Monday, 25 June 2018

Revolution And Bureaucracy.

Going Forward: "Every revolution evaporates and leaves behind only the slime of a new bureaucracy." - Franz Kafka. Painting by Bosc d'Anjou

EVERY REVOLUTION is both rescued and undone by the bureaucrats required to keep it alive. Sweeping away the old order is the easy part. The hard part is establishing a new order that will not fall apart at the first hint of political, economic and/or social trouble. A revolutionary bureaucracy must be more than resilient, however. It also needs to create the organisational architecture favourable to its long-term survival and growth. Unfortunately, these bureaucratic structures have a tendency to ossify. Imperceptibly, the new order becomes the old order and a new generation of revolutionaries begins to stir.

The dramatic economic reforms introduced by the Fourth Labour Government and its Finance Minister, Roger Douglas, were described by the political journalist, Colin James, as  “The Quiet Revolution”. In quick succession, New Zealand floated its currency, opened its borders and eliminated the subsidies which kept so much of its economy afloat. The Labour Government then proceeded to “corporatize” New Zealand’s publicly-owned industries: a process which saw tens-of-thousands of New Zealanders lose their jobs.

In the space of just a few months, the old economic and social order which National’s Rob Muldoon had struggled so hard to preserve was swept away. Not the least remarkable aspect of the “Rogernomics Revolution” was that it was accomplished without recourse to state-initiated violence.

Realising that what was being attempted in New Zealand was a carbon-copy of the economic programme imposed upon 1970s Chile by General Pinochet, one senior trade unionist warned the Labour Government that to carry through such radical reforms it would have to put troops on the streets. He was wrong. And the reason he was wrong was the breakneck speed with which the bureaucratic structures required to make the “free-market” revolution work were erected.

The explanation for the revolution’s rapid implementation lay in the fact that it was conceived by a tightly-knit group of senior bureaucrats located principally in the Reserve Bank and Treasury. Detailed blueprints for the new economic order they were seeking had already been drawn up. All these revolutionary bureaucrats lacked were the politicians needed to build it. In David Lange, Roger Douglas, Richard Prebble, Michael Bassett and Mike Moore they realised they had found them.

Only one significant obstacle to the revolution’s success remained in place – the public service ethos of the old bureaucracy that was being dismantled. A full and successful transition to the revolutionaries’ new economic system, driven by the imperatives of the free-market, would not be possible until the ingrained values of the old state-interventionist system it was replacing had been destroyed.

The State Sector Act 1988 was designed to do just that. Modelled on the administrative principles of the private sector, the new, free-market bureaucracy was led by Chief Executives on lucrative five-year contracts. Working on the assumption that the production of policy advice was no different from the production of baked beans, these new state-sector bosses could be recruited without risk from the private as well as the public sector. That being the case, it was considered prudent to source the new public sector mandarinate from those countries in which the free-market revolution had already triumphed.

Unofficially, it was also considered vital that these new free-market bureaucrats be strong enough to forestall the one eventuality that could undermine the new regime – the election of a left-wing government determined to roll back the free-market revolution of 1984-1993.

In the past, the “politicisation” of the public service had been about politicians “persuading” their bureaucratic advisors to do the government’s bidding. Under the new regime, this was turned on its head. The trick, now, was to “persuade” any cabinet ministers still foolishly clinging-on to left-wing ideas that their careers couldn’t possibly flourish until they finally accepted that the free-market revolution was irreversible.

If history teaches us anything, however, it is that nothing is irreversible. Mounting evidence of free-market capitalism’s failure has stimulated new economic thinking both here in New Zealand and around the world. The successors of those bureaucrats who facilitated the free-market revolution of the 1980s and 90s are now being asked to oversee its dramatic deconstruction. The eventuality they most feared, the election of a left-wing government determined to return the market to its proper place, has come to pass.

State Services Minister, Chris Hipkins, is demanding wholesale “transformation” of the public sector.

Vive la revolution

This essay was originally published in The Otago Daily Times and The Greymouth Star of Friday, 22 June 2018.


Guerilla Surgeon said...

Given the number of times I've seen a headline that goes something like "Treasury forecasts wrong." I've often wondered what the hell they do and why the hell we need them. :)

NickJ said...

I get the feeling that the sheer cost of government utilizing the private sector model dooms it to failure. That may be what drives the "revolution".

A good example of this is the constant increase in the costs of consents etc from local bodies. We now comply to new regulations every second day, RMA consents take longer and cost more. Eventually the increase in these costs will crush the ability of the consumer to pay which will lead to people circumventing the rules.....then the policing costs will increase....more costs. Eventually collapse occurs, or forced reform.

Another example is exploding staff costs. I live in a small rural town, where we are currently scrutinizing rates increases that for several years have outstripped the inflation rate. We no longer have a Town Clerk on a top of the scale regulated salary, we have a CEO on $240K per annum. During the last three years the number of staff has increased by 20%, and the number of people paid over $100K increased dramatically. We are a small town, but this experience is replicated in such places as the Auckland Super City. The same is happening throughout the Public Sector in Wellington, I see it daily. Again consumer / ratepayer / taxpayer resistance will drive collapse /reform / revolution.

The way we have enabled this cost inflation to occur for years has been based upon the model of true economic growth, there has to date been plenty to sustain the excesses. If we hark back to the last great deflation (the 1930s Depression) we get a better picture of what happens in terms of structural "shrinkage". Our current predicament is very different, we cannot grow out of trouble in a good Keynesian way any longer. We are about to discover the ends of growth that has tracked energy supply for two centuries, as available energy relative to output diminishes deflation will set in. A clever government would utilise this to drive a revolution to regain some authority over its mechanisms of state.

pat said...

"The eventuality they most feared, the election of a left-wing government determined to return the market to its proper place, has come to pass."

Sort of......but unfortunately one that didnt have a pre prepared plan and consequently the vital ability to move fast is lost

peter petterson said...

Start reversing it - as much as possible.

peter petterson said...

They didn't even really consider success until a few weeks of the Jacinda Revolution. How could they have plans? No time!

Sam said...

Every one wants another diary boom but it won't happen if we keep spending booms on below 115 IQ distributions. Streamline the tax system - pay your taxes - pay cash for capability sets, and quit borrowing for tax cuts. The age of austerity is over.

David Stone said...

@ Nick J
Human organisations be they corporations or public bodies are essentially living entities , rather like a hive of bees or a termite colony. As such their natural development is to consume and grow and colonise until they either experience outside competition that limits their growth or until they exhaust their food supply. I'm afraid we are the council's food supply.
Cheers D J S

greywarbler said...

Cripes it is a problem that Labour didn't have a plan for every eventuality, and a counter argument for every nitpicking sally. What were they thinking of??

Perhaps just trying to get the general public to wake up and think about them - slogan 'Up and Forward all Rip Van Winkles'!

pat said...

@peter petterson
they had nine years

they could not be expected to have a plan for every eventuality but they certainly could be expected to have 'A plan' if they wished to lead the country....think it fair to note that the criticism they have faced to date all stems from this lack, whether we wish to acknowledge it or not

Nick J said...

David Stone, beautifully put. What can we do about it?

greywarbler said...

You haven't ever had a great idea of yours ridiculed before a bunch of your so-called peers? If Labour had released its plan too soon, like 9 years ahead, or even in the last month, the National Party would be able to trash it before the election. People don't know what to believe, but the wealthy will always choose the best-dressed candidates with the nice accent, no matter what they say.

Nick J
We may need to taint the food supply, us. The bees got varroa mite, even the dreaded foulbrood I think, or is that hens, and the cows got mycoplasma bovis. Upset the RWs, accuse them of not doing anything to stop the syphilis outbreak or something. Start rumours on how the border holes let Ebola slip through? Give them a sick feeling in their stomachs by direct action of not doing something important. Say, not spending on consumer goods for a day, and then threatening another some months later if something important for parents and children - and other vulnerable people - don't get the reasonable help they have asked for.

Jens Meder said...

Perhaps the answer to David Stones insight could be by growing "more food", i.e productivity - through more capital saving, investment and ownership per head of citizen ?

Nick J said...

Dave Stone...Im already tainted. I wish we could get the RWs to respond, but the comment comes to mind that it is difficult to make somebody believe something if their salary (lifestyle or whatever) depends on believing something else.

Jens Meder, here's a concept. Walk to your gate and measure how much land you have, then work out what you could do with it to increase production. take stock of what you would destroy in the process. You will have noticed that the area is finite, the total possible growth finite. So you grow to a finite amount, then all of a sudden the neighbour says he is entitled by dint of law to a square meter of your land per have grown it to the max....what to do?

David Stone said...

Nick J

I hope Jens can grasp your point. The money is a flexible invented concept. It is only the real estate that is wealth.
Cheers D J S

Jens Meder said...

Sorry, but I don't quite get Nick J's point.
Yes, there is no doubt that real estate as a basic factor of terrestrial existence becomes or is wealth, when humans become aware of its limited extent.
But how comes that a huge majority of people in real estate rich Russia live in greater poverty than in real estate poor Singapore ?
The answer is in capital creation and ownership in other areas than just real estate ownership, such as productivity boosting tools and education.

Nick J said...

I will put it simply by stating that you can't grow anything for ever. And I will add that when a body with power to take things away are allowed to keep growing they will take more than can be given.

In short Jens we need a model that allows us to shrink or restrict growth in our institutions demands upon us. And I'm not just talking cash.

Jens Meder said...

Yes, you cannot grow (increase) wealth forever, nor is there a need for it beyond a certain point of reasonable prosperity in a sustainable way.
Except of course, when in the case population growth, no effort of increased wealth creation will result in widening poverty. (?)
While our current (NZ) living standards might be unsustainable and impossible for the whole world, the fact of poverty amidst plenty calls for some socio-economic innovation or amendments indeed.
But with reference to Nick J - to my knowledge there is no legal way for anyone to dispossess me of my legally acquired (saved, invested, purchased?) "finite growth", and most of those countries where it was govt. policy to do so, have given up on it.

So - what need is there to do anything on that here? Does not the question boil down to:

What is more fair, constructive and preferable to overcome the problem of poverty amidst plenty - dispossession of the rich to alleviate poverty - or a universal effort in support towards at least a basic level wealth ownership creation and maintenance by the currently poor ?

pat said...

"But with reference to Nick J - to my knowledge there is no legal way for anyone to dispossess me of my legally acquired (saved, invested, purchased?) "finite growth", and most of those countries where it was govt. policy to do so, have given up on it."

Oh dear...seriously? is your understanding of legality really that naive?

greywarbler said...

All I need to read of your answer Jens is this:
Yes, you cannot grow (increase) wealth forever, nor is there a need for it beyond a certain point of reasonable prosperity in a sustainable way.

and I don't need to read any more. And why? Because you are living with a beautiful theory that cannot stand the heat of hot reality on it which will make it wilt and die. The reality is that it is obvious that humans can be affected by the desire to accumulate wealth to a mendacious level.

It is a feature of our species to want more than 'a certain point of reasonable prosperity in a sustainable way'. Need doesn't come into it, its the getting and pleasure in having, and if it means taking what others need, then tough titty to put it bluntly; this perhaps relating to the inbred and primitive desire to possess resources in competition with other contenders.l

Jens Meder said...

Pat - the Socialist state monopoly capitalism countries made laws which attempted to dispossess private capital ownership (with great cruelty in the Soviet Union) - and how many of them are there now ?

In the free capitalist world, is there not a rule of compensation paid for property "nationalized" and/or "privatized" for the intended "common good"?

Don't you think that between plutocratic elite capitalism and state capitalism - both of which have their useful functions to be retained - "peoples capitalism" towards at least a minimally meaningful level of personal capital ownership by all citizens eventually - would over-rule and "soften" the extremities of both, and be the most humane and "socio-economically" fair and democratic of them all ?