The battle for freedom and opportunity
is never finally won.

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)

This past weekend, we visited the American Museum in Britain. It was thought-provoking: America was of course conceived in liberty but American history, like every nation’s, is filled with examples of man’s inhumanity to man.

The exhibition began with a wall of quotations from significant figures. These particularly stood out:

William Penn (1644-1718):

Those people who will not be governed by God will be ruled by tyrants.

Albert Einstein¹:

Never do anything against conscience even if the state demands it.

Apache Chief Geronimo (1829-1909):

Once I moved about like the wind. Now I surrender to you and that is all.

Thus, beside the lives of pioneers, the museum introduced the history of native Americans and of African-American slaves, terrible experiences which no person should ever know. I was reminded of Karl Popper’s lines in The Open Society and its Enemies:

There is no history of mankind, there is only an indefinite number of histories of all kinds of aspects of human life. And one of these is the history of political power. This is elevated into the history of the world. But this, I hold, is an offence against every decent conception of mankind. It is hardly better than to treat the history of embezzlement or of robbery or of poisoning as the history of mankind. For the history of power politics is nothing but the history of international crime and mass murder (including it is true, some of the attempts to suppress them). This history is taught in schools, and some of the greatest criminals are extolled as heroes.

Coincidentally, I am just finishing John O’Farrell’s An Utterly Impartial History of Britain: (or 2000 Years of Upper Class Idiots in Charge). Perhaps spotting the gathering dust on my scholarly history books, Beth gave me this book as a starting point. It is at least an entertaining read, but the author’s endless cynicism, though supported by events, combined with his wearisome ignorance of sound economics, produces a tiresome read. Compare O’Farrell’s history with that of, say, This Little Britain: How One Small Country Changed the Modern World or The Welfare State We’re in and we quickly find that history, as the record of acting people, deserves to be understood through sound theories of human action.

Enter one of my preferred writers — Ludwig von Mises — with Theory and History (online). From the back cover:

Theory and History deals with the theory of economics, i.e., the study of purposive human action, and with history, the record of the past actions of individuals. All actions are determined by ideas. Thoughts and ideas are “real things,” Mises writes. “Although intangible and immaterial, they are factors in bringing about changes in the realm of tangible and material things.” Rather than rejecting the study of historical change as a “useless pastime,” Mises considers it of the utmost practical importance. “History looks backward into the past, but the lesson it teaches concerns things to come.” History opens the mind to an understanding of human nature, increases wisdom, and distinguishes civilized man from the barbarian. Moreover, historical knowledge is of the utmost importance in helping to anticipate and plan for the future.

A major part of this book is a critique of Karl Marx and his fallacious view of theory and history. Marx attributes the creation of tools and machines, as well as the economic structure of society, to undefined “material productive forces”; Mises rejects this materialistic view and points out that tools and machines are actually created by individuals acting on the basis of non-materialistic ideas. Marx predicts that society is moving towards socialism “with the inexorability of a law of nature.” Mises responds: “The outstanding fact about history is that it is a succession of events that nobody anticipated before they ocurred.”

The book is a tour de force of the ideas that have shaped human history and their refutations. In particular, bearing in mind O’Farrell’s sneering treatment of the free market:

The history of the nineteenth and twentieth centuries has discredited the hopes and the prognostications of the philosophers of the Enlightenment. The peoples did not proceed on the road toward freedom, constitutional government, civil rights, free trade, peace, and good will among nations. Instead the trend is toward totalitarianism, toward socialism. And once more there are people who assert that this trend is the ultimate phase of history and that it will never give way to another trend.

And, closing the book, on attempts at predicting the future:

The fallacy inherent in predicting the course of history is that the prophets assume no ideas will ever possess the minds of men but those they themselves already know of. Hegel, Comte, and Marx, to name only the most popular of these soothsayers, never doubted their own omniscience. Each was fully convinced that he was the man whom the mysterious powers providently directing all human affairs had elected to consummate the evolution of historical change. Henceforth nothing of importance could ever happen. There was no longer any need for people to think. Only one task was left to coming generations-to arrange all things according to the precepts devised by the messenger of Providence. In this regard there was no difference between Mohammed and Marx, between the inquisitors and Auguste Comte.

Up to now in the West none of the apostles of stabilization and petrification has succeeded in wiping out the individual’s innate disposition to think and to apply to all problems the yardstick of reason. This alone, and no more, history and philosophy can assert in dealing with doctrines that claim to know exactly what the future has in store for mankind.

Museums and historians must remind us of the wrongs of the past, and do so through the histories of many aspects of human life, even political power. Let us be guided by them to a better and more open future in which people can be free of all kinds of oppression.

Above all, let us use our reason to reflect on our present circumstances and conclude with Karl Popper that,

even our greatest troubles spring from something that is as admirable and sound as it is dangerous — from our impatience to better the lot of our fellows.

The idea whose time has come, the idea which can carry us forward — from difficulties created by people who wished to better the lot of their fellows, by people who wish to better the lot of future generations — is liberty under the rule of law.

1. Also, “If one purges the Judaism of the Prophets and Christianity as Jesus Christ taught it of all subsequent additions, especially those of the priests, one is left with a teaching which is capable of curing all the social ills of humanity. It is the duty of every man of good will to strive steadfastly in his own little world to make this teaching of pure humanity a living force, so far as he can. If he makes an honest attempt in this direction without being crushed and trampled under foot by his contemporaries, he may consider himself and the community to which he belongs lucky.” [↩]

Via Treasury announces ‘bonfire of quangos’ to save taxpayer millions – Times Online :

Liam Byrne, the Chief Secretary to the Treasury, has written to Whitehall departments demanding an urgent review of all quangos to assess which can be abolished, merged with other bodies or taken back directly into their ministries. A number of quangos appear to have overlapping remits, including some covering skills, law and order, environment and transport. “The Ministry of Justice alone has 200 quangos,” said a Treasury spokesman.

This would be a good time to read the slim book Bureaucracy. The book is online here and my review is here.

The nation’s dreams are troubled, sometimes; dim rumours reach our sleeping ears, rumours that all is not well in the administration of justice; but an ancient spell murmurs through our somnolence, and we remember that the courts are bound to seek the truth, the whole truth, and nothing but the truth, and we turn over and sleep soundly again.

And the new laws whisper:

We do not want to hear you talking about truth

Truth is a friend of yours, not a friend of ours

We have a better friend called hearsay, who is a witness we can always rely on

We do not want to hear you talking about innocence

Innocent means guilty of things not yet done

We do not want to hear you talking about the right to silence

You need to be told what silence means: it means guilt

We do not want to hear you talking about justice

Justice is whatever we want to do to you

And nothing else

via Malevolent voices that despise our freedoms | Philip Pullman – Times Online .

The Convention on Modern Liberty took place today. Shami Chakrabarti’s introductory speech was passionate, as it should be in the circumstances.

The complaints against liberty in Britain today included:

• British complicity in extraordinary rendition
• The long period of pre-charge detention
• Control orders
• Extradition to the United States without equal reciprocal arrangements
• The National Identity Register and ID card scheme
• Intrusive surveillance powers
• The DNA database, which fundamentally blurs the line between guilt and innocence
• Erosion of the right to protest
• Erosion of the right to public assembly — the police can now impose conditions on a meeting of as few as two people
• The criminalisation of trespass
• Erosion of the right to silence
• Erosion of trial by jury
• Withdrawal of the public interest defence for whistleblowers
• Allowing evidence of bad character
• Changes to double jeopardy
• The use of force by bailiffs

Dominic Grieve QC MP spoke with passion and commitment, a great encouragement which was consolidated later by his Chief of Staff, Dominic Raab, author of The Assault on Liberty. David Davis MP spoke powerfully, of course, in defence of freedom.

Despite some skepticism in the hall, I believe we can rely on the Conservatives to restore our historic freedoms.

The left, however, are in disarray. I attended a session on the left and liberty, at which an early and striking observation was the absence of participation by the government, despite the active contributions of Conservative front benchers.  The speakers rapidly acknowledged a charge sheet on which authoritarianism and a benign view of the state are levelled against them, but in no time at all, they had skipped lightly past the long list of dangerous infractions against liberty to decry the free market, on which they focussed.

At least New Labour were roundly condemned.

I understand the police nicely rounded off the day by using anti-terrorist powers on two men standing quietly outside the venue with a banner.

The Assault on Liberty continues:

Thousands more motorists will lose their licences under plans to give police the power to issue penalty points for careless driving without evidence being heard in court.

…

Unlike existing fixed-penalty offences, such as speeding and using a hand-held mobile phone at the wheel, the evidence for careless driving is much less clear-cut and is often a matter of the officer’s opinion.

At present police must take drivers to court if they want to prosecute them for careless driving. This is a time-consuming process involving large amounts of paperwork and officers rarely bother to prosecute, preferring to pull motorists over and give them a warning.

The Government believes that allowing police to issue fixed penalties for careless driving will make roads safer because motorists will know that they are more likely to be punished.

Via On-the-spot points for careless driving.

Of course people should take responsibility and improve their careless driving — which may be symptomatic of a larger problem of detachment from the concerns of others — but, again, it is time for a fundamental reappraisal of the nature of the relationship between citizen and state.
Read more

A policy governing the interrogation of terrorism suspects in Pakistan that led to British citizens and residents being tortured was devised by MI5 lawyers and figures in government, according to evidence heard in court.

A number of British terrorism suspects who have been detained without trial in Pakistan say they were tortured by Pakistani intelligence agents before being questioned by MI5. In some cases their accusations are supported by medical evidence.

via Terror suspects were tortured in Pakistan under UK policy | World news | guardian.co.uk .

Further attacks on the classic understanding of the rule of law, under which legislation should not be retrospective:

A new law aimed at staving off banking crises would give the authorities dangerously wide scope to intervene in struggling institutions on grounds of public interest or financial stability, lawyers warned.

The banking bill offers the government powers to change other laws retrospectively if they conflict with the new rules, say partners at top City firms.

via FT.com / UK / Business – Danger in bank bill, warn lawyers.

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.

Thanks to the Jeremy Vine Show over lunch:

Spitting, swearing and aggressive behaviour will be BANNED from ‘Proud Preston’.
…
Anyone who flouts the tough new code could be arrested or fined by patrolling police officers or council enforcers.

Council officers can fine people £75 for offences like littering, while police can give out fixed penalty notices of up to £80 for a range of offences.

Of course the target behaviour is unacceptable, but do we really want to replace personal responsibility with summary justice for minor misdemeanours? Callers to the show overwhelmingly thought so…

Surely we can do better?

read more | digg story