We all know that in the last 30 years or so that the rich have got richer and the poor have borrowed. We know too that manufacturing in the US and the UK has drastically declined over this same period and that we are in the midst of an economic crisis the likes of which has not been seen since the 1930s. It is clearly the case that the neoliberal economic model is a major contributor to the current woes. But what has sustained this model even in the face of growing evidence that it not only wrecks societies but does not even live up to its own pronouncements? In this book, Locke and Spender go a long way to providing answers. And those answers in turn point to alternatives.
'Managerialism', suggest the authors, really got going after World War 2. 'Operational Research' was developed during the war as a way of:
'solv[ing] unprecedented strategic planning, logistics, and operational problems that could not be dealt with by the methods governments and military bureaucrats had hitherto employed. Operational Research (OR) projects drew on statistical and mathematically informed techniques...that were particularly suitable to maximising efficiency in large-scale military operations.' (P11)
Such statistical analysis and mathematical modelling clearly has a role to play in manufacturing, particularly in, for example, the car industry. It developed as a management tool. But during its development it 'morphed' into 'managerialism':
'Managerialism as opposed to management means "a vast array of customs, interests, prestige, actions, and thought" associated with but nonetheless transcending the need for the efficient running of commercial and industrial organisations.' (P18)
This move from 'management' to 'managerialism' led to the formation of a self-interested 'management caste' that became increasingly detached from the actual businesses of the enterprises that they supposedly managed. At the same time, the use of mathematical modelling, statistical analysis and other 'scientific' tools made management into an academic discipline which in turn enhanced the status of the management caste. The management caste thus became increasingly detached from the actual businesses of the companies they ran.
Meanwhile, Milton Friedman was further developing neoliberal economic theory. Hayek's original idea that competition would safeguard individual liberty and consumer choice was replaced by, as Colin Crouch put it in his recent book,:
'the dominance of giant corporations and the replacement of the demotic idea of consumer choice by a paternalistic concern for 'consumer welfare'' (P16-17 'The Strange Non-Death of Neo-Liberalism
This effectively legitimises the 'Greed is Good' credo of the 1980s. The managerial caste is freed of any social responsibility as the pure pursuit of profit will, like the incoming tide, 'raise all boats'. Of course, it does no such thing.
It turns out that the managerial caste is not even particularly entrepreneurial. They had, for example, no hand in the development of Silicon Valley, which was largely based on technologies developed during and because of the Cold War.
And then there is the example of the US car industry. A classic top-down management structure that simply could not cope with the Japanese incursion. The Japanese management philosophy is fundamentally different. While General Motors' philosophy might be summarised as 'We don't make cars, we make money' (Alfred P Sloan, Jr., President of GM 1923-37, quoted on P112), the Japanese were intent on making the best cars for the money that they could. 'Total Quality Management' (TQM), the 'Toyota Production System' (TPS) demanded that the companies be run by people who actually knew about making cars. Instead of an insulated, 'scientific' and academic management divorced from the actual business product, here the business IS the product. Reminiscent, perhaps in more ways than one, of 'Zen and the Art of Motorcycle Maintenance
The Germans were also threatened by the burgeoning Japanese car industry. But their response emphasises yet again the failure of managerialism. Whereas the US/UK management model is, as has already been indicated, 'top-down' or pyramidal (with more or less inevitable conflict between management and workers), the Germans put in place 'Codetermination' laws:
'Codetermination laws legally entwined employee representatives and management in German firms, and after a two-decade educational effort homogenised behaviour and knowledge. In the US, management not only excludes labour from a firm's governance but the two groups constitute distinct cultures in American life.' (P129)
Still, managerialism was not dead yet. It really got going when it moved into the financial sector. Here, reliance on mathematical modelling and the amoral disregard for the material realities of this 'meta-business' (i.e. the business of business) were, indeed are, at their clearest. Rampant short-termism, the determination to keep the share price as high as possible, even at the cost of future R&D and company pension funds, has nothing to do with developing sustainable businesses that benefit all stakeholders. Quantitative analysts, or 'quants', developed the exotic, and fundamentally flawed, financial instruments that finally led to the current malaise. It seems now, looking back, to be an inevitable outcome of the rise of the management caste. And it's not over yet.
Finally, the authors put forward some suggestions for the future. As they rightly point out, we have been threatened and blackmailed for too long by T.I.N.A. - neoliberal capitalism has been compared to a failed socialism and we have been repeatedly told that There Is No Alternative. We've been here before. From Dani Rodrik
's suggestion that governments finally exert some control, to Colin Crouch's support for extra-governmental pressure groups and Jeffrey Sach
's faith in the Millennium Generation, we've seen a range of proposals. But Locke's and Spender's are different again.
'Management...has been and is far too important to be left to business schools or a management caste, especially since in America they both have renounced any sense of responsibility towards the life of the community or towards promoting the sustainability of the firm on whose existence the community depends.' (P184)
The authors recognise that the management caste is not going to give up its privileges easily and that '[n]ot much reform can be expected either from the political side of the American ledger' (P188), which tallies exactly with Jeffrey Sach's analysis. The choice is not simply between neoliberalism and socialism - that is a false and misleading dichotomy. Instead the challenge, the authors suggest, is to develop 'an internationally regulated form of dynamic capitalism in which firms are more efficient because of participative management, and the markets function better because of a more equitable distribution of wealth in society.' (P192)
A very interesting and rewarding read.