The Podcast of the Lotus Eaters - October 27, 2026


PREVIEW： Brokenomics ｜ THE COST OF ORDER

The Podcast of the Lotus Eaters #1535 Nigel Farage Admits He Has Failed

Episode Stats


Length

26 minutes

Words per minute

136.76

Word count

3,606

Sentence count

162

Harmful content

Toxicity

1

sentences flagged

Hate speech

3

sentences flagged


Transcript

Transcript generated with Whisper (turbo).
Toxicity classifications generated with s-nlp/roberta_toxicity_classifier .
Hate speech classifications generated with facebook/roberta-hate-speech-dynabench-r4-target .
00:00:00.000 Hello and welcome to Brokonomics in our new studio, which is very nice and still some
00:00:22.520 tinkering around the edges to get stuff sorted out, but what a lovely new home for Brokonomics.
00:00:27.400 looks much more like a sort of 19th century gentleman's club which I think I think suits
00:00:32.500 our vibe entirely so yes glad to be here and glad also not to be in France because well it's falling
00:00:40.720 apart isn't it and I've been thinking about this as I'm sure we all have and I did a segment the
00:00:46.400 other day which was all about the cost of a riot and I did try to put this in but I didn't really
00:00:54.920 make the point very well I made the point I was trying to make very well but I didn't I didn't
00:00:58.860 make the the better broader meta point and a lot of people in the comments did highlight it they
00:01:04.340 said well look there's that's just the monetary cost and it was mostly the monetary cost even
00:01:09.760 though I tried to get some of the other stuff at the end and I really wanted to develop that idea
00:01:14.480 actually I think I think this is kind of a crucial idea because we're used to thinking about
00:01:18.760 governments failing because they've lost an election or run out of money or they face some
00:01:22.400 popular uprising or something like that. But there's another way a political system can fail
00:01:27.660 and I think that's something that we are very much in at this point. And we're seeing the early
00:01:31.960 stages of it in Europe at the moment. You know, a functioning society that depends on enormous
00:01:37.960 amounts of cooperation that nobody pays for. People obey the laws and they pay their taxes
00:01:44.060 and they respect institutions and they invest their money and they basically lend their talents
00:01:50.020 to keeping the country running, and the state works because most people are willing to participate
00:01:56.040 in it. And what happens when that willingness starts to disappear? Suddenly maintaining order
00:02:03.960 becomes a lot more expensive. You need more policing, more bureaucracy, more spending to
00:02:12.180 achieve basically the same results. And meanwhile, the state has accumulated enormous financial
00:02:19.900 obligations. It's got less money to address these deteriorating conditions. And then something
00:02:26.780 potentially even more dangerous happens. The capable people who could have repaired that
00:02:31.500 system, they just start to conclude it's not worth it. They withdraw their talents, their capital,
00:02:40.220 and eventually their loyalty, I guess. And they start building alternatives. They're not,
00:02:46.060 to use the phrase of that american civil war general they're no longer in in the tent pissing
00:02:53.440 out they're out the tent pissing in i mean an example of that is like low diseases i guess
00:02:57.960 lots of talent here none of it is being used to fix the system because the system wouldn't have us
00:03:05.040 well i'll get into that more and you get this vicious circle where the political consists
00:03:12.100 The political system consumes the very resources it needs to survive.
00:03:18.280 And it matters because we tend to assume existing political order is permanent.
00:03:24.320 And it can easily look like that within your own lifetime
00:03:26.980 until you get a moment of change.
00:03:29.780 And our pensions, investments, property, government's debts,
00:03:35.700 personal expectations about the future,
00:03:37.640 they're all built around a whole bunch of assumptions
00:03:40.180 that I just don't think hold true anymore.
00:03:42.100 and history shows us that political orders can change and dramatically and when they do
00:03:49.940 the consequences for ordinary people wealth can be quite enormous so i think the question isn't
00:03:56.980 simply whether european governments are unpopular because obviously they are is whether maintaining
00:04:02.600 the existing settlement has become so expensive and not just financially but societally as well
00:04:09.600 that eventually enough influential people will decide
00:04:13.520 that they'd rather replace it rather than continue supporting it.
00:04:16.840 Or in economic terms, it's cheaper to replace it than it is to fix it.
00:04:20.520 You've probably all had cars like that,
00:04:22.580 probably happening to our society right now.
00:04:24.820 And if that happens, what replaces it?
00:04:27.300 And who pays for that transition?
00:04:29.280 Who takes the loss of the lost obligations
00:04:32.460 or the unfulfilled obligations?
00:04:35.860 And what happens to everything we've built our lives around?
00:04:38.600 And so the central question I wanted to get at in this episode is, is Europe's existing political settlement consuming financial, institutional, and human capital that is required to actually sustain it?
00:04:57.400 And I think I've got three core ideas in that.
00:05:00.560 The first one is that there's two budgets.
00:05:02.720 There's money and there's voluntary cooperation.
00:05:05.520 If you lose cooperation, enforcement costs rise.
00:05:12.180 The second one is elite withdrawal.
00:05:15.440 The elite theorists talk about this a lot.
00:05:20.640 But a system can endure public anger, but it will become vulnerable
00:05:25.280 when capable people just withdraw their loyalty from it.
00:05:29.220 They're not interested in it anymore.
00:05:31.200 And then there's the inherited promises.
00:05:32.660 things like debts pensions salaries or even property rights they all depend on the continuing
00:05:41.760 effectiveness of the state trying try having property rights without a state it just becomes
00:05:47.880 violence is that yours can you defend it if you can't then it's not yours so i wanted to start
00:05:55.400 with France, because it's, I guess it's an unusually clear illustration of something
00:06:01.820 that you rarely attempt to even put a price on, order, or in this case, disorder.
00:06:10.700 You know, we see a town hall burn down and we think about violence and politics.
00:06:17.200 But in economic terms, somebody's got to rebuild what has already been built.
00:06:25.400 Police are diverted from other work.
00:06:28.540 Firms lose trade that they will never get back.
00:06:31.700 And the cost of protection is going to go up.
00:06:34.120 What happens when defensive spending becomes a recurring claim
00:06:40.860 on a state that's already enormously indebted,
00:06:44.480 that already has enormous obligations?
00:06:48.400 And watching that, how do you pronounce it?
00:06:51.840 Le Mons, Le Mons, Le Moges, Le Moges Town Hall that burnt down.
00:06:58.240 Lovely old building.
00:06:59.700 1883, I think it went up.
00:07:02.760 Lovely clock tower.
00:07:05.800 Considerable amount of internal art painted on the walls.
00:07:08.700 Not something you can just run in and grab when the place starts to burn.
00:07:12.580 Burnt down. 1.00
00:07:13.920 I've never seen a French burn down a town hall before. 1.00
00:07:16.000 I've seen them spray manure on the side of a government building. 1.00
00:07:20.340 I've seen them burn down cars before
00:07:23.000 not seen them burn down
00:07:25.040 very old
00:07:26.700 very beautiful town hall before
00:07:28.560 and you've got around
00:07:30.280 two and a half thousand arrests so far
00:07:32.900 well it's probably much more because I haven't checked
00:07:35.200 in for a couple of days so that will be
00:07:36.940 probably many more arrests
00:07:38.500 apparently a thousand
00:07:41.120 injured police and emergency workers
00:07:43.360 again that will go up
00:07:45.260 God knows how many protesters
00:07:47.100 are going to be injured as well now that the
00:07:48.820 the police seem to have decided to actually do something about it i mean the repair bill is
00:07:52.820 obviously going to be enormous i've seen estimates of over a billion euros so far that's not counting
00:07:58.460 the lost services the policing the insurance costs that will go up business disruption will
00:08:06.300 be enormous if you've had your store destroyed you might be able to get operational again in six
00:08:11.400 weeks to a limited degree if you can get the stock if you can get the logistics running if
00:08:17.140 you can get it in a feasible state. If it's suffered fire damage, way longer. And even then,
00:08:23.180 I'm probably being optimistic with something like six weeks. You certainly won't be restored
00:08:27.680 to normal service in six weeks, but you can probably do something in that. Again, there's
00:08:32.420 no compensation for that. That's a meaningful chunk of the year. And you look at France's
00:08:36.360 balance sheet, where they arrived at this crisis, state spending is already 57% of GDP.
00:08:43.140 And if you look at just the taxes and the compulsory levy bit of it, the hardest core of what you could unavoidably define as the state, even if you want to make some mixed economy socialist argument about the services side of it, just the taxes and the compulsory levy is 43%.
00:09:03.280 It's an enormous amount.
00:09:05.140 Deficit is 5% of GDP.
00:09:08.680 Their debt is over 100%.
00:09:11.180 It's 115%.
00:09:12.380 makes the debt in the US and UK look vaguely manageable.
00:09:17.520 I mean, we'd both be there in no time at all, so there's that.
00:09:20.660 And if you look at departments like their education department
00:09:24.120 or interior ministry or anything like that,
00:09:27.400 the pension obligations are over 30%.
00:09:29.320 So getting on for a third of everything they spend
00:09:32.240 is just paying out obligations to people
00:09:37.120 who no longer even provide anything.
00:09:39.200 But a promise was made, and so a lot of the budget goes to paying those pensions.
00:09:45.180 And this comes after the 2003 riots that got up to about 700, 800 million euros,
00:09:52.740 getting on for a billion.
00:09:54.720 16,000 people made claims.
00:09:57.900 And again, that's excluding all of the wider costs that are going to be there.
00:10:02.780 And it's hardly just France that's in this situation.
00:10:06.620 Britain's in there as well.
00:10:08.560 $132 billion of borrowing, $100 billion a year of debt interest expense.
00:10:15.540 Germany as well.
00:10:17.520 You know, it's under enormous industrial and energy pressures.
00:10:22.740 Institutions retain greater trust than politicians, which is to say not an awful lot.
00:10:27.780 So the point being, the government consumes well over half of the French economy,
00:10:34.540 and yet it can't defend its buildings.
00:10:35.900 consumes half cannot defend itself with that half because the riots are visible but the everyday
00:10:44.040 cost the the non-riot period the bit that you rely on the cooperation in the system
00:10:50.440 that's invisible economists never talk about it commentators never talk about it
00:10:55.300 but that is a source of wealth which is evaporating i'm not trying to say that one
00:11:00.720 one more wave of rioting is going to lead to the collapse of France. But I am saying that that
00:11:10.220 disorder has an invisible balance sheet cost, and the bill is getting spread out between taxpayers
00:11:14.960 and businesses, or more importantly, opportunities that will never materialise. You know, governments
00:11:21.000 can be vast and indebted while struggling to deliver basic protection, which leads me to the
00:11:28.500 to the deeper question I've been thinking about, which is, you know, what is the invisible resource
00:11:33.840 that usually lets government maintain order so cheaply? You know, a functional state
00:11:39.360 doesn't appear as a line item in the Treasury accounts. People accept its authority without
00:11:47.760 a fight, normally, without even thinking about it, to be honest. You can have two countries,
00:11:53.540 give them identical tax rates numbers of police yet one of them could be vastly easier
00:12:01.260 and less expensive to govern and the difference is is often rules have to be enforced or
00:12:10.020 they're just willingly enforced and that makes things like trust and legitimacy and
00:12:16.240 everyday civic behavior economic assets that go unpriced that's not captured in gdp
00:12:25.860 that's not captured in your treasury report yet that is enormously valuable
00:12:33.160 and you'll never find an economist even mentioning i mean take a thought experiment take take two
00:12:40.480 countries they've both got i don't know 50 million people and they've got identical laws police tax
00:12:45.780 civic institutions whatever in country a citizens accept the authority they pay taxes and they
00:12:54.680 cooperate and in country b the citizens reject that authority at least a high enough proportion
00:13:01.260 of them do they evade their obligations and they obstruct law enforcement right same underlying
00:13:08.260 nominal state imagine what living in those two different countries would be like one of them
00:13:13.480 would be completely dysfunctional.
00:13:15.060 And it's not because of something you can easily measure.
00:13:17.440 It's simply because of the attitudes of the people
00:13:19.620 in those two countries vary.
00:13:21.920 And so you can look at money that goes into police courts,
00:13:28.460 you know, the administrative side of enforcement.
00:13:31.880 And you can look at consent.
00:13:34.840 Is there trust in the system?
00:13:36.220 Does the system maintain legitimacy?
00:13:39.680 Is there civic responsibility?
00:13:41.480 is their voluntary obedience.
00:13:47.040 And if you lose consent,
00:13:49.400 you can spend money to try and substitute for it,
00:13:53.300 but that substitution is getting progressively more expensive
00:13:58.020 at a time where the states affected cannot afford it anyway
00:14:04.340 because even when there were periods of consent and legitimacy,
00:14:09.440 they ran the budget up to the breaking point and beyond in those conditions and now it's lost the
00:14:17.920 invisible side always losing the invisible side of the balance sheet and they don't see it so
00:14:23.500 you've got a number of bills arising from that you've got the public bill obvious things like
00:14:28.280 policing and you know repairing presumably a whole rave of prosecutions and imprisonment for
00:14:35.680 the people who have burnt your city down. And then you've got the private costs, which is
00:14:40.820 security and insurance, property values, lost trade, all of those things.
00:14:47.340 And you've got the other bill of opportunity. Businesses that will never open. Investment
00:14:53.660 that is never made. People who leave and take their talents and capital with them.
00:14:59.040 And you start to realize that these numbers that I've heard floating around of a $1.2 billion bill for France is almost certainly severely understated.
00:15:13.140 You know, you've got 200 shops on a long French street or British street, whatever, 5,000 pounds a year or euros of extra security.
00:15:25.740 That's an extra million a year.
00:15:27.400 or those 20 shops never open again.
00:15:32.680 Much larger invisible cost
00:15:34.720 than even the explicit measurable security cost.
00:15:40.660 And so defensive spending, it maintains existing output,
00:15:44.720 but it doesn't create new wealth
00:15:47.340 because you look at the full set of costs
00:15:50.340 and you decide it's not worth it.
00:15:52.280 Now, I'm not going to try and make the claim
00:15:54.380 that everything is collapsing.
00:15:58.000 I'm very much a proponent of the 90s
00:16:01.580 as a sort of golden age.
00:16:04.300 Apparently, according to official figures,
00:16:08.140 violence is below the 1995 peak.
00:16:12.400 Theft is apparently below.
00:16:14.680 I find that curious
00:16:19.540 because I walked around in London in the 90s
00:16:24.260 and never felt that I was going to get mugs or something stolen from me,
00:16:28.560 but that's what the official figures say.
00:16:31.160 There is a big tax gap.
00:16:34.080 The tax gap is apparently 6.4% versus 7.5% in 2005, 2006.
00:16:43.960 So again, some of the official figures seem to show improvement.
00:16:48.140 If the numbers are to be believed and there's an enormous gap,
00:16:52.700 well, where is that gap?
00:16:54.260 Could it be ordinary compliance?
00:16:58.940 Could it be conventional, measurable factors have improved in some areas
00:17:05.580 while rapidly deteriorating in others?
00:17:09.100 So I'm not saying we've arrived at the point of universal lawlessness.
00:17:13.740 What I'm saying is that increasingly the marginal citizen decides
00:17:17.720 that it's just not worth it.
00:17:18.840 either creating growth, doing something, starting a business,
00:17:24.820 but also, on a much more fundamental level,
00:17:28.780 investing their energies in maintaining the system.
00:17:33.660 Honestly, the greatest subsidy that a government receives
00:17:37.600 is millions and millions of people who govern themselves.
00:17:43.360 People who used to govern themselves.
00:17:44.780 required very little intervention from the state
00:17:51.400 because they would just do the right thing.
00:17:54.820 So I'm not prepared at this stage to say that crime has universally worsened
00:17:59.880 or that people have stopped paying tax.
00:18:03.080 I'm saying that we are very much trending in that direction.
00:18:06.480 And maybe, if you believe the figures, conventional crime has fallen.
00:18:08.860 But the bit that you don't see, the reservoir of everyday compliance, I think that still remains enormous.
00:18:20.400 But you can see it deteriorating.
00:18:25.320 And trying to rebuild a state after that has gone, or even just decayed significantly, is a vast challenge.
00:18:36.420 once consent becomes harder to obtain,
00:18:39.980 every part of the state begins bearing additional enormous costs.
00:18:45.260 So that led me to think about, okay, well, what are the sort of pillars?
00:18:49.580 If this was a table, what are the legs?
00:18:52.160 If the state is struggling, it's not necessarily just because of,
00:18:56.400 you know, the budgets have gone wrong.
00:18:57.800 I mean, it is a factor, sort of thing we normally talk about.
00:19:01.880 we think of its ability to function as a result of various accumulated capital
00:19:11.320 citizens willing to cooperate institutions able to exercise or execute on their mission
00:19:18.700 money to pay for it fine we measure that a lot and people capable and willing to lead
00:19:26.280 but those legs of the table they prop each other one or not they prop each other up
00:19:31.880 When one weakens, the others have to carry a lot more weight.
00:19:35.520 Load becomes ill-distributed.
00:19:39.760 And so I ended up thinking about the four legs of the table
00:19:42.260 as something like this.
00:19:45.960 I mean, one is social capital, the willingness to cooperate.
00:19:51.880 Is there trust?
00:19:53.160 Are there shared norms, legitimacy?
00:19:57.540 Is there civic duty?
00:19:58.720 And if you lose it, the cost of enforcement goes up a lot.
00:20:04.340 Second leg, institutional capital.
00:20:06.780 The ability to execute on what it is you're trying to do.
00:20:11.180 Police, judiciary, civil service, all that stuff.
00:20:16.540 You lose it and you have to spend more to get a worse result.
00:20:23.060 financial capital obviously that's the bit that normally the the one bit that gets measured tax
00:20:31.620 base borrowing credibility what's your growth rate you know lose it and your obligations
00:20:39.000 can crowd out your operational capacity that's very measurable we've discussed it a whole bunch
00:20:46.340 of times on this program. And the OBR unchanged policy scenario, the UK primary deficit is
00:20:59.440 7% by 2075. Again, quite possibly very optimistic, but trending to a level which is simply
00:21:12.160 unsustainable and then the fourth leg again another bit that gets talked about very little
00:21:19.840 is elite capital the thing i touched on in the introduction
00:21:23.420 are there people with the ability and willingness to lead
00:21:29.680 are there competent administrators entrepreneurs people who can do the financing and the technical
00:21:38.600 stuff that kind of thing because talent and loyalty are different things if you've got
00:21:45.480 employees and they have and they have both talent and loyalty to you you are in a very good place
00:21:53.000 and they don't need to lose their talent if they just lose their loyalty
00:21:59.880 lose that commitment and the institution deteriorates and competitors will emerge
00:22:08.600 You know, people like Carl and myself, Beau, in a perfectly healthy scenario, would we be making podcasts?
00:22:20.080 Or would we be MPs?
00:22:22.900 Investing all of this energy into propping up the system rather than being very visibly excluded and cut out of it and having to build something else.
00:22:34.480 and because we are temperamentally inclined to weigh in on the matters of state well we're
00:22:43.260 outside the tent pissing in none of our energy is going to support the british state and i'm sure
00:22:49.360 there are many examples in france or the us or other places i watched a um an hour on mcintyre
00:22:57.940 stream last night where they were talking about how basically these various democrat politicians
00:23:03.400 are effectively saying out loud
00:23:06.220 that they're going to colour revolution the US,
00:23:09.440 but they're going to make it almost impossible
00:23:11.060 for anybody with right-leaning preferences
00:23:13.560 to operate openly
00:23:16.660 without having some part of the state come after them
00:23:19.960 and punish them with the process,
00:23:21.740 or maybe actually punish them, 0.99
00:23:23.120 maybe throw them in jail,
00:23:25.580 certainly get their bank accounts shut down
00:23:27.380 and thrown off social media,
00:23:28.600 all that kind of stuff.
00:23:30.160 Whole cohorts of people
00:23:31.840 who could be lending their energies and their efforts
00:23:36.200 to supporting the state have very deliberately been pushed out
00:23:41.520 and are doing something else.
00:23:44.920 That's elite capital that the state no longer has access to.
00:23:48.560 It's difficult to measure these things,
00:23:50.040 but I did find OECD trust surveys, and the last one was 2023.
00:23:57.960 and it looked at the level of trust that the general population have in various institutions
00:24:03.980 so for example the government France came out at 34% which is worryingly low Britain it was even
00:24:11.100 lower I think it's about 27% Germany slightly higher so you're looking about a third of the
00:24:16.180 people trust the government it was a bit better with police about two-thirds of people do although
00:24:23.300 that again was lower it was closer to half in britain and the courts interestingly there
00:24:30.700 britain um relatively came out higher six out of ten people trusted the courts in france it was only
00:24:39.160 half so low trust in politicians does not necessarily mean that you know the collapse
00:24:46.800 of state legitimacy indeed there is a still an enormous stock of um legitimacy in the system
00:24:55.400 people still expect it to do things and be doing the thing the next day but police and courts
00:25:01.620 and even more so than governments maintain still a significant reserve of trust although
00:25:09.800 when you're looking at that still being only 6 out of 10
00:25:15.280 as opposed to, I mean, in a normaning functioning society,
00:25:18.780 it should be something close to 10 out of 10,
00:25:21.080 certainly 9 out of 10, already dropped to 6 out of 10.
00:25:25.520 And these pillars, they compensate for each other
00:25:29.620 until the cost becomes prohibitive.
00:25:34.240 So this is why low trust in government doesn't by itself mean
00:25:38.540 that society is near collapse, people can dislike politicians while still trusting the
00:25:44.780 police and the courts, the underlying state. Trouble comes when the support weakens past
00:25:53.760 a tipping point. And we don't know if we're past that tipping point. And when you are,
00:26:01.940 solving one problem will just make the other problems worse.
00:26:04.820 If you enjoyed that content, and of course you did because you are a smart person,
00:26:09.940 then why don't you go over to lotuseaters.com
00:26:12.380 where you can watch the whole episode for as little as £5 a month,
00:26:16.780 which really is not much money at all and you get loads of really good content.