One lever for that was experimentation. Like the New Dealers of the past, the progressives of the 1990s decided that experimenting at a small scale was key to discovering new models in an adverse political environment. It was promising in principle, but experimentation was limited by the new political and economic context. The scarcity of resources and the tax revolts of the 1970s[387] made it difficult for the state to undertake new programs and cover new risks at a large scale. What’s more, the absence of a major economic crisis deprived progressive governments of the urge to take radical action. Some experiments did advance, particularly in the fields of zero-based budgeting, performance management, delivery of public services, and public-private partnerships[388]. But few led to convincing results at a national scale. In the end, a highly resilient bureaucracy neutralized innovative efforts and state intervention was scaled back down to business as usual.
Another lever was accountability. As the governor of Arkansas, Bill Clinton was confronted early on with an impossible equation whereby his constituents wanted more public spending, but they hated any politician that raised taxes to finance that spending. Clinton experienced the bitter results: after becoming governor in 1978, he lost his reelection bid in 1980 because of his tax hikes.
Yet instead of renouncing the attempt to improve public services in Arkansas (one of the least developed states in America), he chose to focus on education and offered taxpayers what became known as a “New Covenant”: he would raise taxes to invest in Arkansas’s failing school system; in exchange, he would hold teachers accountable using performance indicators. After his defeat in 1980, Clinton went on to win the governorship again in 1982 and every subsequent election until he ran for and won the US presidency in 1992. Education policy in Arkansas became a landmark example of what liberals needed to do: state intervention had to be based on accountability and improved performance. Voters were willing to pay more taxes; what they demanded was value for their money[389].
Problems arose when the virtuous principle of accountability was extended beyond public agencies and civil servants and onto the private citizens who happened to be recipients of taxpayer money. Following the same reasoning, the idea was that in exchange for social benefits, welfare recipients should prove that they were doing everything possible to find their way out of poverty. What happened afterwards—namely, the widespread discrediting of welfare policy in the eyes of middle class voters—revealed the weakness of the accountability approach. Most liberals were advocating accountability because they held public service to high standards. But nurturing the idea that individuals further down the social ladder may be undeserving of benefits effectively contributed to weakening the idea of state intervention. Accountability proved to be a double-edged sword.
The main problem, however, was of the symbolic sort. The state has always complied with the dominant organizational model of the twentieth century: that of a cathedral, a large, monolithic, resilient organization. During most of the twentieth century, this form inspired consensus since the cathedral was a techno-economic optimum at the time. In the age of the automobile and mass production, it was the surest way to maximize long-term returns on invested capital and deliver an affordable service at the largest scale possible. All the major players in the private sector were cathedrals, too, with corporate executives scientifically managing a giant bureaucracy dedicated to maximizing economies of scale—all without much innovation. You couldn’t criticize the state for being a gigantic bureaucracy when all big corporations were bureaucracies, too!
Thus it didn’t matter that for much of the twentieth century, the cathedral of state didn’t work so well. Nobody, even in the mighty business world, could come up with an alternative: other models simply didn’t exist for them. The entire world of large organizations was dominated by malfunctioning and suboptimal cathedrals[390]. The state had no choice but to comply with that model—even if, like every other large organization, it was trying to turn it into a better, more effective cathedral.
What changed with the transition to the Entrepreneurial Age is that the idea of the cathedral as an optimum is no longer valid. A new breed of technology-driven, entrepreneurial venture is proving that in the Entrepreneurial Age you can provide a more affordable service with a higher quality at a larger scale without being a cathedral. As the state remains a cathedral, it is losing the symbolic legitimacy that once came with embracing that form.
This is the challenge that we need to tackle today. Can we imagine a new art of state intervention for the Entrepreneurial Age, with a new organizational form? Or should we look beyond the state and turn to the mightiest forces of the day: entrepreneurs and the multitude[391]?
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Reviving the state
Reinventing state intervention for the Entrepreneurial Age is not an easy task. As a cathedral, the state experiences the usual problems of large organizations, including sluggishness (particularly when the economy is moving faster) and inefficiency. It is ill-fitted to be relevant, let alone add value, in the age of ubiquitous computing and networks. While it managed to solve many problems in the past, the state has now become an obstacle to solving the problems of the twenty-first century.
Obviously the state could transform itself, from a Fordist cathedral to an organization designed to deliver performance in the Entrepreneurial Age. The problem is that like many big, dominant corporations, it experiences a version of Clayton Christensen’s “innovator’s dilemma”[392]. One reason is the rule of law, which in many cases prevents innovation and experimentation at the margins since it’s difficult to go through a trial-and-error innovation process if every step in that process has to be enacted by law. Another reason is that the state’s growth in the twentieth century has turned it into a corporatist power in and of itself. As civil servants become more numerous (currently up to 20% of the employed workforce in countries such as France), they also become an electoral constituency on whose support politicians rely. Elected officials are now dependent on civil servants as an electoral force—and civil servants, as stakeholders, tend to push against change instead of favoring it.
The wake of the financial crisis didn’t make things easier. Here in Europe, austerity has been the main answer to tightening economic conditions. It has seen European states renounce their traditional mission of countering cyclical downturns with higher spending or lower taxes. It has also deprived them of the means to invest in their own reinvention, precisely during an accelerating paradigm shift which should have seen the state undertake unprecedented efforts at imagining and building new institutions. Instead, backwards-looking European leaders have decided to tighten the bolts even more, often seizing the crisis as an opportunity to implement the same old neoliberal reforms that were better designed for the 1990s than for the 2010s.
The US could have put itself in a better position as it didn’t embrace austerity as overarching policy. Rather it chose to implement fiscal spending and quantitative easing, embracing the traditional Keynesian response to a sharp downturn and even making inroads into institutional innovation by implementing Obamacare. Indeed, early on during the Obama administration there were signs that perhaps the US was undergoing what Michael Grunwald dubbed a “New New Deal”[393].
Almost one century ago, economic security and prosperity were restored thanks to decisive initiatives in building what became the Great Safety Net 1.0. For a time, the Obama administration appeared as if it was about to replicate that feat. There was the American Recovery and Reinvestment Act of 2009 that prompted a vast effort of public investment in cutting-edge technology, then the JOBS Act of 2010 that upgraded the financing of new and innovative businesses, as well as the Dodd-Frank Act to strengthen regulation of the financial industry. And of course there was the Affordable Care Act, also of 2010, which aimed at providing all Americans with affordable healthcare insurance. All those legislative achievements were reminders of the sweeping ambition that came with the Second New Deal of 1935.
However, a series of circumstances made things difficult. The Democrats lost their majority in both houses of Congress only two years after Obama’s election. With the rise of the Tea Party, the aftermath of the financial crisis led to a surge of rebellion against the very principle of providing Americans with universal healthcare insurance. Instead of bringing the US together, Obama, much like Bill Clinton a decade earlier, unwillingly contributed to polarizing it even more. He didn’t lead the Republican Party to rally toward a new consensus, but instead saw it drift even further to the right, all the way to nominating Donald Trump for President in 2016. And so the cause of restoring the legitimacy of state intervention to provide economic security and prosperity seems to be more desperate than ever.
Making matters even worse, the state is too often captured by special interests that simply don’t want it to change, preferring to use it to preserve the status quo. In the US, influencing the state and submitting it to special interests is a discipline that dates back to the 1970s, when the conservative revolution was accompanied by the development of the lobbying sector on K Street in Washington, DC[394]. It has now gained even more strength with the ability of entrenched interests to finance the campaigns of candidates dedicated to their cause. In their book The Captured Economy, Brink Lindsey and Steven Teles document the influence of industry interest groups in great detail and analyze how this distortion of the democratic process contributes to widening the inequality gap[395]. Can we still trust the state when it is captured by special interests to such an extent?
But just as we see with the most successful entrepreneurs, the state could regain its effectiveness by sealing an alliance with the most potent party of the day, the multitude. Building this alliance starts by providing the multitude with what they want: fairness and quality at scale. And the problem is that instead of improving, the quality of public services has gradually decreased due to the long economic crisis of the Dark Ages, the neoliberal response to the crisis, and a general lack of imagination. It’s not only that the fiscal context is adverse to improving the quality of state-provided services. It’s also that government leaders, whether elected officials or civil servants, remain mentally trapped in a paradigm in which quality always has to be sacrificed for the sake of affordability at scale.
Furthermore, customer expectations regarding quality are in fact relative, depending on the level of quality individuals experience in other parts of their lives. If you’re accustomed to being mistreated by rude salespeople in every bank, store and call center, you might look fondly upon the altruistic, slightly quaint sense of dedication found in most civil servants. The problem is that we now live in a world in which ever-increasing quality and personalization have become the norm[396] thanks to the shift to the Entrepreneurial Age. As entrepreneurs now manage to serve individuals “at the highest level of quality and scale, simultaneously”[397], scale is not an excuse for less-than-average quality anymore. This impacts large, exhausted corporations that have failed to transform themselves during the current techno-economic transition. It also impacts the state itself.
As the performance of state-provided services goes down, the day-to-day frustration the state imposes contributes to fueling anger and populism[398]. Thus citizens are eventually moving against the state because they don’t want to pay taxes without receiving any benefits; because they (in some cases, rightfully) see the state as unfair; because the level of quality they expect is increasing over time. When they’re so well served, on a daily basis, by tech companies such as Amazon, Uber, and Deliveroo, citizens have a hard time understanding why the state is incapable of providing that same high level of quality. As Franklin Foer, then the editor of The New Republic, wrote in 2013, “the onus was (once) on liberals to prove the concept of government. And while their ideas for what the state could accomplish were often quite vague, they made confident claims about their capacity to implement them”[399]. As of today, state intervention is a lost art. If the state is to remain a positive agent of change, it must rediscover that art and reinvent it for the new age.
This won’t be easy. Many people, myself included, think that the state in its current shape is incapable of delivering on radical imagination. We are still misled by the power the state accumulated in the past age of the automobile and mass production. But as my colleague Younès Rharbaoui once wrote, “government is a process that only works backwards by validating what exists”[400]. The state can be useful when the time comes to accelerate and reach a larger scale. But before the state can act, the field must be marked by a first generation of pioneers. Innovators and activists are the only ones capable of doing the hard work at the early stage, namely spotting the new economic and social challenges of the day and discovering the basics of the new mechanisms that can effectively tackle them. The state can then take inspiration from what works and design the policy framework to make it more sustainable at a much larger scale.
Indeed most of today’s government programs found their roots in local, entrepreneurial efforts. The first attempts to implement social insurance were not made by the state, but by individuals that took part in fraternal societies and the mutualist movement and organized their own pooling of risks at a small scale. In the US, fraternal societies were among the most successful associations in the nineteenth century because, as put by historian David T. Beito, “in contrast to the hierarchical methods of public and private charity, fraternal aid rested on an ethical principle of reciprocity”. In France, the fraternal benefit societies that pooled risks within certain communities or professions succeeded the Ancien Régime corporations that were abolished by the revolutionaries in 1791. The same bottom-up approach was seen in the US with the rise of cooperative banking, mutual savings banks, and credit unions.
The reason why the state had to take over was that back then the self-organizing efforts of individuals could not extend up to the point of covering the entire population. A large part of the fraternal benefit societies’ success was due to the strong bonds their members forged by living in the same area or belonging to the same profession, being workers from the same factory or industry who pooled their resources to cover risks such as occupational accidents, old age and illness; regional farmers did the same to cover the risk of crop loss. That sense of community proved difficult to replicate at the scale of entire nations in a fast-spreading Fordist economy with limited networking capacities.
But today things are different. One path to reinventing government through a more entrepreneurial approach has been brought forward by Tim O’Reilly, who coined the notion of “government as a platform”[401]. The vision is inspired by the strategy of the most successful tech companies. The likes of Amazon, Facebook, and Apple do not only operate applications designed for end users. They also operate platforms that provide resources and enable other companies to design their own applications and serve specific segments of the market. In O’Reilly’s compelling vision, government should no longer be a cathedral, but an infrastructure and a marketplace on which a multitude of suppliers are invited to seize state-provided resources to design better public services for ever-more demanding citizens.
Like new public management in the 1990s, government as a platform remains an attractive idea in theory. It has been rendered somewhat more concrete by initiatives such as Code for America in the US[402], Estonia’s impressive government-deployed platform[403], and the work of government chief information officers such as Italy’s Diego Piacentini, a former senior vice-president of Amazon[404], and my friend and co-author Henri Verdier in France[405]. In practice, however, the implementation of O’Reilly’s vision has so far proved too difficult in the face of fierce resistance from many parties, a lack of interest from politicians across all segments of the political spectrum, and mere indifference on the part of the citizens themselves. It seems that in such spheres, we’re still lacking what makes new ventures successful in the Entrepreneurial Age: the support of the multitude.
Another approach is that of
Mariana Mazzucato. In a highly praised book published in 2013, The Entrepreneurial State[406], she makes the case for once again empowering the state as a player in the field of innovation. Like at the time of the New Deal, the state must lead in experimenting, exploring new approaches, and discovering the socio-institutional framework of the new age. Now at the head of the Institute for Innovation and Public Purpose (IIPP) at University College London (UCL), Mazzucato promotes a mix of antitrust policy, government support for certain companies and industries, and entrepreneurship by the state itself so as to make the economy more prosperous and more secure. In other words, an industrial policy for the Entrepreneurial Age.
I have mixed feelings about the very concept of industrial policy. For one, I’m not certain the state still has the capacity to work in the general interest. We’re not at the end of the nineteenth century, when the state was still small and could be shaped from the ground up. Today is also different from the 1950s and 1960s, when the Cold War focused Western leaders on the goal of ensuring technological domination over the Soviet Union. Now the state is simply lagging behind and is widely influenced by corporate interests that have learned to harness its power to serve their goals instead of the public’s.
Furthermore, as argued by Rainer Kattel, who’s working with Mariana Mazzucato at the IIPP, it takes a certain organizational form to support innovation in the economy[407]. And based on my experiences as a senior civil servant, I highly doubt that the current form of the state allows it to impose what Carlota Perez calls a “direction for innovation”—one that would lead us all to a Golden Age of ubiquitous computing and networks.
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