Then the 2008 financial crisis happened, followed by a long period of recession and austerity, and suddenly it turned out that the technocratic consensus wasn’t as competent or moderate as it had appeared. Ten to twenty per cent of the electorate suddenly realized that they might have to take an interest in politics after all. So they started paying attention again, and they didn’t have the basic assumptions of the mainstream. All they knew was that the people who used to be in charge seemed to have screwed things up mightily.

Even in the early stages when Beer was first retained as a consultant, people had been warning the Allende government that it was nationalising things too fast, without regard for the capacity to manage them, and seemingly without much in the way of an overall industrial plan. They had introduced a system of ‘intervenors’ who sat in the factories and passed on orders from central government; this was unpopular, and contributed to the impression of central technocratic control rather than devolved autonomous production.

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.

This had a frightful effect on public sector management. The coordination function was impaired; the difficulty of ‘joined-up government’ and making policy for problems that crossed the boundaries of different agencies was repeatedly remarked on. And the operational delivery functions started to suffer severe cognitive loss, too. A company that sells goods and services for profit can never completely sever the connection which takes information from its customers; the people who buy the thing have the ability to refuse to do so. In many cases, people who interact with the state don’t even have the ability to transmit that single bit of information because they can’t shop elsewhere; they can complain if they like, but they interact with the sermon representative, the paradigmatic accountability sink.

Things got worse over a long period of time, but this was initially hard to notice. Recall that in Jerome Levy’s high-level view of the economy, the investing class has two purposes — providing insurance against the business cycle to the working class, and providing them with consumer goods. While the first of these services had been abandoned, this was not immediately obvious — the business cycle itself had been temporarily calmed down. And although many of the purchases were funded by debt, the second still seemed to be functioning. Over the course of a few decades, the risk transfer was completed.

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.