The juxtaposition of two editorials in a mainstream broadsheet makes interesting reading. The one argues that Gordon Brown’s advocacy of a tax on global financial transactions, the so called Tobin tax, suggests that the British government has, at long last, given up its slavish adherence to ‘the ideology that believes in deregulated, untaxed, ever-expanding global capital markets as an end in themselves’. The other argues that ‘China must be held to account for its political repression’. The connection between these two lies deep within the aforementioned ideology.
The theory which, over the past three decades, has become the ubiquitous orthodox free market wisdom, is widely assumed to be simply the current version of classical economics originally expounded by Adam Smith. Moreover, it might be reasonable to assume, it being the latest, it is the most insightful and effective, having been shaped by the errors and excesses of previous versions. The current free market model certainly includes Adam Smith in its provenance, but what makes it different from previous models is the fact it is also based on certain theoretical foundations which are demonstrably false and which previous versions did not share. It has become what J K Galbraith described as an institutional truth. That is, not a truth at all, but a downright lie, but one to which all associated must subscribe if their careers are to prosper.
As recounted in ‘The Rise and Fall of Management’, from the earliest days of industrialisation down to the present day, perhaps one of the most striking step changes to take place has been the adoption of the strategic perspective. It was not till the mid 1960s that long range planning and what became known as strategic management received much overt attention. First in large companies, then among consultants and, finally, in academe, strategy became a dominant perspective, widely acknowledged as the lynch pin of management theory and practice.
Successive governments from Thatcher on, have been committed to free market capitalism with minimised regulation. That was the bad theory that got us into this mess. But the prescriptions for what will get us out of it, permanently, have so far been piecemeal and fragmentary. The pragmatic response of the British government may restore confidence short term and get the wheels turning again, but it does not offer a coherent long term alternative to the erstwhile orthodox wisdom propounded by the late Nobel laureate Milton Friedman and colleagues.