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Planning in the Name of the Market: Neoliberalism and Managerial Governance

In a previous post we highlighted the distinct historical trajectory of managerial practices of governance and their long lineage back to innovations made in the 1950s US defense sector. We also discussed what were the specific features of the paradigm of managerial governance in order to highlight why it should not be analysed as a product of neoliberal theory.

In this second post, we argue that managerial planning received a new lease of life under neoliberalism and make a case for why International Political Economy (IPE) must take these managerial practices of governance more seriously for both analytical and political reasons. 

Planning in the Name of the Market

The revival of managerial planning in the neoliberal era can be traced back to the limitations of neoliberal ideology and its limited answers to the problems of governance. Invoking the promises of the market was an easy sell when criticising policy, but it often proved more limited when it came time to inform concrete policies. While the theory certainly had its uses, for example to justify tax cuts, as an approach to governance it often proved too slow, indirect, and unpredictable a tool of governance to produce the changes neoliberal policymakers hoped for.

And indeed neoliberal governments never stopped intervening to make sure subjects of governance would respond in the right way. For example, these governments were rarely willing to simply rely on market competition to whip public institutions ‘into shape’ because of a concern that this would simply entrench the status quo. As a result, neoliberal officials were often forced to look for alternatives and fell under the spell of managerial promises to deliver improvement in performance as a second-best strategy to transform governance.

Margaret Thatcher rhetorically relied on the theoretical dogma of Friedman and Buchanan, and criticised the British planning practices inspired by the Planning, Programming, and Budgeting System (PPBS) on the grounds that it would burden civil servants and would not improve decision making. Yet, when it came to implementing major reforms of New Public Management, it was the advice and tools of RAND planner Alain Enthoven to which she turned.

The managerial planners thus proved adept at mobilising neoliberal rhetoric about market competition to justify a managerial approach that has little to do with the market. More often than not, this rhetoric became a means to recycle managerial planning ideas that were born out of systems analysis in the early post war era.

While the market promises a decentralised empowerment under this theoretical schema, the quantified performance assessments of the neoliberal era actually inform and reinforce central decision making. It is a cadre of mathematically sophisticated managers at the centre of the organisation who now assign prices to different units and activities of, say, a school or hospital. These are assigned not on the basis of a microeconomic marginal cost and utility function, but more arbitrarily by central managers whose social and technical context shapes their actions. It is not just central government requiring data inputs to conduct policy modelling and analysis. Every school, hospital, or prison requires an informational architecture upon which to organise its budgetary planning and performance monitoring. It is the compulsion to manage, and not the market, that drives the necessity of data generation. By pushing management tasks deep into public services within individual schools or hospitals, the demand for information to construct output targets and monitor progress became exponentially more important.

This ability to recast planning practices as pro-market tools should not be surprising. One of the hallmarks of post war planning was precisely the claim that managerial planning could imitate and better optimize the workings of the market. Building on this old rhetorical move exploited in the 1950s, the champions of managerial governance have been able to repackage the planning strategies born out of systems analysis under the guise of market engineering.

What is at Stake for IPE in Thinking about Managerial Empowerment?

The relationship between neoliberalism and managerialism is frequently normalised in the literature. For Foucauldians and Polanyi-inspired scholars, managerialism is integral to neoliberalism because markets require social engineering. Yet, it remains unclear why neoliberals would want to empower managers in both the corporate and public sector when they have been historically suspicious of them.

Neoliberals have not only attacked public sector bureaucrats through public choice, but also corporate managers with agency theory in the 1980s. In both cases, neoliberals accused managers of being self-interested and unaccountable. Beyond this agent-principle problem, neoliberals have systematically rejected the classic claim that managers can serve as optimising agents which can be substituted for the work of the market. Considering this ideological trajectory, why do we continue to think that neoliberals aimed to empower managers?

This marriage of convenience of managerial practices with neoliberal rhetoric continues to confound the discipline of IPE. The result has been a systematic failure of the Left to engage with the rise of managerialism on its own terms, preferring instead to simply reframe the counter evidence as proof that neoliberalism is a contradictory practice. This has had profound effects on the politics of the Left. As we continue to fight against what we believe to be an impersonal form of ‘market led governance’, we are enrolled in managerial projects which systematically put resources of others into the hands of managers. As we continue to complain about competitive market forces, managers are remaking the world in their own interest. They may speak of ‘letting markets operate’ and facilitating ‘performance driven change’, but these managers have no intention of letting performance dictate outcomes. On the contrary, these managerial practices are all about empowering managers to have a greater say not only on the direction of the organisation they govern, but also on who is assessed to be doing well in this context of performance management.

From a political standpoint, the rhetoric of the market has provided a cover for this managerial project. The market has been an easy alibi for public officials and corporate managers to implement their policies. Their frequent references to the need to conform to market pressures has too often yielded various forms of the ‘TINA’ (There Is No Alternative) argument. This deresponsibilises managers for the controversial policies they implement on the grounds that market pressures leave them little choice.

The striking fact about these developments is that scholars of neoliberalism have not been blind to them. Many now point out that neoliberalism is defined not so much by markets, but by corporate power. But too often this leads scholars to look for proofs that neoliberals justify corporate power, instead of market competition per se. Instead of digging to find evidence in the old texts of neoliberals that they are pro business, we argue that we need to reconsider what are the actual sources of corporate empowerment. For this we need a more robust account of the way institutional practices empower corporations. The study of managerial governance, and its deep roots in both the public and corporate world, offers here a strong platform to understand the growing interpenetration of these two spheres and the distinct entanglement of public/private connections that has come to characterise the era of neoliberalism. 

In putting the rise of quantification within a lineage of managerial governance, rather than neoliberal theory, we are better placed to specify the politics of a world of numbers. In this respect, the tension which we noted earlier between classical neoliberal rationality and quantification is starker than ever in the 21st century. The more quantification deepens, the further governance appears to slip from Hayek’s neoliberal market utopia.

The next step is to realise that this is not a neoliberal project per se. It reflects a much more profound institutional transformation than implied by neoliberal theory. It is a new form of governance which has systematically empowered a managerial class in both the public and private sector, with profound effects on democracy.

Sahil Jai Dutta, Samuel Knafo, Richard Lane, Ian Lovering and Steffan Wyn-Jones

The set image displays a RAND Engineering Operations game with Milton Weiner (3rd from right), Olaf Helmer (2nd from right), and others, 1966.

Sussex Research Group on Management and Neoliberalism
This group has been researching the historical lineage of the managerial practices that have shaped neoliberal governance. It writes about the legacy of innovations made by the RAND corporation on the development of various practices of governance (financial, corporate, environmental, and public management). The group is formed of Sahil Jai Dutta (Goldsmith University), Samuel Knafo (University of Sussex), Richard Lane (Utrecht University), Ian Lovering (University of Sussex), and Steffan Wyn-Jones (Centre for Global Political Economy, University of Sussex).

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