A new book suggests that the problem with the use of consultancies by western governments is not just the amount of money that is spent on them. It might not even be the main issue.
IT IS widely viewed that the Labour Government has indulged in the use of outside consultancies in the process of making policy. It is estimated that it has spent some $1.7 billion on the use of outside contractors especially that of Deloitte, KPMG, Ernst and Young (EY) and PricewaterhouseCoopers (PwC). They happen to be the four biggest consultancy and auditing firms in the world.
The National Party proposes to reduce the amount of money spent on consultants by a minimum of 25 percent, in the region of $400 million, and redirect that money toward low and middle income families.
National Party leader Christopher Luxon's declaration of war on the consultancy 'gravy train' can only be popular with the public and puts Labour in the awkward position of having to defend such spending at a time of increasing economic difficulty for a growing number of people.
New Zealand has been part of the global growth in the consultancy industry over the past three decades. In 2021 it was estimated that governments around the world spent $US700-900 billion on outside business consultancies. PriceWaterhouseCoopers has some 120,000 employees in South East Asia alone, and over 300,000 worldwide. It employs approximately 1700 people in New Zealand.
But in their new book The Big Con: How the Consulting Industry Weakens our Business, Infantilises our Governments, and Warps our Economies, authors Mariana Mazzucato and Rosie Collington argue that the problem with the use of consultancies by government is not just the amount of money that is spent on them. It might not even be the main issue.
Mazzucato is professor in the economics of innovation and public value at University College London and her co-writer Collington is a PhD candidate at University College London’s, also in the Institute for Innovation and Public Purpose.
Marianna Mazzucato is something of a rare breed: a left-wing economist. She has forged an international reputation in her defence of public investment and the public sector over the private. It has invariably put her at odds with a neoliberal 'consensus' that always seeks to diminish and downgrade the public sector. Her views have made her few friends among mainstream economists loyal to 'the market' and she has even been described as 'the world's scariest economist' by some of her conservative detractors. She quotes Polish socialist revolutionary Rosa Luxemburg as a source of inspiration: 'Those who do not move, do not notice their chains.'
The Big Con contends that there has been little recognition that the use of consultancies is a symptom of fundamental structural problems within contemporary capitalism:'The consulting industry may not be wholly responsible for the financialisation of the economy, corporate ‘short-termism’ or the gutting of the public sector, but it certainly thrives on them. Throughout the history of modern capitalism, the consulting industry has been there to surf each new wave of dysfunction.'
The authors regard the consultancy industry as being a huge confidence trick: 'A consultant’s job is to convince anxious customers that they have the answers, whether or not that’s true'.
But farming out work to consultancies only serves to hollow out and weaken the capacity of the state. The more governments outsource work to consultancies they simply diminish their own abilities to do the job themselves. Unfortunately, in New Zealand as elsewhere, awarding consultancies with wide-ranging lucrative contracts has become the default option. Observe the authors:
'The growing reliance on big consultancies with extractive business models stunts innovation and state capacity, undermines democratic accountability and obfuscates the effects of political and corporate actions. In an age of climate breakdown, these consequences have become existential. We all pay the price when public funds and other resources are wasted, and when decisions in government and business are made with impunity and little transparency.'
Mariana Mazzucato has said in a number of interviews that the consultancy con is really a product of neoliberal ideology; that the private sector knows best and will be more efficient than public sector workers doing the job.
Mazzucato and Collington propose an altogether different role for government. But it is not one that is likely to find favour with New Zealand's current crop of market-loyal parliamentary parties who remain steadfast defenders of the neoliberal status quo:
'Transforming our economies in the public interest requires changing how we think and talk about the role of government. We must stop seeing the state as merely a market rescuer and de-risker, and recognise it as a critical economic actor.'
While the authors want to cut the consultancy industry off at the knees, they do see a role for it. They write: 'Of course, departments should also work with other organisations and people that can help them achieve their democratic mandates – but this advice should come from the sidelines, provided by people with genuine expertise and experience.'
This is vague. Are they proposing that the consultancy industry would not be central to government but an adjunct? How would that work? The ambivalent language stems from Mazzucato's desire not to overturn capitalism but to 'fix' it. But it is an indication of just far to the right that western mainstream politics has swung that even this argument is regarded as too radical by the political establishment.
Socialist economist Michael Roberts, in his criticism of Mazzucato, has a different alternative to the present neoliberal status quo and one that is unequivocal in its intentions:
'Surely, the solution comes in ending outsourcing and consultants and instead rely on the workers in firms and governments to improve outcomes. But that would mean giving workers democratic control of production and services and ending the autocracy of grotesquely overpaid chief executives and shareholder power. With workers control of the workplace, integrated into a plan for investment, training and employment, real improvements could be made – with hundreds of billions saved and used more effectively.'
At the government level this situation has become somewhat visible. But business has turned to seeking financial and political gain from state, non-profit and charitable entities for a long time now. They can make big money while claiming to work for the public, planetary or environmental good without the need to provide any substantial outcomes at all.ReplyDelete
It seems to governments the chief purpose of such private consultants is to provide unaccountable cover for their inaction. The public service as an arm of government had a degree of built-in accountability. But the private sector can market themselves and the government as professionalised doing-somethings while doing nothing but unlike state employees, without being answerable for their own non-answers, non-action and non-results.
The public awaits the outcome of this or that ''working''-group for answers to urgent problems and though the consultants aren't shy about filing extravagant expense claims, they do not front up to explain themselves to the public that is forced to foot the bill, (and while doing without themselves all too often). And nor can private consultants be made to do so.
Public servants are accountable if they claim to need the champagne, caviar and five star hotel rooms to conduct their work, but private consultants can just clock-up pointless, highly priced hours within frivilous luxury just to provide the government with fig leaves to cover its nakedness.