Organisational Dynamics

The blog Cabalamat Journal agrees with my take on public-sector waste.

It’s important to emphasise the dynamic aspect of this. When the state sets up an organisation, it can be very efficient. The NHS probably worked very well in the ’40s and ’50s. Stalin industrialised Russia into a superpower with efficiency equal to his ruthlessness, and indeed wartime Britain’s state-controlled economy was equally effective. As late as 1960, even Western politicians of both left and right believed that the communist system was more efficient than the market.

The problem with state control is not that it makes organisations inefficient. Organisations become inefficient naturally. The problem is that under state control there is no way to reverse that. If the NHS or the Inland Revenue could be made as efficient as they were fifty years ago, the 1980s USSR could have been made as efficient as it had been fifty years previously. There’s no mechanism to do the job, in either case. Unfortunately, most of the electorate believes that the clock can be turned back, to the relatively well-functioning public services of the 1960s. That model just wasn’t sustainable. It can work for a time in a crisis, such as 1940-45, but in the long run it is doomed. The efficient NHS is gone forever, and cannot be recovered. This is what Howard is too chicken to tell the electorate.

Here’s hoping for the next leader of the Conservative Party.

I would recommend Robert Skidelsky, The World After Communism, but it seems to be out of print.