The UK example: when govts are unstable but institutions remain strong

 Political leaders often argue that economic development requires a strong and unified government, but a strong government is not necessarily the same as a strong state.

From Chong Kok Boon

Over the past several years, British politics has experienced considerable turbulence. Prime ministers have come and gone, political parties have fought internally, policies have been reversed and events at 10 Downing Street have often appeared chaotic.

Yet, the British state and economy have continued to function. This raises an important question: does economic stability really require political stability?

The UK experience suggests that the answer may be more complicated than commonly assumed. A country can experience political turbulence while maintaining economic and institutional continuity. The key distinction may not be between a stable and unstable government, but between stable and unstable institutions.

Governments change. Political leaders make mistakes. Political parties fight. Policies are sometimes reversed.

But institutions can continue. The civil service remains. The Bank of England continues to operate. Courts and regulators continue their work. Financial markets continue to assess government policy. Independent economic institutions provide scrutiny.

A new prime minister does not automatically replace the entire civil service. A change in political leadership does not eliminate the legal system, regulatory framework or economic infrastructure.

This distinction is important: political instability and institutional instability are not the same thing.

The 2022 mini-budget crisis demonstrated that political decisions can damage market confidence. Political instability clearly matters. But it also demonstrated the importance of institutions and market mechanisms capable of forcing correction.

Independent institutions do not prevent politicians from making mistakes. Rather, they can limit the scale and duration of those mistakes.

Institutional independence does not eliminate political risk; it makes political risk more manageable. The UK experience also reminds us that economic performance should not be measured simply by GDP. We should examine at least three dimensions: economic stability, value creation and affordability.

Economic stability includes output, employment, inflation, public finances, investment and financial market confidence. But we should also ask what kind of value an economy creates.

Is it becoming more technologically advanced? Are high-value sectors expanding? Is investment increasing? Is innovation generating greater economic value?

Productivity should likewise not be reduced simply to output per worker or output per hour. These are important measures, but they do not fully answer whether an economy is creating greater value.

An economy may employ more people without significantly increasing the value of what it produces. Alternatively, a smaller workforce may generate greater value through technology, capital investment, skills, innovation and high-value industries.

The question, therefore, is not simply how much we are producing, but what value we are creating, who captures it, and how that value is distributed.

The same applies to household welfare. We should distinguish between cost of living and affordability. Cost of living describes the prices people face. Affordability asks whether people’s incomes can keep pace with the cost of essential goods and services.

This requires examining wage growth, minimum wages, disposable income, housing costs, energy, food, taxation, benefits and interest rates.

The question is not simply whether prices have risen. Have incomes and people’s purchasing power kept pace with the cost of essential goods and services?

This brings us to a broader question, particularly for developing countries.

Political leaders often argue that economic development requires a strong and unified government. There is some logic to this. Countries with weak administrative capacity may genuinely need stronger coordination to deal with corruption, political fragmentation, weak tax systems and inadequate infrastructure.

But a strong government is not necessarily the same as a strong state.

A strong government may mean concentrated political power and the ability to make decisions quickly. But a strong state means capable public administration, professional civil servants, effective tax collection, independent regulators, reliable courts, credible statistics and functioning public services.

Strong institutions are different again. They must be capable of performing their functions with sufficient independence from short-term political interference.

The crucial question is this: does a country need a strong government, or does it need strong institutions?

Political leaders may genuinely believe that centralised authority is necessary for stability and development. But concentrated power can also create incentives to weaken independent institutions. This creates a political dilemma: short-term political control versus long-term institutional resilience.

Independent institutions can be inconvenient. An independent regulator may reject a politically attractive policy. An independent auditor may expose weaknesses. An independent central bank may refuse to follow short-term political preferences.

But these constraints may ultimately create greater predictability, credibility and resilience. A government constrained by strong institutions may ultimately create a stronger state.

The UK experience therefore suggests that economic resilience may depend less on having a permanently stable government or a single powerful political leader, than on having a network of institutions capable of continuing to function despite political change.

This is not an argument that developing countries should simply copy the UK. Every country has its own history and political realities.

But it raises an important question: when does political centralisation help build state capacity, and when does it become a mechanism for political control that prevents the development of independent institutions?

For my fellow Malaysians, perhaps this is also a moment for some soul-searching.

We often hear that Malaysia needs a strong and stable government to ensure economic and national stability. There is certainly value in political stability and effective governance. But perhaps we should ask whether we have placed too much emphasis on the strength of governments and too little on the strength, independence and continuity of institutions.

Political leaders and governments will inevitably change. Institutions should outlast them.

The question Malaysia may need to confront is not simply whether we have had strong enough governments, but whether we have built and protected enough independent institutions to preserve economic resilience, policy credibility and national continuity when governments change.

Perhaps this is what we have missed. - FMT

Chong Kok Boon is an FMT reader.

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.