In America, government officials increasingly think and talk like liberal economists. Terms like “incentives” and “outcome-based assessment” are now common. Striving to operate more like businesses, government agencies have adopted the organizational strategies, management styles, and corporate cultures of the for-profit sector. Sanford Schram’s The Return of Ordinary Capitalism laments the rise of this neoliberal ethos. Schram sees this shift as socially harmful and anti-democratic. He believes it has contributed to precarious living conditions for ordinary Americans.
To enter into a discussion of Schram’s argument, there are some facts we must set aside: 1) As recently as 1980 nearly half of the global population starved on a few dollars a day, while today fewer than ten percent of human beings live similarly; and 2) while the American middle class is shrinking, the number of those earning twice the median income has risen seven percent since 1970 and basic goods, services, and living space have never been so affordable to so many Americans. So, on a variety of dimensions, our world is arguably becoming less precarious. Still, we wish to cede to Schram the conspicuous nature of corporate management styles in government services; indeed, we applaud him for emphasizing this point. We invite readers to consider an alternative explanation for the rise and domination of neoliberalism.
Contemporary academics typically assume that the governmental provision of social goods and services is necessary and justified. They forget that the provision of these services by real governments is a relatively recent phenomenon. In the wake of the Great Depression and WWII, the American federal government expanded, both in fiscal size and in scope of operation. Previously, diverse American citizens participated in their local communities and cultivated what Alexis De Tocqueville referred to as a “delicate art of civil association.” Local community groups, churches, clubs, and other civic organizations thrived in early American society. This decentralized network of civic organizations provided, though indirectly, a relatively vibrant and robust system of mutual aid and social services.
From this wider historical perspective, the recent trends of welfare reform, privatization, and curtailing of entitlements should not be seen as a deviation from an otherwise ideally functioning system of government services. Instead, these developments are merely one type of adaptive reaction to the imperfections and administrative failures that came along with taking large swaths of American society under bureaucratic administration.
The New Deal was aptly named – it newly established formal governmental programs in transportation, education, housing, and other public services that simply had not existed before. Whether under Bismarck in Germany, Beveridge in England, or Roosevelt in America, the creation of government programs entailed the displacement of a once-vibrant civil sector. By governmentalizing these facets of society, in all three cases, citizens increasingly became residual claimants in one another’s lives. In America, as these new institutions grew in size and scope, the population also grew and diversified. With this size and diversity came an increase in reasonable disagreement and scarcity driven conflict.
The unique ideological assumption of the twentieth century, captured in the rhetoric of the New Deal, is that collective governance is normatively and practically superior to a disjointed liberalism. In transportation, education, criminal justice, and social service provisions, it was (and remains) commonly assumed that the central driver should be government. Yet the ideological assumption that social tasks must be accomplished collectively through political action, in itself, provides no practical explanation about how this can actually be done. Who should get priority services, of what quality, how should they be produced, distributed, and administered?
To us, the popularity of neoliberal management styles across different governmental sectors is more of a feature than a bug of the American system. In large groups of diverse agents, some disagreements and conflicts are inevitable. By subsuming social services under more formally governmentalized purviews, the New Deal and subsequent twentieth century federal expansions sent the several bureaucratic agencies of social service provision down similar paths. They all continuously sought to appease a growing variety of sometimes-exclusive aspirations while maintaining voter support.
We share Schram’s concerns about “suboptimization,” where decision makers focus so intently on performance measures that they compromise more foundational margins of social welfare. Schram’s discussion of this important problem reminds us of F. A. Hayek’s critique of market socialism. As Hayek demonstrated, standards of quantification and incentive structuring do not operate akin to markets when applied within governmental bureaucracies. This is not because numbers and incentives are inherently pernicious. It is because the bureaucratic context and informational feedback therein are differently structured from markets.
When customers perceive low quality products, or when private donors perceive poor results, they are free to go elsewhere and invest in alternative institutions with perhaps better management standards. Potential innovators are free to enter, and inferior practices free to exit. The proxies of success are defined within a context of continual competition, trial, error, updating, adaptation, and innovation. But when a state’s bureaucratic network of public housing implements a managerial scheme detrimental to social welfare, political incentives reaffirm more funding, more professional advising, and more extended oversight. Bureaucracy begets bureaucracy, far more than neoliberalism begets neoliberalism.
Why do we get stuck with neoliberal bureaucracies? Quantified reports and outcome-based strategies have proven manifestly unable to accomplish abstract political ideals (consider the War on Poverty, the War on Drugs, or No Child Left Behind). Still, these styles of measurement provide an appearance of tractable performance in terms that political decision makers and voters can understand and appreciate.
To us, the rise of neoliberal management styles in government operations is not the result of a directed effort (or conspiracy) to marketize social services. It is, more profoundly, an inevitable by-product of managerial trial and error within a bureaucratic context. The more complex and abstract the political aspirations that are attached to governmental programs, the more likely that bureaucratic attempts to realize those aspirations will misfire. Venues of repeated failure are likely to cycle management styles until some minimal common denominator is reached that at least appears to do least harm. Thus, we aspire to a schooling system that is vibrant, equal, and respectful of different forms of intelligence. But in fact our public school system segregates children, requires educators to teach to tests that deny differences, and instills mindless lessons about submission to authority. Thus, we aim for rehabilitation and justified retribution within an enlightened criminal justice system, but we end up merely warehousing human beings.
Schram derides the pernicious role of neoliberalism: He calls for activism and solidarity as alternatives. It is unclear how those alternatives will actually work. We invite readers to consider an alternative inference from the pernicious tendency of bureaucracies to converge on neoliberal management styles. To us, the governmental trends that Schram describes suggest a more radical remedy—perhaps we should reconsider the scope of social activities that we entrust to bureaucratic governance.
