The End Of The Experiment? Part 1

Our new book, The End Of The Experiment? From Competition To The Foundational Economy  is now available  as an ebook on Kindle. Over the coming weeks we will be outlining its argument and we begin here with a sketch of the historical and intellectual context of the work.

The British economy has been in relative decline since the last quarter of the 19th century, and there has been debate about the sources of that decline since at least the great ‘national efficiency’ debate prompted by the failings revealed by the Boer War.  Britain, it seems, is the subject of eternal experiments. In the post-war years there have been two. The first was the post-war settlement, which delivered historically unparalleled prosperity and generous public goods in the form of the welfare state. That settlement floated on the ‘long boom’ (the thirty glorious years) and it sank alongside that long boom in the 1970s. For over thirty years now we have lived through a new experiment, symbolically inaugurated by the victory of Thatcherite Conservatism in 1979, but an era of experimentation which also encompassed the heady years of New Labour domination. That experiment had several well known features.  It created ‘flexible’ labour markets;  it dismantled the command economy represented by publicly owned industries;  it placed a bet on the creation of a ‘branch’ economy in manufacturing in a global division of labour, and on a financial services revolution in London; it prompted an outsourcing revolution which saw numerous public services franchised to private corporations; it created an audit state; and it ushered in a new era of micromanagement by the Whitehall elite.

The starting point of our book is the failure of this latter experiment.  The public occasion of failure was the great financial crisis, but the roots lie much deeper.  Our book explores four great deficits left by the thirty year experiment:

• A competitiveness deficit: productivity stubbornly lags behind our competitors; the financial services sector  has failed to generate employment; and ‘branch’ manufacturing  has failed to solve the problem of the trade deficit.
• A sustainability deficit: the post-war settlement delivered generous public goods; we show (for instance  in our broadband chapter and in the separate studies of the rail industry carried out in CRESC) that the privatised system isn’t delivering a sustainable infrastructure.
• An accountability deficit: the thirty year experiment was legitimised in the language of accountability, but it has created new worlds of unaccountability – out of control corporate elites, franchises in privatisation and outsourcing shrouded in opaque accounting, constant uncertainty about accountability lines between politicians and service deliverers.
• A competence deficit: the age of experiment has also been  a new age of fiasco -  outsourcing, PPI, rail privatisation, financial regulation; a hollowed out civil service unable to police the new franchises.

The metaphor of an experiment has an appealing ring: experimentation is, after all, the standard method by which the sciences learn, by  testing, refuting or confirming theories. But the British history of experimentation is very different: we show in the book that we live in a state that finds learning from experience very hard. There seem to be three political reasons for this:

‘Hyperpoliticisation’: in a world of extreme micro-management everything is turned into adversarial politics and what in the book we call the ‘antidote fallacy’

The closing of the metropolitan political mind: a drastic narrowing in the social and institutional range of elite recruitment (symbolised by the disappearance of the mass political party and domination of  politics by a narrow class of  professionals) is part of the problem; an equal problem is the rise, since Thatcherism, of a ‘TINAF’ mentality: There Is No Alternative Framework, and this drastically  narrows  the range of possible dissent from the official ‘line to take’.

The shrivelling of professional expertise.  Thirty years of centralisation and increasingly tight control of professional elites have left  (beyond devolved government) shrivelled alternative institutions in civil society  - and alternative sources of ideas.

We will develop these themes further over the next three blogs.

Manchester Capitalism

A 19th Century Institution Confronts 21st Century Problems

The publication in mid-March of a report by the Public Accounts Committee on the latest episode in the outsourcing saga (Contracting Out Public Services to the Private Sector, HC 777, 2013-4) represents the latest attempt by the institutions of parliamentary scrutiny in the UK to come to terms with the astonishing phenomenon of the new contractual state and the accountability issues which it has created.
The dimensions of this new contractual state are now well established.  The combination over the last thirty years or so of the privatisation boom and the outsourcing boom have created whole new areas of corporate enterprise and brought into existence new corporate giants.  The PAC report itself documents some dimensions of the phenomenon.  Government in the UK spends £187 billion on goods and services provided by third parties each year; about half of that is estimated to be directly connected to outsourcing contracts. The four outsourcing giants Atos, Capita, G4S and  Serco between them held government contracts worth around £4 billion in 2012-13.  Any financial configuration of this size and rate of growth raises obvious important issues of  accountability. The Public Accounts Committee, under successive chairs, notably David Davies, Edward Leigh and Margaret Hodge, the present chair, occupies an honoured position in this struggle: a string of PAC Reports over the years have thrown light on successive and costly fiascos in the outsourcing system and in public procurement more generally.  Democratic politics would be poorer without these interventions.

But the history of the Committee, and indeed its latest report, show key weaknesses of the accountability system.  In a sentence: this is a 19th century institution, with a 19th century set of values, trying to make sense of a 21st century world.  The PAC is an unusual Committee.  Most of the present range of House of Select Committees are creations out of the post-1979 reforms set in motion by Norman St John Stevas as Leader of the Commons.  The Public Accounts Committee, by contrast, traces its origins back to the middle of the 19th century.   It is a creation of the great budgetary reforms associated with Gladstone’s tenure as Chancellor of the Exchequer, and it reflects his famous insistence on the importance of economy in public spending – on the importance of ‘saving candle ends.’  The key House of Commons resolution,  of 1862, which still governs the Committee’s mission reads in part as follows:

‘There shall be a standing committee designated "The Committee of Public Accounts"; for the examination of the Accounts showing the appropriation of sums granted by Parliament to meet the Public Expenditure, to consist of nine members, who shall be nominated at the commencement of every Session, and of whom five shall be a quorum.’  

In 1866 Parliament created a key institutional connection which continues to shape the Committee’s work: it appointed the PAC as the overseer of the work of the Comptroller an Auditor General, who in modern Britain has morphed into the head of the National Audit Office.  As a glance at the hearings that underly the most recent report show, it is investigations by the NAO which now provide the main grist for PAC hearings and subsequent reports.

These 19th century origins have had two fatally narrowing consequences as the PAC has struggled to come to terms with the new contractual state.  The first is that the original ‘saving candle-ends’ emphasis on austere economy has turned, in the age of neo-liberalism, into a single minded focus on the extent to which outsourcing is governed by competitive markets, and the extent to which competition delivers ‘value for money’ –  delivering the most economic candle ends that money can buy.  This latest report, like earlier PAC investigations, is essentially about why the competitive market doesn't seem to be working in outsourcing. The second fatal narrowing consequence is that the work of the Committee has become focused on fiascos in the outsourcing system.  A subsidiary reason for this is that the investigation of fiascos, and the chastisement of senior executives in public hearings, makes for good media soundbites.  All modern chairs of the Committee have become minor media stars delivering excoriating judgements on firms’ failings on TV news and on the Today programme. And indeed the exposure of fiascos, of which there are plenty in the contracting system, is a legitimate task of the PAC.  But the overconcentration on media focused exposes, in the manner of a kind of parliamentary version of Private Eye, risks missing the bigger accountability issues raised by the rise of the huge outsourcing system.  Documenting that G4S keeps losing prisoners, or that it made a pig’s ear of the contract to provide security at the London Olympics, certainly provides good copy. But a focus on fiasco draws attention away from more important issues. Most of the contracting that takes place in the outsourcing business does not involve fiascos, for the very good reason that it is largely about making money from carrying out safe, easy to organise, mundane services: just how difficult can it be to administer the pension payment system for teachers?  Outsourcing means handing over to a small number of corporate giants a set of licences to print money.  And the relationships which govern the award of those licences, and more importantly the contractual conditions under which they are awarded and scrutinised, are largely missed in the search for candle end savings and the exposure of fiascos.

Pooter.