“Constraint or Confusion: A Conversation on UK Productivity between Dr. Goldratt and the Chancellor”
🧑💼 Characters:
-
Dr. Eliyahu M. Goldratt (EG) – Systems thinker, physicist, founder of TOC
-
Rt Hon. Chancellor (CH) – UK Finance Minister, classically trained economist
🏛️ Setting:
Downing Street, Policy Strategy Room
Mid-year Economic Strategy Review
CH:
Dr. Goldratt, thank you for coming. As you're aware, the UK’s productivity has stagnated for over a decade. Our current strategy is to reduce the deficit, rationalize public spending, and pour targeted investment into infrastructure to stimulate GDP growth. We're also considering tax restructuring to increase state capacity. What’s your perspective?
EG (smiling):
Let me ask you something, Chancellor. Do you believe GDP growth equals productivity growth?
CH:
Well, GDP per capita is our best available proxy. When GDP rises and employment is stable, we assume productivity has improved.
EG:
Assumptions are dangerous. GDP is a measure of activity, not value. You can spend billions cleaning up a flood and GDP will rise — but society hasn’t improved.
Productivity is about how effectively we turn inputs into value. That’s what I call Throughput — value generated per constraint per unit of time. And right now, I suspect the UK is pumping resources into non-constraints.
CH:
Then tell me — what is the constraint in the UK economy?
EG:
That is the right question.
But don’t assume it’s capital or infrastructure. Infrastructure is easy to spend on, but if it’s not the constraint, you just increase Operating Expense (OE) without increasing Throughput (T).
Let’s start with a simple logic tree.
-
You want to increase GDP.
-
That requires increasing productivity.
-
Productivity requires more value flow per unit time.
-
But every system has a constraint that limits that flow.
Have you clearly identified what that constraint is for the UK today?
CH (pauses):
We’d say it's a combination — underinvestment, skills gap, perhaps low R&D spending…
EG (leans forward):
That’s not identification — that’s a list.
You can’t relieve “a list.”
You must find the one constraint whose elevation would unlock the most system-wide throughput.
Let me propose a method:
-
Map the flow of value in your economy.
-
Identify where it slows, backs up, or fails to convert inputs into value.
-
Challenge assumptions — especially politically popular ones.
CH:
That sounds like systems engineering, not economics.
EG:
It is both. Economics without systems thinking is like medicine without anatomy.
Here’s an example: You might assume infrastructure is the constraint, but what if the real constraint is regulatory friction in scaling businesses? Or lack of mid-skill technical labor? Or public sector misalignment between departments?
Pouring billions into roads won’t fix those.
CH:
We believe in government-led investment to stimulate demand and multiplier effects. Infrastructure is tangible. The public sees results.
EG:
Yes, and they’ll also see spending without systemic gain if you don’t relieve the actual constraint. You're trying to fix a leaky pipe by turning up the pressure.
Let me suggest another path — TCE: Throughput-Centric Economics.
CH (intrigued):
Go on.
EG:
TCE says: Instead of managing the economy through spending, taxation, and aggregates, manage it like a system.
-
Find the constraint.
-
Subordinate policies to support flow through that constraint.
-
Elevate the constraint.
-
Prevent inertia from treating past constraints as present ones.
And we measure success not by GDP but by net Throughput: value to society per unit of time.
CH:
But we must balance the budget. We can't afford to fund everything.
EG:
Exactly. That’s why we must focus only on what limits the system.
Budget cuts everywhere except at the constraint make sense. Elsewhere, they're noise.
This is not austerity or expansionism — it is focused leverage.
CH:
And what happens if the constraint is not under government control — say, private sector investment appetite?
EG:
Then your role is to create the conditions that elevate it:
-
Simplify regulatory paths.
-
Reduce decision latency.
-
De-risk constraint-based innovation.
-
Remove policies that cause local optima.
You stop trying to manage the whole economy and start managing the constraint.
CH:
Let’s say I accept your premise. How would we begin?
EG:
Start by using TOC Thinking Processes:
-
Build a Current Reality Tree (CRT) to trace effects like low productivity back to their causes.
-
Use the Evaporating Cloud to surface and challenge conflicting policy assumptions (e.g., cut spending vs invest in growth).
-
Model future outcomes with the Future Reality Tree (FRT) if you elevate a suspected constraint (e.g., logistics, vocational training).
And crucially: Create a Throughput Dashboard, not a GDP tracker.
CH (scribbling notes):
And taxation?
EG:
Only if taxation helps elevate the constraint. Otherwise, it’s a distraction.
Tax smartly:
-
Discourage waste and local optima (e.g., tax unproductive rent-seeking).
-
Incentivize flow toward constraint leverage (e.g., R&D that aligns with current bottlenecks).
-
Avoid tax complexity that chokes small businesses trying to scale.
CH:
You realize this would require a complete mindset shift in government.
EG (smiles):
Yes. But only if you're serious about solving the problem — not just managing appearances.
“Chancellor, the real problem is not your deficit, not your infrastructure, not even your labor market. The real problem is your assumption that more motion equals more progress.”
“You are managing the parts — taxes, spending, interest rates — but ignoring the system. If you want productivity, stop asking how to do more, and start asking what’s stopping the flow. Identify the constraint. Subordinate everything else to elevating it. That’s where the leverage is.”
“The UK doesn’t need more noise; it needs clarity of focus. You don’t need more money; you need fewer assumptions. And you don’t need more initiatives; you need a coherent strategy around one point of leverage.”
“When you find your constraint, you’ll find your policy.”
“Form a national Throughput Task Force. Give it one mission: Find and elevate the constraint of the UK economy. Everything else must wait.”
發表文章
