Whatever Happened to “Producer Capture”?

Last week’s story in the UK that the Conservatives were now in favour of setting up “workers co-ops” to run public services (really!) was the culmination of a fascinating trend over recent years towards policy-makers favouring the ‘empowerment’ of public sector professionals. Both the New Labour Government and Tory opposition have been touting ideas about removing the terror of targets and central controls and freeing frontline workers to innovative and improve public services.

Those of us with longer memories than last week’s news cycle will find all this a bit bizarre. Back in the 1970s the fashionable critique of public services from both Left and Right was that they suffered from what the economists dubbed “producer capture”. That is, they tended to be run in the interests of those who worked in them rather than those who paid for or used them.

On the Right the critique tended to focus of “budget maximising bureaucrats” who’s only interest was in boosting their budgets in order to enhance their status and salaries. This was, supposedly, the driving force behind the relentless expansion of state activity in the post-war years.

On the Left the criticisms were mainly levelled at the professions – teachers, doctors, police, social workers – who had colonised the welfare state and warped it to satisfy their own self-interested, paternalistic, professional desires.

Whilst the diagnoses may have differed slightly – in practice they tended to meld together into a sort of anti-bureaucratic mush – the prescriptions turned out to be sometimes remarkably similar. Many on the Left and Right supported moves to curb ‘Sir Humphrey’ and reassert political (i.e. democratic representative) control over the managerial and professional bureaucrats. Both also tended to champion the rights of users – although the Right wanted to turn them into ‘customers’ whilst the Left favoured a more civic approach. Where they tended to part company was in the use of markets – privatisation, contracting out, internal competition – to shake up public services. Where they agreed was that ‘producer capture’ was a thoroughly bad thing.

Today the pendulum has swung, and again we find plenty of those of the Left and Right criticising the ‘terror of targets’, the inequities of ‘command and control’, and extolling the virtues of setting public sector managers and workers free to develop services as they see fit. What a turn around.

The critique from the Left has come mainly from academics and representatives of the professions, condemning what they see as corporatist target-setting and overweening inspection regimes and bureaucracy and the ‘audit society’.

From the Right the favourite critique has focussed mostly on supposed Stalinist central controls and the supposed devious behaviour of people subject to such monitoring, who, it is alleged, systematically “game” the system for their own benefit. Many from the Left and supposedly neutral academics seem to echo these particular criticisms, assuming knavish behaviour by… public sector managers and professionals.

What none of these critics – who generally seem to adhere to the ‘liberate the frontline’ argument – seem to put together is that the same people they accuse of systematically ‘knavishly’ gaming performance monitoring systems apparently turn into saintly ‘knights’ if freed from these same systems?

The ‘free the frontline’ argument is just as false, or at ay rate partial, as its predecessor ‘producer capture’ narrative. The truth is that politicians, top managers (‘bureaucrats’), professionals and the public users of services can all behave both ‘knavishly’ and ‘knightly’ to use Julian Le Grand’s terminology (Le Grand 2003). The answer is not to flip-flop between seeing the frontline as either knaves or knights, but to recognise the inherent contradictions and create sensible systems of checks and balances. As usual though the politicians, of both Left and Right, seem intent on over-simplifying to the point of absurdity. ‘Red Tories’ supporting ‘workers co-ops’ – give me a break.

Le Grand, J. (2003). Motivation, Agency, and Public Policy – Of Knights & Knaves, Pawns & Queens. Oxford, Oxford University Press.

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