There is such a thing as society -
it’s just not the same as the state.

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)

The Queen’s Speech: 15 Bills, but only 33 days left of Parliament:

Labour has today promised “guarantees not gambles” as it used the final Queen’s Speech to draw dividing lines with the Conservatives ahead of the general election.

The Queen set out the Government’s legislative agenda for the 33 sitting days left until the last date for a general election, in a programme containing 13 Bills and two draft Bills.

The measures include plans to reform the financial services industry, new rights for employers to allow them to positively discriminate, greater powers to disconnect internet download cheats, and plans to give free care to the most vulnerable.

But the package, described by a Cabinet minister as the “most political in 12 years” has caused consternation because critics say much of the legislation is of no benefit to voters but is instead designed to “smoke out” the Conservatives.

However, Daniel Finkelstein tells us of his experience of focus group polling about a past Queen’s speech:

Well, the pollster said slowly, here’s the thing. They didn’t answer any of the questions you posed because, erm, they’d never heard of the announcement. None of them. At all. They sort of knew who Gordon Brown was, they weren’t totally sure what a billion was, although it sounded like a lot of money, but they most certainly hadn’t come across this spending stuff.

While that seems rather bleak, it does demonstrate that power and people have become too distant. This is why we have to bring power closer to the people.

Via Ireland votes yes to Lisbon treaty | World news | guardian.co.uk :

In a dramatic political U-turn, Ireland has voted decisively in favour of the Lisbon treaty just 16 months after it first rejected the European Union reform plan.

With counting continuing this evening it was expected that 64% of those who voted in Friday’s referendum would have backed the treaty.

But I don’t like this result: best two out of three?

Now expect to hear Eurocrats celebrating the democratic will of the Irish people…

In a related message, David Cameron has sent this to supporters (emphasis mine), explaining how difficult a Conservative win will be to secure:

Our Conference starts in Manchester this weekend. It’s going to be the most vibrant and exciting for years.

Next week, we won’t be playing it safe – instead we will be offering bold plans to deal with the big problems the country faces.

Labour spent their conference talking only to themselves – not the country.

In contrast you will see a Conservative Party united, determined and ready to deliver the bold, tough and radical change Britain needs.

Labour are now the party of unemployment – at this conference we will show that we are the party of new jobs and new opportunities.

To deal with Labour’s Debt Crisis we will be setting out some of the tough decisions that need to be taken and unlike Gordon Brown we won’t duck them.

To give people hope for the future the country needs to change direction, and our Conference will show how we’re ready to make that change.

But there is absolutely no complacency.

Every member of the Conservative Party needs to remember the following: the Conservatives have never won a General Election from a starting point as difficult as we face now.

To win a majority, we must hold every seat we won in 2005 plus an additional 117 constituencies. This would be the biggest number of Conservative gains at a General Election since 1931.

We can do it: but we are going to have to work incredibly hard for every vote, every day between now and polling day. In this election, every vote will count.

This weekend we will hear the results of the referendum in Ireland on the re-named EU Constitution.

I want to make one thing clear: there will be no change in our policy on Europe and no new announcements at the Conference. There will be no change in Conservative policy as long as the Lisbon Treaty is still not in force. The Treaty has still not been ratified by the Czechs and the Poles. The Czech Prime Minister has said that the constitutional challenge before the Czech Constitutional Court could take 3-6 months to resolve.

I have said repeatedly that I want us to have a referendum. If the Treaty is not ratified in all Member States and not in force when the election is held, and if we are elected, then we will hold a referendum on it, we will name the date of the referendum in the election campaign, we will lead the campaign for a ‘No’ vote.

If the Treaty is ratified and in force in all Member States, we have repeatedly said we would not let matters rest there. But we have one policy at a time, and we will set out how we would proceed in those circumstances if, and only if, they happen.

This is going to be a great Conference. I look forward to seeing many of you in Manchester.

Well, I’m off to Manchester tomorrow where I will be chairing three joint fringe debates for the Smith Institute and the Centre for Social Justice on the bank bailouts, housing and insolvency. Looking forward to it.

I am constantly amazed by the equivocation of people who really should understand the importance of being able to dismiss a government at the ballot box.

I love Europe. I want deeper, freer relations among European people — all people for that matter — but I am not prepared to surrender democratic control of power in order to install a government which plans to force what could happen naturally. And yet here is Daniel Finkelstein’s view:

Second, they risk looking unreasonable and obsessive about Europe. While resisting the treaty before ratification was completely correct, resisting it after ratification risks Cameron’s image as a moderate person, fit to govern, someone who gets things in proportion.

Read more at Comment Central – Times Online – WBLG: What the Conservatives should do about Europe.

At this point, all we can do is hope that either the Irish vote no or that the Cameron team has a good answer up its sleeve. Otherwise, we may find ourselves locked into a failed and failing superstate.

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

Researching for my constituency applications, I revisited Carswell and Hannan’s The Plan, and rediscovered:

To put it starkly, the political party as an organism – a complex structure bringing together local branches, clubs, activists, sympathetic newspapers, professions, trade unions, churches and pressure groups – is dying. The modern political party will be protean: a series of ad hoc, issue-by-issue coalitions.

Curiously enough, one of the very few politicians to foresee the magnitude of the internet in the mid-1990s was Newt Gingrich, of whom more later. At the time, his tendency to bang on about the web was regarded as a sure sign of eccentricity and unsuitability for offce. Thee politics of his era punished those who were right before their time, favouring instead the cautious men, the careful men, the men who waited until everyone else had spoken before expressing their view. But the present era places a premium on quick reactions. That, too, will eventually impact on the political system.

How then is the big state to continue? Of course, it can’t.

As David Cameron has pointed out:

We are fortunate to be in politics at a time when technological innovation has – with astonishing speed – developed the opportunity to decentralise power in a way we’ve never seen before. For the first time, every citizen in their home can have access to exactly the same information as the most powerful bureaucrat in a ministry. 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 to make wise decisions on our behalf – simply falls away, cut down by the invigorating, liberating power of the information revolution.

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.

With courage, there is every reason to believe a Conservative government will introduce the radical changes necessary to match government to a society which has outpaced it.

Just 150 Afghan voters dared to go to the ballot box in the area of Helmand province where British soldiers sacrificed their lives to secure a safe election day, it was revealed yesterday.

The figures were released as the British Ambassador to Kabul admitted that troops could be engaged in combat in Afghanistan for five more years.

The Electoral Commission in Kabul said that early estimates of voting in the former Taleban stronghold of Babaji, north of Lashkar Gah, the provincial capital, indicated that few exercised their right to vote last Thursday. Several thousand people could have voted.

via Four British soldiers die for sake of 150 votes – Times Online .

With all the debate about quangos, I wondered whether anyone had made the case against them based on the Rule of Law.

And so I found and added to my reading list Political power and democratic … – Google Books:

There is a sense in which quasi-government diminishes the role and authority of Parliament as well as its more obvious erosion of local government. In practice, the quango state removes layers and ares of policy-making and action from the parliamentary — and public — gaze. The absence of a constitutional framework and the informal and secretive nature of its policy processes blocks scrutiny and parliamentary and public debate about policy goals and outcomes. The government can co-opt and mobilise all manner of bodies, including private companies, consultants and advisers within the domain of quasi-government to carry out major tasks, such as industrial re-structuring, training and employment policies. Parliament has no oversight over the government’s creatures, their interests and processes, as they operate under cover of ministerial discretion. Indeed, even the government itself often has no direct control over them.

I am reminded of a quote attributed to Harold MacMillan:

We have not overthrown the divine right of kings to fall down for the divine right of experts.

And of the following campaign poster from the Conservative Party Archive (shelfmark 1929-31):

Via The Conservative Party | News | Speeches | David Cameron: Giving power back to the people:

The British state has developed over centuries into a powerful entity charged with delivering important goals.

To protect its citizens from internal and external threat.

To redistribute wealth from the richest to the poorest.

To ensure public services – education, healthcare, welfare – are there for all who need them.

These things have helped make our country a place which is safer, fairer, and where opportunity is more equal. But the more the state does, the greater the risk that it gradually becomes master over the citizens it’s meant to serve. That’s why we have traditionally created checks to keep the right balance of power.

Checks to stop the state exerting too much power over us, in other words, protecting personal freedom. And checks to help us exert power over the state, in other words, ensuring political accountability.  But the last twelve years of Labour Government have diminished personal freedom and diluted political accountability. Today, I want to talk about both.

With 63 of 69 seats declared:

As Mark Mardell writes:

It’s an important result. As a whole it confirms the mood of the British electorate towards the EU. It is also significant in terms of its impact on the Conservatives. It is pretty clear if you compare the local elections with the Euros that the Conservatives lost votes to UKIP. They want those votes back in time for a general election. So if there was ever any argument for them soft-pedalling their hard line on the EU it’s gone. Those who’ve argued for a range of policies, pulling out of the centre-right group, arguing for a referendum, for a new relationship with the EU, will have their hand strengthened.

via BBC – Mark Mardell’s Euroblog. Mardell also writes of the EU-wide failure of social democracy, a failure which should surprise no one familiar with the political economy of freedom and equality before the law.