Economists are strange creatures, usually kept within the confines of government offices, University halls or boardrooms; they’re highly influential behind the scenes, but are rarely thrust into the limelight.
That said, not all economists are made equal, and some manage to push beyond the limits of mathematical modeling to capture something much rarer: the imaginations of the disaffected majority.
Enter Mariana Mazzucato, UCL Professor in Economics of Innovation, best-selling author, and founding director of the UCL Institute for Innovation and Public Purpose.
Having spent her working life challenging long-held orthodoxy surrounding the role of the state and private sector in driving innovation, how economic value is created, measured and shared, and how policies should be designed to solve humanities most significant challenges in a ‘‘mission orientated” manner – Mazzucato’s newest book comes as no surprise.
It’s officially out!!!!! pic.twitter.com/rZa6QTKNUC
— Mariana Mazzucato (@MazzucatoM) February 21, 2023
Co-authored alongside PhD candidate Rosie Collington, “The Big Con: How the Consulting Industry Weakens our Businesses, Infantilizes our Governments and Warps our Economies” becomes available on the 23rd of February.
As the book largely turns focus towards UK state dependency on profiteering global consultancies, what is Mazzucato and Collington’s analysis? What are its broader implications, and why is it important?
The Problem: An insidious relationship?
Mazzucato’s analysis centres around the accepted justification for state use of consultancies, namely, the fact that when governments face great challenges, they often turn to high-impact specialists with the relevant skills and ideas to provide a solution. Whilst these services come with high costs, they are employed on a short-term basis under the premise they provide huge efficiency gains.
Critiques of consultancies speak to a much murkier reality, Mazzucato herself uses both Brexit and the COVID-19 pandemic as points of inflection to demonstrate this. Between 2017 and 2020, approximately £450m was spent on consultancy by UK government departments on Brexit-related issues, whilst Covid-19 spending reached £600m.
Without context, this may not clearly present as an issue, but when analysed alongside a string of related scandals – including a barely functioning Brexit customs plan and an inefficient COVID-19 test and trace system – valid questions surrounding opaque measures of consultancy value and expertise emerge.
Tory spending plans. Cut health & welfare but fund private consultanices to do #brexit??!! @NewEuropeans https://t.co/7rCzSewlqN
— ProfJuliet Lodge 💙🇺🇦🇩🇪🇪🇺 GE Now (@julietlodge2) April 3, 2017
However, as Mazzucato and Collington note, the UK state consultancy culture spans beyond Brexit, COVID-19 and questions of poor value, and important historical context underlies further issues of dependence.
Neoliberal free market reform in the 1980’s was underpinned by a huge reduction in state market involvement, where the private sector was championed as a more effective and efficient vehicle for the provision of goods and services. Over time this thinking has spilled over from free markets and into the public sphere, where under Thatcher’s government, public spending on consultation services increased from £6m to £246m.
As such, a vicious cycle of outsourcing contracts and state-department underfunding has created a civil service unequipped to take on challenges, alongside a dependency on outsourcing. Where global consultancies once provided just that, consultancy, in some cases they are now responsible for the delivery of core governmental functions.
It also becomes necessary to ask if state and private-sector values align. Following the 2008 financial crash, many consultancies backed actions to reduce state capacity, opening the door to increased profits and private-sector involvement at the governmental level.
Beyond this, global consultancy firms have been famously caught up in state scandal; McKinsey & Company, PwC and Boston Consulting Group were all recently implicated in an Angolan corruption case for aiding daughter of former Angolan president, Isabel dos Santos, in becoming a billionaire through state fund manipulation.
Isabel dos Santos, the daughter of Angola's former president, is estimated to be worth over $2 billion. Documents obtained by @ICIJorg and shared with The New York Times show how Western consultants helped her take a cut of her country's wealth.https://t.co/ZcyZu05FCr
— The New York Times (@nytimes) January 19, 2020
Where the state has a clear mandate to maximise the provision of public good, it is not always clear that this aligns with profiteering and the untrustworthy track record of consultancies.
To Mazzucato and Collington, the problem is clear. Consultancies know less than they claim, are overvalued, overpaid, untrustworthy and actively prevent the public sector from developing essential in-house capabilities.
A claim ratified by Lord Agnew, who in 2020 stated consultancies ‘‘infantilise the civil service by depriving our brightest people of opportunities to work on some of the most challenging, fulfilling and crunchy issues,’’ and whose proposal for an in-house government consultancy has now been abandoned.
Lord Agnew intervened on the reliance on consultancies infantilising civil servants https://t.co/fS9RcdatpA
— Sam Nutt (@SamANutt) January 25, 2022
With “The Big Con” largely UK focused, does Mazzucato and Collington’s analysis hold any relevance more broadly speaking, across the rest of the world?
Beyond the UK: State consultancy around the globe
Following the introduction of the EU structural reform support programme in 2017, the EU commission has faced criticism over consultancy spending, which reached €156m in 2020. Whilst some MEPs have claimed spending is justified through efficiency gains, others have warned of conflict of interest between public functions and private contractors.
In March 2022, President Macron’s consultancy spending came under the scrutiny of the French senate, for more than doubling since the start of his tenure. Contracts worth €2.4 billion were signed over to private contractors, for issues ranging from climate change to the vaccine rollout.
Under Trudeau’s government in Canada, spending on outside consultancy has grown by $6 billion since 2015. Whilst the global pandemic is largely seen to drive this, journalists and critics have still raised questions surrounding state bias in awarding contracts, mismatched values in terms of fostering co-dependence, and questionable value and expertise.
Government spending is up 64% since Trudeau took office – measured after pandemic spending is wound down. The civil service has grown by 20%, consultants 40%.
The $6,000 per night hotel room is just one example of how Trudeau doesn't care about your money.https://t.co/kJsjNdJNFD
— Brian Lilley (@brianlilley) February 18, 2023
In the USA, government consultancies are commonly used to help overcome “operational challenges and improve efficiency,’’ particularly tasked with “reorganisation, transformation and modernization.’’ In the 2021-2022 fiscal year, the US federal government issued 29,127 management consultant and project management service contracts worth a total of $23.5 billion.
In Australia, federal government spending on consultancies is seen to have more than doubled over the last decade, rising from A$352m in 2012 to A$888m in in 2022. Research from the Australia Institute shows that alongside consultancies consistent failure to clearly publish results, the equivalent investment could create 12,000 public sector jobs.
Australian finance and public service minister, Katy Gallagher, has expressed the desire to drastically cut spending by creating an in-house team to work cross-departmentally across federal departments. Gallagher has stated that ‘’there is already deep expertise’’ within the public sector which is underutilised.
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Although it is true to say state consultancy culture is most prevalent in developed economies, it would be a mistake to say it is confined to them; the Asia Pacific region shows the highest growth momentum, with state contracts in developing economies making up a large share of this.
Governments in India, Pakistan, Vietnam and Indonesia are all overseeing vast economic reform, where consultancies are being used to improve market conditions, enhance efficiency and overhaul infrastructure.
In particular, India has come under scrutiny, where consulting firm turnovers have, on average, risen by 10.8% per year since 2018. Where Prime Minister Narendra Modi has enlisted support across numerous flagship initiatives, such as “Clean India,” “Digital India,” and a smart cities programme, critics have been quick to point out poor value for money in developing economies, alongside the erosion of state capacity and the creation of long-term dependency.
Upon review, a global picture of state dependency on consultancy services emerges, and not one simply confined to wealthy nations. Alongside unanimous global spending increases, consultancy critiques all seem to fall in line with those leveled in “The Big Con.”
So, what are the solutions and why is Mazzucato and Collington’s work important?
The Big Con: Where do we go from here?
The solution put forward in “The Big Con” is relatively simple: Governments should stop using consultancies as default, and instead turn towards alternative organisations, such as public research institutes, whose aims extend beyond those of securing repeat business and increasing profits.
Despite what hard-line free market economists may have you believe, “the state is back.’’
In both Europe and the US, large amounts of public money are being invested into economic and social recovery plans, which Mazacatto fears risk being mispent without proper state oversight.
Unsurprisingly, this governmental call to arms builds on Mazzucato’s previous work challenging assumptions around the role of the state and private sector in driving economic value and fostering innovation. Her 2011 book, “The Entrepreneurial state,” comprehensively debunks myths of the lumbering bureaucratic state vs. the agile, dynamic private sector.
Her message is clear, it’s time for governments to invest in their own bureaucracy and give highly capable public servants the proper resources to respond to the most critical national and global issues, reducing state expenditure, and maximising the provision of public value.
That said, Mazzucato is not explicitly waging war on consultancy services or the private sector more broadly, her real message is premised on overhauling the public vs. private binary altogether.
Rather, she calls for a shift in what the public and private strive towards together, through shared risk and reward under a common banner.
The hidden message: A changing state and new imaginaries?
Alongside the explicit value in Mazzucato and Collington’s accurate analysis and resulting suggestions, their calls for a reinvigorated state capture a quieter but altogether more radical message. Theirs is just one voice in a growing body of dissent, all of which signal a potential turning point in the broad acceptance of free-market economic logic.
Over the past decade, prevalent academics from pluralist economic schools of thought, such as ecological economists Kate Rayworth and Dan O’Neill, and Degrowth economists Giorgos Kallis and Jason Hickel, have been advocating economic ideas that may disagree with Mazzucato’s prescription.
That being said, they do agree, in part, with her diagnosis; that Capitalism is broken and the time for a more sustainable alternative to harmful free-market capitalist economics is now.
How about Doughnut Economics by Kate Rayworth and Less is more by Jason Hickel? They introduce an environmental critique of capitalism and also raise issues about the exploitation of the Global South which has been a key element of capitalism.
— patrick wiggins (@Caennais) November 4, 2020
The issue of state consultancy dependency and its need to reorientate, then becomes about much more than a neatly allocated state budget or better-equipped civil service. It becomes about a principle, an opportunity to redress and dismantle structures that work against the reality of tackling the social and ecological crises facing national and international communities.
As succinctly penned in a student manifesto, calling on University economics departments to bring education in line with the multidimensional challenges of the 21st century through a more pluralistic approach to education, “change will be difficult – it always is.’’
But surely change, in the face of such blatantly destructive norms, is the start of a more hopeful future for all?
Editor’s Note: The opinions expressed here by the authors are their own, not those of Impakter.com — In the Featured Photo: PwC logo on building. Featured Photo Credit: Adriano Ruiz/Unsplash