Adam Boulton Diary – Cummings the unqualified tech investor

Back in the Reagan-Thatcher heyday, when it was still morning in America, a journalist friend of mine accompanied a party of Conservative politicians on a junket which included a chance to admire a glistening new infrastructure project. “How much of all this was paid for by the state?” “About 10%,” their guide replied. The MPs purred with satisfaction at this vindication of their free market principles.

It was, of course, no such triumph, just further proof that Americans and Britons are divided by a common language. In the US, “the State” means just where you happen to be, such as Texas, Arkansas or Maine. The rest of the bill, or rather check, for the project had been picked up by the Federal US Government in Washington DC. But nobody disabused the British junketeers.

In the following decades this misapprehension bloomed on both sides of the Atlantic. Taxpayer investments were cutback, but there was no adequate substitution from private investment. As a result, the public realms in the US and UK are among the most rundown in the world’s leading developed economies.

Boris Johnson’s chief advisor Dominic Cummings still believes in the private sector when it comes to awarding government contracts, without tendering, to his cronies. In fact, he believes perhaps as much as a trillion pounds more of taxpayers’ money should be chucked in the way of entrepreneurial businesses.

This inversion of Thatcherite orthodoxy about state aid has now emerged as the demand which could lead the UK to blow up negotiations with the EU, consequently leaving the Union at the end of this year without a trade deal or agreement on a future relationship.

During its years of EU membership, the UK lagged behind its nearest neighbours in state aid, spending well under 0.5% of GDP. France invests double that and Germany almost triple. But the rules do require Brussels’ approval for any subsidy greater than €300,000. Small beer to Cummings, who is looking for “ways we can build $1 trillion tech companies.”

Cummings has outlined his vision of light touch regulation and big state intervention in tens of thousands of obscurantist words on his blog. His obsession is “the extraordinary ARPA-PARC episode” when technological breakthroughs funded in part by the US government passed to the private sector for exploitation by the likes of the future billionaires Bill Gates and Steve Jobs. The internet, GPS, touchscreen, Siri, Alexa and Echo all have roots going back to the Advanced Research Projects Agency (ARPA) and the Xerox spin-off PARC (the Palo Alto Research Company).

Put simply, Cummings’ gripe is that respective bureaucracies left it to others to profit from their breakthroughs. When it comes to “something unarguably massively world changing,” he complains, “the administrators seem to prefer to be completely in control of mediocre processes to being “out of control” with super-productive processes. They are trying to “avoid failure” rather than trying to “capture the heavens”.’’

Conservative resistance to state intervention grew out of the bitter experience of the 1950s, 60s and 70s. Rather than “reaching for the heavens”, Britain squandered its national wealth keeping lame ducks like British Leyland temporarily out of the gutter. For a time during the Conservative governments of Margaret Thatcher which followed, it seemed that privatisation opened the door to greater profit and investment. But only up to a point. There were some public goods – from infrastructure like Railways to Universities – which could not thrive without support from the taxpayer.

A Thatcherite free marketeer and Sir Tim Berners-Lee, the pro-bono-publico-inclined inventor of the internet, might agree that ARPA-PARC did their job. As ornaments of the military-industrial complex, their pure research created the tools for Apple and Microsoft to become some of the biggest companies in the world, massively to the benefit of the US economy.

Not Cummings. He is obsessed with the opportunities he believes Britain lost when when the home-grown companies DeepMind and ARM were bought respectively by Google and the Japanese SoftBank. He wants to pick the winners unrestrained by regulation and ride them with taxpayer investment to profit. Half a billion dollars to the bankrupt OneWeb low satellite business is his first gamble. Originally billed as a substitute for the European Galileo GPS project from which the UK has been excluded by Brexit, government sources now say it is nothing of the kind. We shall see what it really is.

Cummings has already been given the green light to establish a British Version of ARPA by the Treasury. But like the British version of Germany’s fabled Robert Koch Institute, which is headed by Dido Harding, a Tory Peer and undistinguished tech businesswoman, rather than a leading scientist – it remains to be seen how independent it will be of political influence. Sceptical Conservative MPs already fear that more state aid will mean investment to buy votes and preserve jobs in failing businesses. Martin Stanley, a former senior civil servant at the Business Department closely involved with “state support projects”, wrote recently: “Despite my experience I have no confidence in ministers’ or officials’ ability to “pick winners… I was accordingly a great fan of the [EU] requirement that 75% of program cost had to be funded by the private sector.”

Does Dominic Cummings – an Oxford graduate in History, one of the humanities he despises so much – know what he’s doing as a tech investor? The former Conservative minister Nick Boles tweeted despairingly this week: “Dom Cummings is a clever chap, and well read. What he knows about business, and economics of technology, would fit on a very small postage stamp. Yet the decisions that will shape the UK’s economic future is [sic] being driven by his quixotic interpretation of economic history.” A former Cabinet Minister with a STEM career behind him dismissed the Senior Advisor after several conversations as devoid of any genuine knowledge or insight into these core subjects.

Number Ten is no more a fan of local knowledge and investment than those Tories on tour in America back in the last century. The governments of our version of their “States” – Edinburgh, Cardiff and Belfast – are united in complaining that Brexit will mean Westminster taking greater control over state investment in their nations.

Brexit is likely to remain Dominic Cummings’ greatest achievement. The tech sector would welcome more investment but its lobby organisation, TechUK, warns that any conceivable gains would be dwarfed by the damage if the UK leaves without agreements on issues such as international data transfer, employing highly skilled immigrants and access to expand in EU countries.