Is life so dear, or peace so sweet, as to be purchased
at the price of chains and slavery?

This post originally appeared at cobdencentre.org.

Via FT.com, Ofgem urges a shake-up of the energy market,

Sweeping reforms of the UK’s energy market must be brought in urgently to protect energy supplies, reduce greenhouse gas emissions and deliver the £200bn investment needed in the power sector, the energy regulator said on Wednesday.

Ofgem said options for reform would include placing more stringent legal obligations on energy suppliers, and “improved market signals”, which could include a higher price on carbon dioxide emissions. More drastic options could include a centralised renewables market and a central buyer of energy for the whole of the UK.

Which all seems very well, until you realise that this is the fruit of an ideological aversion to the free mutual cooperation of individuals and corporations. Ofgem apparently tell us, “It would mean taking away the market’s role in delivering that investment.”

We need to make our minds up about whether planned or free economies can provide us with the means of our survival and prosperity. History’s answer is clear: planned economies cause misery and then collapse.

Further reading

• Living with Leviathan, David B Smith
• Moral Markets and Honest Money
• Ofwat, Water UK, the Consumer Council for Water and The Managerial Revolution (via stevebaker.info)
• XXXVI. THE CRISIS OF INTERVENTIONISM: The Harvest of Interventionism (via mises.org)

Via David Cameron: We can’t go on like this:

A decade of big government and blunt, bureaucratic control has undermined responsibility and made our social problems worse, not better.

We are determined to forge a new direction.

We will use the state to help remake society by encouraging people to take responsibility for themselves and for one another.

We will provide new opportunities for community groups, neighbourhood organisations, charities, social enterprises to help rebuild our civil society.

We will create incentives and use the best technology to encourage and enable people to come together, solve their problems together, make this society stronger together.

As we do this we will redistribute power from the political elite to the man and woman in the street.

Within months of a Conservative victory there would start the most radical decentralisation of power this country has seen for generations.

Government will enter a new era of transparency.

And a strong, unbroken line of democratic accountability will be restored between the people and those that make the decisions that affect their lives.

It is a future barely recognisable from the present, but this party is determined to take us there.

A Conservative Government will send the clearest possible signal to everyone in Britain…

…if you take responsibility, we will back you; if you aspire to a better life for you and your family, we will support you; if you play your part in building the big society, we will reward you.

I recommend the entire speech.

In this article, I make the case that we live in a managerial society, one born in the tragedy of the first half of the twentieth century, and that it is this social system which is failing today. I also set out what can be done about it: the future is hopeful.

This morning, I watched on the BBC a fascinating series of interviews in connection with this story about water pricing:

Average water bills in England and Wales will be reduced slightly over the next five years, regulator Ofwat has announced.

It has ruled that typical bills will fall by £3 to £340 by 2015, before the impact of inflation is considered.

Of course, the interviews were not in themselves fascinating; they were fascinating for what they said about the way we have set up our society.

First, Ofwat’s Chief Executive explained with palpable enthusiasm what the regulator is going to do to the industry: force them to operate their businesses in certain ways, insist that there is a record amount available for investment, hold them to account and so on. Ofwat is of course a quango: its estimated expenditure for 2008-9 was £14,856,000.

At some point we heard the industry’s concerns. In September, Water UK, who are “working on behalf of the water industry towards a sustainable future”, said:

Unless Ofwat thinks again, the draft determinations will:

• put at risk capital expenditure needed for the sustainability of water services;
• delay service improvements consumers have requested and expect to be delivered;
• reduce investors’ confidence in the financial stability of the sector leading to higher prices in the medium-term; and in consequence
• provide a poor bargain for customers and society.

It might be worth reminding ourselves that there was a windfall tax on the utilities but we face an energy crisis: now we find the water industry saying, using jargon, that price controls threaten water supplies.

Returning to the BBC story, after Ofwat, we heard from the National Chair of the Consumer Council for Water, who explained how the Council would be standing up for consumers. Superficially, this is all very well — we would all like someone to stand up for us — but I immediately thought, “Is this a voluntary body of concerned consumers or a government body funded by the taxpayer?”

It is, of course, a government body, one with net operating costs of £5,836,000 in 2007-08.

We now wait for Water UK’s response to Ofwat’s announcement. We see a struggle of Titans in the media, all Titans funded by us: presumably operating Water UK costs the industry — and therefore all of us — a considerable sum every year (their accounts did not come immediately to hand).

So, in a nutshell and leaving aside indirect burdens, it appears the government is spending well over £20 million of our money every year just to deliver a ruling that we shall pay £3 a year less for water by 2015, ignoring inflation.

That will perhaps not come as a great comfort to the gentleman who was telling me recently that, at the age of 74, he is still paying income tax on the modest income he gleans from his savings and state pension. This is a man who worked and saved all his life.

He is right to be angry.

The nature of the system

Now, I have spent enough time with public servants to know that everyone means well. I know from personal contacts that senior civil servants are, on the whole, people of the very highest calibre, people of intellect and talent, good communicators with the best of motivations.

Nevertheless, the system which has been set up is one of conflict. Conflict between “the industry” (represented by Water UK), “the consumer” (represented by the Consumer Council for Water) and the regulator (Ofwat). It spends a great deal of money that we do not have.

Now, I do not propose in this article to prove whether this system is in any sense working or not: I attempt only to set out the pattern of our society and stimulate thought. Plenty of others have set out the case at length: see for example the Institute of Economic Affairs’ Living with Leviathan by David B. Smith. As Smith explains (emphasis mine):

New Labour’s so-called ‘third way’, and the prevalent economic paradigm in much of ‘Old Europe’, appears to correspond to none of these categories [free market, socialist and 'Butskellite' mixed]. Instead, it appears to be a system under which the private sector maintains a nominal legal control over its capital and labour, but the returns on these factors of production are so heavily influenced by tax and regulation that the public sector ends up effectively controlling such returns. This sham form of mixed economy, which needs to be distinguished from the British mixed economy of the 1950s, has traditionally been associated with fascist regimes – for example, the gelenkte Wirtschaft (supple or ‘joined-up’ economy) that Goering implemented in Nazi Germany in 1936. Such systems represent an obvious intellectual attempt to reconcile a socialist-inspired desire for a powerful interventionist state with the wealth-creating force of ‘bourgeois-liberal capitalism’, and tend to be popular with politicians and bureaucrats, because they force all sectors of society to kowtow to the state and its functionaries if they are to remain in business.

This is not a system of freely-chosen mutual cooperation: it is a system of managerial control.

The Managerial Revolution

It is very easy to find polemics against the social changes which were born in the first half of the twentieth century through two world wars and the Great Depression. They include, for example:

• Karl Popper’s The Open Society and Its Enemies: Volume 1: The Spell of Plato and Volume 2: Hegel and Marx;
• Friedrich Hayek’s The Road to Serfdom;
• And, bringing things more up to date, Jonah Goldberg’s Liberal Fascism: The Secret History of the Left from Mussolini to the Politics of Meaning

And it is very easy to find the relevant propaganda. However, it was only recently that I discovered a scholarly attempt to set out, in 1941, “What is happening in the world”: James Burnham’s The Managerial Revolution.

Burnham identifies and examines three theories of the development of society:

• The permanence of capitalism,
• The inevitability of socialism,
• The transformation of capitalism into some non-socialist form of society.

Burnham — previously a Trotskyist — dismissed the first two and explained that society was experiencing a “Managerial Revolution”. Consider (emphasis mine):

Burnham looked around the world for indications of the new form of society which was emerging to replace historic capitalism and saw certain commonalities between the economic formations of Nazi Germany, Stalinist Russia, and America under Franklin D. Roosevelt and his “New Deal.” Burnham argued that over a comparatively short period, which he dated from the first world war, a new society had emerged in which a “social group or class” which Burnham called “managers” had engaged in a “drive for social dominance, for power and privilege, for the position of ruling class.” For at least a decade previous to Burnham’s book, the idea of a “separation of ownership and control” of the modern corporation had been part of American economic thought, with Burnham citing The Modern Corporation and Private Property by Berle and Means as an important exposition. Burnham expanded upon this concept, arguing that whether ownership was corporate and private or statist and governmental, the essential demarcation between the ruling elite (executives and managers on the one hand, bureaucrats and functionaries on the other) and the mass of society was not ownership so much as it was control of the means of production.

So, while Burnham made many incorrect predictions, it does appear that, at last, here we are, firmly entrenched in a managerial society. Ownership is separated from control. We do indeed have a managerial system along the lines Burnham identified: technical managers, executives, finance capitalists and stockholders. We see that the stockholders do not actually control the companies they own and that attempts to motivate managers by making them stockholders seem to fail because the downside is not shared: bank staff were already paid in deferred stock options before the crisis and, in any event, the crisis was caused by government intervention.

It is this managerial system of society which is now failing us. Let me give two further examples.

As I have reported here in respect of the European Union, an organisation whose propensity to issue detailed rules hardly needs a reference:

So we have the bizarre spectacle of socialists who think the EU may be neo-liberal, capitalists who think it is a socialist project and democrats who illustrate the EU’s democratic deficit to the agreement of its supporters and even the EU itself.

And yet Burnham wrote (1941):

The day of a Europe carved into a score of sovereign states is over; if the states remain, they will be little more than administrative units in a larger collectivity.

It seems to me that the European Union is neither neo-liberal, with all its restrictions on external trade, nor is it socialist, with its emphasis on a supposedly free market: the European Union is managerial.

In “The Living Dead: Switched Off, Zoned Out – The Shocking Truth About Office Life”, David Bolchover makes the case that:

The real truth is that there are millions upon millions of people who are actively disengaged from their jobs, who spend months and years sitting in offices doing next to nothing, lost in the cracks of laughably inefficient and abysmally managed large organisations, their talents wasted and long forgotten.

And there is the tragedy: talents wasted and forgotten. No one is arguing against individuals: we criticise the system in which we live and work. Surely the stellar success of Dilbert and The Office speak for themselves? Why not encourage a new system?

The fundamental problem and the route to progress

Society is the cooperative actions of billions of thinking, acting people. It is an unimaginably complex system which is not only beyond complete comprehension at any particular instant, but which remakes itself and its trajectory as people make subjective choices, moment by moment.

In other words, society cannot be managed. It is a self-organising system which must be allowed to do just that: organise itself.

Ironically, the scholastics of mediaeval Salamanca, who first wrote systematic treatises on economics, knew this, as did many of the enlightenment philosophers. Perhaps the “scientific socialists” forced us to forget.

Management is a worthwhile and laudable profession — I would say that, as a manager myself — but to apply a tool to a problem it cannot solve is a mistake. We have been making this mistake long enough. As Professor Jesús Huerta de Soto writes:

To attempt to coordinate society through coercion is an intellectual error.

Thankfully, David Cameron has been setting out, consistently over several years, a vision of a post-bureaucratic age:

We’re living in an age where technology can put information that was previously held by a few into the hands of almost every one. So the argument that has applied for well over a century – that in every area of life we need people at the centre to make sense of the world for us and make decisions on our behalf – simply falls down. In its place rises up a vision of real people power. This is what we mean by the Post-Bureaucratic Age. The information revolution meets the progressive Conservative philosophy: sceptical about big state power; committed to social responsibility and non-state collective action. The effects of this redistribution of power will be felt throughout our politics, with people in control of the things that matter to them, a country where the political system is open and trustworthy, and power redistributed from the political elite to the man and woman in the street.

For all the rough and tumble of contemporary politics, I am convinced that David Cameron and the Conservative Party have the right vision and the right policies to transform our society into a system which will prosper and endure. People need more power over their own lives, more opportunity, more responsibility and a secure environment within which to determine their own destiny.

The managerial revolution is at an end: it is time for change.

Further reading

• The Managerial Revolution
• Political Power and Democratic Control in Britain: The Democratic Audit of the United Kingdom
• Chaos: A Very Short Introduction
• The Pretence of Knowledge, my precis of Hayek’s Nobel lecture
• Human Action: A Treatise on Economics, which sets out the key issues in the first volume (PDF)
• Theory and History: An Interpretation of Social and Economic Evolution (PDF)
• The Boundaries of Order (PDF)
• Moral Markets and Honest Money
• Economic Freedom and Interventionism (online)

Via Plans for swingeing hospital cuts as NHS on brink of ‘Armageddon’ – Telegraph:

Health service managers warned of an “Armageddon scenario” facing NHS finances as they draw up secret plans for swingeing hospital cuts.

Senior officials have set “aggressive” targets to reduce the number of patients referred to specialists, or treated in Accident and Emergency departments, while GPs will be asked to cut down on the amount of time spent in consultations.

The plans are being issued as senior managers warned that the NHS is about to face the greatest financial pressures since its inception.

They fear that when the current spending round ends in 2011, the impact of an anticipated real terms freeze or cuts – coming as the demands on the NHS of an ageing population increases – will be devastating.

Right now, my stepfather is terminally ill with lung cancer. I spent last week with him and Mum. This gave the opportunity for several conversations with NHS, Marie Curie and Macmillan nurses. They already know services are on the brink and that substantial, frankly unacceptable cuts in front line services are planned. For example, one of the home nursing services will be reduced to telephone support.

The money has run out. Too much money is being spent on management. Too much emphasis has been placed on degree qualification for nurses, a feature which experienced and very good nurses know would have excluded them.

Each of the nurses with whom I spoke wants to see NHS reform. In each case, I recommended Nurses for Reform.

I am an Associate Member of the Centre for Policy Studies and I always enjoy reading their pamphlets: they remind me I am not alone. I caught up with the following four yesterday on the train. The theme? Putting humanity back into our society.

Click the images to download the pamphlets as PDFs.

The Reality Gap – an analysis of the failure of big government demonstrates that more government means worse. Jill Kirby writes of voter disenchantment and indicates that, in the EU elections, “Only one voter in 11 voted for the runaway winners, the Conservative Party”.

Jill provides and explores:

five techniques which have been deployed by the Government to create the appearance of success, while presiding over failure:

• Moving the goalposts
• Declaratory legislation
• Government as public relations
• Data collection
• Complex structures, procedures and language.

In particular, from the chapter Declaratory Legislation:

A 2008 survey by Sweet and Maxwell found that Margaret Thatcher’s Government introduced an average of 1,724 new laws every year. That rose to 2,663 under Tony Blair and in the first year of Gordon Brown’s regime the annual total reached 3,071.

This frenzied legislative activism can only be ignored by ordinary people. It puts me in mind of Jamie Whyte’s article Am I a Criminal? I haven’t a clue:

This Government has relentlessly undermined the rule of law by its vague legislation and constant meddling

Jill concludes that “The only answer is a significant reduction in state control” — I could not agree more.
Read more

The Policy Exchange has advised the next government that it must be prepared to make radical and immediate cuts to spending plans or face a serious risk of a full-scale sovereign debt crisis. In a new paper, it has also shown that only a third of the impending surge in government spending can be traced back to measures intended to combat the recession, with the rest going on increased budgets for ballooning government departments.

via UK ‘needs emergency Budget’ – Telegraph. The Policy Exchange report is here:

Government spending is growing far more quickly than in other countries, and faster than in previous recessions, think tank Policy Exchange today warns. A new report finds that the surge in spending is not being driven by the recession.

At most, 6% of the increased spending is going on public works, and just over a third is due to the rising cost of social security or debt. Instead of “investment”, most of the increase is due to a decision to spend more on consumption.

“A decision to spend more on consumption” — that is, borrowing to fund present expenditure: plainly unsustainable.

David Cameron lays out the Conservatives’ radical ideas for giving people  the power and responsibility to help themselves and one another:

That’s what we mean by the post-bureaucratic age: the satisfying clunk-click of political philosophy matching contemporary reality to produce a genuinely historic shift in how we organise our affairs. That’s why the idea of the post-bureaucratic agenda is so central to all the changes we want to make, and why, on reflection, it makes those big myths about the current political situation seem so ridiculous.

It is the post-bureaucratic age that allows us to deliver progressive goals through conservative means, and thereby stick to the changes we’ve made and stick to the political centre ground. In the past, there was an assumption that the only way you could make society fairer, make opportunity more equal and help the poorest live a decent life was through central government redistributing money and running programmes aimed at tackling disadvantage.

Today, that assumption no longer holds. After 12 years of intense and committed bureaucratic intervention the poorest have got poorer, there are more of them, and social mobility has stalled. So while there will always be a role for redistribution, we can confidently argue that what is called for today is a post-bureaucratic response to poverty: advancing social justice by really understanding the causes of poverty, family by family, and giving people and organisations in local communities the power and the responsibility to help themselves and each other.

via It is not enough for Labour to lose this election | The Spectator.

The Centre for Policy Studies has released The 2009 Lexicon, A guide to contemporary Newspeak. 

Some random examples:

Dialogue (meaningful): the pretence of genuine two-way conversation.

Equality: sameness. Absence of diversity.

Joined-up government: excuse for cross-departmental initiatives which will centralise and increase government intrusion into everyday life.

Radical (of reform): minor technical/organisational adjustment.

And so on.

It is recommended reading and yet, rather like the cartoon Dilbert, overdoing it might be unwise.

An end to equality before the law?

Every public body will have to take class background into account when making decisions under radical new legislation unveiled by the Government today.

The law means that all public authorities – from Whitehall to local councils – will be subject to an over-arching legal duty to bridge the divide between rich and poor.

The new duty, which is to be tacked onto the Equalities Bill, has been described by one Cabinet minister as ’socialism in one clause’.

But the Tories today released a report which they said undermined Labour’s claims that it was tackling a lack of social mobility.

Shadow work and pensions secretary Chris Grayling said: ‘Labour has had ten years to make a difference to social mobility but have failed.’

via Labour’s Class Law: Legislation to order every public body to tackle divide between rich and poor | Mail Online.

Bureaucracy: from Stalin and Trotsky to David Cameron, we all know we loathe it. What is it?

In “Bureaucracy”, Ludwig von Mises explains:

Bureaucratic management is management bound to comply with detailed rules and regulations fixed by the authority of a superior body. The task of the bureaucrat is to perform what these rules and regulations order him to do. His discretion to act according to his own best conviction is seriously restricted by them.

“Bureaucracy” is a slim book of only 101 pages, thoroughly readable and insightful. Mises uses his understanding of economic calculation to explain succinctly the differences between bureaucratic management and profit and loss management in the free market. His argument has far reaching consequences: it demonstrates that public administration must become uneconomic and irrational.

Here’s a favourite section:

The history of Sweden can be treated with almost no reference to the history of Peru. But you cannot deal with wage rates without dealing at the same time with commodity prices, interest rates, and profits. Every change occurring in one of the economic elements affects all other elements. One will never discover what a definite policy or change brings about if one limits his investigation to a special segment of the whole system.

It is precisely this interdependence that the government does not want to see when it meddles in economic affairs. The government pretends to be endowed with the mystical power to accord favours out of an inexhaustible horn of plenty. It is both omniscient and omnipotent. It can by a magic wand create happiness and abundance.

The truth is that the government cannot give if it does not take from somebody. A subsidy is never paid by the government out of its own funds; it is at the expense of the taxpayer that the state grants subsidies. Inflation and credit expansion, the preferred methods of present-day government open handedness, do not add anything to the amount of resources available. They make some people more prosperous, but only to the extent that they make others poorer.

So we begin to see how the Austrian school of economics explains how the policies of the left create the very inequalities and injustices that they rail against: inflation hits savers and credit expansion widens inequality (the poor don’t invest with leverage). The intentions of the left are very well, but their impatience to use the power of the state to advance social, economic and political justice is a great enemy to progress in every area.

The champions of socialism call themselves progressives, but they recommend a system which is characterized by rigid observance of routine and by a resistance to every kind of improvement. They call themselves liberals, but they are intent on abolishing liberty. They call themselves democrats, but they yearn for dictatorship. They call themselves revolutionaries, but they want to make the government omnipotent. They promise the blessings of the Garden of Eden, but they plan to transform the world into a gigantic post office.^[Lenin] Every man but one a subordinate clerk in a bureau, what an alluring utopia! What a noble cause to fight for!

No one likes bureaucracy. Detailed rules and regulations abolish much in life for which we strive: they destroy progress and extinguish hope. We need another way.