The Unaccountability Machine— Dan Davies

Part 1: The Nature of the Crisis

1.Something’s Up

““Capitalism is disappearing, but Socialism is not replacing it. What is now arising is a new kind of planned, centralised society which will be neither capitalist nor, in any accepted sense of the word, democratic. The rulers of this new society will be the people who effectively control the means of production: that is, business executives, technicians, bureaucrats and soldiers.”

George Orwell, ‘James Burnham and the Managerial Revolution’,1946

Economists end up solving this problem by denying it (a mechanism that Stafford Beer looked at in detail, concluding that ignorance is a kind of information processing system of last resort). Where analysis fails, ideology steps in, and the solution the economists decided on was to fantasise an equivalent system for producers — a profit-maximising firm with an understanding of its market, a style production process and a manageable set of decisions. It ended up going disastrously wrong, but the original intellectual sin may have been the failure to respect the integrity of the black box.

Part 3: The Blind Spots

6. Economics and How It Got That Way

This has been all but eclipsed by another kind of economics. One of Friedrich Hayek’s contemporaries defined economics as ‘the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses’. It’s this idea of a generalised study of human behaviour under conditions of scarcity that has been responsible for the economists’ intellectual imperialism. Because if you announce that you’re the experts on human beings when they have to choose between different priorities under conditions of scarce resources, well, when aren’t resources scarce? When don’t people have to choose between different things they want?

From a cybernetic point of view, it’s interesting as an example of how the systems and structures mattered so much more than the individuals involved. The development of the Friedman doctrine into the intellectual backing for the leveraged buyout boom and the private equity industry are best seen as a conflict between two comprehensive systems of interest, both of which might have regarded the other as a threat. The great unremarked class struggle that happened in the 1970s and 1980s was that between capitalism and managerialism.

The managers lost this struggle, pretty comprehensively. And as we’ve seen, the combination of the blind spots in management and the blind spots in economics came together to produce an ideology which was bound to remove management capacity. And that created further blind spots, and further reduced the system’s ability to cope with shocks. The story of how we got to where we are is a story of the attempts of the system to cope with this, and to search for short-term equilibrium.

There are a number of models, most of them ignored for decades, in which the corporate sector provides a stabilising function, insuring the working class against fluctuations in the business cycle, rather than expecting them to soak up the volatility.

The intriguing thing is that Simon and Galbraith didn’t write polemics to the effect that this was how corporations should behave — they just described what was in front of them at the time. Before Milton Friedman’s essay, lots of people assumed that this was just naturally the way things would tend. Without the Friedman fiction by, without very great re-engineering of the systems of corporate finance, the industrial economy might have just gone on and developed into a technostructure.

Maybe they were right? It would certainly be good if they were, because that might indicate a much easier path to defuse the immediate source of crisis. If the problem with the modern corporation is the result of the capitalist counter-revolution against the managerial class, we just need to change the terms of the battle.