Ethics is an objective, metaphysical necessity
of man’s survival.

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)

From bella gerens, an excellent explanation and defence of libertarianism:

The truth is that advocates of freedom are found all over the political spectrum, but the only true libertarians are the ones who advocate it at all times in all circumstances, from the bedroom to the wallet – who believe that ‘freedom from’ is the only state of being consistent with the dignity and majesty of humankind.

‘Freedom from’ is the most important part of that ideology. Freedom from coercion. Freedom from interference. Freedom from oppression.

‘Freedom to’ is where the misunderstandings enter. People on the right think libertarians are advocating freedom to burgle, rob, rape, murder – because they read ‘freedom’ to mean ‘freedom to do whatever you please.’

People on the left think libertarians are advocating exploitation, pollution, callousness, and the primacy of making (and keeping) money above all else – because they read ‘freedom’ to mean ‘freedom to do whatever you please.’

And both sides think libertarians consider the laws we have prohibiting these activities to be a restriction on freedom.

When will they realise that they don’t understand?

It is now undeniable that a century or so of managerialism — of thinking the state knows best and is entitled to trespass on your private property for your own good and for that of your fellows — has succeeded in creating a segment of society within which anything goes and from which it is increasingly hard to escape: a segment populated by libertines who torment themselves and others despite a state which tries desperately to care for them at vast expense, an expense it forces on everyone, including those of meagre means.

Of course, the approach has now also succeeded in ruining us all, though not all have yet realised it, while delivering a state with tremendous power over our lives, and virtually every aspect of our lives too. Consider:

The state now looms far larger in many parts of Britain than it did in former Soviet satellite states such as Hungary and Slovakia as they emerged from communism in the 1990s, when state spending accounted for about 60% of their economies.

The question now is not how state power should be used to save us, but how state power can be gracefully dismantled so that we can save ourselves and one another from a system which plainly does not work.

What should now follow is a social system of mutual cooperation based on private property and the rule of law. Whether such a system comes to pass is up to us.

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.

Even The Guardian has had enough of Gordon Brown:

Political reform can no longer be put aside as an abstract idea, of appeal to dreamers but not to voters who face the harder realities of life. The public is calling furiously for a better system. People want an honest parliament. They want leaders who are prepared to act. They loathe the old system, and many of the people who are part of it.

…

All must agree that the die is cast and a hard judgment made. Otherwise progressive politics will be dragged down at a general election in May 2010 that could lead to a much bigger defeat than Labour suffered in 1979. That might bring a chance for other parties to take it forward, as the Liberal Democrats are trying to do in this election. But they are not placed to enter government. Labour has a year left before an election; its current leader would waste it. It is time to cut him loose.

via Gordon Brown: Labour’s dilemma | Editorial | Comment is free | The Guardian .

Gordon Brown will be remembered as a brief and unsuccessful Prime Minister and as a less brief but more unsuccessful chancellor. That is sad for him but sadder for the United Kingdom. Of much greater long term importance is a proper understanding of the system of government we have, the system which is now failing. The Guardian calls for a revolution in the way of doing government without apparently realizing that no revolution is possible within their mindset. Do the left propose to abandon the idea that a few should choose appropriate outcomes for the many?

True progress will come when people achieve responsible independence yet have more to do with one another, freely. The appropriate system of government is not one of direction and control, of rules set and amended by unaccountable authority, of coerced action to achieve other people’s ends. The right system of society is one of freely-chosen interdependence and mutual cooperation, a system within which people are free to choose and strive for their own ends by their own means wherever neither impinges on the ends and means of another. A system within which people choose to recognize the needs of others less fortunate and help them.

The right system of society is the uncoerced free market and the welfare society. Labour will never deliver that: they will never deliver human progress worthy of the name. We need a general election. Now.

Many who are in power on the New Left today were students when this was written in Education in America:

Meaningful freedom has always implied responsibility, and responsibility demands self-control. Self-control presupposes guidelines within which the individual attempts to live in accord with accepted and acceptable standards. The denial of those standards and of the necessity for self-control in the name of “academic freedom” is as much a denial of true freedom for the individual as is an attempt to censor student and teacher in the classroom. Either way, genuine academic freedom suffers.

…

The lapse of self-control in favor of the “humanitarian” view of life partially explains how the dreamer of utopian schemes menaces civilization. While all such revolutionaries share a willingness to destroy the existing order, their ideas of what should be erected in its place tend to vary from vision to vision, reflecting not merely a pipe dream untouched by reality, but a series of pipe dreams as unstable as the personality of the dreamer. Once self-control is abandoned and reality rejected, all that remains are half-formed, bizarre visions of typically unfulfilled revolutionary personalities. Such fuzziness in goals, such lack of personal fulfillment within the existing order, are both evident in the rhetoric of the New Left.

Of course we must be humanitarians, but let us achieve self-control and a realistic understanding of society first in order better to progress towards our compassionate goals.

It seems sometimes that there is little truly new thinking to be done, merely the attempt to catch up with previous dismissals of foolish and destructive ideas:

Of course, there will always be individuals and groups of individuals whose intellect is so narrow that they cannot grasp the benefits which social cooperation brings them. There are others whose moral strength and will power are so weak that they cannot resist the temptation to strive for an ephemeral advantage by actions detrimental to the smooth functioning of the social system. For the adjustment of the individual to the requirements of social cooperation demands sacrifices. These are, it is true, only temporary and apparent sacrifices as they are more than compensated for by the incomparably greater advantages which living within society provides.

…

The contractual order of society is an order of right and law. It is a government under the rule of law (Rechtsstaat) as differentiated from the welfare state (Wohlfahrtsstaat) or paternal state. Right or law is the complex of rules determining the orbit in which individuals are free to act. No such orbit is left to wards of a hegemonic society. In the hegemonic state there is neither right nor law; there are only directives and regulations which the director may change daily and apply with what discrimination he pleases and which the wards must obey. The wards have one freedom only: to obey without asking questions.

The Wall Street Journal said that Human Action “ought to be on the bookshelf of every thinking man”; I concur. It’s free online here.

Following comments on the immediate astronomical human cost of the Great War:

Yet this essay has to do less with numbers of ended lives than it has to do with altered lives, or rather, with changes in the status of the private life of the modern individual, the modern family, the modern community. This essay is about private property, about the autonomy of the individual, and the disastrous trend, accelerated by World War I, of the state claiming the right to take at whim everything within its territory.

A secondary theme is that this great change in private life was already in process before 1914. The real agent of change was not the war, but the state and its backers and minions. Yet war as an accelerator of change was bad enough. Political and intellectual leaders in all countries welcomed the war for the collectivist changes it would inevitably bring. In the United States, one of the more important figures welcoming the war was John Dewey, a veritable god in the pantheon of our modern civil religion. Dewey saw the war, rightly, as the accelerator of the coming industrial society—a managed positivist society, which he thought of as democracy itself.

via Some Costs of the Great War: Nationalizing Private Life – T. Hunt Tooley – Mises Institute .

“The ECB is doing whatever it takes to unclog the interbank market,” said Gilles Moec, from Bank of America, who described the move as “spectacular” volte-face and a belated recognition that the credit crisis is deadly serious.

The monetary blitz was welcomed in Brussels, where EU leaders were meeting yet again, just days after agreeing to the most comprehensive bank bail-out in history. “We are not at the end of the crisis, we are still living in dangerous times,” said Jean-Claude Juncker, Luxembourg premier and Eurogroup chair.

He issued a stark reminder that life is going be very different for the banking elite as governments move to restore the lost discipline of the Bretton Woods financial order and attempt to “civilise” capitalism, the code word for clamping down on the City – dubbed “the Casino” in Europe.

“Let everyone remember after this crisis, who solved it. Politicians did, not bankers,” he said. Mr Juncker added that this episode would have a profound effect on the euro debate in Britain.

“The British prime minister had to beg to be let into the room. I’m sure that when the storm is over, the British will think about whether they shouldn’t become an equal in all decision-making bodies.”

When firms become too large to fail and must be bailed out by forcing debt onto taxpayers, you know something is wrong: capitalism is too civilised already. Once the immediate crisis is over, good reforms would restore sound money and provide regulations which ensure the effectiveness of the market. We need more competition, not more central control.

There are two clear sides to this debate. The centre left think all would be well if only we thought everything through and enforced a thick blanket of rules, preferably on a few large but easily-controlled corporations. The centre right know that experience delivers the greatest wisdom: they know that free competition among many companies, in a market regulated for responsibility, delivers far greater progress than any system designed by the human mind.

There must be regulation; there must be responsibility. One person must be prevented from coercing another and the rules must ensure commitment to mutually beneficial contracts entered into voluntarily. Failed corporations must be allowed to fail, or we will be forced to prop up ever more failures as our economies grind to a halt.

To choose to live in the cathedral or the bazaar? One of these organising principles leads to progress through freedom, the other absolute control and stasis.

read more | digg story

From the front page of The Times, right now:

The FTSE falls by more than 10% in a few minutes, and Gordon Brown explains how “we must lead the world”. John Redwood says that “there is a new kind of madness stalking the government world, as the governments lurch from one inappropriate response to another in response to a fast moving banking crisis”.

Who says we are in a post-ideological age?

Idly wondering whether communism had died in the UK, I discovered The Communist Party of Great Britain and their paper, “The Weekly Worker”.

This edition has a fascinating sidebar — “What we fight for” — which states first and foremost:

Our central aim is the organisation of communists, revolutionary socialists and all politically advanced workers into a Communist Party. Without organisation the working class is nothing; with the highest form of organisation it is everything.

Moments later, I had discovered:

• The UK Communist Party
• The Communist Party of Britain Marxist-Leninist
• Proletarian online, the site of The Communist Party of Great Britain (Marxist-Leninist)
• New Communist Party of Britain – “This is the century of socialism”
• And, with a particularly grotesque site, the Revolutionary Communist Party of Britain (Marxist-Leninist)

I hope this Pythonesque nonsense speaks for itself.