Electric blues

Over eight years ago, in 2013, I wrote a post on this blog about the absurdity of a supposedly competitive market for electricity, and energy more generally. That absurdity was incipient in the privatization of gas and electricity industries in the UK in the 1980s and early 1990s. It has now interacted with a global energy crisis to create a major problem which, in turn, is contributing to a wider cost of living crisis.

It was an accident waiting to happen. As I wrote in 2013, the idea of ‘shopping around’ between energy providers was a farce because there was no competitive market in what had long been recognized as a natural monopoly. What had been created was, at best, an oligopoly of the six major providers and consumer choice was illusory, That mattered, because the underlying theory of privatization was that choice would lead to competition which would lead to greater efficiency and lower costs. Knock away the first link in this chain and the whole concept (even if it had held water in other ways) was destroyed.

Since then, although the big six always remained dominant, the illusion of choice was sustained by a regulatory change in 2014 which allowed the entry of a large number of new firms. These did indeed sometimes offer consumers cheaper prices, although the highly opaque nature of charging often made comparison hard, and in some cases the option of greener and more environmentally sustainable energy. In fact, I was one of those who did exactly that.

Another way in which the ‘market’ was supposedly made more competitive was by introducing an energy price cap in 2019 to try to prevent companies charging extortionate amounts on their default or standard tariffs to those customers who didn’t ‘shop around’. Again, the very need to do this was an indication that this was not, and could not be, a market in the way envisaged by neo-classical economics.

In the autumn of 2021 these two developments came together to create a disaster. For as wholesale energy prices rose globally the cap meant that companies couldn’t pass on all of these rises to consumers, and it emerged that many of the new entrants did not have the financial resources to survive. In some cases they had also had a policy of last-minute buying of wholesale energy which meant that they had less of a time buffer against price rises. In consequence over twenty of them went out of business, including Bulb, the seventh largest firm.

Since then, the price cap has been raised, by 12% last October, with a further 54% rise to come into effect in April, leading to dramatic increases in consumer bills: the average household energy bill will rise from £1277 to £1971 per year. For poorer households this is a disaster.

And what, now, of choice? First off, the customers of most of those firms that went bankrupt were transferred to one of the big companies, with no choice of which one. My own experience of being transferred to a big firm – ironically, the one I had left a few months before – was a nightmare in itself (and I’ve heard similar stories from others), with incorrect transfers of meter readings, and endless arguments about what money was owed.

Some of these problems arise from the more general way that, for years now these firms have ceased to actually use meter readers, and the bizarre use of constantly updated estimates of future usage so as to set direct debit payments, rather than simply paying for what you use, as you use it. I simply don’t understand the bills I receive any more. Added to all that is the perennial problem of call centres you can’t get through to, or get cut off from, or which say they will call back and don’t. And added to that is the new reality of everything being done online, the chatbots, the inexplicable rules and all the rest of the hideous inconvenience of the most mundane of transactions that are now the norm.

And then what about choice of tariffs? I, like almost everyone transferred, ended up on the standard or ‘deemed’ tariff i.e. the maximum price allowed under the cap. So are people who never changed tariff or did so under a time-limited deal that has now ended, or who move house are also on the standard tariff. There may be a few options to find a cheaper alternative, but they are extremely limited, and the illusion of choice that I wrote about in 2013 has now entirely disappeared. With it, there has gone the last vestige of pretence that this is a market in any meaningful sense of the term.

Indeed this whole saga shows how, as with many other core goods and services, it is politically impossible simply to ‘leave it to the market’. Even if not very effectively, the government and the regulator is under pressure to, at the very least, ensure that the lights stay on. Yet at the same time, since the industry remains privatized, consumers are ultimately paying for the dividends and bloated salaries, as well as the malign effects of financialization.

Restoring the UK industry to common ownership wouldn’t solve the many complex environmental and geo-political problems facing the production, distribution and consumption of energy, but it would at least end the farce and failure of the pretence that there is a market for consumers. There’s already been something like a de facto re-nationalisation of railways (£), and it’s well overdue for something similar to happen to the energy industry.

Trains hit the buffers

The biggest organizational story in Britain at the moment – the abject chaos on the railways – is one which happens to affect me personally. I use one of the routes on the Govia Thameslink Railway (GTR) network which, along with Northern Trains, introduced massive changes to the timetable on May 20. The time for every single service on the GTR network was changed and in the process some stations saw a larger number of services but, certainly at my station, most of the fast services to London were removed. Thus a service which used to have several trains a day that took 40 to 45 minutes into London now has a few trains with a 50 minute journey time but most scheduled to take 70 minutes.

That would be cause for dissatisfaction, but it is not the cause of the chaos. Rather, from the moment that timetable was introduced it failed disastrously, with almost all the new services cancelled or massively delayed. Journey times rose in some cases to three hours and, of course, where these trains ran they were massively overcrowded. The result was misery, frustration, missed appointments and disrupted lives.

Although GTR put out statements about teething problems being expected, it was very soon clear that what was happening was far worse than that implied. Thus, a week after it all started, an amended timetable was created in which almost all of the faster trains were stripped out. But, even amongst the services left, cancellations and delays abounded. Nor is there even an official timetable to try to plan by – what has been created, and is still the case as I write this, is a service, if one call it that, which changes hour by hour.

Trains are mysteriously announced, apparently randomly, and sometimes run but often are just as mysteriously cancelled. Or they run, but don’t stop at the stations they say they are going to, or terminate at a different station to what was said. Or are delayed for unexplained ‘operational reasons’. Information is minimal, and often incorrect. So a 45 mile journey to London is now an excursion into the unknown that can take hours, often in extremely unpleasant conditions.

It is difficult to overstate how utterly dismal this experience is. People’s lives are completely built around being able to travel to places of work and education and are intricately calibrated around public transport. And whilst for many year the British rail system has been marred by cancellations, delays and overcrowding, what is happening now is on a scale beyond anything that certainly I have ever known before. Nor should it be forgotten what a terrible situation it has put those working on the railways in. It is they who have to bear the brunt of the anger and distress – and, I wouldn’t be surprised, threats and violence - of passengers, yet they are powerless to do anything and don’t even have any accurate information to pass on.

So far as can be ascertained from what has been said in public, the reason all this has happened is that the train companies failed to recruit and train (for the new routes) enough drivers. It is as simple, and as absurd, as that. Given that the timetable changes had been planned for many months, possibly as long as a year, this represents a level of organizational and managerial incompetence on a quite extraordinary scale.

I expect that, eventually, we will learn more about what happened organizationally, but a few things are already obvious. It may not be the case that what has happened is directly attributable to privatization – although there are good reasons for criticising that on general grounds, including the far higher subsidies paid to the private companies than were ever available to British Rail. But it certainly appears that the fragmented structure created by privatization is part of the explanation. This encompasses both the split between responsibility for the network infrastructure and for train operations, and the way that routes are bundled and unbundled together under every-changing franchises (for example, GTR is I think third or possibly fourth company that has run my train service in the last 20 years). This creates co-ordination problems, loss of organizational memory and, I have no doubt, cost-cutting pressures.

At the same time, what is happening now exposes starkly the lack of meaningful accountability. There are calls for the Transport Secretary, Chris Grayling, to resign. He’s a politician with such a track record of incompetence in the various ministerial roles he has held that he is widely dubbed ‘failing Grayling’; indeed he was the Justice Secretary responsible for the disastrous reforms discussed elsewhere on this blog. He has resisted these calls, on the grounds that it is not he, but the rail and train companies that are responsible.

This points up the basic, structural problem of the various ways that political and administrative systems have been increasingly separate over the last 30 years or so (sometimes by privatization, sometimes by the creation of arms’ length agencies, sometimes by sub-contracting) with the State no longer itself providing services. It enables politicians to avoid responsibility, in some sense with justification in that no one seriously thinks that the Minister resigning will, in and of itself, resolve this crisis.

Yet, as Grayling is finding, there are limits to that. As with the supposed transfer of risk to the private sector through PFI projects and outsourcing, when basic services fail people will, ultimately, blame politicians. It may also feed support for rail nationalization, which stood at 60% just before these recent events. And it may add to the public outrage about executive high pay (see pp. 117-118 of my book), given that Charles Horton, the CEO of GTR was paid almost £500M in 2016 despite many service problems even before the present ones.

But none of this will help with the immediate situation that I and tens of thousands of people are currently stuck with, which has made a chaotic mess of our lives.

Tax but don't spend

Last February I wrote a post in which I peevishly listed various experiences of organizations not working very well. One item on the list concerned the problems of getting through the HMRC (the British tax office) on the telephone. So I was interested to see that this week the National Audit Office (NAO) published a report on HMRC’s quality of service. This identified a “collapse” in customer service over 18 months in 2014-15 with call waiting times tripling and some customers being kept on hold for up to an hour.

What lay behind this were massive cuts in staffing levels, which in personal tax fell from 26,000 to 15,000 between 2010-11 and 2014-15. This of course is just one of the many consequences emerging across all parts of the public sector as ‘austerity economics’ bites deep under the ideology that eliminating the government’s budget deficit is the sole aim of policy (what Nobel economist Joseph Stiglitz calls “deficit fetishism”). But there is more to it than that: associated with the cuts was the technocratic fantasy of paperless (on line) tax returns and automated telephony.

We’ll break here for another oldster rant: why does everything have to be done online, with endless passwords and usernames in hundreds of different formats? How I long for the days when you could just fill in a form and send a cheque in the post. There are still a few places you can do this and I would single out from my own experiences the insurance company NFU Mutual as particularly good not just for this but for that fact that they have an ordinary phone number that goes to the local office where I talk to a person I have met and who has been in post through all the years I have dealt with them. And, on the one occasion I’ve had to make a claim, they are excellent to deal with. Is it because they are a mutual organization?

Back to the HMRC and what is interesting is to note how this story illustrates some of the recurring – and linked - themes of my book, namely those of unintended consequences and of the ambiguity of efficiency. In terms of unintended consequences the issue is how cost savings in one budget show up as new costs somewhere else. This is especially obvious in relation to HMRC because an effective tax gathering system is vital to meet the costs of government spending departments. So to impinge on the first inevitably has consequences for the second.

The issue of efficiency is linked in that what may be efficient for the HMRC maybe inefficient for other departments but, beyond that, inefficient for the user – in this case the taxpayer or, as they are now called, with tragic inevitability, customers. And let’s just have another break here to remind ourselves how crass, how nonsensical, it is to describe people paying taxes as ‘customers’. The NAO Report is helpful in quantifying this by reference to the HMRC’s own costings of people’s time (£17 per hour, apparently). On this basis, the time spent waiting and talking, and the cost of the call, added up to £97M (of which £66M was the cost of waiting to be answered) in 2015-16. So HMRC’s efficiency savings become its “customers’” costs. According to the NAO and the HMRC things are now getting better, though I must say that this is not my personal experience and, anyway, we have been here before. A damning 2012 NAO Report on phone call waits was also met with promises of improved performance and assurances that this was beginning to happen.

There’s a bigger organizational story here. The HMRC is the result of a merger, in 2005, between what were previously the Inland Revenue and the Customs and Excise office. Culturally very different, many date the problems at HMRC from this archetypical example of reform through reorganization. Subsequently, there have been repeated high-profile scandals. Dave Hartnett, its boss until 2012 when he joined global accountancy firm Deloitte as a consultant, was accused of cutting lax ‘sweetheart deals’ with big corporates like Vodafone and Goldman Sachs, and called “a liar” by the chair of the Public Accounts Committee. His successor, Lin Homer – dubbed ‘Dame Disaster’ by satirists – was criticised for failures in relation to the HSBC tax scandal and also for claiming the HMRC to have had its best year ever in 2015 despite – yet again – massive problems with phone systems. She stood down in April 2016.

As for the future, who knows? HMRC have taken on more staff, but the ongoing closure of 137 local tax offices in favour of 13 regional centres does not bode well, and the latest NAO Report says that HMRC’s capacity to sustain planned cost reductions rest upon its Making Tax Digital initiative, another techno-fantasy, which has already been met with scepticism, if not outright derision, by tax accountants.

It’s tempting to ascribe all this to the well-attested failures of neo-liberal ideology in general and the effects of its application to the public sector in particular. But it’s more complex, and worse, than that. Even the most assiduous neo-liberal assumes, accepts and expects that the State will act as a ‘nightwatchman’, undertaking the basic functions of tax collection, law and policing. But cuts have “brought the court system close to breaking point” and are causing a crisis in policing and in the prison system. It used to be the leitmotif of anti-state ideologues that cuts could be achieved by getting rid of ‘five-a-say Czars’, ‘diversity officers’ and, of course, that perennial favourite ‘faceless bureaucrats’. Now it turns out that even the most basic functions of the state are up for grabs. If proof of that were needed, look no further than current plans to privatise the Land Registry, the body that administers that most basic feature of any capitalist economy, property ownership.

Steel yourself

There are two big news stories in the UK today. One is the closure of the Port Talbot steelworks, following a decision by its Indian owners, Tata, and due mainly to the flood of cheaper Chinese steel into the UK and other markets. The other is the death of the veteran comedian Ronnie Corbett.

They could hardly be more different stories, but I think they are in a certain way linked. The closure of Port Talbot is expressive of the consequences of neo-liberal privatization and globalization. British Steel was privatised in 1988, one of a wave of privatizations under the second Thatcher government, and was subsequently merged with the Dutch group Corus, taken over by Tata in 2007. In recent months the influx of cheaper Chinese steel (a consequence of the slowdown in China) has rendered Port Talbot’s steel uncompetitive.

The fallout of that has exposed many ironies. Some insist that steel must continue to be produced in the UK because of its strategic importance to the defence industry. Here, as in Thatcherism, the tensions of free market and nationalist ideology are evident. Others, arguing for Brexit, complain that the EU has not prevented Chinese steel-dumping. The irony here is that those same people routinely argue against EU ‘meddling’ and yet are now bemoaning the lack of it. A further irony is that the lack of EU action derives from being blocked by the UK government, yet Brexiters say that they are in favour of decisions being made by the UK government, and that the UK has no influence on EU policy. A further irony – or, really, a re-run of the first - is that most Brexiters are free market liberals and yet in their desire to trash the EU they bemoan its lack of protectionism.

What, then, of the death of Ronnie Corbett (a resident of my home town, Croydon, by the way)? Well, the connection for me is that Corbett’s popularity was greatest in the heyday of 1970s broadcasting when he appeared in The Two Ronnies which routinely had audiences of 20 million people. That collective experience was all of a piece with the pre-neo-liberal world of nationalization and of the limited choice (of, in this case, TV channels) to which neo-liberals so vehemently object.

I’ve written elsewhere on this blog about Jonathan Coe’s novels and in particular about his sense of nostalgia, quoting the passage in his 2015 novel Number 11:

“Roger was convinced … that life was better, simpler, easier, in the past … it wasn’t just a hankering for childhood. It was bigger than that. It was to do with what the country was like … in the sixties and seventies …. For Roger it was about welfarism, and having a safety net, and above all … not being weighed down by choice all the time … he loved the idea of trusting people to make decisions on his behalf. Not all of them. Just some. Just enough so that you were free to live other parts of your life the way that you wanted.” (Coe, 2015: 176)

In an earlier (2001) novel, The Rotters’ Club, the central character Benjamin Trotter reflects on watching The Morecombe and Wise Show, which, like The Two Ronnies, attracted mass audiences in the 1970s. I don’t have the book to hand, but the gist of the passage was about Benjamin’s awareness that all over the country millions of people were watching the same show, and that he was part of a collective experience as he sat watching it with his family. Indeed I can remember myself how discussing these kind of shows the day after was the common, shared experience in schools and, I imagine, workplaces in the 1970s.

So what I am suggesting is that there was a relationship between a variety of forms of commonality at that time, ranging from shared ownership of industry to shared cultural experience. Some of that was, surely, nostalgic even at the time: shows like Morecombe and Wise and The Two Ronnies were the lineal and in some cases literal descendants of the music hall and seaside pier traditions of Victorian Britain.

If the two stories are connected, then so are the responses. A significant segment of the Brexit vote (and especially the older demographic from which it derives much of its support) is nostalgic for the days of British economic dominance but also for those shared cultural experiences and, probably, even the peculiarly British tradition of the music hall. I actually share some aspects of that nostalgia but I also recognize that it is not enough. And in particular, I can see that its sentimentality makes easy fodder for a Brexit campaign led not by those who want to protect Britain from the forces of globalization and neo-liberalism but by those whose most fervent dream is for their greater and more untrammelled application. In that dream, any number of workers and strategically important industries will be sacrificed; and as for The Two Ronnies well those who want it can subscribe to a pay-to-view channel or buy the DVD, right?

The real welfare scroungers

I have posted elsewhere on this blog (e.g. The New Barons and Impoverished by outsourcing) about the consequences of public sector outsourcing, picking up on some brief comments in the book (e.g. p. 86-7 and 124-5), but I want to return to it with a particularly egregious example that has just been reported, relating to the sub-contracting of the UK Probation Service:


“Taxpayers will face a £300m-£400m penalty if controversial probation privatisation contracts are cancelled after next May's general election under an ‘unprecedented’ clause that guarantees bidders their expected profits over the 10-year life of the contract.”


The neo-liberal theory behind outsourcing public services, which grows out of the general assumption that markets are efficient, is three-fold. First, that the private provider bears the risk and profit is the reward and incentive for this. Second, that providers who do not deliver will lose their contracts. And third that private providers will deliver at lower cost.


The probation case is the latest and perhaps most flagrant demonstration that the first is simply not true. It is not true in a general way – because, in the end, if a private provider fails then the State will ultimately have to step in, as happened when G4S failed to provide adequate security for the London Olympics, for example. But it is true in a more specific way, as well. For the providers of these probation services will get their profits come what may. For a long time now, research has shown how risk transference in this context is a myth – best documented in the case of Private Finance Initiatives (PFI) as, for example, in this study by Ball, Heafey & King (2003).


This in itself blunts the second rationale, because there is no downside to losing a contract if the provision fails. And in case it might be thought that a firm which keeps failing to deliver will no longer be awarded new contracts, then that too is false. Even whilst under investigation for fraud in relation to previous contracts, the same firms are in the running for new contracts (see also p.87 of book for older examples).


As for lower costs, these are achieved in two ways. One is simply by reducing the number of staff and their wages, which saves money on one government budget but increases the costs on other budgets, such as unemployment and tax credits. Beyond that – and the probation service is again an example – all the difficult, complex and expensive cases are left as in the rump of the public service provision.


There are simply too many examples of public outsourcing failure for it to be remotely credible any more in the terms that it is justified. On some internet discussion forums I have seen, apparently in all seriousness, a last ditch attempt to do so through the argument that these failures are the consequence of public sector incompetence in drawing up contracts. It is a breathtakingly circular and unfalsifiable argument: outsourcing must work because private is better than public and if it doesn’t work then it proves that private is better than public. One might admire the audacity of such market ideologues but, really, this no longer has any discernible roots in market ideology. It is better understood through another meme of the neo-liberal right: welfare-scrounging. It is the welfare-scrounging of the super-rich, living voraciously and vicariously off the hollowed-out shadow state.

More on power

This issue of how to organize electricity generation and supply is a pressing and controversial one across the globe, from Turkey to Nigeria to India to the USA, and it is at the top of the political agenda in the UK, where the cost of electricity is a hot issue. I heard the government’s energy minister, Ed Davey, interviewed the other day and he was talking about all sorts of complicated measures he had in mind to make the energy market work, including a state-funded network of advisors, state rebates for the most vulnerable and so on. And of course his central idea is about switching between providers - but that is absurd because the big energy companies offer more or less the same prices and because what is the best deal when you sign up will, possibly within a few hours, be a poor deal - and yet typically you are locked into it. Or, if not, then you have to engage in constant market scanning and switching. This is an aspect of the paradox of choice, discussed in the book (p.75).

All these absurd gyrations arise from the refusal to acknowledge a basic truth - electricity supply is a textbook natural monopoly and, as such, the most efficient way to run it is through state provision. That refusal exists as much in the opposition Labour Party, which has proposed a price freeze, as in the government.  It's pointless to blame the electricity companies - the scope they have to compete in the way that, say, supermarkets do is virtually nil, even if they were minded to (and why should they be - as Adam Smith observed long ago, markets do not work on the basis of charity or, as we might nowadays say, social responsibility and we should not expect them to). That comparison is an instructive one: no one thinks that to make the supermarkets be competitive we have to have community advisors, rebates for the poor, complicated rules about switching, statutory requirements to offer the best deal and a government regulator because (whatever one thinks of supermarkets) all that consumers have to do if they are not satisfied is do their next shop somewhere else. With many caveats it more or less works as a market.

This week, the big six electricity suppliers were called to the British parliament, accused of price fixing, because they all more or less simultaneously announce more or less similar price rises. Their defence was that their price rises were because almost all their costs – the wholesale electricity price and taxes – are beyond their control. But if we turn that round, it also means that they cannot compete on price. So what else might they compete on? In most markets it would be product quality and product innovation, but that too is impossible: electricity is just electricity, so there is no way of offering ‘really good electricity’. For the same reason, they can’t even compete on brand image: no one would think there was something especially worthwhile about electricity from, say, E-On as opposed to EDF, would they?

So electricity (like other utilities such as gas and water) simply does not and cannot a function as a competitive market. By pretending otherwise we have to bear all the costs of an entirely ineffective regulatory system in order to pay both in supply and - as mentioned in my previous post - in generation often state owned companies of other countries to deliver the chimerical benefits of privatization and competition.

Thus, to use an over-used phrase, there is a huge elephant in the room that no mainstream British politician will talk about: the whole thing needs to be re-nationalised. And, curiously, given politicians unwillingness to talk about it, this is supported by 69% of the British electorate.

Power at any cost

It was announced today that a new nuclear energy plant is to be built in Britain, a development described by the government as ‘historic’. Well, it is historic but perhaps not in ways that give any great cause for celebration. It is the first time that a nuclear power station has been built in Britain not by the government but by private investors, principally state-owned companies in China and France. It is an extraordinary irony that the privatization of British electricity generation – on the basis of the supposed virtues of the private sector – has ended up with paying overseas public companies to do what used to be done by the British state. It is nevertheless underwritten by the British state: there is no risk for the investors both in the specific sense that they are guaranteed a future revenue stream set at twice the level of present prices and in the more diffuse sense that, ultimately, the state will be responsible for ensuring power supplies come what may.

The deal resembles the PFI deals extensively used for public investment in Britain and elsewhere over recent decades. In these, present private investment is paid for by guaranteed long-term future expensive payments from the public purse. Notionally risk is transferred from the state but that is indeed notional since, when public services are at stake, the risk ends up back with the government, as happened for example with the London Underground. PFI has been widely criticised for its poor value.

It is difficult to overstate the folly of these kinds of deals, and not just financially. Thinking about energy in particular (but also transport, healthcare etc.) the idea that key, strategic, services can so casually be handed over by governments is breath taking. With PFI it could be understood as an infatuation with the private sector in line with neo-liberal ideology. But in the case of the new power station there is not even that explanation. Instead, it actually shows the bankruptcy – literally – of that ideology, because it shows that the shrivelled neo-liberal state has no option other than to bribe the state-owned companies of other countries to do what it no longer has the skills or the capital to do itself – whatever the cost.

Thinking about immigration

A comment on my last post – yay, a comment! thank you! – reminds me that I was going to come back to the issue of immigration. It’s a good time to do so from a UK perspective as David Cameron, the British Prime Minister, has just made a speech promising to ‘get tough’ on immigration. That is of no great interest in itself since it’s timing is mainly motivated by the rise of the anti-immigration, anti-EU UKIP Party, whilst its content is mainly a re-assertion of existing policy (e.g. restrictions on immigrants’ access to benefits) or a response to virtually non-existent problems (e.g. ‘health tourism’). Its wider significance is that, unsurprisingly in a time of what is, in effect, if not in formal definition, a global economic depression anti-immigration sentiment has risen. In the UK this is still relatively benign compared with, say, Greece, where the growth of the neo-fascist Golden Dawn party has seen increasing levels of violence against immigrants.

It’s worth recalling why this topic is relevant to the study of organizations and the answer, of course, is that most migration is connected with movements of labour. It is hardly surprising, then, that the business community is, generally, in favour of immigration either as a way of increasing the pool of labour from which it can choose skilled workers or as a way of depressing wages (although the effects of immigration of wage rates is not clear cut). In this way it leads to schisms in both the traditional right and the traditional left. For the right, it opens up the contradiction between social traditionalism and free-market economics. For the left, the contradiction between internationalism and the protection of national working-class constituencies. Thus, in the UK, the Conservative policy of an immigration cap has been vociferously criticised by the City of London. On the other hand, the previous Labour government policy of not restricting immigration from new East European entrants to the EU became an issue in the last election, symbolised by the ‘bigot gate’ controversy.

In some ways, there is nothing new in all this. Although it is often said by opponents of immigration that it used to be fine but has now become ‘uncontrolled’ and is having adverse consequences for employment, social cohesion, housing, overcrowding and so on, I can recall in the 1970s exactly the same kinds of arguments being made. In other words, in precisely the period that is now seen as a time of immigration not being a problem it was, in fact, constituted as a problem. The lesson, I think, is that – leaving aside the out and out racists – problems of one sort (e.g. lack of housing) are ascribed to something else: immigration. In fact, there is no more reason why population growth by immigration causes any more problems that population growth by indigenous fertility. What would actually be a serious problem for Western countries, given historically declining fertility rates and an ageing population, would be a lack of immigration.

What is bizarre is that a much more obvious source of complaint would be the migration of capital, both in the sense of the globalized ownership of what were hitherto national or even regional companies; and the propensity of such companies to shift production and employment around the globe. For example, in the UK, it has just been announced that Sea and Air Rescue (one of whose employees is no less than Prince William, the heir to the British throne) is to be sub-contracted to a US company. Unlike labour migration, capital migration has had very definite effects upon the employment prospects of Europeans and yet is commonly regarded as a simply ‘natural’ event, rather than an outcome of policy. Any criticism of that policy is derided as protectionism. By contrast, immigration is commonly regarded as the ‘unnatural’ consequence of policy decisions and defence of those decisions is derided as being ‘elitist’, even treasonous.

The failure of mainstream politics is not, then, one of not ‘listening’ to the ‘legitimate concerns’ of the population: it is of failing to spell out the meaning and consequences of the globalization that they champion – the Right through dishonesty, the Left through cowardice. Into the space they have left is inserted a populism which is at best platitudinous and at worst violent.

Beef with efficiency

The current horsemeat in frozen beef meals scandal is an interesting illustration of the issues around what constitutes efficiency which I discuss at several points in the book. The story reflects many different dimensions of this. The way that a hugely complex globalized supply chain has developed reflects one particular, dominant, understanding of organizational efficiency: driving down costs by all means possible. That presents some serious problems even leaving aside the use of horsemeat, such as the unappetising use of mechanically recovered meat products. Thus, even if our microwaveable lasagne only contained beef, we might be rather horrified to see just what that really consisted of, as this selection of charming images allows us to do. But this is what ‘efficient’ use of carcasses means in the dominant understanding. Passing off horsemeat as beef, of course, represents something beyond this ‘normal’ efficiency, because it involves fraud and misrepresentation. But it is only the extension of the same logic. For the suppliers and producers involved it is, precisely, efficient.

To prevent such frauds, and to control the adulteration of foodstuffs in general, requires state regulation, and such regulation is one of the earliest examples of regulation of the free market. This becomes much more complex in extended global supply chains which span national jurisdictions, another of the ways that politics has not caught up with economics as I said in an earlier post about tax avoidance. But it also makes it bizarre that, in the UK, recent years have seen a reduction of food inspectors. Of course this, too, is ‘efficient’ with respect to government budgets, ‘removing the burden of red tape’ from businesses, and ‘getting value for money’ for the taxpayer. In other ways it is grossly inefficient. For a little more paid in tax, the supermarkets and food brands now suffering a catastrophic collapse of confidence in their products - and maze of expensive legal actions - could have had an ‘efficient’ system of inspection.

Then, beyond this, there is you and me, the consumer. Unwilling to spend our time buying ingredients and cooking them, we find it more efficient to buy packaged up meals for the microwave. Worldwide, consumption of ready meals increased by about 10% in volume 2010-2011. And not only do we want it quick, we want it cheap. Efficient? Perhaps not, considering the very high amounts of salt and fat that some of these meals contain. So maybe the time we saved on cooking will turn out to be dwarfed by the time we end up spending in hospital. There will be plenty of time on the cardiac ward to ponder the meaning of efficiency.

Impoverished by outsourcing

Under the cover of the budget deficits which are mainly the result of the financial crisis, the welfare state in many European countries is being rolled back. In the UK, the latest manifestation of this is today’s announcement that much of the work of the probation service is to be outsourced to private providers. These will, it is said, be ‘paid by results’ implying that they will only be paid if re-offending does not occur. This move combines two now familiar claims made by neo-liberal policymakers but is also indicative of the way that neo-liberalism is now transforming into something quite different.

The familiar claims are, first, that private provision is more effective then public provision, with competition driving standards up and prices down and thus offering taxpayers better value for money. The other is something well-known in management theory, namely that motivation comes from economic reward in the way famously envisaged by Taylor.

It’s not hard to predict what the results will be, because it is exactly the same policy that has been applied to workfare to work programmes. Here, the private provider is to be paid according to how many unemployed people are placed in jobs. In fact, the evidence shows that the leading provider in this area, A4E, is less successful at placing people than would be the case if no such scheme existed. Yet they continue to be paid. Moreover, the payment by results system, which is presented as simple common sense, has precisely the kinds of dysfunctions that are well-known in management theory. It incentivises the providers to focus on the easiest cases and to write off those with more complex needs.

The deficiencies of such schemes do not end there. Typically, such outsourcing involves recruiting staff who used to work for the public sector to work for the private contractor but on worse terms and conditions, whilst the contractors themselves are normally global companies who do all they can to reduce their UK tax liability.

However, the idea that what is happening here represents anything like the competitive free market envisaged by neo-liberal theory is quite laughable. What we have is a handful of companies to whom contract after contract is awarded by the UK and other governments despite a track record of persistent failure. Examples include the well-documented case of Capita (discussed on p.87 of the book but see also here) or the high-profile case of G4S which failed to provide the necessary security for the 2012 Olympics and had to be bailed out by the oh-so-incompetent public sector.

What is emerging, then, is not neo-liberalism as normally understood but what might be called neo-mercantilism. Under mercantilism, an economic doctrine of the 15th-17th centuries, companies were licensed by the State to trade, thus stifling competition and encouraging corruption. Ironically, it was Adam Smith, the unwitting poster boy of neo-liberals, who was one of its sternest critics. Now, we see something similar emerging, with the global outsourcing firms being handed licences to milk what were hitherto public monopolies, with guaranteed revenue streams from the taxpayer. We also see something of the corruption, too, with politicians and senior civil servants who bestow these contracts moving seamlessly on retirement onto the boards of the companies who benefit. The overall effect is quintuply impoverishing: poorer public services, higher costs, diminished employment conditions, an erosion of the tax base, and a corruption of politics.