Wednesday, September 28, 2011

Parkinson's Law strikes again

C. Northcote Parkinson died in 1993, but almost every day we see examples of his famous Law in action. Put simply he said "Work expands to fill the time available for its completion". From this fundamental insight, in various semi-humorous books, he laid out different aspects of how human nature conspires to undermine the efficiency of organisations.

You may want to read his original and brilliant essay here.

Nowhere is Parkinson's Law more clearly obeyed that in government bureaucracy.

I recently saw a good example.  A well known international financial agency has approached the governments of the Baltic countries to create a fund of funds that invest in the region. Leaving aside whether or not this project is a good idea in principal, and whether or not it might "crowd out"  the private sector or not, the slightest glance at how bureaucracy and government works should tell you what a wrong headed project it is.

Since the agency is asking for government money, it is clear that each of the three governments will have to go through an evaluation process and will need to depute resources to scrutinize the idea and to monitor expenditure once the funds are ear-marked. That is only right and proper, given that tax payer's money is involved. So the man-hours required simply to make a decision on the project will be significant. Once the idea is evaluated and presumably approved, a responsible official will need to be appointed within the relevant ministries, these officials will also need cover, for when they may be away, they will need office support. Meanwhile they will need to liaise with the existing investment agencies, both internal, and since the fund is intended to be international, external too, this means that both these agencies will need to appoint representatives to cover the project.

Before a single penny is invested, there are already at least ten people in each country that will be working on the project, so across the three countries that is at least thirty. All of this for a minimally sized investment fund. 

Even if we accept that creating such a fund is a good idea in principal, it is quite clear that the practical mechanics leave a lot to be desired. Yet the politicians will probably approve the project, since the headline message is positive- never mind that the cost to each country is likely to be higher than the benefits that the taxpayer may expect to receive, even if the funds perform well, which- of course- they may not.

This is happening across the European architecture at the moment, with grandiose projects taking on a life of their own, whether or not they provide any net benefit, or indeed even when they can only deliver the precise opposite of what was intended. From centralizing the fire services in Scotland, to investments in the Baltic countries, the government bureaucrats create more and more make-work projects and ever less efficiency.

At a time when the financial roots of the European project are being torn up, it strikes me that we will simply have to restrict the remit of government for the future. Big is not beautiful, it is mostly bad. A big state is unsustainable, and the network of patronage that nurtures it ultimately ends up becoming corrupt.

The agency should go back to the drawing board and the local governments should reject the idea at the outset.

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