One of our most treasured beliefs about ourselves is that, as individuals and societies, we are rational. And there’s some truth in this, although a lot less than we like to think. Very few of the decisions we make in life are the result of deep thought. Most of them are simply habit, and most of the rest are driven more by prejudice than analysis. On Planet Economics, that bizarre parallel universe which is supposedly more real than the one we actually inhabit, things are of course different. Everyone is a rational actor, motivated by enlightened self-interest. It’s possible that the world might be a better place if this were so, but it ain’t. People are motivated by self-interest often enough, but “enlightened” is not really the word to describe it.
One of the unlovelier ways in which this truth manifests itself is corruption: the practice of obtaining a decision you want by giving the decision-maker cash or other goodies. This has been going on ever since there were individuals who got to make big important decisions, and it shouldn’t come as a shock to find out that it still goes on. We all know, for example, that large contracts are not always awarded to the ideal bidder. There are many conversations that go something like this:
ARMS SALESMAN: Would you like to buy some jet-fighters for $1bn?
DEFENCE MINISTER: We don’t really need any jet-fighters.
ARMS SALESMAN: Would you like $10m in your Swiss bank account?
DEFENCE MINISTER: Where do I sign?
A sufficiently enlightened defence minister might have saved the money for something that his armed forces actually need, but such people are in the minority.
It is fairly notorious in the UK that government services tend to be outsourced to the same small set of companies, regardless of how often and how spectacularly they cock things up. The mania for outsourcing almost everything is unaffected by this, even though the alleged “value for the taxpayer’s money” is non-existent. I am not going to name names, but most people in the UK could compile their own list without too much difficulty. The magazine Private Eye has been exposing this stuff for years; nothing changes.
At the start of the pandemic, when there was a mad dash to acquire PPE, many companies popped up out of nowhere with no track record or expertise in the delivery of PPE, which nevertheless were awarded contracts to deliver PPE, and which then failed to deliver PPE of the requisite standard (or, in some cases, anything at all). Those companies often seemed to have mysterious links to government ministers – in one case, a contract was famously awarded to the landlord of a pub frequented by the then Secretary of State for Health. None of this, naturally, is going to be investigated. The Treasury is also cheerfully writing off the money lost to fraudulent claims to government support, a figure estimated at a chunky £27bn.
Nor is this sort of thing confined to the public sector. In a previous life I once had a job at an insurance company. A large part of their business was motor insurance, which all drivers in the UK are obliged to have. Many drivers simply renew their existing policy every year, which is great news for insurers because they can charge them more money than they would have to charge new customers (for whom they are competing with other insurance companies). While savvy motorists know this and shop around, enough people either don’t realise it or can’t be bothered to switch that this is a very nice earner.
They wanted to buy an off-the-shelf software package to replace what they were currently using. As is generally the case in big companies, they set up a team to evaluate the package they were thinking of buying before they did so, because it was going to cost them a lot of money. So far, so rational. The team duly reported back that they didn’t recommend the package; for one thing, it didn’t handle renewals. (It was developed by a US company, and apparently in the US motor insurance renewals are not a thing; you have to get a brand-new policy every year.) There were some other big strikes against it too, but that was the biggie. (I wasn’t on the evaluation team, but I got this from someone who was.)
The company bought it anyway.
Now I am not in a position to accuse any specific individual of taking a back-hander in this case, but it’s pretty clear that this decision was not an enlightened one. What is laughingly known as “enterprise software” costs a lot of money. Another organisation I worked for had an agreement to lease a software package for £40,000 a year – this was in the early 1990s, when that was still quite a substantial figure – and never even installed it. The fact that the head of IT went on a jolly in the Caribbean at the software company’s expense had, I am sure, nothing to do with this.
As I say, this sort of thing has been commonplace for a very long time. What has changed, though, is how blatant it has become. It used to be the case, not so long ago, that something like this would be regarded as scandalous. Heads would rolls. People might even do jail time. Back in the day, BAE Systems got into hot water for conducting conversations not unlike the one above with various movers and shakers in the Kingdom of Saudi Arabia.
Nowadays this is just how business is done. The government does it, the private sector does it – or at least those companies who engage in big-money contracts. And nobody seems to feel the slightest embarrassment about it. We used to suppose we were above that sort of thing; it was the difference between respectable countries and tin-pot third-world dictatorships. I’m sure it still went on, of course, but at least it was done discreetly.
When I was at school, we studied the history of the Third Republic in France (1870-1940), which was largely presented as an object lesson in how not to run a country. Indeed, the Wikipedia article is mostly a list of scandals. A phrase that sticks in my memory from the textbook we used was that many national newspapers in France “could notoriously be bought over the counter like so many pounds of cheese.” By implication, we were supposed to think that this was obviously much worse than having a quiet word with the editor of the Times at one’s club, which was how the British were doing these things at the time. These days it seems to be the newspapers doing the buying, not that it’s any improvement.
Ultimately, the problem with normalising corruption is that it undermines the moral authority of the status quo. There was a time when at least some of those in positions of power were people of good will who were at least trying to do the right thing. That no longer obtains, and it is seen not to obtain. Cynics always claim to be realists: when they actually are, something has to change.
I have written elsewhere about the importance of accountability. When the powerful refuse to be accountable for their actions, they are likely to have accountability thrust upon them, and that can get very ugly.
If those at the top of the pile don’t change their ways – and there seems no reason to suppose they will – scenes like this are going to occur. I don’t want to see them, but it seems inevitable. Maybe that’s what needs to happen to clean up public life, at least to a tolerable level. If this becomes the price of corruption, choosing the honest path will at least be the rational decision once again.
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