How should we view Big Brother? As a response to a previous post, one of our correspondents asked: 'Stephen would you see the Big Brother as more benevolent or more one that watches us intently?' This is both an interesting and an important question. If we are to see greater state intervention in the economy and in social affairs, is that necessarily a good thing?
Let us lay on one side the dogmatic language of the extremists. There are those for whom all state intervention is bad. To these people, no amount of discussion will persuade them differently. They are fixed in their views. Equally, there are those who take a dogmatic view that there should be greater state intervention. Once again, there is no talking to these people, so fixed are they in their views. Our comments below are directed to the vast majority who take a more nuanced view of how things should be - at some times, state intervention is the best course of action; at others, the state should draw back.
In our model, we have two poles for the delivery of public services - the state as commissioner and deliverer, and the state as commissioner but with the private sector as deliverer. In our current iteration of the model, we have the state as commissioner (i.e. government decides which services are to be provided, how much money will go into these services, and the parameters for their delivery). The private sector acts as the deliverer of public services (i.e. private companies take responsibility for delivering the services, within a given set of parameters). This model has worked well for some time and has been the main device by which public sector spending has been controlled in recent decades.
It is our contention that this equilibrium is changing. The commissioning model has its uses, but it also has its limitations. The way in which services are outsourced is through a process of competitive tendering where, normally, the lowest bid wins the contract. We have now reached a position where companies are placing competitive bids that are costed too low to do the job effectively. They have what is known as the 'winners curse'. In the face of the winners curse the whole system lacks resilience and is very insecure.
The 2012 Olympics gave a really good example of this. The security of the event was outsourced to G4S, the largest private sector security firm in the world. The contract was awarded under the competitive tendering regime. However, G4S suffered from the winners curse - they had not sufficiently allowed for the complexity of securing the games in their original tender, which may have been low-balled to gain the contract. The result was that, just before the games, G4S had to admit that their security was beyond the company. The government responded by cancelling leave for the armed services and using service personnel in the roles that the civilian contractors should have fulfilled (see story). This had an immediate impact upon G4S, whose shares were downgraded (see story), and a longer term impact in that there is now a question mark over its ability to handle large scale public sector contracts (see story).
What is now called into question is not the ability of one company to deliver a complex public contract, but the ability of the system to avoid a market failure. It should be noted that the contract to run Wolds Prison not only has been taken away from G4S, but also is to return into the public sector. This is how the worm turns, and provides a data point to suggest that the worm has turned.
The delivery of public services by the private sector only has resonance if there is no extensive market failure. If market failure does occur, then the lack of accountability in private sector delivery leads to calls for those services to return to the public sector. And that is one half of the answer to the question posed about how we should view Big Brother. In the face of a delivery failure - caused by a market failure - and an inherent lack of public accountability for that failure, the return of Big Brother is to be welcomed.
Of course, the worm will turn again. As service delivery returns to the public sector, so will the inefficiencies and feather bedding for which the public sector is well known. We are likely to return to the land of Sir Humphrey, where the man from the Ministry knows best, and is best served by an army of civil servants. However, that is an argument for another day. Our model suggests that we may have to wait another generation or two for another Thatcher Revolution.
At this point in the cycle, Big Brother is something of a benevolent force. It is correcting a failure in modern life - the failure of private corporations to act for the public good. That will change over time, but, for now, many people will welcome the re-nationalisation of parts of our life.
Stephen Aguilar-Millan
© The European Futures Observatory 2012
Let us lay on one side the dogmatic language of the extremists. There are those for whom all state intervention is bad. To these people, no amount of discussion will persuade them differently. They are fixed in their views. Equally, there are those who take a dogmatic view that there should be greater state intervention. Once again, there is no talking to these people, so fixed are they in their views. Our comments below are directed to the vast majority who take a more nuanced view of how things should be - at some times, state intervention is the best course of action; at others, the state should draw back.
In our model, we have two poles for the delivery of public services - the state as commissioner and deliverer, and the state as commissioner but with the private sector as deliverer. In our current iteration of the model, we have the state as commissioner (i.e. government decides which services are to be provided, how much money will go into these services, and the parameters for their delivery). The private sector acts as the deliverer of public services (i.e. private companies take responsibility for delivering the services, within a given set of parameters). This model has worked well for some time and has been the main device by which public sector spending has been controlled in recent decades.
It is our contention that this equilibrium is changing. The commissioning model has its uses, but it also has its limitations. The way in which services are outsourced is through a process of competitive tendering where, normally, the lowest bid wins the contract. We have now reached a position where companies are placing competitive bids that are costed too low to do the job effectively. They have what is known as the 'winners curse'. In the face of the winners curse the whole system lacks resilience and is very insecure.
The 2012 Olympics gave a really good example of this. The security of the event was outsourced to G4S, the largest private sector security firm in the world. The contract was awarded under the competitive tendering regime. However, G4S suffered from the winners curse - they had not sufficiently allowed for the complexity of securing the games in their original tender, which may have been low-balled to gain the contract. The result was that, just before the games, G4S had to admit that their security was beyond the company. The government responded by cancelling leave for the armed services and using service personnel in the roles that the civilian contractors should have fulfilled (see story). This had an immediate impact upon G4S, whose shares were downgraded (see story), and a longer term impact in that there is now a question mark over its ability to handle large scale public sector contracts (see story).
What is now called into question is not the ability of one company to deliver a complex public contract, but the ability of the system to avoid a market failure. It should be noted that the contract to run Wolds Prison not only has been taken away from G4S, but also is to return into the public sector. This is how the worm turns, and provides a data point to suggest that the worm has turned.
The delivery of public services by the private sector only has resonance if there is no extensive market failure. If market failure does occur, then the lack of accountability in private sector delivery leads to calls for those services to return to the public sector. And that is one half of the answer to the question posed about how we should view Big Brother. In the face of a delivery failure - caused by a market failure - and an inherent lack of public accountability for that failure, the return of Big Brother is to be welcomed.
Of course, the worm will turn again. As service delivery returns to the public sector, so will the inefficiencies and feather bedding for which the public sector is well known. We are likely to return to the land of Sir Humphrey, where the man from the Ministry knows best, and is best served by an army of civil servants. However, that is an argument for another day. Our model suggests that we may have to wait another generation or two for another Thatcher Revolution.
At this point in the cycle, Big Brother is something of a benevolent force. It is correcting a failure in modern life - the failure of private corporations to act for the public good. That will change over time, but, for now, many people will welcome the re-nationalisation of parts of our life.
Stephen Aguilar-Millan
© The European Futures Observatory 2012
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