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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Having transformed the car business with his technical flair, his eye for logistics, the genius from the Bay Area tried the same in Washington. He had a record of supporting a different political party to that of the president who appointed him. But no matter. If the bloated state could adopt the efficient methods of this avant-garde industrialist, all would win.
In the end, Robert McNamara, the Ford man turned Pentagon chief during the Vietnam war, was a tragic failure in government. His name is still a byword for the misapplication of cold reason to the messiness of public life. Will Elon Musk, in his quest to rationalise the state, do much better?
It is Europe that must hope so, not America. A continent that is spent of ideas and confidence needs a model of reform to emulate. If anything, Musk is wasted in the US. Whatever is wrong with the federal government hasn’t kept the nation from outrageous economic success. Taxes are complex, but competitive by western standards. Public debt is high, but the issuer of the premier world currency can get away with a lot. Government intervention, on antitrust in particular, stiffened under Joe Biden, but not to a European extent. As for the “deep state”, the president, who can make around 4,000 appointments, has more control over the executive than in other democracies.
Now consider Europe. Its major economies, including Britain, have tax burdens that are high by their own peacetime standards, never mind America’s. Apart from Germany, they have debt that equals or exceeds their GDP, without the exorbitant privilege of the dollar. At the same time, cutting entitlements or raising taxes is political hell, as Britain’s Labour government is learning and as Emmanuel Macron could have told them. If there is a way out of this circular trap of fiscal pressure and low growth, it is a redesign of the state from first principles.
That change, recent form suggests, won’t happen unless America sets an example. The turn to industrial strategy under Donald Trump and Biden led to imitations in Europe, at both national and EU level. So did the prior consensus: the Clintonian mix of open markets and mild redistribution in the 1990s.
If the next intellectual trend is Musk’s rethinking of government itself, one European nation in particular would notice. In the main, the British elite’s cringing obsession with America is a bad thing. On the left, it led to the importation of critical race theory and other fads. (If only there were tariffs on ideas.) On the right, there was the delusion that America was going to do the post-Brexit UK a favour on trade out of some ancestral attachment. But one advantage of this unreciprocated infatuation is that, if Musk does change Washington, the British political class will sit up, as it wouldn’t if the same achievement took place in Paris or Canberra. He might give them what is known in the jargon of the day as the “permission structure” to reform.
Britain needs that nudge. It hasn’t balanced its fiscal budget since the early millennium. The planning regime is a Surrealist joke. The NHS forever needs “saving”. The civil service is nimble in a crisis — see the banking crash of 2008 and the almost calamitous “mini” Budget of 2022 — but its wider sclerosis is the (private) complaint of both political parties. Britain can’t borrow much more. Tax? Another major revenue-raising Budget would ensure this government is a one-term affair, which is why the chancellor talked down that prospect this week. Britain’s only consolation is that France and Italy have similar problems, and Germany equal but slightly distinct ones. The need for outside inspiration is pan-European.
None of this means that Musk will provide it. The structural forces against a taming or even trimming of government seem unbeatable. In 1920, fewer than one in 20 Americans was 65 or over. A century later, one in six is. And so two of the largest items of federal spending are healthcare and social security. Barring some kind of Logan’s Run-style cap on how far people are allowed to age, how does even a great executive begin to cost-engineer a way out of this problem? As for defence, those who assume he will save vast amounts from procurement haven’t met the pork barrel politicians of Capitol Hill.
The trope of a business star who enters government and fixes the whole circus is compelling. Actual examples of it — anywhere — are laughably scarce. McNamara was no exceptional flop. The last great engineer-industrialist at the top of US politics, Herbert Hoover, ranks around 36th among the 46 presidents in polls of historians. Silvio Berlusconi didn’t make a Singapore of Italy. The most complex business on Earth is much simpler than a major national government: in the range of demands put upon it, in the difficulty of even defining success. It would be no surprise if Musk quits Washington in a cloud of acrimony circa 2026.
If he succeeds, though, it could shock and embarrass Europe into change. A Mario Draghi report prescribing some more investment here, some structural reform there, was never going to move the continent. The demonstration effect of the US transforming its government — and growing even faster as a result — just might. As it looks across the ocean at Musk, itching to boost an already rampant nation, Europeans should curse him as the right man in entirely the wrong place.