The Observer is carrying a series of reports from the \”secret diary\” of a senior civil servant. The essential message is \”Oh Woes\”, the civil service, the backbone of Britain, the manager of everything good and pure in this land, is being gutted.

I am writing because something fundamental has changed in our political system. The process may have started under the previous government, but has accelerated. The civil service is being eroded by a pungent acid that will soon dissolve the foundations of our politics. The solid oak beams of state are being cut to pieces and the roof will come crashing down. This process is moving fast. A brain drain has begun and our brightest graduates have got the message that this is not a good place to be. The implications will not be felt for some time, but the results will be devastating to our society and our economy. It is still not too late. It can be reversed, but we all need to be open about what is happening and speak up for the civil servants who will otherwise suffer in silence.

Our anonymous author seems to be missing a very important point here.

That\’s the damn point.

Let us start with something very simple: simplistic even. Yes, all activities need to be managed, regulated. No, absolutely nothing happens without the interaction and cooperation of large numbers of people, most certainly not in this modern and complex world.

The question we want the answer to though is, who is going to do that managing, that regulating? Who is to oversee that interaction and cooperation?

We could imagine two different systems here. We construct a group of wise (as much as possible of course), omniscient (as much as that is possible) and well meaning (as much as James Buchanan says that isn\’t really possible) people to order everyone about on our behalf. We could, just to invent a few words, call these people bureaucrats, the institution a bureaucracy and what they and the institution do planning. We could, roughly, call this the current civil service system in the UK.

Our second system would have no centralised such planner at all. We simply allow potential and actual producers to get on with producing or pondering about producing. Consumers similarly simply get on with consuming or not as the fancy takes them. We might, again to invent words, call this a market system, the actors within it, market participants. Here our management, our planning, come from the interactions of the desires, actions and knowledge of those in this market place.

The question is, which of these two systems (and of course, raising ourselves from such entirely simplistic descriptions, we would acknowledge that the two different systems shade into each other, they are the ends of a spectrum, not dipoles) is the correct system to use for a specific area of life?

Where we do use the planning system, rightly and righteously, tends to be where there is a serious problem with using the market unadorned. While the message hasn\’t quite got through to every bonehead that calls themselves a socialist the merits of the central planning of everything, that planning is by itself more efficient, is a point that we\’ve tested and found wanting. N Korea as is does not inspire confidence, the Soviets had GOSPLAN which never worked at all. The immediately post war socialists in the UK really did believe that national planning of such commanding heights of the economy such as steel, railways, coal and so (all the way down to the allocation of bricks for building works in fact) on would be more efficient than that messiness of the markets. No, not just fairer, more just, more socially useful, they really did think it would be more efficient: more output for a given set of inputs.

OK, we tested that idea and found it wanting. We found that a planned economy can increase inputs, sure. But it cannot (or at least does not) increase total factor productivity: our experience is that only a market economy finds the ways to produce more output from the same level of inputs.

But what they actually found was that Soviet growth was based on rapid growth inputs–end of story. The rate of efficiency growth was not only unspectacular, it was well below the rates achieved in Western economies. Indeed, by some estimates, it was virtually nonexistent. *(Paul Krugman)

We might, for example, note the inherent problems of having different armies fighting for control of the country, the most efficient (or the one able to increase its efficiency the most) being the one that controls the territory. While this is indeed an excellent method of increasing military efficiency we tend to think that, mindful of the Wars of the Roses, the side effects of getting from here to there are more than we are willing to pay. So we plan the military, grant the State a monopoly and agree to give up such efficiency gains for a quiet life. Duelling legal systems might be another example…..although even there we generally agree that it is only the criminal legal system which must be the monopoly, there are a number of competing commercial and civil law systems, self regulation of professions, religious legal systems, arbitration and so on.

At the other end of the scale we have our market based system of the provision of pencils. As described here in I Pencil. No one actually knows how to make a pencil, there is no Pencil Authority, no one plans the numbers to be made or their styles, their delivery to retail outlets, and yet there they are, pennies apiece, in every office and schoolroom, on every high street, across the land. That interaction of producers, would be producers, consumers and potential consumers seems to do the job very well indeed.

So we have our two systems and we can see that they are useful at different things. The question, the one we really want the answer to, then becomes, OK, which is better at what task? Of the things we want to have done, at which should we point a bureaucracy and at which should we point the greed of producers and the laziness of consumers?

Recent years have given us a system which truly does believe that there are large areas of life where that bureaucracy will do better. On the allocation of places in schools for example: local authorities or their agents decide how many school places there will be and who gets them. To the extent that when they cannot decide they institute lotteries. Health treatment similarly, to the point that all nurses of a certain level of (proven on paper) competence are paid the same amount, whatever local wages or availability of such nurses are. The central planners dictate that no one should wait more than 4 hours in A&E.

OK, it\’s a system, certainly, but our question is, is it better than the alternative? One in which the producers and the consumers regulate matters by their interaction? It does, after all, work for pencils.

What recent weeks has given us is a new government. One which thinks that schoolsn\’ospitals are more like pencils than they are like The Army. They may be right and they may be wrong (I think they\’re right and you may not, but it\’s not the answer to this question which is most important, it\’s actually asking the question in the first place which is. Which areas of life are like pencils and which the Army?) but they are asking the right question and applying their solutions according to what they think is the answer.

To repeat our question in a pithier format: some things must be run like the Army because markets fuck up. Other things should be run like pencils, because markets are more efficient. OK, so which are the things which need to be run like the Army because markets will fuck up and which should be run like pencils in the name of efficiency?

What we have now with our New Coalition Overlords is a change from the previous stasis. A change in that answer: we now think that schoolsn\’ospitals are more like pencils than they are the Army.

All of which brings us back to our civil servant complaining about the gutting of that bureaucracy.

\”The civil service is being eroded by a pungent acid that will soon dissolve the foundations of our politics. The solid oak beams of state are being cut to pieces and the roof will come crashing down.\”

Yes, this is the point. This is what we want to happen. We have decided to move from using you, the bureaucracy, The Army method, to the market, the pencil method. Eroding the civil service is not a side effect, an unwanted error. It\’s the very point. We no longer want nor need you running large swathes of national life.

Complaining that through neglect the civil service will be fucked and die is both ludicrous and ignorant. That\’s the very end we are trying to achieve: we want the civil service to fuck off and die. We\’re moving to the pencil model, the one that requires rather fewer of you sucking on them and the one that allows rather more choice by us out here about how we produce and or consume them.

A brain drain has begun and our brightest graduates have got the message that this is not a good place to be.

Bye then and don\’t let the door hit your arse on the way out. And leave the office pencils where they are would you? We\’ve plenty of them out here which is exactly why we\’re doing this.

10 thoughts on “Who manages?”

  1. Great post – expletives not required, though.

    I’d suggest that very, very few things need anything other than ‘management by outcome’

    ” We want the NHS to achieve cancer survival rates at least as good as the EU average and preferably amongst the best in the world. You’ve 10 years to achieve that (moving) target – now get on with it, using fees as the source of additional money”

    Ditto for education at individual schools, though you’d need to ensure that exam standards, for once, remained stable over time.

  2. ”We want the NHS to achieve cancer survival rates at least as good as the EU average”: stupid target. You’d then spend lots of money on earlier diagnosis and less money on treating it. If you don’t want that combination, try to find a more intelligent target, or accept that Management by Targets has its limits.

  3. Excellent post although I don’t suppose we’ll see this argument put forward in the MSM.

    We could also argue that if the are that good we need the brightest graduates out here in the real world creating wealth o consuming it.

  4. dearieme:
    > ”We want the NHS to achieve cancer survival rates at least
    > as good as the EU average”: stupid target. You’d then spend
    > lots of money on earlier diagnosis and less money on
    > treating it. If you don’t want that combination, …

    Pardon, would you kindly explain: why would we not want that combination? It sounds like a good idea to me, particularly from the point of view of spending effectively the scarce resources of the public sector.

    Why would we want to spend a lot of money on treating cancers, rather than spending less money on detecting cancers early, when they are more easily treatable, or even preventing them altogether?

    This is a question of principle; the practical issues of what is feasible and where the state control for pre-emptive actions has unnecessary and unwanted side effects are another matter.

  5. Entertaining read, but although I nodded along to most of it I can’t help but feel the differences between market driven and command driven systems are somewhat confused by equating the command driven system with bureaucracy.

    I think a command driven system is more susceptible to being hampered by bureaucracy which then calls for more funds and an increase in bureaucracy to solve such self-imposed problems, whereas markets either pass on the costs or go out of business and are thereby motivated to keeping their internal bureaucratic costs to a minimum.

  6. You’ve 10 years to achieve that (moving) target – now get on with it, using fees as the source of additional money

    What happens if/when you don’t hit it? Why should you care about trying to hit it? What happens when the reporters start writing articles about everyone with non-cancer medical problems who are being neglected for the target? Probably the government will start setting additional targets, and thus the NHS will have the perfect excuse for not meeting the first one.

    Markets are great because people aggregate all their preferences into “I’m willing to pay for this”. If a hotel gets the distribution of its investment between sound-proof rooms/comfortable beds/flash showers/cleaning services/free wi-fi/speed of check in/etc wrong, compared with a competing hotel, then people can just shift hotels. A cheap hotel does less of many things than an expensive hotel, but they still have an incentive to try to match a diverse range of client requirements. Targets are a very clumsy tool by comparison.

  7. “. . . some of the most experienced officials are packing their bags. Giddy with the glimpse of freedom, they are happily waving through these gigantic plans. Beneath them are scores of officials who would like to muster the fight to critique and improve them. Instead they are paralysed by the imperative to let the new regime make its own mistakes – to avoid being the no men. They are also desperately searching for jobs . . . On the recent regional cabinet meeting, [Lib Dem ministers]were miserable and silent while Tory ministers laughed and joked. . .The opposition is also not doing its job. Preoccupied with a leadership battle, it is neglecting its purpose. . .The media is failing too. . . holding back on real criticism . . .[the] coalition has baffled them. . . it’s all confused – like a giant chessboard where the black and white armies have fused and pieces are on the wrong squares.”

    The writer’s premise is the traditional role of the civil service is being undermined. The civil service has acted as a check on the enthusiasm of “here today, gone tomorrow” ministers in government since Victorian times. Which pre-date ideas of the command economy coming into being. I might agree with your argument favouring a market economy. I might see the article you discuss as an argument by and on behalf of rent-seekers: senior civil servants wanting to maintain their own personal current economic favours. But I don’t agree that the civil service, or a part thereof, wants the UK run under a command economy and don’t see the article supporting this.

  8. The army could be market driven. Mercenaries.

    The legal system could be market driven. Different areas have different systems. The area with the best system being the one where everyone migrates to.

    🙂

  9. dearieme: stupid target. You’d then spend lots of money on earlier diagnosis and less money on treating it

    This is a very good point. If organisations are managed by targets, they will seek to do wjhatever meets the targets — which might not be what the target-setter wanted.

    If you are going to have management by targets, it’s therefore very important that the targets be good ones.

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