The historian Tony Judt explained in the 1990s what we had learnt from the collapse of communism: “The state is a strikingly inefficient economic actor. Nationalised industries, state farms, centrally planned economies, controlled trade, fixed prices, and government-directed production and distribution do not work.” He added a caveat, however: “That is all we know.”
What we were yet to learn, as Mariana Mazzucato and Rosie Collington show in their book, The Big Con, is that the state’s use of large consultancies replicates some of the inefficiencies and criminality of the governments that collapsed in the late 1980s.
The tale that Mazzucato, professor in the economics of innovation and public value at University College London, and her PhD student Collington tell is not a happy one. But it is all too familiar to those of us living in South Africa, where consultancies such as McKinsey, Bain and KPMG, knowingly or unknowingly, facilitated state capture, hollowed out the tax authority and helped redistribute at least R56bn to corrupt politicians and businessmen.
But as The Big Con reveals, this is far from just a South African phenomenon; Angola and Ivory Coast have shockingly similar stories to tell.
But there’s more. In many other countries, from Italy to Australia, consultancies have, as the authors put it, played “both sides of the street”, using their access to government knowledge and information in ways that benefit their business clients. “Such cases,” they write, “are usually only revealed later through newspaper investigations or special government inquiries.”
Sure enough, shortly after The Big Con was published, it was revealed by the media that PwC in Australia had shared confidential tax avoidance information with clients.
But in many ways, the book is not about these scandalous acts. The rot, as Mazzucato has explained for much of her career, is far deeper.
The “big con” of the consultancies really began with the neoliberal governments of Margaret Thatcher and Ronald Reagan in the UK and US. The book sketches out just how the reliance on consultancies by these governments and those that followed has systematically hollowed out and “infantilised” public institutions.
‘Zombie e-mails’
As Mazzucato and Collington argue, a good example of how much damage they have done and continue to do was the UK government’s response to Covid. The crisis proved that the state and its civil service were woefully short of skills and capacity — a skills gap created and then not ameliorated by consultancies themselves.
Knowledge and expertise can’t be purchased. Institutions, particularly public institutions, have to be able to learn from their experiences. This is something consultants don’t do
As the authors’ interviews with civil servants and consultants show, the consultancies themselves were hopelessly underskilled. Their young graduates knew little of the practical workings of the institutions they were now advising. The people who actually knew the systems were then inundated with “zombie e-mails” asking for help from hordes of “wandering consultants” from Deloitte who had been employed supposedly because of their expertise in the area. And all this was happening while Deloitte was earning $1.3m a day from the contracts.
The point the authors make is that knowledge and expertise can’t be purchased. Institutions, particularly public institutions, have to be able to learn from their experiences. This is something consultants don’t do, as they’re moved from one project to the next. Institutional memory is vital for governments to function. And it is precisely this that the reliance on consultants undermines.
This situation resulted directly from the neoliberal belief that the market is a more effective organiser and innovator than big government. Not true, Mazzucato and Collington argue. Government can both “row and steer”. This is what the early National Health Service (NHS) in Britain and US space agency Nasa proved. Nasa’s “moonshot” resulted not only in unparalleled technological innovation — but it was also the result of the public sector’s capacity to organise and collaborate. During the early years of the NHS, “radical organisational and public health transformations took place, drawing on the knowledge and experience of public and private actors across society”.
Mazzucato and Collington are certainly not suggesting that consultants aren’t needed. However, they argue that, in their current form, consultancies tend to be both self-serving and, at times, worryingly incompetent. Nor are they saying that governments can be effective producers of goods. But public sector organisations can, they argue, be value creators: they can organise certain sectors of society better than the private sector. And if this is so, then their depleted internal organisational capabilities need to be rebuilt.
In South Africa, we are confronted with some of the worst elements of consultancies and a public sector that seems entirely dysfunctional. You might feel the urge to respond to The Big Con by simply throwing up your arms in despair.
But we shouldn’t be so cynical as to ignore the lessons in these pages. Of course, we already know that relying on consultancies to act in society’s interests is a bootless errand. However, an important takeaway is that privatisation of the public sector and handing its functions to consultancies have deeply damaged many societies.
But just how, after years of neglect and failure, we can even begin to rebuild our public institutions and state-owned entities is a R56bn question.
* The Big Con: How the Consulting Industry Weakens our Businesses, Infantilizes our Governments, and Warps our Economies, by Mariana Mazzucato and Rosie Collington (Penguin Random House)
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