Government as experiment?
John Law and Karel Williams
What if we think of government as experiment? So that we see the UK since 1979 has been
conducting a particular kind of economic experiment whereby abstract ideas about
competition and markets frame generic cures for each and every sector’s problems. Our
argument is that over the years this experimental commitment has been converted into a
dogma, with the result that government has not recognised its mistakes and cannot build on
successes. Government is in a state of non-learning.
Against this, we propose reframing to open up new experimental possibilities. We illustrate
this with a worked example taken from our research. Here we will focus on a sphere of the
economy- the foundational economy of utilities, supermarkets, schools and adult care- which
is sheltered so that government could experiment with of new kinds of social franchise
policies. Then we challenge you to think about how this approach could be applied to an
activity you know in the voluntary or public sector. Instead of just blaming government, what
could and should we all do to open up new experimental possibilities and novel ways of
learning about and managing economy and society?
Experiment and incremental learning or reframing
Britain since 1979 has been the test-bed of a social and economic experiment in theory and
practice that has taken the form of privatisation, deregulation and marketization. The
promise of the experiment was (or has been) prosperity and the outcome is at best patchy.
Whatever the successes may have been, they need to be set again increasing inequalities in
wealth and income, regional disparities, the substantial de-industrialisation of the UK, and
the 2008 financial crisis.
Some insist that the experiment is incomplete and that the ills of (say) the National Health
Service and the care system or defence procurement will be remedied by marketization. But
there are powerful arguments for thinking otherwise. In utilities, BT as dominant player
rations investment in broadband infrastructure, the big 6 players in energy confuse
consumers, and in rail the burden of investment falls on the state. Outsourced service
providers such as Serco and G4S fail to deliver, marketization of the NHS impedes
cooperative health care provision and adult care combines inferior care and low pay.
But if the experiment is failing, then what needs to be done? Politically, we approach this
question with a very simple set of linked propositions about how government is about
experimenting and experimenting is about learning. Effective learning is about building on
successes but also about making mistakes, recognising these as mistakes, and moving on. In
thinking about this process of trial and error, it is helpful to distinguish between four
different kinds of learning:
1. learning within the framework, which uses the latter to judge between outcomes;
2. learning by adapting the framework, in order to remedy a detectable problem;
3. learning as gaming the framework in order to turn it to advantage (for instance by
complying formally with performance metrics); and finally there is
4. learning as large scale reframing during which the validity of the whole framework is
undermined.
Select Committee Reports and all the rest show that MPS, ministers and civil servants can
recognise the many policy failures which are reported on the front pages of the broadsheet
newspapers. In the face of failure they accept that things are not necessarily working very
well, but they favour incremental learning within the framework (learning mode 1), or by
adapting it in small ways (learning mode 2). While private operators display increasing skill at
gaming the system (learning mode 3), government is unable to question the overall
framework, and continues to try to impose an abstract version of competition and market
rather than exploring alternatives.
So using this simple framework, our argument is that key parts of the British state – and in
particular the Treasury – have lost the capacity to think about reframing ( learning 4) because
they have become dogmatically committed to a single form of experiment within one
unquestioned framework: ‘TINA’ (‘there is no alternative’) was Margaret Thatcher’s slogan.
Two or three decades on this has become ‘TINAF’ (‘there is no alternative framework’). This
is the working assumption of New Labour and Coalition ministries. If this seems an
exaggeration, consider the official determination to persist with rail franchising in the
completely dysfunctional railway financing system (Bowman et al. 2013).
Our rethinking: social franchising in the foundational economy
Here is an example of how we have started thinking about what reframing might mean. The
standard post 1979 assumption is that the whole national economy is or should be the
sphere of market competition enforced by government policy. Hence we have flexibilised
labour markets to ensure workers compete, competition authorities to make sure that firms
compete, privatization of utilities with regulators to simulate competition, marketization
and outsourcing of public sector activities put out to competitive tender. And the corollary
political argument is that we must submit to international competition in a globalised world.
So we began to think about the (many) activities which could not easily be fitted into this
frame and started with sectors we knew like railways, supermarkets and retail banking
because we had recently researched then for sponsors like the British TUC and a Dutch meat
company
Here we had a variety of activities producing mostly mundane and taken for granted goods
and services. These included: the pipe and cable utilities; some traditionally private activities
such as retail banking, supermarket food and petrol retailing, together with food processing;
transport; and some traditionally state activities including especially health, education and
welfare or social care. Then we bracketed these diverse activities into a category which we
called the ‘foundational economy’ which had four interesting characteristics.
1. Size. These activities employ 40 % of the workforce and more than 2/3rds of women
workers. Size is important because changes in the foundational economy make a
major difference to a large part of the labour force and its customers and other
stake-holders. (Compare and contrast this with R and D intensive high-tech
industries which employ less than 2% of the labour force).
2. Distribution. It is spread out across the UK because foundational activities such as
schooling or retailing are distributed according to population. The thinking here is
that any successful attempt to improve the foundational economy would help to
rectify the profound regional imbalances currently evident in our unsustainable
economic recovery.
3. Protection. The foundational economy is sheltered either because it is (implicitly or
explicitly) politically franchised by the state, or because it is protected by barriers
from direct, non-territorial, competition. Enterprises in the foundational economy
are in direct and mutually-dependent relations with communities or user-groups,
often experience limited competition, and draw their customers and profits from
those communities. The argument is that in return for their sheltered existence they
owe something to those communities or groups.
4. Political consent. The foundational economy is more or less politically dependent
and rests on implicit or explicit political license. This may be explicit and contractual
(rail franchising, social care) or regulatory (as in the relation between supermarkets
and planning permissions). Alternatively, and they may exercise de facto territorial
monopolies (bank branches), or depend on state inducements (rural broadband
rollout). The argument is that enterprises in the foundational economy lead a
sheltered life in part for political reasons.
All this is invisible to the current generation of policy makers who would subject the whole
economy to abstract market logic on the assumption that what is appropriate to globally
competitive industries is similarly appropriate to sheltered parts of the economy. The idea
that an alternative economic and political framework might be better has not been
available. Our counter-argument is that the foundational deserves attention conceptually,
economically, and politically and because it is different.
How to think about alternative policies? We have noted above that foundational enterprises
depend on more or less active political consent. This means that it is possible to think of
them as social licenses. Licensing is an explicit or implicit arrangement that offers
contracting enterprises privileges and rights whilst placing them under reciprocal obligations
as they draw household spending and/ or tax revenue: this is explicit in the case of a
franchised train operating company or a private provider of NHS services, but implicit in the
case of a supermarket or high street bank. Our policy proposal extends the notion of social
license because we want to argue that all foundational enterprises should be understood as
social licenses.
In return for the sheltered streams of revenue that we have briefly described above, such
enterprises should be required to offer social returns. This is a suggestion that is
simultaneously mundane and quite far reaching. It is mundane because in large parts of the
foundational economy this is already happening. In the ‘para-state’ sector, where the state
outsources its services (including the railways, prisons and security services, education, and
health and social care) the logic of social licensing of private providers from tax revenue.is
already in place. However, in other parts of the foundational economy (for instance retail
banking or the supermarkets) revenue comes from customers. To treat the branch of a
supermarket chain as a social license would require new policy mechanisms and political
understandings of the character of economic activity.
A supermarket chain, for example, should be required to think broadly about the effect of
its conduct on its supply chains which requires more than signing up for fair trade. In meat
supply, Tesco and the other buyer led supermarket chains, have driven down prices against
British pig farmers and processors so that a large part of the UK’s supply of pigs is now
sourced from Denmark and the Netherlands, with negative national consequences for
employment and the balance of payments. However, there is one supermarket chain that
works quite differently. Morrison profitably slaughters and processes its pigs in-house and
has longer term relations with its (British) pig farmers. If you have the expertise of a
Morrison to run an effective integrated supply chain the results pay just as well if not better.
So, why could not the other supermarkets work in this way? Why is government not
pressuring the supermarkets to work differently?
Your Challenge
Our challenge for you is to think about whether and how this kind of reframing approach
could be applied to a public sector or voluntary activity that you know from your own
experience as manager or worker. It could be the probation service, NHS primary care,
secondary schools, housing associations, credit unions or major charities like the RSPB.
Here are four questions to get you started:
(1) Is your activity part of the foundational economy? Numbers employed or their
distribution across the UK are both relevant. But the key issue is whether your activity
is economically sheltered from competition or whether it operates politically to serve
a local, regional or special interest public. In sum, is your activity a kind of economic
and political franchise?
(2) How (if at all) has your activity been disrupted by reform and restructuring motivated by a
generalised presumption in favour of competition and markets (including breaking up large
integrated organisations, privatization and outsourcing)? Be fair, because many reforms
produce (sometimes unintended) betterment and you should try to identify framework
related issues not just (fixable) problems.
(3) What different set of priorities should be articulated for your activity? If you think of
stakeholders (customers, workforce, suppliers and investors) whose interests need to be
pressed and through what measures. How would you balance inevitable conflicting demands?
And please explain who loses what and why?
(4) How would social licensing work in your activity? Is reorganisation of operating units and
control structures necessary or a pernicious irrelevance? Do you have political actors (eg in
local, regional or national government) who could and would take responsibility for social
licensing? If not, why not?
We envisage answers would be activity and sector specific because you are not trying to discover or
apply a general formula. We hope your answers feed into disruptive thinking about new kinds of policy
experiment. If you can think disruptively without using our foundational economy frame, please do
so.