The contract between ordinary people and
powerful high-paid elites rests on the tacit understanding that the former will
tolerate the yawning gulf between their power and standards of living and those
of the latter, while the latter run society and the economy well.
This unwritten contract begins to break down
when high-paid elites continue to exercise enormous power and award themselves
enormous pay packets after they have given ordinary people reasons to doubt their
competence. Loss of public faith in the competence of ruling elites can lead to
civil unrest, revolts and revolutions.
So far the automatic stabilisers in mature
multi-party democracies have enabled them to cope with losses of faith in the
competence of ruling elites quite well. Fixed terms between general elections
allow voters to depose self-serving, or incompetent rulers before they do too
much damage. Ordinary people have faith in the system, if not always in their
ruling elites and the efficiency of markets that allocate human resources and
rewards.
But the incidence of egregious errors in
corporate management, and manifestly incompetent government seems to be
increasing at a time when web-based communication and ‘social’ media can broadcast
word of gaffs, misjudgements and elementary miscalculations instantly.
Take the case of High-Speed Rail 2 (HS2), a planned
fast rail link between London, Manchester and Leeds, which has all-party
support. At the end of June transport secretary Patrick McLoughlin owned up to
an alarming miscalculation, and said that HS2 was now expected to cost £42.6 bn,
24% more than the initial estimate. A week later it emerged that the calculation
of the economic benefits of faster journeys, on which the business case for HS2
was based, and about which the National Audit Office had expressed grave doubts
in May, was grossly overestimated, because it assumed passengers could not work
on trains.
Large sums of taxpayers’ money have been
pocketed by well paid and putatively well-qualified people for preparing these
deeply flawed cost-benefit analyses, and a new and similarly expensive review
of the project’s economic viability seems inevitable. So far no heads have
rolled, no ministers, or civil servants have resigned, and no fee claw-backs
for shoddy work have been announced.
The HS2 debacle is not a casus belli for a taxpayer revolt, but it certainly adds to the
impression of incompetent government, and is particularly disturbing, because
all political parties still seem eager to go ahead with the project, even
though its business case, marginal from the start, is now in tatters. Some may
say that big infrastructure projects of this kind are needed to get the economy
moving, but £50 bn (including rolling-stock) is a huge opportunity cost that
could be spent on a set of smaller projects, with better economics.
Another way of looking at the new age of
incompetent government is to see the problem as lying not so much in the
personnel as in the volatility, uncertainty, complexity, and ambiguity (VUCA as
the US military characterises the contemporary environment) of the issues
confronting the ruling elite. Complexity is the VUCA driver and it has always
been with us. We could forecast each raindrop by now if the weather system had
only recently become complex. But the world is also becoming more volatile,
uncertain and ambiguous, because many of its social, economic, political and
financial systems have become complex too.
There’s nothing new about administrative
mistakes, but it is to be expected that they will be more frequent and more
conspicuous at a time when the unintended consequences of decisions are
multiplying and word of errors is spreading ever more rapidly and widely.
The problem for government agencies is that,
unlike business, they are not subject to competition, which, in the business
world, weed out bad decision-making.
Email us at: info@cceg.org.uk
[The views and opinions expressed in this blogs by guests or members of the CCEG are those of the author, and not of the CCEG or the University of Northampton Business School]
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