the public disenchantment with elective politics - and the growth of alternative for a, such as NGOs and protest movements - suggest a deep malaise.

On ways forward:
The extremely complex nature of decision-taking means that powerful people have focused their attention on the more tractable issues, and where their focus is drawn, other people of power are drawn. It is reasonable to imagine that re-weighting the structures of power, so that more attention is given to the less tractable and rewarding aspects of decision-taking. It would help companies and countries manage their way through complexity, avoiding dispute where possible, actively forging consensus and deploying the best possible opinion and knowledge in pursuit of options for renewal.

Advice that has been offered subsequent to the work group that generated this paper has suggested a number of ways in which effective government will regroup. We are going to address these comments under two headings: successful administration, and successful politics.

Successful administration

A clear feature of government over the past generation in almost every developed nation has been the marked shift from art to science. Much that was open for political debate is now an issue only in terms of how its technical management is to be undertaken: matters of professional judgment. This is notably true of macroeconomic policy, and the shift hat we have already discussed towards evidence-based and expert solutions will accentuate this trend. At the same time, there is a great deal more to be managed. This comes from two forces, neither of which is likely to abate.

First, the growing connections between once-isolated processes, nations and groups of people mean that it is necessary to take a systems view of events. Market failures have to be policed. Greater international connectivity demands a coherent operational framework - one part of which is the elusive 'level playing field' - and significant fractions of European law are now generated from this source. The US, of course, has been through similar contortions during the integration of the federal states, a process which included warfare.
Second, the fact of there being more stakeholders who feel entitled to recognition of their interests, many organised into semi- or fully-professional pressure groups.

Administration will, therefore, be much larger, more complex and faster-moving than it has ever been in the past. At issue is what a successful response to this might look like. A guiding principle has been that there is an absolute maximum size to the number of people or agencies which can be involved with any given decision. Consequently, the state must continue to break itself into modules, where each of these has tightly defined tasks and powers. Separately, the state needs to separate the executive clearly from the legislature - which is far from the case in the US, for example, and deeply vague in the EU - and to separate policy formation into its natural steps.

Before we get into the nature of this segmentation, we would like to table the idea of the engineering hierarchy. This is a design concept that is of great relevance to government but which has not be explicitly addressed by it. An example of such a hierarchy is that of the telephone network. There are seven levels at which one can address instructions to a telephone network, from "get me a line" to events which happen at the level of individual switches.

The relevance of this lies in the reason why engineers design systems like this. If one is programming for the Windows operating system, one uses a number of so-called API instructions to do complex things like open a window or shut it, select an application and so on. This is a huge simplification of an otherwise complex task. A commanding officer can concern him or herself with every aspect of a piece of logistics, or can simply call on pre-established functions - layers - to undertake standardized options: "Move the army, there." He -and the Windows programmer - relies upon the system to have safeguards in it that stop the army attempting to camp in the middle of the North Sea. Government, however, has yet to learn this lesson and to create modules of activity that can be deployed as "meccano".

Some aspects of the state are necessarily very large. One lesson of the recent past is, however, that gigantism is no impediment to agility if it is restricted to delivery vehicles, and where these vehicles deliver something that is cleanly defined, following something of the spirit of the multi-layer engineering protocol. The thinking parts that drive these outwardly simple, giant structures need themselves to be small, agile, networked with their peers and their task masters and, above all, separated from the elements that deliver operations. They say "move army" and that which moves armies does its stuff. If, by contrast, whether we move the army or no has to be negotiated up and down each level in the system, then agility is not the outcome.

Generating knowledge-rich policy

The paper to which we referred at the beginning of this section tells us that even thinking and communicating itself has a number of discrete and different stages to it. Failure to observe this makes participatory processes difficult to manage, because people are asked to give their input at the wrong time, or with inadequate briefing. Such stages should be sequential and separate, and managed by a party who is not involved in the debate itself. The need for decision taking is not continuous. That is, what an elected politician brings to a process that should otherwise be handled by the civil service is in fact a quite limited.

Britain once had a process which was closely allied to this. A politicians would ask for options. A series of consultative steps would allow the civil service to bring forward a thinking document, with the constraints on what was possible spelled out and the options largely defined. Today, such a process would be more transparent than hitherto, and a challenge and dissent would have been taken into account. Politicians then define the preferred option, which may be to do nothing. A further draft of the chosen option is made public, for consultation and challenge. Finally, a legislative document is brought forward for formal debate and legal enactment. The whole structure is then made operational through existing or new systems of delivery.

Three things must be noted about this. First, a great deal of law is coming from international agreements, and from the implications of new case law and other challenges to what seemed not to be in need of legislation. Second, politicians are increasingly inclined to work back from examples of outcomes that they would like to see to theoretical justifications of this. Third, the engine that defines policy needs, looks for ideas and options - and so forth - is essentially dead through neglect. There is too much going on elsewhere - and too much centralisation around the inner circle of power - for such a system to work. Most Western countries have confronted complexity by putting most power into the hands of a quasi-monarch, who is expected to direct everything from foreign policy to personality clashes in the executive. This is, of course, regressive, a return to a medieval model of governance.

The sad truth is that Western political structures are primitive remnants of an earlier age. The civil service has moved on, often in ways which reflect earlier remarks about organisation. In reality, there is nothing particularly unified about the places in which elected representatives are needed in a democracy. Political decisions in policy making, the process of enacting statute law, the daily running of executive government and crisis management are in fact quite separate things, entirely capable of being handled by different groups of public servants accountable to distinct groups of politicians. Some are best handled locally, some nationally; some are matrix-like in that they permeate other forms of activity, still others are stand-alone. Any one of these can be so defined that it can act as an engineering layer - above - having its inputs and outputs, accountabilities and span of decision. Relatively few of them are innately conceptually complex - although frequently structurally complicated, and large - except insofar as political interference makes them so.

We now need to add a further issue that makes these arrangement seem increasingly archaic. That is the question of sub-national autonomy, competitive positioning and regional differentiation. A common response to integration of any system at one level - at the European level, for example - is to increase differences that were hitherto masked. If one creates a common currency, then balances between wages and productivity will become the grounds on which competition is played out. This was very clear in the US, when states merged their currencies and opened their borders to trade. What came later was, however, a wave of scale-seeking activity which rolled any initial inhomogeneity flat.

As we have seen, however, success is less a matter of scale than cluster and network formation, agility and fitness for purpose. Increase competition will generate winners and losers- or stronger cross subsidy - but will also force differentiation, causing regions to play to their strengths. Twenty years of hard drive towards - let us say, offshore engineering and energy production - has made Western Scotland very different in its skills and outlook to the East. How to manage such specialised regions in their own terms, whilst maintaining national standards, presents a new challenge to a central state. It can only be answered by enhanced regional autonomy, on the one hand, and by much tighter policy integration between these regions in any issues which affect all of them.

Modes for successful politics

We have already spent some time on the shortcomings of the existing political model, one which has been replicated across the industrial world and which has, for the most part, served its members reasonably well. The future is, however, deeply challenging to political leadership, which is already overwhelmed by the many pressures that exist upon it. What is needed is the means to "work smart" rather than to "work hard". In particular, the specific roles which politicians play in the processes of government need to be given a much cleaner definition; and the job description of those roles sharpened both to create the space needed for thoughtful leadership.

The model of political engagement which almost all industrial countries follow is essentially that dictated by archaic views of how power is used. Primitive power structures are pyramidal: an apex - the court, the general - thinks its thoughts, and orders pass down the pyramid for execution. This evolves into a brokerage model, in which one or more interests contest for the right to pass orders down the pyramid. At this point, evolution essentially ceases. Only the nature of the interests which are represented have shifted for, in some cases, two centuries.

This model is not adequate for the challenges of the future.

The implied remit on those who occupy the apex is that they are omni-competent, omnipotent and so responsible for absolutely everything that occurs. The apex itself has a hierarchy, and the Leader is expected to engage with issue and think every thought, attend to every crisis and heal every wound. This approach is essentially amateurish, in Britain's case left over from the age of the gentleman politician, and one would certainly not try to run a medium sized company in this way.

A more appropriate approach is easy to derive, at least in general terms. First, as discussed above, process engineering skills should tell us the nature of the activities in which elected officials should engage. There will be many of these, from ideas generation and option selection to legal enactment, overseeing implementation and conflict resolution. These will occur in a myriad of domains, defined by geography and functionality. The interaction between these creates many tasks, with clear boundaries and deliverables. It is easy to see that generic clusters of tasks can be pulled out of this complexity. For example, what might be called "thought central" tasks have little or nothing to do with the scrutiny and holding to account of the executive. Running administration has little or nothing to do with either thinking about policy or enacting law. Making sure that communications flow between the branches of the state, and that they take account of each others' interests, is a separate set of tasks. Different kinds of people, operating to differing time frames, are needed if these are to be done well.

Such considerations can easily be connected to extant structures. Indeed, the specifically administrative side of government is often segmented in much this way. However, politicians feel empowered to sprawl across this structure much as it pleases them, and without external disciplines save those of the diary, career considerations and the need to beat down adversaries in formal and informal conflicts.

Voters are disenchanted with politics. Investigations into the sources of this point to two basic features. First, 'There are no exciting views on show - all the parties are the same'. Second, 'It is all a beauty contest with no substance, and the motives of the individuals who are involved are suspect'. Let us look at each these in turn.

People feel that political parties are innately bland and boring. There are several reasons for this. First, the economist Hotelling suggested that the flight to the middle ground was unavoidable in any market where scale was important. Where many niches are possible, then many manufacturers - or political parties - can thrive. Parliamentary democracy revolves around winning by a majority of votes, however, so attaining scale is all-important. Few nations have more than three major parties in play, all of them trying to occupy the middle ground that most voters find broadly acceptable and which offends no major group.

Second, parties are constrained by the facts of expert management. Whole realms of what were political battlegrounds are now the subject of objective optimisation: macroeconomics has been mentioned, but also labour theory, the legitimacy of commerce, welfare and health economics. All of this makes policy debate both more esoteric and less exciting than hitherto.

Third, voter identification with general, constrained brands of this sort has to be very partial. There is much more variation of opinion and interest in the population than can be reflected in party politics, and in the absence of grand polarising ideas, there is only vague identification between any one individual and what the party says that it represents. Additionally, any one voter can agree with Party A on its health policy and Party B for its stand on defence. It is a far cry from the football club enthusiasms of the great days of left and right, King or Commerce.

Pathways to trust

Above, we noted two reasons for voter apathy in respect of democratic politics. We have discussed the issue of why party politics fails the voter. Now we turn to the question of trust.

Surveys show that politicians are trusted less than almost any group of people, with only around 30% of US citizens telling a 2005 Pew poll that they "would take it for granted that a politician was telling the truth". That is, seven out of ten people seem to believe that their leaders systematically lie to them. Some of this is jejune cynicism, but some part of it is real. Corresponding numbers obtained for 1950 invert these figures. We have a healthy suspicion of people who seek power over us, whether they be healers or priests, politicians or care workers, because we suspect their motives. A significant number of politicians are competitive power-seekers who will say and do whatever it takes to get what they want. The match between the mind set of the psychopath and the amoral politician is an uncomfortably close one. However, that has always been true - and probably much more evident in historical times than it is now - but the general distrust of politicians is, however, relatively new.

A variety of things have changed: people are more educated, and much more exposed to and informed about marketing messages. They see 'worked examples' daily on television as to how political corruption works, or how self-interested the charming villains can be. Equally, politics has professionalised, with very large sums being spent in US Presidential elections. If politicians are pitched as soap powder, then soapy is how they will be seen. The facts of winning an election and winning a vote - over being right, in the right, or winning the argument - have also been exposed. Politics is seen as a machine for winning, not a forum for finding the best for the nation. The US habit of "ear marking" bills with funding for egregiously partisan funding does not help in this respect: first, the winners deny funds to the losers, at least by implication; and success is bought with smart lawyers, lobbying and campaign contributions, not "human values". Democratic politics is supposed to be about values and optimisation on behalf of the electorate - cake baking - yet in the US system, at least, it is very clearly exposed as the slicing of the public cake for the benefit of the powerful and the articulate. Similar things can be said of the Liberal Party years in Japan.

To summarise what we have said so far: political power is managed in government in amateur ways; and political representation is flawed in ways that lead to a sense of disenfranchisement and distrust. There are many forces at work in the world which will show up these weaknesses. In addition, new forces may lead us into a world in which the temptations of populism grow for politicians, offering them the opportunity to mortgage the future for present political gain. Once again, we ask what might constitute a successful response to this.

There are some tensions to resolve:

The need to operate at a relatively disaggregated, networked way but to do so without getting bogged down in detail and reconciliation processes.
The need to present the public with real, meaningful representation over the things which matter locally and personally whilst preventing a drift into detail, interventionism, populism.

It may be that some of the issues that we have discussed above point towards the shape of new solutions. What is plainly true is that the pyramidal model of governance - what is called the "CEO as God" in management literature - is a retrograde step. The cabinet model - of overlapping responsibilities and common purpose - has many virtues which the dominant CEO format tends to crush. However, the 'process' model, in which there are custodians of assorted processes, reflecting the long term and the short, administration of what has been decided and the creation of new legislation, is a form of separation of power which seems to be promising in commerce and which has much to say to government.

Government for knowledge-using societies

One crucial feature of representative democracies is that of feedback. The Seventeenth century model on which many nations still work sat a man - usually - on a horse and sent him off to a far away chamber to represent their constituents. A small elite met in coffee houses and private houses to discuss issues and introduce new ideas. Now, however, these same riders have to fulfil a myriad of tasks, but direct representation is not a dominant one of these. Instead, it is the media who provide the chief feedback, as do specialist interests from financial markets to religious groups and NGOs. Many of these operate to short time frames, have extremely narrow interests and, in some cases, have a vested interest in dissent, crisis and personalities. Debate through many of these channels has a fragmented, frenetic quality to it that emphasises nothing for very long, failure over success and which provokes a relativism in which one assertion is as good as another, and the loudest voice usually wins.

Plainly, these channels are to be permanent feature of our lives. It is, however, important to supplement them with the means to be 'effectively thoughtful', and to provide informed critique which is not overwhelmingly intended to be destructive criticism. Party politics, for all that its practitioners say that the cling to the idea of the loyal opposition, is nevertheless far from a natural forum for this. If the legislature is still to be dominated by parties - as these will not reform themselves away, and are anyway far too convenient for those involved - then this channel of critique needs to be created in the area of policy formation and policy execution.

All of the words and phrases that are commonly used about the reform of government tend to revolve around issues of information processing: transparency, access, process, evidence, consistency, trust. On the one hand, government can become clogged through these if they are not handled judiciously. On the other, government which is undertaken without them will be capricious, arbitrary, interest-prone and ill-informed. The crucial issue is, therefore, how the word "judicious" can be put into practice. Common complaints about the political system - as discussed above - are secondary to a definition of the style of operations into which the necessary political lubrication and representation can be injected.

We know, in truth, what such a style will look like. It is homogeneous at the thinking level and extremely fragmented in operations. It is clear about who does what, and where the boundaries of competence and responsibility are to be found. It is obsessed with getting the right sources of information to deal with each other, and with digging for information where it finds itself to be ill-informed. It operates to a complex and much-reviewed balanced score card. An important part of this score card is the due regard that those assessed by it are to give to the proper time frame within which their domain of operations are to be viewed: that it is pointless to think about energy policy in less than decades, but that the effectiveness of waste management at the borough level should, for example, be assessed weekly. And so forth: the prescription flows from the nature of the problem which is, at its most general, that of striving for information integration in the face of wildly expanding complexity.

In summary: A political and administrative structure that predisposes a nation to success is, therefore, one which realises the importance of the effective processing of information. It draws on the best sources of knowledge when forming policy, and does this in a way that limits distractions from these. It takes advice. It separates its decision-taking structures into reasonably homogeneous blocks, where the definition of the block's domain is set by the nature of the problems that it has to solve. Each block has explicit tasks for which it is accountable. Many such blocks - and layers of blocks, for problems iterate at different levels of scale - are required to communicate amongst each other, with the effectiveness of this being itself under separate management. The inner core of the nation's government is itself segmented by task, with at least one component of it being charged only with ensuring that process and information flows run smoothly.

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