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Interfering politicians and a dysfunctional market how we got the worst of both worlds

Tue, 23rd Jun 2015

It’s not where we wanted to be. Somehow we have ended up with a weird mutant capitalism that cumulates the worst of both worlds: on the one hand a predatory and amoral market (motto: ‘If you ain’t cheating, you ain’t trying’, as a Barclays vice-president pithily summed it up) which systematically generates crashes and inequality, and on the other an increasingly dictatorial and interfering administrative state that thinks nothing of casually dispossessing housing charities (the new right to buy), micromanaging everything from GP’s diaries to the number of rooms people are allowed to live in, and now, if you please, outlawing future (Keynesian) changes to economic policy – in sum, a nightmare cross between Ayn Rand and Stalin, or, if you prefer a home-grown version, Orwell and Bullingdon.

How did we get here? After all, the whole point of the market was to strip out useless rules and non-value-adding activity. Outsourcing to the private sector was supposed to get politicians out of managment. Submitting public services to the discipline of market forces would diminish the purchase and interference (not to mention cost) of the state in favour of individual economic choice – just let the marvel of the market decide.

How wrong can you be. Instead the UK has developed a model that is both state-dominated and market-driven. As John Kay has pointed out, a huge and expanding regulatory state, extending across the private as well as the public sector, manages to be both intrusive and ineffective. Meanwhile, David Graeber (The Utopia of Rules) has noted the proliferating bureaucracy (in the double sense of red tape and low-level jobs administering it) of public and private administration, to which the internet, far from mitigating, has simply added another bureaucratic layer. In Graeber’s categorisation, these are ‘bullshit jobs’, adding no value, demoralising user and agent alike, and paying too little to keep those who perform them out of subservience to the state.

Paradoxically, much-derided bureaucracy and much-lauded market are two sides of the same coin. One of the drivers of the dynamic between them is the careless political conflation of ‘the market’ with ‘business’ or ‘companies’. The market is indeed a uniquely powerful mechanism, but like an F1 engine it needs constant care and attention to keep it in balance. Ironically, its most troublesome constituents are companies, which at least in Anglophone countries have been absolved by today’s corporate governance from any duty of care to the markets they claim to live by or the society they are part of.

When the business of business is business, all legal means are fair ones, including those that prevent markets working as they should – tactics such buying up competitors, predatory pricing, rent extraction, or, less obviously, cutting back on investment in R&D and training to benefit the short-term share price. While these are legal, such a culture easily tips over into real market rigging, as with the banks. There’s a weary inevitability about the subsequent process, as Kay describes: ‘We have dysfunctional structures that give rise to behaviour that we don’t want. We respond to these structures by identifying the undesirable behaviour, and telling people to stop. We find the same problem emerges, in a slightly different guise. So we construct new rules. And so on. And on. And on.’

The insistence on an ‘unfettered’ market based on self interest is thus self-defeating, paradoxically driving its own hobbling as retribution for compulsive gaming of a rule-based system. A similar process of remorseless regulatory tightening operates in the public sector, and, as an important forthcoming report by think-tank Respublica will show, in the professions too. In both cases, assumptions of self-interest and producer capture have led to a dispiriting public-private mix of central bureaucratic target-setting with profit-oriented delivery that has reduced relationships of professionals and citizen to one of lowest-common-denominator contractual exchange, disengaging both citizen and service provider and reducing service from concern with individual lives to bureaucratic box-ticking. Government promises to simplify and reduce the number of targets are comprehensively trumped by what we might call Kay’s Law.. Thus for example a deficiency in NHS care caused by pressure to meet financial targets (as at Mid-Staffs) is countered by a target for compassion, or a too-obvious preoccupation with exam results driven by schools league tables generates the forlorn absurdity of a target for making lessons engaging.

Either way we end up with a horrible combination of cynical low-cost private utility policed by an authoritarian state that has replaced individuals and their needs as sole Soviet-style arbiter of the public good. The focus on performance management, outcomes and accountability saps professional purpose and pride, all too easily shading into the surveillance state. No wonder workforce engagement is so low.

This is the vicious circle that results from a system of rules based on mistrust of human nature and a perceived need to prevent people doing bad things rather than incentivising them to to do good. People generally behave according to the expectations their environment generates – it is a self-fulfilling prophecy. To break the cycle, we need to cut off the supply of commercial incentives to do bad things, at the same time relieving the pressure to create ever more rules, and internalise the requirement to behave responsibly. Until we do, work will continue to cut humans off from their better nature, stultifying the ambitions of both public and private sector, and people will continue to wonder why, as Peter Drucker once put it, 'so much of management consists of making it difficult for people to work'.


 

 


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User comments

Henning :: 25th Jun 15
Bravo, Simon. As usual, well-argued and persuasive.
Mike Davidge :: 26th Jun 15
Have you read 'The Establishment' by Owen Jones? I suspect you will have. In which case you will know that he says what you describe here is a consequence of a 40 year strategy by free market zealots to win the intellectual argument over how to run things aided and abetted by those who have much to gain by that approach. His answer is that those who oppose this need to win back the intellectual ground first.
guest :: 25th Sep 15
Thank you for a great column. I believe George Lakoff would concur with Mr.Davidge above. As the saying is, "If you don't know where you're going, any road will do." That said, Mr. Edmund Phelps' recent book "Mass Flourishing" suggests a 'modern' value system that appears consistent with Mr. Caulkin's essays. How would a modern humanistic philosophy be manifested in our institutions? our society? i.e. what would it look like?
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