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“Whoever pays the consultant gets pretty much what they want to hear”*…

For as long as there has been business, there have been consultants– outsiders hired hired by organizations to advise (on strategy or marketing or whatever), find opportunities, or fix problems. And like any large class of vendors, it’s been a mixed bag; some of those counselors have been helpful, some less less so, and some, downright harmful. What we come to think of as “management consulting” has grown up over the last century or so.

But over the last four decades consulting has changed in a way analogous (and not altogether unrelated) to the rise of the financial sector over roughly that same period (e.g., from about 5% of GDP in the U.S to nearly 8%; globally, the World Bank estimates that financial services have grown to 20-25% of the world economy). While there are still myriad consulting firms offering an astounding array of services, “consulting” has come to denote an industry dominated by firms like McKinsey & Company, Boston Consulting Group, Bain & Company, PricewaterhouseCoopers, and Deloitte– an industry that has had astonishing growth in recent decades. The worldwide market for consulting services is now worth somewhere between $500 billion and $1 trillion a year.

Mariana Mazzucato and Rosie Collington‘s new book, The Big Con: How the Consulting Industry Weakens Our Businesses, Infantilizes Our Governments, and Warps Our Economies, traces that growth, and it’s too-often painful consequences…

The authors race through a medley of involvement in misconduct — price gouging vital medicines; corruption in South Africa and Angola; forest destruction from Brazil to Guyana; ICE detention camps; the asset-stripping of public services from health care to railways; brutal economic restructures of struggling economies; mass layoffs; tax-dodging; the 2008 crash; and the Enron scandal, to name a few. One quickly gains the impression that there isn’t a single major act of state or corporate malevolence in our lifetimes free of the big consultancies’ fingerprints.

But despite a roll call of cartoonish villainy, The Big Con is more of an academic intervention than a boilerplate attack on unscrupulous businesses. First, it challenges the consultancies’ fundamental value proposition: that the industry’s success is based on increasing efficiency and profits even in a narrow sense. Second, it interrogates and historicizes consultancies’ success, rooting it in the peculiar history of recent capitals. And finally, it makes a strident call not merely for undermining the power of McKinsey and similar companies, but for reinventing how we produce value in a time of huge challenges…

Collington and Mazzucato focus on several particular forms of business. There are the “Big Three” strategy consultancies; the “Big Four” accounting firms whose profit is today based far more in consultancy than in their original functions; the “outsourcing” firms that claim to offer specific services to government such as IT or security but in practice effectively perform the role of government; and smaller firms based in similar models.

This sector has been at the heart of a decades-long transformation in both business and government. In-house expertise and specialized knowledge have been eroded and replaced by dependence on consultancies and their short-term, one-size-fits-all methods.

Mass privatization is, of course, a far broader phenomenon than consultancies. NATO’s wars in Iraq and Afghanistan saw private military and security contractors explode in size relative to the armed forces, resulting in both huge financial costs and human tragedy

The privatization doctrine has also been enforced on the developing world, with brutal results. In every case, the public purse assumes most of the risks and the private sector profits most of the rewards.

Twin ideological doctrines have underpinned such a shift. In business, the “managerial revolution” — in which internal expertise is deprioritized, workers are ignored, downsizing solves everything, and all incentives are subordinated to short-term shareholder value — has been comprehensive. Recently the Boeing 737 MAX incident, in which passenger aircraft were effectively programmed to crash themselves, was attributed to the consequences of this revolution.

And in government, the historic experience of state-led innovation from NASA to the UK National Health Service (NHS) has been forgotten, and replaced with the inflexible view that the state is always less efficient than the private sector; public servants cannot be trusted to work for the common good; and where government has to exist it should resemble business…

A powerful– and painful– critique of consultants: Nathan Akehurst on The Big Con: “Consultancies Have Been the Handmaidens of Neoliberalism,” in @jacobin.

See also: “Need a consultant? This book argues hiring one might actually damage your institution” (source of the image above)…

While the modern consulting industry has a history stretching back over a century, Mazzucato and Collington write that the use of consultants really exploded after the 1980s. That’s when proponents of freer markets, like Ronald Reagan and Margaret Thatcher, began dismantling government bureaucracies and regulations. More left-leaning “Third Way” leaders, like Bill Clinton and Tony Blair, continued in their wake. “Public sectors were transformed under the credo of New Public Management — a policy agenda that sought to make governments function more like businesses and diminished faith in the abilities of civil servants,” Mazzucato and Collington write.

As governments lost the faith and capacity to do things themselves, they increasingly turned to consultants to help them accomplish tasks. Governments began using consultants for seemingly everything, from devising new tax rules to advising armies to overseeing the privatization of state industries to administering IT departments to devising strategies on how to cut carbon emissions.

At the same time, private corporations also increasingly turned to consultants to help them become more profitable. And here, Mazzucato and Collington portray consultancies as opportunistically surfing wave after wave of destructive capitalism. McKinsey & Company, for example, was involved in the Enron scandal and profited from the opioid crisis, helping Purdue Pharma “turbocharge” sales of its OxyContin painkiller.

“The Big Con is of course not responsible for all the ills of modern capitalism, but it thrives on its dysfunctionalities — from speculative finance to the short-termist business sector and the risk-averse public sector,” Mazzucato and Collington write…


Matthew Stewart (an author and philosopher who worked in consulting for seven years before turning away)


As we look askance at avaricious advice, we might recall that it was on this date in 1767, in a letter to Frederick II of Prussia, that Voltaire wrote “Doubt is an uncomfortable condition, but certainty is a ridiculous one.”


Written by (Roughly) Daily

April 6, 2023 at 1:00 am

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