The Big Con: How the Consulting Industry Weakens Our Businesses, Infantilizes our Governments and Warps our Economies by Mariana Mazzucato & Rosie Collington • 2023 • Penguin • 352 pages • $30
The British management scientist Stafford Beer occasionally used to begin lectures by describing a horrible experiment he had witnessed in a medical laboratory, in which neuroscientists cut the connection between the cerebrum of a cat and the rest of its brain. The animal lived the remainder of its short life in a peculiar state of dysfunction—it could walk, eat food that was placed in front of it, and even clean itself, but it was no longer capable of purposive action. It could survive only in an unchanging environment; it could no longer respond to unanticipated stimuli.
“The decerebrate cat” was Beer’s go-to metaphor for the state of many public sector organizations (particularly universities) in the 1970s. Since then, things may have gotten substantially worse. The economist Mariana Mazzucato has written over a period of many years about the need for an active and innovative public sector in the modern industrial economy, setting up the Institute for Innovation and Public Purpose (IIPP) at University College London to pursue research into how state capabilities can be built and used. Now, in a new book co-written with her IIPP colleague and PhD student Rosie Collington, she addresses the question of why there is a problem to solve at all. Why are so many government departments so weak and dysfunctional when they need to be strong and capable? The Big Con focuses on one particularly serious cause: the management consulting industry.
Management consulting is something of a soft target, to be sure. People in all walks of life are generally predisposed to be hostile to the highly paid go-getters who walk into their offices and claim to know better than anyone who already works there. And the industry gives its critics a lot of material to work with. As a “profession” with no professional standards body, no professional regulation, and no agreed code of professional ethics, it proliferates outrageous behavior at a rate to rival the bankers. One of the things that may strike and appall fans of the genre when reading this book is that although it contains a catalogue of crimes almost as extensive as those in When McKinsey Comes To Town, The Management Myth, or Rip-Off!, there is surprisingly little overlap in the actual scandals. Mazzucato and Collington have not yet won, but thoroughly deserve, the highest accolade that can be awarded in the consulting literature: a snooty Statement On A Recently Published Book on the webpage of McKinsey or Bain.
However, precisely because everyone hates the consultants, it’s important to be fair to them. It is true that in a lot of cases, management consultants just collect solutions that the employees knew about already and dress them up in fancy language and PowerPoint slides to make them appealing to top executives. But this is what they are for! If your staff has a solution to your problem but isn’t able to make it heard, then that is a management failure, and management failures are what management consultants are there to cure. You might as well claim that a barber doesn’t provide any useful service because he just rearranges the same hair that you already had.
The trouble starts because consultants always pitch for repeat business. Like a doctor curing a patient, a consulting firm that did its job properly would make itself redundant. The temptation is instead to act as a corporate Dr. Feelgood, prescribing solutions that ease clients’ pain in the short term while sapping their independence and health in the long term. Mazzucato and Collington call this phenomenon “infantilization” where Stafford Beer called it “decerebration”; the book notes that it has also been described as “consultocracy” by British government researchers and “brochuremanship” by the former director of NASA.
It leads to a kind of self-fulfilling prophecy. Having invited the consultants in out of a belief that the private sector can handle complicated things like technology and economic studies better, the public sector eventually succumbs to the consultants’ upselling of projects that encroach further on government’s core functions. This sets up a chain of events ensuring that the client’s own competence gradually declines, rendering it unable to plan, let alone innovate, and finally bringing it to a stage where it’s completely dependent on outside help, like one of those poor cats. As Mazzucato and Collington put it: “The consulting industry today is not merely a helping hand; its advice and actions are not purely technical and neutral, facilitating a more effective functioning of society and reducing the ‘transaction costs’ of clients. It enables the actualization of a particular view of the economy that has created dysfunctions in government and business around the world.”
When I joined the Bank of England as a graduate trainee in 1994 (three years before it had an email address), one of the first things we were shown was the filing system: great walls of metal cabinets, with three different kinds of locks depending on the secrecy of the material within. Everything was written up in memos and “notes for record,” and these were supervised by the Information and Records Officers—the “I&Rs.” The I&R staff consisted mostly of working-class young women from suburbs to the east of London, and we were taught to fear and respect them; if you were below the rank of senior manager, you were definitely less important than the files. From time to time, the excess of older paperwork was taken to an out-of-town facility that also housed the bank’s sports club. As it had some good tennis courts that professionals to trained on, people tended to find a need to consult past documents and “go down to Roehampton” in the weeks immediately before the Wimbledon championship.
I was always skeptical about how valuable this great big papery brain really was; it has presumably been digitized by now, and I doubt the I&R people have survived successive rounds of staff and budget cuts in any great number. The files sometimes made entertaining reading when you found an excuse to look up a past crisis or bank failure, but they had hardly any relevance to policy. Not the least of the reasons for this was that as well as being taught to respect the files, we were taught to fear them; you made sure not to write down anything that you wouldn’t be happy to see dug out by a “litigation trawl” a decade later.
But that’s by the by. The files were important because of the names they contained; they were a by-product of the true institutional memory of the bank, which was stored in the heads of all the long-serving officials who had seen and done so much more than they had written down. And more so, the files were symbolic, a reminder of permanence. The real purpose of the fearsome filing clerks and the treasure they guarded was to be a living reminder that this place matters. We’ve been around for 400 years. There isn’t much we haven’t seen and there isn’t much we can’t do. In a government department where we often had to interact with high-powered investment bankers and their lawyers, this message was and is very important. Central bankers need to have a certain swagger, the self-confidence to take action, and when they falter or allow themselves to be intimidated, it tends to end in embarrassment and crisis.
This is the background to Mariana Mazzucato’s work over the last decade and more: the central question of the market economy’s need for public sector capability. She is one of these authors, like Noam Chomsky, who has a single big idea (I’ve joked that the point of Chomsky’s 432-page book Manufacturing Consent is summarized succinctly by the two-word phrase “manufacturing consent”), but one that needs to be regularly fleshed out at book length and applied to particular cases so that you can really appreciate how important it is.
Mazzucato’s equivalent to “manufacturing consent” might be the title of her 2013 book, The Entrepreneurial State. This book challenged the conventional history of Silicon Valley by showing that in many cases, private sector fortunes had been built on scientific and technological breakthroughs achieved with government funding. In her later The Value of Everything, this idea was supplemented with an analysis of the ways in which business interests generate value for themselves and their shareholders by enclosing and rent-seeking in public spaces, rather than by innovation and production. The overall vision is one directly opposed to the neoliberal concept of a minimal state that is responsible for setting rules and addressing abuses but otherwise abandons the economic sphere to private capital. In Mazzucato’s “mission economy” (the title of the previous book to this one), she makes a case for policies that take an active role in creating new markets and responding to challenges.
While the “New Public Management” of the 1990s called on the government to “steer more and row less,” Mazzucato and Collington make the case that the two are inseparable, saying that “the less a government rows, the less it learns…the less it can steer.” When the oars are handed over to other actors, “it doesn’t matter how much the government yells directions from the cox; if the actors that hold the oars don’t want to row, the boat will not go anywhere.” Whether the motivation for doing so is profit or ideology, the effect is the same: Private enterprise takes over those parts of the state that it can monetize and allows the rest to wither.
Mazzucato’s work, then, has been an essential counterweight to the lazy assumption that smallness is an intrinsically desirable property of government. It is excellent news for the hope of a functional public sphere that she now has a co-author capable of maintaining the pace of her output, and of doing so in an effective and straightforward prose style that’s eerily reminiscent of the best management consulting reports, piling up the damning evidence with simple factual statements rather than explosive condemnatory language.
The title of this book is a slightly cleverer pun than it appears. The “big con” is consulting, and indeed the authors characterize management consulting in the public sector as a con game. But it’s a confidence trick in more than one sense. To lodge itself inside the system, the industry has to destroy the self-confidence of its host, creating an illusion that its services are essential. The infantilization of the public sector could never have happened if it hadn’t been accompanied by decades of ideological work by advocates of small government in the political and business communities that was aimed at convincing the victims that they deserved it—that the government was intrinsically incapable, lazy, and stupid, and that it ought to hand over as much activity as possible to professionals.
But this victimhood was a two-way street. In many cases, the public sector partners found it devilishly convenient to adopt an air of weakness and helplessness, because a decision that has been handed on to consultants is one for which there can be no accountability. It passes, almost imperceptibly, out of the realm of democratic oversight and into that of technocratic “solution.” One of the great functions of management consultancies in the corporate world is to take on the role of scapegoat for decisions with which their clients would prefer not to be associated. This is even more intoxicating a promise to a politician than it is to a middle manager.
The Big Con does a good job of outlining not only the contours and the causes of the problem, but also its sheer scale. We hear about a British transport department that was unable to run a tender process, a Danish tax agency that couldn’t update its own computer systems, and the organizational fiasco in Sweden that led to the New Karolinska University Hospital being called “the most expensive hospital in the world.”
Mazzucato and Collington—in my view, correctly—also take an expansive definition of what constitutes a “management consultant.” The French food services firm Sodexo, for example, has nearly half a million employees worldwide, the vast majority of whom are cooks, laundry workers, and the like. But when it contracts with the public sector to take over the catering in schools or prisons, it’s obviously not the customer-facing employees it’s bringing to the table; in most cases, those are going to be the same people doing the same jobs as they were under public ownership, for lower pay. A big “outsourcing” company is selling the service of managing the delivery of what used to be a government function.
And all the time, advances and innovations in these fields are accruing outside the public sector, to the benefit of the private sector partner. The cost of management consulting services can’t simply be measured by looking at the size of the overall billings, massive though they sometimes are. When the public sector client is sufficiently denatured, decerebrated, and infantilized, the consultants get brought into the actual policy process, where they can write the very rules of the game. In extreme cases identified by the UK Public Accounts Committee in 2013, the consultants seemed to be helping to draft the tax laws while simultaneously advising clients on how to avoid them. Ironically, as the book notes, “as a former consultant at Price Waterhouse herself, [the chair of the committee] was in a better position than most to make this analysis.”
This raises the disquieting possibility that the huge amounts of money spent on consultants might be the tip of the iceberg. As long as a big consulting firm maintains access to the heart of government, it can always find some way to monetize that access; one might say that if you’re directly influencing the regulatory structure of an industry and you’re not making money out of it, then you’re not trying. This is why consulting firms tend to react to a temporary budget shortfall or an effort to cut spending on consultants by offering low-priced or pro bono work.
Mazzucato and Collington contend, therefore, that all the micro-scale conflicts of interest detailed in their case studies should be seen not as isolated scandals or even as part of a pattern of misbehavior, but as evidence of a big and fundamental conflict of interest at the macro level. The entire management consulting industry, considered as a system, has an interest in promoting a particular political economy model of the relationship between the state and society and between capital and labor.
When dealing with the public sector, consultancies have a large and structural vested interests in promoting shareholder value, privatization, and deregulated capitalism, because they are capitalist enterprises themselves, and so are the majority of their clients. And if the business of government is organized in such a way as to maximize the profit potential of every activity, it is unlikely to be done well except by chance.
So what is to be done? Mazzucato and Collington make the case that a specific practice called “prime contracting,” in which government hands over an entire policy area to a lead consultant with the expectation that sub-areas will then be contracted out to subject specialists, is particularly pernicious in terms of destroying capability and should be banned outright. They argue that this practice creates consulting projects that are “too big to fail,” and that no public sector contract should be so big as to create a crisis if it needed to be cancelled.
They also suggest that all consulting contracts should be drawn up to contain specific provisions for declaring the project to have ended, and for the transfer of knowledge acquired to take place before payment. (This seems like a sensible way to commission consultants for anyone, not just the public sector.) And they argue that fees paid for public sector consultants need to be transparent, and to be set at commercial rates with no “lowballing”; there is no such thing as free advice, and the alternative ways of monetizing government access are likely to end up being more expensive in the long term.
The authors might have cited some of the few success stories of public-private partnerships, like the e-government system of Estonia—an exception that proves the rule by showing that a public sector client with its own strong capabilities can speed up their deployment by hiring outside expertise for specific projects. But overall, it seems that the patron saint of the consulting industry is Niccolo Machiavelli, and its unofficial motto is his saying that “A prince who is not himself wise cannot be well advised.” The Big Con takes this message seriously, and adds Mazzucato’s own insight that a government system without a belief in its own legitimacy is bound to be undermined.
There is an element in public life, not well understood or analyzed by economists, that might be thought of as “the kind of energy and identity that makes purposive action possible.” It is the analogue at the organizational level of what went missing from Stafford Beer’s cat when the neurologists carried out their operation. A Polynesian society might think of it as mana, the life force, but it might be less pretentious for us to call it “mojo.” A lot of the problem of renewing government in the twenty-first century is as simple as this: The public sector has lost its mojo. We can work out who stole it. The only question is how to get it back.