Why Procrustean Politics Undermines Growth and How the SHIFT and LEAP Frameworks Offers a Path to Sustainable Prosperity
By Elias Sanchez and Ritvik Verma
Our engagement with Britain’s so-called ‘productivity puzzle’ began not in a seminar room, but while listening to a podcast from LBC in which a stream of callers voiced their frustrations about the economy and the political system. What struck us in that moment was not only the palpable sense of disillusionment, but also the absence of any conceptual or theoretical vocabulary through which these citizens could situate their concerns. Despite the frequency of debates on Britain’s economic stagnation, the public discourse remains largely detached from a framework that might defend the real processes of wealth creation and highlight the centrality of entrepreneurship in political culture.
This disjuncture between lived experience and theoretical articulation provided the starting point for our inquiry. To address it, we put forward the following diagnosis.
Britain finds itself caught in a double bind: persistent inflation and stagnant productivity. Prices briefly cooled in 2024 but have resumed their upward climb; output per worker, which grew at roughly 2% annually before the global financial crisis, has barely improved since. The policy reflex—oscillating between fiscal gimmicks and monetary activism—distorts price signals that normally guide economic coordination, much like traffic signs obscured by fog. The result is systematic miscalculation and misallocation of resources.
Credit has increasingly flowed into consumption-oriented sectors such as retail and e-commerce (via trade margins), arts and entertainment (including online gaming and casinos), personal services, and large segments of private healthcare and education—all of which have expanded rapidly in recent years. By contrast, capital-intensive and tradable industries, especially manufacturing and the innovation processes tied to them, have been progressively crowded out.
A telling indicator of this structural shift is the long-term decline and subsequent stagnation in the ratio of Gross Fixed Capital Formation (GFCF) to GDP: from 19.9% in the 1970s to 17.2% during 2000–2007, and only marginally higher at 17.4% by 2024. This trend does not signify a collapse of British innovative capacity but rather reflects the enduring legacy of pre-2008 resource misallocations of capital and labour, which produced widespread malinvestment and were reinforced by years of monetary intervention. By distorting the intertemporal structure of production, such policies weakened the very incentives required to rectify past errors and sustain long-term capital accumulation.
Two consequences follow. First, low levels of real saving and insufficient investment in long-horizon projects slow productivity growth. Second, inflation acts as a hidden tax, disproportionately burdening entrepreneurs and low-income households.
Britain’s much-discussed “productivity puzzle” is therefore no mystery. It stems from the persistent rigidity of the production structure, which has failed to adjust effectively since 2008. The deeper problem therefore is a “policy puzzle”, which is political: resource allocation has been guided by policymakers rather than entrepreneurs, displacing the discovery process essential to innovation and efficiency.
Escaping this trap requires more than marginal adjustments. It demands structural microeconomic reforms rather than new rounds of monetary manipulation or fiscal expansion. Such reforms would involve liberalising markets, particularly labour markets; reducing and rationalising the public sector; reforming the welfare state to restore individual responsibility; and lowering the heavy tax burden on entrepreneurs—especially taxes that penalise profits and capital accumulation (Huerta de Soto, 2022).
Yet these measures run against the grain of what may be called Procrustean politics: the impulse to stretch or compress market processes to fit pre-set political templates, regardless of their distortive effects. Such interventions override the spontaneous order of the market and obscure the crucial role of profits as signals guiding entrepreneurs toward sustainable investment.
Reforms of this kind are also politically difficult to implement. Comparisons will inevitably be drawn with the short-lived programme of Liz Truss, whose measures lacked both the institutional groundwork and the political momentum required to endure. What Britain has not yet witnessed is therefore a “Milei effect”: a decisive break with redistributionist orthodoxy and the willingness to confront entrenched interests in order to restore monetary and fiscal discipline.
To confront Britain’s economic predicament, we draw on two complementary and recently developed analytical frameworks: the SHIFT framework, which offers a diagnostic lens, and the LEAP framework, which outlines a path for institutional renewal.
The SHIFT framework explains why economies become locked in stagnation by examining five interrelated dynamics: Stagnation, which entrenches low-growth and static equilibrium; Hayekian Insight, which highlights the role of decentralised knowledge in overcoming coordination failures; Informal Innovation, driven by bottom-up discovery processes of entrepreneurship; the necessity of Foundational Institutional Infrastructure for scaling ideas; and the eventual Transition toward a new process of dynamic efficiency.
As a complement, the LEAP framework serves as a blueprint for post-Milei effect institutional reform in real innovation-driven economies. It emphasises a Layered Architecture of institutional infrastructure and platforms; the creation of Emergent Value through interactions between these layers; the harnessing of Asymmetric Knowledge generated by entrepreneurial discovery; and the acceleration of progress through Permissionless Protocols that lower barriers to entry in the market.
Taken together, SHIFT provides a systematic diagnosis of why Britain remains constrained, while LEAP offers the institutional pillars required to restore long-term investment, foster entrepreneurial discovery, and rejuvenate productivity.
It should be noted that, given the limited scope of this paper, the specific mechanisms through which the LEAP framework could be implemented and foster institutional renewal in the British context are not examined in detail, as these fall within the remit of a separate analysis.
Growth: Why Has UK Productivity Lagged Since the 2008 Financial Crisis?
From Productivity Puzzle to Policy Puzzle
Britain’s “productivity puzzle” has become one of the defining economic questions of the past two decades. Before the global financial crisis, labour productivity—measured as output per worker—grew at roughly 2% per year. Since 2008, the rate has remained below 1%. Conventional analyses attribute this slowdown to weak investment, inadequate infrastructure, underdeveloped human capital, and deficient management practices (Williams et al., 2023).
In SHIFT terms, this reflects Stagnation: a structural lock-in in which output growth remains subdued despite episodes of cyclical recovery. This diagnosis points to persistently low levels of real savings and insufficient investment in long-term capital, both of which have progressively eroded productivity growth over time.
Why have savings remained shallow and long-term investment been weak? The most immediate explanation lies in the pre-2008 boom, an episode of exuberance driven by artificially low interest rates. These monetary distortions channelled factors of production into long-term yet ultimately unsustainable fixed assets. Once economic actors recognised that many of these projects were merely façades, the underlying misallocation was revealed: a financialisation dynamic that redirected capital into areas where it was never intended to be productively employed.
When the bubble burst and investment errors surfaced, Britain’s economy entered a prolonged phase of Stagnation. The post-crisis policy environment further reinforced this misdirection, entrenching the rigidity of factors of production rather than enabling entrepreneurial market processes to reallocate them efficiently. In a report I co-authored with colleagues at the Macro-Policy Leeds Policy Institute (2025, p. 34), I examined the UK’s decentralisation agenda, particularly under the Coalition Government. That analysis revealed both the strengths and inherent limitations of the approach, demonstrating that it failed to resolve Britain’s productivity puzzle by fostering entrepreneurship or correcting the broader misallocation of factors of production.
In SHIFT terms, this reflects the absence of Hayekian Insight: rather than relying on entrepreneurial knowledge to identify new productive opportunities, policymakers eventually imposed top-down remedies. By privileging fiscal stimulus, regulatory interventions, and ultra-loose monetary policy, the state displaced the very discovery process through which markets would ordinarily correct misallocations.
As the Financial Times recently observed, “Britain has a puzzle. But it is one of policy, not productivity.” On this point, I concur. The difficulty lies not in a deficiency of entrepreneurial capacity among Britons, but in the policy framework within which they are constrained to operate.
A genuine “policy puzzle” arises when the instruments prescribed by prevailing economic theory—whether fiscal expansion or monetary stimulus—repeatedly fail to deliver the intended outcomes, or generate counterintuitive long-run effects, even when models are calibrated to account for timing, exogenous shocks, and measurement error.
UK policy has failed to recognise that a genuine reallocation of factors of production—one capable of sustaining investment projects aligned with authentic market demand—requires an institutional framework grounded in adaptability. Such adaptability depends on the capacity of the economy, particularly its labour and capital markets, to adjust to shifts in global demand through innovation. This forms the essential precondition for dynamic efficiency.
For such adaptability to emerge, policy must cultivate a flexible institutional environment—one capable of evolving in step with the competitive pressures of the global economy. Instead, Britain has entrenched a rigid framework characterised by high taxation (including the inflation tax), interventionism, and regulatory burdens that obstruct the reallocation of resources in line with the genuine intertemporal preferences of investors and entrepreneurs.
In this light, overcoming the productivity puzzle—manifested in persistently weak output relative to input—requires not merely “more investment,” but a reorientation of policy towards a flexible institutional order that allows market signals to guide resources effectively across all sectors. As Austrian critics such as Javier Milei contend in his work The End of Inflation, the essence of this policy puzzle lies in the persistent reliance on top-down attempts to resolve fiscal weaknesses through monetary remedies. While such measures may alleviate short-term pressures, they ultimately distort relative prices, misdirect resources, and undermine the foundations of sustainable growth.
In contrast, economies such as Switzerland demonstrate how prioritising clear rules, openness, and enabling bottom-up institutional infrastructure—rather than top-down allocation—can drive rapid and compounding growth. In 2024, Statista ranked Switzerland second on the Index of Economic Freedom with a score of 83 out of 100, while Britain lagged behind at 68.6, reflecting the institutional gap that shapes their divergent growth trajectories. The Hayekian lesson is clear: prosperity cannot be engineered through centralised structures but emerges when decentralised entrepreneurial knowledge is free to test, fail, and reallocate resources in line with genuine market signals.
This is also where Informal Innovation—innovation that occurs beyond the boundaries of the state’s grandiose projects—becomes critical, as identified in the SHIFT framework. Britain has a long tradition of bottom-up discovery, from the workshop entrepreneurs of the Industrial Revolution to the Cambridge tech cluster and modern fintech firms such as Wise and Revolut. Yet in today’s economic landscape, Britain is constrained by heavy regulatory burdens and high taxation. The contrast with Estonia—a pioneer in embedding informal innovation—is stark. Estonia leads Europe with 7.7 unicorns per capita—unicorns being privately held startups valued at over $1 billion—whereas Britain has just 1.6 (Invest Estonia, 2022).This divergence illustrates how Estonia’s flexible, decentralised framework empowers entrepreneurial experimentation to scale into national advantage, while Britain’s institutional rigidity leaves much of its entrepreneurial potential underutilised and unable to perform effective economic calculation to reallocate factors of production toward sustainable uses.
Unlocking Britain’s growth potential therefore depends on restoring the conditions under which informal innovation can flourish—enabling entrepreneurs and small businesses to channel grassroots ingenuity into capital formation that accelerates and sustains long-term growth.
Rethinking Production: From Aggregate Output to Time-Structured Processes
Professor Jesús Huerta de Soto has often remarked that “there is nothing better than a good economic theory.” In the context of Britain’s policy puzzle, the difficulty lies in how economists conceptualise production. Within Keynesian frameworks, production is treated in highly aggregated terms, which predisposes policymakers toward a persistent reliance on top-down monetary remedies to address fiscal weaknesses.
From the standpoint of prevailing policy, production is typically reduced to the aggregate output of consumption and capital goods at a given moment in time, as measured by GDP. Yet this abstraction obscures the complex, time-structured stages of production through which goods and services actually emerge across different sectors of the real economy. In practical economic terms, and from the perspective of human action, it is impossible to capture the full range of outputs generated across all production processes within the British economy. GDP thus provides, at best, an average proxy—a statistical construct that conceals, rather than resolves, the deeper knowledge problem inherent in production.
Several Austrian axioms are crucial for a more accurate understanding of production. First, production is inherently heterogeneous, varying across goods, services, and sectors. Second, productivity gains are typically greatest in the more capital-intensive stages of production that lie further away from final consumption. This challenges the common policy assumption that production can be homogeneously defined by aggregate GDP output, and that stimulating demand for consumer goods will automatically translate into higher productivity. Such reasoning is fundamentally misguided, as it overlooks the structural complexity and temporal dimension of the production process.
The consequences of this epistemological and methodological error have shaped policy incentives in the British economy over the past three decades. Since the 1990s, growth has been concentrated in service sectors, particularly real estate, retail, and wholesale trade.
It is important to recognise, however, that it would be a fallacy to assume that all production within the service sector has been consumption-driven rather than capital-driven. Production is far too complex to be reduced to such a conclusion. Certain services—such as artificial intelligence, finance, information and communications technology, or professional services—are highly capital-intensive. Others, by contrast, such as the online casino industry, have expanded primarily as consumption-heavy activities. The core issue, therefore, is not simply whether investment has occurred in these sectors, but whether, in real terms by a market process of coordination, capital-intensive projects have been directed toward long-term, sustainable uses capable of evolving into higher-productivity dynamics and activities that improve living standards over time.
The trajectory of UK economic output in real terms raises further puzzles of inefficiency. Real estate has been one of the largest contributors to Britain’s services-led growth, accounting for a substantial share of GDP. Yet the country continues to experience a persistent housing crisis. This paradox underscores the disconnect between measured output growth in real estate and the structural shortcomings of Britain’s housing market, where restrictive supply conditions, speculative dynamics, and affordability constraints remain unresolved. From this perspective, growth in the housing sector has proved insufficient because of the misdirection of factors of production.
A different analytical lens is therefore required for this industry—one that considers how government distortions have shaped this sector: from incentivising credit bubbles through artificially low interest rates to promoting nominal construction projects designed for short-term electoral gain. The origins of these distortions could help explain Britain’s housing crisis in ways that conventional demand–supply accounts fail to capture.
A clearer indicator of Britain’s long-term imbalance in capital formation lies in the persistent weakness of what the SHIFT framework designates as Foundational Infrastructure—institutional incentives shaped by prolonged periods of low interest rates that have misallocated resources toward less capital-intensive stages of production. This diagnosis is corroborated by the ratio of Gross Fixed Capital Formation (GFCF) to GDP, which declined from 19.9% in the 1970s to 17.2% in the period 2000–2007, and by 2024 had recovered only marginally to 17.4%. Such stagnation indicates that insufficient resources have been channelled into higher-order, capital-intensive sectors—factories, infrastructure, machinery, and technology—where productivity gains are most commonly generated.
Britain’s so-called “productivity puzzle” is therefore less a mystery than a predictable consequence of policies that have disregarded Hayekian insights into the role of dispersed knowledge and the importance of intertemporal coordination. Instead of fostering roundabout, capital-intensive projects that sustain long-term growth, successive monetary interventions have steered resources toward consumption and short-term speculative assets. The result has been the erosion of incentives to undertake the kind of long-horizon investment essential to raising living standards in a durable way.
To reverse this structural weakness, Britain must re-anchor its growth model in the rebuilding of foundational institutional infrastructure. This requires a sustained commitment to directing real savings and resources toward long-lived productive investment. One possible avenue—long debated in monetary theory—would be to resolve the incomplete legacy of Peel’s Act (1844) by requiring demand deposits to be fully backed rather than fractionally reserved. Another, more contemporary approach can be observed in Argentina, where proposals such as the Banca Simons seek to address similar institutional weaknesses. Whichever framework is ultimately adopted—an issue that remains open to debate—the underlying challenge must be confronted if Britain is to avoid perpetuating cycles of misallocation and crisis in the coming years. What is clear, however, is that a greater share of resources must be channelled into productive assets such as advanced manufacturing, transport networks, and cutting-edge technologies. Such capital formation would facilitate capital deepening, providing workers with more sophisticated tools, processes, and infrastructure, thereby strengthening productivity, competitiveness, and long-term economic resilience.
Britain should not resort to setting quotas on investment but should instead seek to remove the obstacles that give rise to economic discoordination—prolonged periods of artificially low interest rates, currency instability, and regulatory uncertainty—which divert resources towards short-term consumption and speculative activity. With credible institutions and decentralised and spontaneous processes of entrepreneurial discovery, and increasing levels of Gross Fixed Capital Formation (GFCF) that could arise as the natural consequence of entrepreneurial calculation rather than the outcome of state design.
Inflation as a Policy Trap
The policy puzzle created by the persistent attempt to resolve fiscal weakness through monetary remedies is akin to curing a fever with heat. As Javier Milei argues in The End of Inflation, fiscal deficits cannot be solved by printing money to prop up demand. Such measures risk setting in motion spirals of Argentine proportions. Indeed, Argentina provides a vivid illustration: inflation surged to 211–300% in 2023–24 before President Milei’s programme of fiscal retrenchment, an end to debt monetisation, and exchange-rate liberalisation reduced inflation to 2.2% in January 2025 and 1.5% in June—the lowest in five years.
History demonstrates that inflation is, above all, a monetary phenomenon. Since monarchs first debased coinage and states claimed the authority to “manage” money, the global economy has repeatedly undergone cycles of booms, busts, and speculative bubbles. These outcomes are the predictable consequence of policies that disregard Hayekian insights into knowledge, coordination, and intertemporal structure. States have exercised monetary power primarily through two instruments: first, the sovereign prerogative to issue fiat currency unbacked by fungible assets such as gold or silver; and second, the banking system’s ability to generate demand deposits without full reserves—a practice incentivised by legal tender laws and underwritten by central banks.
Britain’s recent experience exemplifies this dynamic. Rachel Reeves’s recent violation of fiscal rules, reflected in persistently high public debt, was compounded by previous ultra-loose monetary policy between 2009 and 2022. The Bank of England held interest rates at historically unprecedented lows—around 0.5%, falling to 0.1% during the COVID-19 crisis—and maintained that floor for over a decade. This was accompanied by successive rounds of quantitative easing (QE), in 2009 and again in 2020, through which government bonds and other assets were purchased to inject liquidity into the financial system.
Yet these measures failed to achieve their stated objectives. Rather than fostering genuine recovery and redirecting factors of production toward sustainable, capital-intensive investment, they obstructed precisely that redirection. Most critically, they forestalled the necessary process of recognising and liquidating the malinvestments of the pre-2008 bubble. Entrepreneurs were given the false impression that no increase in real savings or sacrifices was required to support future long-term projects—projects that could have improved Britain’s living conditions today. In effect, ultra-loose monetary policy paralysed the reallocation of misdirected resources and prevented the renewal of productive capital structures.
At the same time, low interest rates and QE acted as an implicit subsidy for persistent fiscal deficits, keeping government borrowing costs artificially low. This masked underlying insolvency risks and delayed necessary fiscal adjustments, entrenching the very structural imbalances that continue to undermine Britain’s long-run growth potential.
Who, then, should undertake sustainable investments in long-term projects? Should it be the government of Keir Starmer—or any ministry for that matter—or should it arise instead from the broad entrepreneurial process, carried out by countless firms and individuals in an environment where confidence is restored and market signals are once again able to guide resources effectively (Huerta de Soto, 2022)?
The monetary dimension is decisive here, for it conditions the very interactions that occur in the real economy. When this dimension is distorted—through inflation or other forms of macro-monetary manipulation such as ultra-loose monetary policy—it produces a cascade of microeconomic distortions. These distortions undermine entrepreneurial calculation, misdirect factors of production, and weaken the very foundations upon which sustainable economic growth depends.
Procrustean Politics and the Productivity Puzzle
Britain’s policy puzzle—specifically the generation of foundational institutional infrastructure required to scale ideas in the political realm and the eventual transition into a more capitalist dynamic efficiency system of production that improves living conditions even more than it did since the era of industrialisation—is reinforced by what may be described as Procrustean politics, a phenomenon deeply embedded in Britain’s political culture and institutional system.
In Greek mythology, Procrustes appeared as a hospitable host, but in truth forced his guests into a single, pre-set standard: an iron bed of fixed length. Those who were too short were stretched; those too tall were cut down. The outcome was conformity imposed through violence, disguised as order.
The prevailing hegemony of Procrustean politics functions in much the same way. It imposes artificial uniformity on diverse societies, pressing individuals, regions, communities, and markets into rigid frameworks that disregard their natural heterogeneity. In economic life, this manifests most clearly in patterns of welfare and wealth redistribution, where one-size-fits-all interventions compress the complexity of entrepreneurial activity. Such policies erode the tacit and decentralised knowledge that coordinates scarcity and abundance across society.
Although Britain is the focus here, the concept transcends its borders, resonating across both Western and non-Western political economies. When societies, guided by their political leaders, internalise a Procrustean political culture, they entrench demands for uniform policies defined by ideologically fixed parameters—standards first conceived in the minds of political actors, often guided by envy or short-term popularity, rather than grounded in lived realities of life, liberty, and property within a capitalist economy.
Economically, such regimes distort intertemporal preferences by incentivising present consumption over long-term investment—echoing Rome’s panem et circenses or the promise of “manna from heaven” or “money ex-nihilo”. These policies foster dependency while undermining productive capital formation. Yet, because they are idealised within erratic strands of economic theory, their persistent failures are excused or rationalised politically, even when their outcomes contradict the assumptions embedded in their models.
In practice, policymakers and economists attempt not to adapt their frameworks to reality but to force reality into their frameworks—a drift into what Hayek (1974) called the “fatal conceit.” History provides stern warnings: as Rome in the third century shows, the pursuit of short-term political survival through fiscal giveaways and monetary debasement hollowed out its productive capacity, fuelling inflation and social decay. In contemporary terms, such dynamics risk corroding nation-states from within, sowing the seeds of stagnation and crisis.
It is important to reaffirm, as economists, that inflation is the most insidious and damaging burden on the vulnerable. It functions as a hidden levy—a “tax on the poor”—falling hardest on those least able to bear it. Within the world of ideas, this truth should be preeminent. Yet in practice, the drive of Procrustean politics often proves more powerful than evidence. In a world without such politics, genuine protectors of the poor would be governments that address the monetary roots of inflation rather than resorting to monetary expedients to conceal fiscal weakness.
Modern politics, however, is riddled with inconsistencies. It reflects a society whose intertemporal preferences have been skewed toward present consumption over savings and sacrifice—not entirely by choice, but because systemic incentives condition individuals to remain in that state. Instead of correcting monetary distortions, governments turn to redistributionist welfare policies and coercive interventions as supposed remedies.
The result is today’s expansive welfare state, encompassing the most fundamental functions of civilisation—justice, education, health, and beyond. These domains remain the subject of ongoing academic debate and could form the basis of a broader Austrian critique. One line of inquiry, for instance, would draw on the educational and anarchist perspectives of Ivan Illich to explore how civil society might reclaim such functions from Procrustean states. That debate, however, lies beyond the scope of the present discussion.
What must be emphasised here is that welfare-state redistribution has not resolved Britain’s economic challenges; it has merely deferred them to future generations. This postponement has often been defended by public figures. A case in point is economist Gary Stevenson’s recent proposal for a 2% tax on individuals with wealth above £10 million, justified because the rich otherwise outcompete the middle class. His critique of the financial system is notable, for it implicitly recognises Cantillon effects—the uneven distributional consequences of credit inflation stemming from the collusion of banks and the state. In this sense, Stevenson has identified the right diagnosis. His remedy, however, is Procrustean: it targets the wealthy indiscriminately by imposing an arbitrary threshold. If £10 million qualifies, why not £9.9 million, or £1 million? And when inflation erodes purchasing power further—driven by low productivity, itself a consequence of insufficient real savings and distorted intertemporal preferences—will “wealthy” one day mean £40,000, or even £10,000?
Such arbitrary thresholds, that could be potentially be imposed through state coercion, embody the very logic of Procrustean politics in Britain. They illustrate the dangers of uniform solutions and underscore the need for a more serious debate—grounded in theory and evidence—about how to resolve the named “productivity puzzle” which really is a “policy puzzle” without resorting to coercive uniformity.
Why the UK Needs a Milei Effect
Given the preceding diagnosis, a complete shift in Britain’s economic and political direction is required. As former Conservative MP Steve Baker has argued, Britain “needs its own Milei” to confront its inflationary dynamics and restore monetary discipline. These trends underscore the case for what may be called a Milei effect in the UK.
Currently, redistributionist and Procrustean politics prevail, facilitated by the Bank of England and driven by the Treasury’s short-term priorities. Borrowing costs continue to rise, while public debt pressures intensify. So long as these conditions persist—and so long as no political movement is prepared to challenge the hegemony of Procrustean politics in the realm of ideas—Britain’s trajectory will remain unchanged. This is a sacrifice that neither of the major political parties in the UK appears willing to make.
Britain therefore, requires a political force capable of producing a Milei effect: a movement willing to prioritise the defence of liberty, life, and property above all else. Without such a rupture—one that ushers in a transition toward a more dynamic economic order, grounded in fiscal discipline, counter-inflationary policy, and a rejection of coercive redistribution—Britain’s fragile condition will persist, both as a monetary and political reality. This is the unavoidable consequence of neglecting monetary restraint in favour of short-term expediency.
In SHIFT terms, this could represent the Transition pillar—a crucial leap away from stagnation and toward a more dynamic order.
Applying the LEAP Framework: Pathway for Britain’s Renewal
This section discusses the LEAP Framework not as an interpretation but as a solution. It provides a theoretical and institutional structure through which Britain can shift from stagnation to an economy characterized by dynamic efficiency and renewal. A more detailed examination will come later, but the main idea is clear: Britain needs to rebuild the ways information, incentives, and innovation flow throughout its economic system.
Layered Architecture: Reconstructing the Institutional Stack
Britain’s renewal must start with rebuilding its institutional structure, which includes the relationship between its monetary systems, industrial platforms, and entrepreneurial activities. These layers have become disconnected: Foundations are weakened by ongoing fiscal intervention and monetary choice; Platforms have been hollowed out by short-term credit cycles; Applications are limited by complex regulations and a fear of risk.
A clear reform plan must rewire this structure. At the foundational level, reliable and rule-based monetary and fiscal institutions should take the place of discretionary policies to anchor expectations and restore the incentives necessary for investment.
At the platform level, resources should flow into long-term, capital-intensive sectors such as advanced manufacturing, infrastructure, energy networks, and research-rich technologies because they are more beneficial in terms of profits for investors and living conditions for economic actors, rather than into consumption-driven activities that provide only temporary benefits.
At the application level, Britain should renew the institutions that enable entrepreneurial efforts to create real value. This includes reframing capital markets, reforming labor systems, and legal frameworks that reward reinvestment in real capital structures instead of speculation. When these layers function together, information and incentives can circulate through a stable institutional structure that supports long-term growth.
Emergent Value: Restoring Dynamic Coordination
While the SHIFT framework identified stagnation and division, LEAP suggests restoring emergent value. This value comes from the natural creation of wealth and knowledge that happens when entrepreneurs, institutions, and technologies interact freely. Britain’s current critical state results from interference in this process, where administrative control has taken the place of market coordination and compliance has replaced innovation.
To change this, policy should foster an environment where value emerges from interaction instead of direction. This means lessening the barriers that separate finance, technology, and enterprise, and promoting the combination of existing resources into new setups through mechanisms like lower taxes. Industrial policy should focus on exploration through trial and error, rather than control; and fiscal systems must support long-term investments that can grow over time as an spontaneous process of the market.
Such coordination doesn’t need centralized control, just credible rules. This includes clear taxation, stable money, and open trade and regulation. Under these conditions, dynamic efficiency, or the economy’s ability to evolve, becomes the basis for economic life.
Examples already exist. Britain’s Fintech Sandbox and Catapult Centres show that light regulation and cross-sector cooperation can allow emergent value to arise through decentralized experiments.
Asymmetric Knowledge: Empowering Entrepreneurial Discovery
No economy can progress without acknowledging society as a hub of asymmetric knowledge—the understanding that entrepreneurs, not policymakers, have the contextual insight needed to use resources effectively. Britain’s stagnation is a result of stifling this discovery process due to political overreach and fiscal dependency.
LEAP aims to reactivate entrepreneurial discovery as both a thought process and institutional method. This starts with decentralization, allowing decisions to shift from the center to local areas where knowledge is found. Regional actors should be free to test business models, investment strategies, and governance structures that fit their strengths. The government’s job is not to pick winners but to maintain fair rules: transparency, contract enforcement, and monetary stability.
Education and skills policy also needs to reflect this understanding. Human capital should not be seen merely as a bureaucratic factor but as a source of entrepreneurship. Britain should be rebuilt through decentralised institutions that connect learning with enterprise, such as vocational academies, industry-led apprenticeships, and entrepreneurial training programs. These steps would turn knowledge asymmetry from a limitation into a growth driver, creating an economy where flexibility and adaptation take the place of administration as the main ways to coordinate efforts.
Permissionless Protocols: Opening the System to Experimentation
Britain’s long-term health relies on establishing permissionless protocols—arrangements that allow for innovation without needing complex prior approvals. The current system is still tied to permission, marked by high entry and opportunity costs, discretionary approvals, and unclear regulations. This creates dependency and discourages risk, stifling entrepreneurial spirit.
A permissionless framework changes this dynamic by replacing bureaucratic barriers with straightforward, rule-based systems. Regulations should move from controlling behavior to encouraging trust and exploration within set boundaries. Fiscal policy must promote reinvestment and innovation instead of short-term gains.
Digitising public services and creating open-access infrastructure, like interoperable digital identity systems, transparent procurement, and open data platforms, can further ease entry. The aim is not to remove regulations but to create smart regulations—rules that enable rather than permissions that delay.
In such a setting, experimentation becomes a norm: ideas grow based on merit, markets adjust through exploration, and growth stems from constant entrepreneurial recombination. This reflects the freedom of a society to evolve without coercion.
Conclusion: From Diagnosis to Cure
While the SHIFT Framework highlighted Britain’s stagnation—including structural issues, misplaced incentives, and decaying institutions—the LEAP Framework offers a path for recovery.
All these ideas represent more than just policy suggestions; they indicate a shift in thinking and institutions. This shift moves from centralised control to adaptable systems, from financial manipulation to sustainable practices, and from compliance to creativity.
Britain’s revival will not come from another round of fiscal intervention or monetary experiments but from rebuilding an institutional framework where innovation, coordination, and freedom support each other. LEAP lays out the groundwork for this change, moving from static efficiency to dynamic efficiency, and transforming from a managed economy to an entrepreneurial society.
This work is the result of a collaborative effort between Elias Sanchez, an economist and political scientist at King’s College London, and Ritvik Verma, an computer scientist at Newcastle University. Sanchez has focused on diagnosing economic stagnation and outlining a path toward dynamic growth, drawing deeply on the Austrian tradition, particularly the analyses of Jesús Huerta de Soto in Japonización de la Unión Europea (2021) and Crisis Financiera, Reforma Bancaria y el Futuro del Capitalismo (2022). Verma has developed the SHIFT and LEAP frameworks as innovative tools for diagnosis and prescription, applying LEAP in particular to demonstrate how layered architectures, emergent value, asymmetric knowledge, and permissionless protocols can restore dynamism in complex economies. Together, their insights underpin the frameworks’ emphasis on entrepreneurial discovery, dynamic efficiency, and institutional reform as the foundations for long-term prosperity.
