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Why we all lose in a game of beggar-thy-neighbour over transport

21 Feb 2018

Blurred traffic in central district

Irrespective of the various eye-catching sporting events, this year’s Winter Olympics in Pyeongchang have already produced quite a spectacle in the unexpected warming of relations between North and South Korea.

The North sent their head of state and a troop of cheerleaders, while the opening ceremony featured athletes from both Koreas marching under a unification flag.

It’s a reminder that the Olympics are always as much about politics as sport. This was also evident when 169 Russian competitors entered the arena under a neutral banner, without national uniforms, as a result of the crackdown in response to the state-sponsored doping that has taken place.

It would be nice to believe that cheating in sport by taking performance-enhancing drugs is limited to certain countries or sports, but history shows it can happen in any contest where there is money or prestige at stake. The reason is fundamental to human behaviour, and is demonstrated by what economists call ‘the prisoner’s dilemma’.

Imagine two prisoners, in separate cells with no way of communicating. The authorities don’t have enough evidence to convict on the charge they want, so the criminals are offered a deal: rat out your pal and get off scot-free. Overall, it would be better for both prisoners to stay silent, but they don’t know what the other will do, so both have a strong incentive to implicate the other. This ends up with both receiving the longest sentence.

Leaving aside for a moment the fact that many athletes are in fact honourable, a similar dynamic is at play. If nobody dopes, it’s a level playing field. But it’s impossible for any one competitor to know whether any of their rivals are cheating and gaining an advantage over them. This can have the effect of encouraging multiple people to dope, as was famously the case in the 1999 Tour de France, where several riders confessed or were found to have taken a drug called EPO.  

You might be wondering why I’ve spent so long talking about doping in sport in a blog about business. It’s because an everyday version of the prisoner’s dilemma is taking place at the moment amongst companies in different parts of the UK. You’ll probably recognise it by the more common name: beggar-thy-neighbour.

At an IoD dinner in Harrogate recently, I spoke to several members who felt deeply aggrieved about the Government’s decision last autumn to cancel the electrification of the trans-Pennine rail line. The frustration is completely understandable, with businesses keen to see the political rhetoric on the Northern Powerhouse turned into tangible improvements.

Despite the Department for Transport arguing that their preferred option of so-called bi-mode trains, which are capable of both electric and diesel running, were better value for money, it caused an entirely predictable backlash when, soon after, the Government gave its conditional support to Crossrail 2, a new North-South railway for London. The move caused an entirely predictable backlash.

Andy Burnham, Mayor for Greater Manchester, tweeted at the time: "On Friday, Tories say they can't afford rail schemes in the North. On Monday, they find billions more for London. Are these two things linked?" Whether it’s true or not, it’s good politics from Burnham.   

As with everything, it’s a question of where you’re sitting. I went to City Hall in London the week after the Harrogate dinner to meet the Mayor, Sadiq Khan, who argues that they’re not getting special treatment from the Government. Crossrail 2 is contingent on London providing half of the funding, and not from ticket revenue afterwards, but upfront.

If you live outside the M25, your sympathy for Khan will probably be pretty limited, but the problem is that if business starts copying politicians and seeing the UK’s undoubted infrastructure weaknesses as a battle between different cities or regions, we fall into the beggar-thy-neighbour trap.

Companies don’t tend to work only within the area covered by a local authority, city mayor or local enterprise partnership, which are administrative boundaries, not necessarily economic ones. A very high proportion of IoD members trade internationally – over 60% - so these divisions make even less sense. It you import parts through Felixstowe, assemble them into a product in the West Midlands, and then sell the finished article across the UK and abroad, you don’t want the Government playing different parts of the country against each other, you want an integrated transport network.

We have one great advantage over the prisoners in the dilemma: we can talk to each other. Now is the time for the business community to band together and make the case for improvements across the country. Rather than letting politicians turn us against each other, let’s turn the tables on them.       

Edwin Morgan, Interim Head of Policy, IoD 

Edwin Morgan is Interim Head of Policy at the Institute of Directors. He joined the IoD shortly after the 2010 General Election.

He has represented the interests of the Institute’s 30,000 members through the ups and downs of the Coalition Government. Alongside the IoD’s team of policy experts, Edwin is responsible for making the case in the media for competitive markets and a business environment which enables job creation and economic growth.

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