WE LIVE IN strange times. In the private sector, market rules are so degraded that it has become the role of companies in the real economy, some built up over decades, to act as chips tossed around by high rollers in the City supercasino. Meanwhile, the public sector is in the grip of a central planning regime of a rigidity and incompetence not seen since Gosplan wrote Stalin's Five-Year Plans.
You think I exaggerate? Well, as Exhibit A, consider the hedge funds that borrow company stock in order to vote for or against a proposal - a merger or takeover, say - not to further the interests of the company, but to make their previous bet on the firm's share price come true. For Exhibit B, name another government since Leonid Brezhnev's that prescribes 198 targets for local government, numbers and postings of junior doctors, reading methods for teachers in primary schools, cleaning techniques used in hospitals and how GPs should organise their appointment diaries.
Already individually dysfunctional in their own way, in combination these diametrically opposed management extremes deliver not the fabled 'third way', or at least not in any man ner intended, but an unholy mess, from which we get the worst of both worlds.
How have we got to this position? As a reader reminded me last week, our most illuminating guide may be the lamented Jane Jacobs. When she died in 2006, obituarists emphasised the Canadian writer's regeneration opus, The Death and Life of Great American Cities . But in Systems of Survival (1992), she also put forward startlingly original and equally penetrating observations about the way economic life in general is organised.
From sources ranging from The Observer to medieval law and anthropology, Jacobs concluded that humans had developed two ways of gaining a living: 'taking' and 'trading', or 'conquest' and 'commerce'. She also found that each of these survival systems had a corresponding 'moral syndrome', built out of precept and tradition, modified over time. For example, it's hardly surprising to find that commerce thrives on a syndrome of honesty, competition, respect for contracts, initiative and enterprise, optimism, thrift, willingness to collaborate and agree, and avoidance of force.
The other syndrome, which Jacobs dubs the 'guardian' syndrome because it derives from territorial protection, by contrast emphasises loyalty, honour, tradition, prowess, exclusivity and the distribution of largesse. Trading is anathema to it. This syndrome governs the behaviour of governments and their bureaucratic and other agents, including police, armed forces and judges (also, incidentally, organised religion).
Three points are essential to understand how the syndromes work. The first is that they are practical and internally consistent, not arbitrary: they are 'what works', as evolved over time. Second, though mutually exclusive, they are also interdependent: commerce needs 'guardians' (the state) to establish and police the rules, guardians need commerce to provide energy and innovation, not to mention taxes. Finally, and crucially, they are systems . One characteristic of systems is that the parts work together and are self-reinforcing.
But by the same token it's impossible to change or remove individual elements without causing unintended consequences all along the chain. In this case, so sensitive to tampering are the syndromes that combinations of the two produce not a milder median, but what Jacobs calls 'monstrous hybrids', with the perverse property of turning virtues in one syndrome into vices in the other.
The classic case is the Mafia, a rigidly 'guardian' organisation put to the service of commerce, making travesties of honour, loyalty, competition and industriousness in the process. But hence also the dysfunctional examples with which I began this piece. In fact, in 1992 Jacobs was already anticipating the buyout boom, which she interpreted as companies abandoning commercial morality (thrift, innovation, enterprise) to treat other firms as plunder.
Conversely, the disastrous results of the GP contract can be traced directly to the government's determination to turn an essentially guardian organisation into a commercial one. GPs have responded to incentives in textbook fashion, by finding ways to meet the targets. The government has changed their motivation from intrinsic (the work itself) to extrinsic (outside rewards). But, as a patient, which GP would you rather consult, one motivated by money or by doing the best medical job?
The point about the syndromes is that one isn't better than, or replaceable by, the other: they're symbiotic. It follows that the ability to navigate between them, maintaining their integrity but knowing when to switch, is vital. If, as Jacobs suggests, such a capability is a mark of civilisation, we can only conclude we are going in the opposite direction to what New Labour intended: backwards.
The Observer, 9 March 2008