The stench of public partnership economics

The stench of public partnership economics

by Eben Wilson
article from Monday 20, February, 2017

A DANGEROUS CANKER is growing in Scottish governance. It’s surrounded by what seems to be completely reasonable assertions, but my alarm bells are sounding loudly. I sense socialist managerialism getting out of control.

Let me introduce you to the notion of “evidence-based participative policymaking”.  Scotland, apparently, can be a world leader in this. Let’s examine those alarms.

First, the idea of evidence. Good social science has a strange relationship with evidence. It is extremely difficult to verify any truths one finds in statistics. Confirmation bias, in which evidence is used to merely to confirm existing opinion, abounds.

Second, the idea of participants.  The phrase above was taken from Alliance Scotland which promotes policy action in the health and social care arena – the largest area of public spending. This entity has a vested interest in collective policy partnership arrangements because their operations are based on the use of our tax money.

We should not deny that there could be a rigorously objective policy maker within such an organisation with a good grasp of the facts of health and social care; but is it likely? Equally, are the Alliance’s counter-parties in policy making likely to be equally as objective? Public choice economics tells us that the incentives of policy makers, particularly politicians, are anything but principled. 

The social philosopher Friedrich Hayek would point to another hole below the waterline of the ship of state that hopes to build policy through expertise on “how to deliver participative, outcomes based public services”. He noted that “the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form, but solely as dispersed bits of incomplete and frequently contradictory knowledge.”

So, where does this leave this notion? Sadly, probably in a sea of meetings, policy papers, multiple confused objectives, multi-agenda missions and a perpetual re-working of bureaucratic management methods to achieve precisely nothing. Indeed the outcomes can often be worse than when the process started (think Scottish education). If that sounds like the modus operandi of the Scottish Government to you, do not be surprised.

Socialists like “partnerships”; they smack of a collegiate nicety in which good people have good ideas to get good things done.  But partnerships in the public arena, about which we hear a lot from the Scottish Government, do not actually make their public choices this way.  

Public economics tells us that, unlike in business, no-one is on guard against losses that threaten survival, and there are few incentives to be concerned about overheads. Initiative is therefore taken with little constraint by cost implications. A little bit of extra pressure on the taxpayer is balanced against a good hit from policy success – with the good being chosen for its electoral rather than monetary gain. An additional danger is that policy success revolves around the perceptions of political spin and nice sounding platitudes, rather than hard evidence.

Partnerships in this arena become shared goal initiatives between government and interest groups; environmental, industrial or professional. But the incentives are badly balanced; politicians want electoral success, trade unions want secure pay and employment and the professions want to stop others from taking their positions of privilege through standards and qualifications.

Governments have very few assets in relation to their turnover; instead they trade in re-distributions. They are also able to support their losses by taxing people. That makes them dangerous – they can tax our children’s tomorrows, denying them the liberty that comes from personal economic freedom.

The incentives above have been allowed to drive Utopian constructs about “social justice” without any real constraints on the costs of these aspirations. In Scotland, we can easily recognise this; we are awash with them, and more often than not they are delivered through partnerships.

And what these partnerships are about are re-distributions of other people’s money to other people with no concern for concomitant losses. If you have listened to the debate about Scotland’s budget in the last month you will have heard a cabal of voices calling for yet more spending across many areas of state responsibility.  This reflects a wider approach that is becoming worryingly institutionalised within Scotland’s methods of governance – partnerships of big spenders are permanently on the hunt for more spending money.

If you dip further into what these spenders do, you will find ten-point plans, collaborations, partnerships, joint planning, and so on. Essentially, this is all the well-meaning managerial “stuff” that drives the centre-left political mind – central plans to achieve centralised, controlled outcomes.

Now, for economists, such central planning has a big downside; overheads and lack of productivity. The evidence from communist Central Europe in the 20th century is very clear; central planning creates a huge protected well-paid but inefficient bureaucracy – the opposite of the outcomes the left desire, and re-distributively backwards. Scotland has a huge army of middle-class do-gooders earning good money and nice pensions. They operate in a world of multiple and often incompatible objectives implicit within their partnerships; going to endless planning meetings and achieving not very much, not very fast.

If asked, many will admit as much, but their incentives are of course not to blow the whistle, but to act offended if anyone attacks their expensive centralised planning. And there is one more step; which I call self-opinionation. They begin to coalesce into a propaganda machine intent on mutual support, as partners, of mutual organisational goals. The charity sector has been severely criticised over this, becoming what are called sock puppets of the state, not only serving its policy aims but promoting those policies without an electorate to vote them out of office. That too is dangerous. Scotland is developing a world of universally invasive politicised horse- trading across civic society as everyone chases less and less public money.  In Donald Trump terms – a swamp.

Trump and Farage populism, with its distaste for the state and its institutions is a direct outcome of the People noticing that despite all the blether, nothing is improving very fast and can even be getting worse.  The news management propaganda machine has been found out.

Could Scotland escape this cabal of traders in re-distribution? Under the present political alignments in which the SNP and Labour Party have to compete for their clientele by buying votes, the Greens only make this swamp more treacherous. Pulling away from their hold is not going to be easy, but there is always a bigger picture.

Jo Grimond famously said that “the state owned monopolies are among the greatest millstones round the neck of the economy” and that any economy is unmanageable as long as the state attempts to do too much. Scottish politicians are many miles up a long cul-de-sac in their institutionalisation of nationally managed monopolistic practices across our public sector.

The Scottish Government has one potentially de-centralising policy in its proposal to give more powers to head teachers; but the proposal is hedged by the creation of regional authorities, presumably to assuage the rage of the bureaucratic “blob” of educational experts who think that only they know best how to equalise our children’s life opportunities, but it is a start.

There are many other ways such de-centralising could be done within present powers. PIPs, personal independence payments, could be extended to all and turned into personal providence accounts.  Charges paid out of these for non-core health and welfare needs could free individuals to choose their burden on the NHS and the Parish more responsibly. Scotland’s roads could be turned into locally owned Trusts. Planning could be made truly local and competitive. Councils could be broken up into separate entities for housing, welfare, and the public realm.  The key is to de-monopolise and induce innovation, with as much pricing as possible.

Partnerships are the wrong way to go – the economics of their politics is against them.

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