Beyond the Balance Sheet: Why Major Economic Decisions Can Never Escape Politics

In the pristine world of finance and investing, there exists a powerful ideal: the purely rational decision. It’s a decision stripped of emotion, bias, and the messy unpredictability of human affairs. It’s a world governed by elegant models, cost-benefit analyses, and the cold, hard logic of numbers. We see this ideal in the rise of algorithmic trading, quantitative hedge funds, and the persistent call for “independent committees” to oversee major economic projects. The goal is always the same: to take the decision ‘out of politics’.

But what if this ideal is not just unrealistic, but a dangerous illusion? A recent, incisive letter to the Financial Times by John Webster serves as a potent reminder of a fundamental truth: for any project of significant scale, separating the decision from politics is impossible. Webster argues that the very questions at the heart of these projects—who benefits, who pays, and whose values are prioritized—are inherently political. This isn’t a flaw in the system; it’s the system working as intended in a democratic society.

This article delves into that essential argument, exploring why the technocratic dream of apolitical decision-making falls short. We will examine the inescapable political nature of value, analyze real-world case studies, and provide a framework for investors and business leaders to navigate this complex reality. Because in the modern economy, understanding the political landscape is no longer a soft skill—it is a critical component of financial analysis and strategic success.

The Technocratic Dream: An Alluring but Flawed Premise

The appeal of depoliticizing major decisions is undeniable. Politics is often seen as the domain of short-termism, populist whims, and inefficient compromises. In contrast, a technocratic approach, led by impartial experts, promises efficiency, long-term vision, and optimal allocation of resources. The thinking goes that if we let engineers, economists, and finance professionals make the call based on pure data, we would get better outcomes—projects that deliver the highest possible return on investment for society.

This belief underpins the creation of bodies like independent infrastructure commissions or monetary policy committees at central banks. The goal is to insulate critical functions of the economy from the electoral cycle. In the world of financial technology, this same ethos is baked into the DNA of many blockchain projects, which promise a “trustless” system governed by immutable code rather than fallible human institutions. The logic is compelling: remove the people, and you remove the politics.

However, this view fundamentally misunderstands what a “political” decision is. It isn’t just about politicians trading favors. A decision becomes political the moment it involves distributing scarce resources and balancing competing interests. As Webster’s letter implies, a spreadsheet can tell you the projected economic output of a new railway, but it cannot tell you whether it’s fair to build it through a protected nature reserve or a community’s ancestral land. It can model the financial cost, but it cannot quantify the social cost of disruption or the cultural value of what is lost. These are questions of values, not just variables. Geopolitical Tremors: How US-Iran Tensions Could Reshape Your Investment Portfolio

Value is Political: The Core of the Argument

At the heart of any major project—be it a multi-billion dollar infrastructure venture, a new banking regulation, or the architecture of a fintech platform—is a value judgment. The choice of which metrics to prioritize in a cost-benefit analysis is, itself, a political act.

Consider the construction of a new airport. A purely economic analysis might focus on:

• Projected increase in GDP
• Number of jobs created
• Potential revenue from landing fees and retail
• Return on investment for the financiers

But a political and social lens introduces a different set of questions:

• Who bears the cost of noise pollution?
• Which communities are displaced, and are they fairly compensated?
• What is the environmental impact, and who is responsible for it?
• Does the project benefit the entire region or only a select few economic hubs?

Pretending these latter questions are secondary to the “real” financial numbers is to make a political choice: that economic efficiency is more important than environmental justice or social equity. There is no neutral, “apolitical” ground. Even the decision to do nothing is a political one that upholds the status quo. As a report from the OECD highlights, the political economy of public investment is fraught with these trade-offs, where governments must mediate between economic efficiency, territorial equity, and political gain.

Case Studies: Where Financial Models Meet Political Reality

History is littered with projects whose fates were determined more by political will than by their initial balance sheets. These examples serve as cautionary tales for any investor who believes in a purely technocratic view of the economy.

HS2 High-Speed Rail (UK): Perhaps the quintessential example, HS2 was conceived as a project to bridge the UK’s north-south economic divide and boost national productivity. While its business case has been debated fiercely for over a decade, its continuation has been a matter of pure political capital. Successive governments have backed it to signal commitment to “levelling up,” even as costs have ballooned from an initial £32.7 billion to estimates exceeding £100 billion for the full network. The decisions to curtail its route were not based on new financial data alone, but on a political calculation of what was palatable to taxpayers and where spending could be redirected for more immediate political wins.

Central Bank Digital Currencies (CBDCs): The debate around CBDCs is a perfect modern example in the fintech space. From a purely technical and economic standpoint, a CBDC could offer immense efficiencies in the banking and payment systems. However, the project is almost entirely stalled by political questions. How much privacy should citizens have from the state in their transactions? What impact would a CBDC have on the business model of commercial banks? How could it be used for financial surveillance or social control? These are not economic questions; they are deeply political ones about the relationship between the citizen, the state, and the economy. The technology is ready; the politics are not.

The “Big Dig” (Boston, USA): This massive infrastructure project to reroute a major highway underground was a technical marvel but a financial catastrophe, with costs spiraling from $2.8 billion to over $14.6 billion. The overruns were a direct result of the complex web of political stakeholders—city, state, federal agencies, local communities, and private contractors—each with their own demands and leverage. The final project was a product of countless political compromises, not an optimized engineering plan. The Venezuelan Gambit: Why Saudi Arabia is Watching Every Move

A Better Framework: From Political Avoidance to Political Analysis

If we accept that politics is an unavoidable feature of the economic landscape, the goal for investors, finance professionals, and business leaders must shift. Instead of trying to find an apolitical oasis, we must become better at navigating the political terrain. This means integrating political risk analysis and stakeholder mapping directly into our financial models.

The table below contrasts the traditional technocratic approach with a more realistic “Political Economy” model for project evaluation.

Adopting the Political Economy model means an investor in an infrastructure fund doesn’t just look at the projected toll revenues; they analyze the stability of the government granting the concession and the strength of local opposition. A fintech startup doesn’t just build a disruptive trading platform; it actively engages with regulators and policymakers to shape the environment it will operate in. This approach transforms politics from an external threat into a manageable variable within the investment thesis. More Than 'Winging It': Why America's Heartland is the Next Frontier for Tech and Finance

Conclusion: The Art of Investing in a Political World

John Webster’s letter to the FT was a short but powerful critique of a pervasive myth in finance and economics. The dream of taking decisions “out of politics” is a fantasy that ignores the fundamental nature of how societies function. Every significant allocation of capital is a statement of priorities, and the debate over those priorities is the very definition of politics.

For those in finance, banking, and the broader economy, this is not a counsel of despair. It is a call for a more sophisticated and realistic approach. True mastery in the world of investing and business leadership lies not in building models that ignore the messy reality of politics, but in building strategies that embrace it. The most successful ventures of the 21st century will be those that understand how to build coalitions as well as balance sheets, and how to navigate the corridors of power as skillfully as they navigate the fluctuations of the stock market. The numbers are crucial, but they never tell the whole story. The rest is politics.