I am of the opinion that of all the economic organisations we have available to us the state is not just potentially one of the most efficient, but is one of the most efficient.
The reasons are obvious. When there is a need for universal supply of a product or service, wherever the user is located and whatever their circumstance, then the state has unique powers to deliver with an efficiency no other structure has.
It can cross subsidise at will. Some people, whether it's the person needing a postal service on a remote island, or the person with recurring serious illness, are always going to be expensive to supply in any community. Most of these people don't pick themselves. In my opinion they are all valuable. Only the state has the option of treating them equally with equanimity.
And when the supply is to be universal it is the state that can ensure the supply is consistent in a way that no other service can, precisely because all other economic structures are predicated on making things different when the last thing most people want is postcode lotteries.
And the state can be efficient. I do not deny its imperfections for a moment, but it can also beat hands down a system that must record every last detail of financial interaction (not cost, I stress, but interaction - and the two are quite different). That's because a state organisation has fewer boundaries than a smaller private sector body. And since interactions happen at boundaries and are very expensive to record the state could save all that cost and concentrate on efficiency if only it was allowed to do s0 (but which 500 organisations in the NHS prevent).
And the state can provide economies of scale no one else can. I known it hasn't always done so. And I agree that's been absurd. But it does not need a change of ownership to do so. It needs a changed ethos to deliver such efficiency, that's all. That will now exists. And breaking things up can only remove the chance of its delivery.
But no one is willing to say these things. No one shouts that just as multinational corporations have got big and have diversified to be cost efficient by eliminating wasteful internal competition, sharing resources and standardising systems and reporting so should the state do the same. Instead we hear that the state must be broken up, that small is better, that creating false markets works when all they can deliver are massive admin costs, duplication and diseconomies of scale.
There are three explanations for this fact (for fact I think it is). First there is dogma. Second there is ignorance. And third there is fear. All are important but the last is the most important for it feeds the other two. The fact is that big business no longer has a clue how to make money. Innovation and growth are things that it is no longer capable of delivering as by and large the needs of those with money (who are the only people they are interested in) have largely been met. And so instead of innovating what they want to do most of all is capture another income stream entirely - which is the income that only taxation can deliver.
The goal of privatisation is to pass the assured revenues that only the state can supply into private hands for private gain. An enormous amount of money and effort is being directed to this purpose. That is money that those with wealth supply. And they fund the dogma, and through their control of the media they fund the ignorance. And with their money they fund the fear.
That's why the reality that the state is an extraordinarily efficient supplier of public services is almost entirely ignored. We need voices that challenge the assumption that it isn't. We need to tell the truth.
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Agree. This might not seem related, but…
Something I’ve thought about recently is transparency. I find it likely that humans are unable to be completely objective. Even if they can, it’s infinitely harder to be believed to be so. In the past we’ve revved a lot on perceived personal integrity to provide the assurance of objectivity, and a lot of the book keeping that occurs is as a check against individuals fallibility.
Transparency and openness, which technology makes so much easier to provide at nearly no cost, might provide an alternative foundation. We have the idea of freedom of information, which I think is fantastic. I think that the next step is that for everything governmental or socially owned, the assumption should be that it is transparent and open.
A platform (probably, literally, a technology platform) should exist where the all the default options are that everything should be open. All data, all spreadsheets, all minutes and documents… There are requirements for opacity at times, and that’s okay, but probable the assumption should be openness.
Getting public functions on to something like this allows for inspection. It allows the public to say “what’s happening here”, and it also allows the same public to say “ah, but that’s fine, really, because look at this”.
… anyway, just a thought 🙂
This does not work unless it applies to the private sector as well – where the problems are much worse
Where the supply of a certain service tends to a natural monopoly, e.g. Water, energy, policing, defence, etc then it is imperative that this be met by the public sector as otherwise economic rents will accrue to the privateers. So yes, in many if not all services the public sector is clearly more efficient than a private sham market.
Your description of how the state runs looks some distance off my experience in the public sector.
In my view, the state is good at some things (following processes, transparency and accountability issues have much improved, using powers in emergencies to get things done — something you wouldn’t want them doing every day).
The systems, organisational structures, legal constraints and the incentives mean the state is not very good at other things. Not very efficient — getting from A to B can take ages, lots of steps. And not very creative.
I’m in local government procurement. My role exposes me to a very wide range of public services (social care, education, public health, waste, transport, leisure, highways etc). In my view, nobody gets to see the variety of public services at the coal face better than procurement and finance people in local government, Not even the chief executive gets to see what we see.
Your CV published on this site does not suggest public sector experience? Have you had any, particularly in the past 10 years?
I agree – I have not worked much for the state in he last decade
But I have spent one heck of a lot of time talking to those who do
And I also know how hopelessly inefficient the private sector is – which most people forget about
After all – remember it was the private sector that crashed the economy
The fact is no organisation is that good
And that’s called the limits of human organisation
But once these services are hived off to the private sector FoI is stymied by commercial confidentiality.
“But I have spent one heck of a lot of time talking to those who do”
It is a very secretive, risk averse, cover-your-backside environment. Talking to people just isn’t much good, in itself.
You cannot get much of an informed realistic picture without seeing it for yourself. You really can’t.
Can I recommend you try get a 12 month contracting stint (or even a permanent job). Presumably in finance, ideally in local government (you’d get much more exposure to a wider range of things, than you would in central government, or in a particular body such as the NHS).
It will change your views. Not all of it will be bad (you’ll see some positive things, for sure), but you will get a bit clearer idea of what the state is good at, what it’s not.
My own view is that the state should stick to what its good at (and what it is necessary for) and stay away from the rest.
So what does the state do well and badly in your view given I will definitely not be seeking a 12 month contract?
Well-the state seems to be staying well away from housing and look at the foul up we have there:
1) market has done a great job at wrecking the real economy with bubble after bubble
2) Skyrocketing land costs-all very efficient according to you.
3) Houses still built from unsustainable material because it’s unprofitable for the market to change its traditional supply sources.
Wow -the efficiency of the market is blindingly successful!
One prime example is tourism. Who but the State, can promote tourism to a nation. No private operator is going to launch advertisements overseas, organise the infrastructure. Individual hotel chains, B&Bs, theme parks, museums and sites aren’t going to do this. They can at best promote their own products and services, but not an entire nation. Only a national or state government has the ability, because it doesn’t need to generate a profit from the activity of promotion. The reward comes in seeing more people visit a country, more revenue in the pockets of local businesses and ultimately more tax revenue as the final result.
I was in Sardinia 2 years ago and it was tragic to see so much unemployment and yet so many opportunities for tourism. E.g. a lot of archaeological sites that just haven’t been developed for visitors, trained guides, ensuring there are local facilities, restaurants and accommodation. This is the kind of thing that needs a big push…and that can only really come government. But what’s government doing at the moment? Cutting spending. Ridiculous.
I think your argument has always suffered in my opinion, in a lack of definition of what “The State” actually is. I have never, ever, seen a “State” that was not riven by self interested cliques. I am not saying private enterprise is a bed of roses, but like Democracy for example, it is far better than the alternatives.
Emphatically, no
What democracy? -another one dimensional definition of freedom! Open your eyes!
Yeah, I particularly love the way private enterprise runs the utilities, the raiways. the rental sector and public transport.
Every example so cheaply and efficiently run who never rip off their customers for profit.
And don’t get me started on PFI contracts
Adrian,
The difference as well is what a well-funded, well-run state looks like, as opposed to some of the barely-clinging-on state functions we have a the moment.
I am married to someone who works in local government, so I’d like to think I have an insider’s view, and the stories of some of the things that happen are depressing. In almost all cases however, the frustrations are down to rock-bottom moral, as a result of poor wages and facilities, stress etc, as well as over-work, poor managers (no doubt due to the best ones heading for better pay and less stress in the private sector – who can blame them), and vitriol from a government that seems to direct most of their energies to undermining and denigrating the notion of public service at every possible opportunity.
Want to work 50 hours a week, on £10,000 less than you should be, in a building that smells of wee and should have been demolished 10 years ago, with a computer that takes 15 minutes to boot up, that can’t afford to provide you with the proper tools to do your job such as printer paper, teabags, and even, in some cases, loo paper? How excited would you be to go to work then? No? Me neither.
After that it’s just a downward spiral. 5 more years of this and we’ll be in serious trouble.
That sounds very familiar … I get a very similar view and comments from my wife, it drives her mad.
Perhaps I’ve missed something. The list of the things that the state provides much more efficiently than the private sector is a long one, but its not restricted to what are usually thought of as public services. We should include the provision of public goods as well. Might it be worth promoting Mariana Mazzucato’s work in this area? Her book, which has been referred to on this blog, does ‘debunk Public versus Private Sector myths’ very convincingly.
Indeed
I agree