Chris Dillow, a heterodox economist who owns Stumbling and Mumbling blog, attacks managerialism from a position decidedly on the Left. But it’s a Left that’s friendly to markets, decentralism, and self-management, and hostile to the New Class version of bureaucratic socialism that dominated Britain from the Webbs to Harold Wilson.

The central focus of Dillow’s critique of New Labour is managerialism. By that, he says,

…I mean an ideology which tries to eliminate political debate about the rival merits of competing ideals. In its stead, managerialism relies on a central elite which believes that it, and it alone, has the skill and know-how to devise policies to cope with the inexorable forces of economic change…. In short, New Labour believes it can run a country in the same way that executives run a business. [pp. 11-12]

…Managerialists like to pretend that we face big challenges in a fast-moving environment. They invite us to believe that they alone are equipped to address such challenges (in managerialism, problems are never solved, only addressed). And they like to present policies as necessary responses to external events–just as company bosses present mass redundancies as inevitable measures over which they have little choice. [p. 14]

The irony is that New Labour managerialists, for all their proclaimed technocratic competency, are so ham-handed in their “solutions” to the pressing needs of the changing economy. “Information technologies are transforming our lives,” goes the Nulab slogan. “Fair enough,” replies Dillow. But he points out that the organizational paradigm of the new economy is the substitution of networks for hierarchy, while the Blairite “solution” is even more hierarchy. [p. 16] An interesting point of comparison is Bill Gates, the fountain of so much superficially libertarian rhetoric about new economies and flattening hierarchies, but whose practical agenda focuses almost entirely on the use of state power to protect corporate hierarchies from the destabilizing effects of the new economy: the Digital Millennium Copyright Act, Vista Genuine Advantage, the recurring threat of infringement action against Linux distributers. Blair and Gates, faced with a technological and economic revolution against hierarchical institutions, attempt to domesticate the revolution and render it amenable to the control of hierarchical institutions.

This is especially disappointing, given Blair’s Christian socialist roots and his early affinity for quasi-distributist ideas. The Cooperative Party, in an almost touching exercise in denial, have long persisted in celebrating their ties to Blair and Brown; until recently Blair’s visage leered down from the banner of their website.

But despite occasional lip service to “a redistribution of power that offers people real control over the decisions that affect our lives” (Gordon Brown), New Labourites never consider any cooperative challenge to corporate hierarchy.

New Labour likes to claim that it is “pro-business.” The significance of this is that one rarely hears that it is “pro-market.”

The distinction is important. Markets are tumultuous, unpredictable and uncontrollable processes, which often make fools of the most esteemed expert…. Businesses, however, are hierarchical bureaucracies and their leaders are often more like senior civil servants than buccaneering entrepreneurs.

New Labour’s preference for business over markets shows its managerialist bias–because to any managerialist, businesses, with their mission statements and their illusions of control, are much more congenial than the disruptive anarchic forces of the market. [p. 19]

Dillow, in denouncing New Labour managerialism, does not fall into the common pattern of considering its economic agenda a neoliberal departure from the older Fabian socialism.

We might observe, in passing, that almost from their first Fabian and Crolyite beginnings, New Class advocates of a mixed economy in the Anglophone world have been in fact the hired help of the corporate plutocracy.

And as Dillow points out, Blair’s agenda was very much in line with the anti-labor authoritarianism of the old Fabian movement. Blair’s “work not welfare” was a logical outgrowth of the Beveridge Report’s aim “to make and keep men fit for service.” [p. 9] C.S. Lewis’ depiction of authoritarian social engineering in That Hideous Strength was a fairly plausible extrapolation from the most proto-fascistic tendencies of H.G. Wells and the Webbs (with their forced labor camps and sterilization for the underclass), and from the New Statesman agenda of the late 1940s.

There is one issue on which I probably disagree with Dillow: the necessary tradeoff between efficiency and equality. Dillow takes issue with the New Labour theme that we can have both efficiency and equality. Although that position may well be spurious as it is meant by New Labour, I think it is in fact quite possible to have dramatic gains in both equality and efficiency compared to the present baseline, with no tradeoffs of any kind. The reason is that most of the present inequality in income bears no relation to differences in efficiency, but rather results from privilege and exploitation. If by “equality” one means eliminating incomes that derive from privilege, and by “efficiency” tying income to productivity, the two are necessarily connected.

I suspect the problem with New Labour’s idea of reconciling the two lies with their conception of “efficiency”: a Schumpeterian/Chandlerian/Galbraithian monstrosity of centralization, false economies of scale, and Weberian rationality. Accordingly, their recipe for “efficiency” assumes the existing corporate institutional structure will be left intact with all its assorted forms of privilege, and then “equality” is achieved by redistributive taxation and welfare to distribute some of the surplus accruing from such “efficiency.” The New Labour approach is to leave the hierarchical corporate and state apparatus untouched, and then promote both “equality” and “efficiency” through top-down social engineering: carefully tailoring taxes, benefits, minimum wages, and other incentives to maximize output and achieve the ideal distribution of income.

….governments know how labour supply decisions respond to tax and benefit rates, so they can design a tax and benefit system that encourages people to work. They know how to set the minimum wage at a high enough level to raise incomes, but not so high as to destroy employers’ willingness to employ peole. They know enough about what determines companies’ capital spending decisions, so they can promote investment by striving for macroeconomic stability. And they know how to improve education, and how education affects earnings, so they can use better schooling to reduce wage inequality and promote economic growth by providing a bigger supply of skilled workers. [p. 21]

But in fact the present corporate system is pretty bad from the standpoint of efficiency. It starts from the assumption of enormous concentrations of wealth in a few hands, the absentee ownership of capital by large-scale investors, and a hired labor force with no property in the means of production it works. Necessarily, therefore, the absentee owners must resort to the expedient of hierarchy and top-down authority to elicit effort from a work force with no rational interest in maximizing its own productivity. Such hierarchies necessarily result in the divorce of effort from reward, and of productive knowledge from authority. Each rung of authority interferes in the efforts of those who know more about what they’re doing, receives only information filtered from below based on what they want to hear, and is accountable only to those higher up the chain of command who are even more unaccountable and out of touch with reality.

The obvious solution, the worker cooperative, by uniting knowledge with authority and reward with effort, would slice through the overwhelming majority of the hierarchical corporation’s knowledge and agency problems like a Gordian knot. The problem of socially engineering the wages and benefits system so as to “encourage people to work” would disappear; the elimination of privilege and unearned income, and the receipt by labor of its full product, would tie reward directly to effort.

But this solution is ruled out by the system’s structural starting assumptions of concentrated wealth and absentee ownership. So the hierarchical corporation is adopted as a sort of Rube Goldberg expedient, the most rational means available given fundamentally irrational ends.

I say above that I probably disagree because Dillow’s own agenda, presented at the end of the book, consists of the very sort of program of economic democracy that would be perfectly designed for the coincidence of efficiency and equality. He is an enthusisatic supporter, for example, of worker cooperatives and self-management. He is also very big on the idea of the government introducing cooperative, decentralist and democratic principles into its own enterprises:

The salient fact about New labour is that it has done nothing whatever to equalize status within the organizations it runs. The civil service is as inegalitarian–lethally so–as it was in 1997. And there’s been no effort to convert schools and hospitals into more egalitarianly managed structures. The state is far more hierarchical–far more opposed to the concept of equal status–than any investment bank. [p. 215]

Indeed, one of the planks in his agenda is titled “Turn schools and hospitals into cooperatives.”

His case against hierarchy and for self-management is bolstered by extended arguments toward the end of the book. In Chapter 13, “The Rituals of Reason,” he examines at length the fallacies and biases to which management is prone, in overestimating its own competence and underestimating the intractability of problems.

One might raise the question of whether managers are really unique in this respect; are not workers, also, prone to such conceptual biases? The answer, I think, is that (of course) everyone is prone to logical fallacies and conceptual biases. But their tendency to distort thought increases the more a decision-maker is separated from direct knowledge of a problem, and the more concrete practical knowledge is replaced by abstract considerations. The closer a decision-maker is to the subject of his decision, and the more it involves matters of familiar technique or personal experience, the more competent his decisions. A skilled laborer on the shop floor is apt to be the best judge of organizing production, or of handling the organizational problems involved in coordinating the activity of skilled workers like himself in his own work unit. If his work unit is a small factory producing for a local market, made up of people largely known to the work force, and with retail outlets that have maintained relations with the factory for an extended period of time, he and his coworkers are apt to be the best judges of the levels output required by the market and the product innovations likely to be demanded.

Dillow’s critique of hierarchy, as a source of irrationality and knowledge distortion, is very Hayekian.

When the first factories were established by Richard Arkwright and James Watt, it made sense for them to control production with an iron hand, because they knew the production processes inside out–they had invented them…

Today management doesn’t have this know-how. Products, process and markets are too complex for anyone to know as thoroughly as Arkwright or Watt did….

Instead, knowledge of the production process is scattered across the organisation. If you have a problem, it is often better solved by asking your fellow workers than asking the boss.

However, hierarchies can obstruct co-operation between workers. One reason for this is simply that pyramidal reporting lines often prevent workers from knowing and therefore using the skill of their colleagues. Another reason is that communication requires trust…. Worse still, the benefits of co-operation are often impossible to quantify, and so a management obsessed with budgets and targets does not encourage it. And the knowledge that such gains will flow to managers, rather than themselves, will inhibit workers from co-operating fully. [p. 278]

The hierarchical, authoritarian corporation is especially ill-suited to knowledge work, and other forms of production in which human capital is the most important factor.

It might make sense to give the order “be here by nine o’clock.” But it’s just gibberish to say, “be creative.”

In an authoritarian environment, workers prefer (in the words of Kenneth Cloke and Joan Goldsmith) to “suppress their innate capacity to solve problems and wait instead for commands from above.” [p. 279]

Dillow observes that excessively large government works contrary to the goal of income equality. The reason is that, when state expenditures eat up a large enough portion of the GDP, it becomes impossible to fund them by taxing the rich alone. A society in which the state consumes 50% or more of GDP will, of necessity, have a high tax burden on the middle class. [p. 69]

He is quite hostile to New Labour’s social engineering approach to taxation. Rather than a complex, administration-intensive program of carefully targeted tax credits and cuts, it would make far more sense to institute a citizen’s basic income which requires little administrative bureaucracy. [p. 85] In the American context, I have long cursed the lack of an alternative to the mainstream Democratic and Republican approaches to tax cuts. The Republicans, predictably, are wedded to the idea of “across the board” tax cuts that go overwhelmingly to the plutocracy. Democrats, as one might expect of such nanny statish social engineers, prefer carefully targeted tax credits for child rearing, health insurance, higher education, home energy efficiency, etc. The obvious alternative to both, as progressive as it would be libertarian, would be to simply raise the standard exemption to $30,000 or so.

The great size of political units, and the removal of the administration of welfare as a question for local self-government, has nullified the natural tendency toward mutual aid shown by humans in communities small enough for direct personal acquaintance with the disabled or unemployed. As a result, the working class tends to resent the underclass and to be vulnerable to anti-welfare demagogy by right-wing politicians. [p. 219] A decentralized society of small, self-governing population units might well contribute voluntarily to mutual aid arrangements on a scale sufficient to render taxation unnecessary (especially if laborers received a larger portion of their actual product).

In the process of writing his book, Dillow manages to attack many of the platitudes of establishment economists and neoliberal chatterers like Tom Friedman. For example, he points out that the natural tendency of technical change is to reduce the international division of labor. The increasing speed with which technology crosses national borders means that particular nations maintain comparative advantage for shorter and shorter periods. “that tends to limit the international division of labour and, with it, world trade growth.” [p. 45] And as I recall someone else suggesting, a great deal of “comparative advantage” is the artificial result of “intellectual property” [sic] laws.

He is merciless in attacking the New Labour love affair with education as the solution to poverty (likewise beloved of social engineers in this country, both liberal and neocon). The real benefit of education, from the perspective of the corporate economy, is its function in signalling a “good attitude”: educated workers have “a high marginal utility of income, a propensity for hard work, …and an ability to identify with managers rather than workers.”

If education works by changing our characters, and by straightening the crooked timper of humanity into something useful to bosses, prosperity is achieved by sacrificing liberty and diversity to managerialism. [p. 119]

What’s more, as the impolitic Joe Bageant argued, the social engineering panacea of education depends on a fallacy of composition. While individuals can increase their chances of advancement by education, the entire population cannot do so. The Empire requires some 25% or so of the population to fill supervisory, administrative and technical slots. Increasing higher education beyond this share of the total population simply increases the competition for those slots and drives down salaries, while inspiring an authoritarian, dog-eat-dog attitude on the part of the winners toward the losers. It inspires, that is, the same status anxiety that motivated so much of the German lower middle class to support Hitler.