It's government not management, stupid - and management must be rethought too

A businessman's plea in the UK's Financial Times for a "change of management" in British government is a dangerous mistake.
Tony Curzon Price
Tony Curzon Price
14 April 2010

Luke Johnson's defense of his signing-up to the anti-NICs (pro-Osborne, pro-Tory policy) letter in today's FT is chilling for the mixture of economic ignorance and the arrogance of the entrepreneur that it demonstrates.

First, the economics. He writes:

Since 2008, in spite of a downturn, most British citizens have stayed in work, inflation has remained subdued – but the state has maintained its profligate spending habits.

The tell-tale word is "but". It should be "because". I wonder if there are any economists -- even the ones who thought that a shock would be salutory -- who do not accept that without the government stepping in to maintain demand in the last 18 months, there would have been a very serious recession and deflation. In other words, it is because government spending was maintained that the system did not collapse, 1930s style.

Second, the arrogance of the entrepreneur.

The first chill came in this sentence:

the country is in a desperate state ... like any business that has to be turned round, there is one absolute rule to fix the mess: change the management.

But a country and a business are crucially different precisely here: business is the one domain of social activity in which dictatorship is not only tolerated, it is celebrated. When that model is transfered to politics, we are getting pretty close to Karl Schmitt's defense of dictatorship: just get a good CEO in place to sort out the mess.

There is an economic mess to sort out, but a strong-man view of how to do it is no solution. That was tried under Thatcher, but the reforms put in place led directly to the mess we're in now, with an economy much too dependent on utlimately value-destroying financial services. A good part of the reason that Thatcher's attempt to re-vivify the British economy through entreprise resulted in such a thin veneer of lasting economic value was that the reforms were so divisively, undemocratically, imposed. They made the City attractive as a space that had all the feel of the entrepreneurial --- deal-making, supposed innovation, adrenalin --- without the reality of making lasting value (the losses of the banks have wiped out the profits made in the past 10 years). The "innovations" of securitisation, CDOs, CDSs, etc do not measure up favourably to what came out of the entrepreneurial culture of,say, Silicon Valley.

To put it in business terms, as Johnson seems to like, if your organisation's problem is a culture of vacuous managerialism, you don't fix it by changing the management. The problem runs deeper and will require a real opening up to work.

Johnson goes on to reveal the extent of his self-belief with:

In a capitalist economy, investors and entrepreneurs make the entire system function. If the state alienates them to an excessive degree, then they opt out, and jobs and tax revenues evaporate.

It is hard to even get into the mind of someone who can think this when it was financial entrepreneurialism that came close to destroying the world economy. Investors and financial entrepreneurs made the entire system disfunctional. We would have been much better off without most of our financial innovators doing what they'd been up to for 20 years.

Yes, public finance will need to be fixed (though the timing is critical if we want to avoid really economically destructive recession - see posts here and here, especially comment by J Fox and my reply). Yes, we should look forward to  a culture of value-creating entrepreneurialism in Britain. But please let's learn the lessons of a whole generation's failure - from Thatcher through New Labour - to do either. This is not a "change the management" moment. It's a "change the way we think about management" moment.

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