Can We Improve On Bureaucracy? The need for a real third way.

THIS WAS THE DESIGN FOR MY BOOKCOVER WITH THE SAME TITLE IN 2001. STILL AVAILABLE ON AMAZON. HOW LONG BEFORE IT IS OUT OF DATE?

I REPEAT, A COMPREHENSIVE WARNING, IN 2001, OF PRECISELY WHAT IS HAPPENING WITH FAILED REGULATION AND DEBTS IN 2009.

(Revised post G20. 04-03-09)

ECONOMICS FOR VOTERS.

I am not an economist but have considerable experience of being on the receiving end of economics from 1928 to 2009 especially in business from 1946 to 1988. Actually it is extremely unusual for anyone to experience more than one depression in a lifetime. I was 11 when we solved the 30s depression with World War ll and will be 81 when this one starts at the end of 2009. Solution this time? Another Hitler, Stalin or WW lll?

In my experience there are two scenarios. A. Strong demand = strong profits = low unemployment = strong demand. B. High unemployment = weak demand = weak profits = high unemployment. Scenario B can involve a short downturn, a minor recession, a major recession or a depression. The UK 60s were a good example of Scenario A and the 70s of a Scenario B serious recession. The natural reaction is that all we need to do is copy whatever we were doing in the 60s and reject whatever we were doing in the 70s. Unfortunately it’s not quite as simple as that. It was what we were doing in the 60s which caused what happened in the 70s.

It is a question of what creates the strong demand and unfortunately it is debts. Economists talk about the “economic cycle” and the “business cycle” as if it’s an Act of God. Nonsense. It’s a man-made debt cycle. Whatever we may have learned from the 30s we learned nothing from the debts. The reason that Scenario A does not last very long is that the permanent escalation of debts is unsustainable and market forces are all pushing in the direction of sub-prime. The borrowers and lenders both come to the end of the road which is a disaster for both. Furthermore, when scenario A changes into scenario B, even some individuals and companies that were triple A borrowers change into sub-prime. This is also a disaster for both. The solution to this problem was supposed to be a command economy. Since this was 100% monopoly combined with 100% bureaucracy the cure was worse than the disease. Our current bureaucracies offend all the simple basic principles of management and the only motivation we offer is empire building. Since we climbed down out of the trees most of our achievements and most of our disasters have been created by competition. Our problem is to encourage the constructive competition and discourage the destructive competition.

In developed countries we only waste half our money on bureaucracy. Governments do not have a complete monopoly. It’s a bit late for voters to protest after the constant repetition of downturns, minor recessions, major recessions, depressions, financial crises and speculative bubbles have proved that neither the politicians, nor the economists, nor the regulators know what they are doing. They created the disaster in the first place, didn’t see it coming in the second place, were recently talking about a “Goldilocks Scenario” and “Decoupling” in the third place, constantly revise their forecasts because they are wrong in the fourth place and their only idea to solve the problem of unregulated, escalating irresponsible, unsustainable, private sector debt is unregulated, escalating, irresponsible, unsustainable, public sector debt in the fifth place. The US claims to be promoting democracy around the world. They have just spent 18 months debating colour and gender. They did not debate whether an agnostic could win. The answer is no. What is the relevance of any of this when they have major debt and bureaucracy problems? We already have hordes of regulators who are an abject failure.

My book includes numerous case histories where necessary simple regulation and legislation was not implemented or, when it was, the amount of red tape for execution produced an ineffective, inefficient, counter productive, waste of money. Either way it is the taxpayers who suffer. The UK has had numerous Parliamentary Committees and Royal Commissions about reforming our Civil Service. Some of them were quite good although I am unaware of any that attempted to remove the motivation of empire building. Most were shelved and the others handed over to the Civil Service to streamline itself! Most ex-command economies have permanent committees for “reform” but they also expect their bureaucracies to streamline themselves! We now want them to regulate something complicated! The message is loud and clear. Economic anarchy is a disaster but we do not need regulation which is incredibly expensive, inefficient and make things worse!

It may be that in a democracy voters should also be offered some alternative version of economics! Certainly they do not qualify to vote with no interest or knowledge at all. The quality of life for 6.5 billion inhabitants of this planet depends on economics except in countries where their priority is killing one another although the demand for weapons design, manufacture and sales is good for an economy somewhere. They are not in the business of making themselves redundant and neither is the Army, Navy, Airforce or intelligence services. Certainly the voters do not need to hear from economists who are a proven failure and whose status symbol is complexity when the real fundamentals are simple.

We will get absolutely nowhere until we start work on a regulatory framework which does not offend all the basic simple principles of management with the only motivation of empire building and the fact that demand dependent on escalating debts is unsustainable. We need small brainstorming groups with the same well defined limited problems, the same 100% determination to get the answers and the same structure as the ones that got us nuclear weapons and trips to the moon. After that we will be in a position to start on education and preserving the planet. These are the real fundamentals.

Patrick Moran. (patmoran28@gmail.com )