Abby Innes writes that while UK governments have refrained from intervening in the private sector, they enable ever greater business access to public authority and revenue. She argues that successive policies have led to corporate state capture

Innes, Abby

English

LSE Research Online

Corporate	state	capture:	the	degree	to	which	theBritish	state	is	porous	to	business	interests	isexceptional	among	established	democraciesAbby	Innes	writes	that	while	UK	governments	have	refrained	from	intervening	in	the	privatesector,	they	enable	ever	greater	business	access	to	public	authority	and	revenue.	She	argues	thatsuccessive	policies	have	led	to	corporate	state	capture.British	Ministers	and	MPs	operate	with	uniquely	close	ties	to	business.	These	ties	are	an	essentialfeature	of	the	neoliberal	transformation	of	the	state.	Their	vulnerability	to	conflicts	of	interest	andcorruption	are	a	feature,	not	a	bug.	Under	the	New	Public	Management	agenda	of	the	last	fortyyears,	agenda-setting	and	policy	design	have	increasingly	been	outsourced	to	professionalconsultancies,	third-sector	agencies,	law	and	accountancy	firms	and	corporate	sponsored	think	tanks.	Theadministrative,	policy–making	and	agenda-revising	throughputs	of	the	state	have	seen	greater	businessinvolvement	via	senior	civil	service	recruitment	and	special	advisors.	Departmental	non-executive	directors	havesignificant	powers	but	are	routinely	recruited	through	an	opaque	process	from	businesses	with	a	direct	interest	inthe	terrain	under	a	department’s	control.	Finally,	the	state’s	core	outputs	in	terms	of	welfare	and	regulation	havebeen	ever	more	outsourced	to	the	private	sector.	The	machinery	of	state	is	now	porous	to	private	business	intereststo	a	degree	that	is	exceptional	among	the	established	democracies.	A	third	of	today’s	central	government	spendinggoes	on	outsourcing.Britain’s	neoliberal	state	has	become	a	semi-permeable	membrane	in	which	governments	refrain	from	intervening	inthe	private	sector	but	enable	ever	greater	business	access	to	public	authority	and	revenue.	‘Corporate	statecapture’	refers	to	the	high	point	of	corruption	whereby	private	interests	subvert	legitimate	channels	of	politicalinfluence	and	shape	the	rules	of	the	legislative	and	institutional	game	through	private	payments	to	public	officials.	InBritain	that	influence	has	largely	been	gifted	as	a	matter	of	public	policy.Britain’s	corporate	state	capture	by	design	has	happened	because	neoliberalism	is	a	materialist	utopia.	It	is,	in	fact,the	exact	counterpart	to	its	Soviet	communist	opponent	albeit	even	less	tethered	to	social	reality	in	its	theoreticalfoundations.	Where	Leninism	was	based	on	a	deterministic	reading	of	Marx’s	analysis	of	capitalist	change,	Britishneoliberal	policy	has	been	rooted	in	the	most	market-fundamentalist	wing	of	neoclassical	economics	that	dependson	deductive-theoretic	mathematical	reasoning	and	tends	to	disregard	market	failures.	The	result	is	an	agenda	ofbeguiling	simplicity.	In	this	scheme,	it	is	axiomatic	that	when	you	remove	state	intervention	you	improvecompetitiveness	and	allow	the	economy	to	move	closer	towards	a	general	equilibrium	in	which	demand	and	supplyare	matched	with	a	perfect,	frictionless	efficiency.	This	is	the	mirror	of	the	Soviet	belief	in	perfectly	efficient	centralplanning.For	Britain’s	neoliberal	governments,	it	has	followed	as	a	matter	of	logic	that	the	more	the	state	can	be	‘got	out	ofthe	way’	or	made	more	‘business-like’	where	it	remains,	the	better.	As	a	society	we	have	moved	from	ethicaldebates	about	the	effective	government	of	people	in	a	complex	and	uncertain	world	to	an	era	in	which	parties	havecompeted	over	the	management	of	a	pseudo-science	about	the	allocation	of	things	in	a	closed-system	world	ofapparently	little	meaningful	complexity	at	all.	The	seeds	of	state	capture	are	sown	in	materialist	utopias	because	asan	article	of	faith	they	privilege	the	interests	of	one	social	group	as	the	virtuous,	transformative	vanguard	that	willlead	us	to	the	Promised	Land	of	seamless	allocative	efficiency.	In	neoliberalism	it	is	business	rather	than	theindustrial	proletariat	taken	to	exemplify	the	idealised	rational	economic	agent	and	business	is	duly	endowed	withthe	‘leading	role’	in	society.British Politics and Policy at LSE: Corporate state capture: the degree to which the British state is porous to business interests is exceptional amongestablished democraciesPage 1 of 4		Date originally posted: 2021-04-16Permalink: https://blogs.lse.ac.uk/politicsandpolicy/corporate-state-capture/Blog homepage: https://blogs.lse.ac.uk/politicsandpolicy/In	Britain,	this	idealisation	has	led	successive	governments	to	a	deep	lack	of	curiosity	about	the	diversity	andcomplexity	of	actual	businesses.	It	has	also	created	a	profound	political	complacency	about	what	drives	innovationand	improves	productivity.	The	history	of	economic	development,	as	distinct	from	the	neoclassical	thoughtexperiment,	tells	us	it	is	not	just	‘competition’.	Despite	the	fact	that	the	investment	culture	of	Britain’s	tradedcompanies	has	been	hollowed	out	by	norms	of	short	term	profit-maximisation,	governments	have	proved	resilientlyindifferent	to	the	pathologies	of	corporate	financialisation:	the	extraction	of	profit	even	unto	the	cannibalisation	ofthe	firm	itself.	John	McDonnell	ended	this	complacency	in	Labour,	but	it	persists	across	the	aisle.	In	the	meantime,Britain’s	public	sector	industry	firms	are	among	the	most	financialised	of	all.	Carillion	and	Interserve	went	bustbecause	of	it.	Serco	and	the	rest	continue	to	leverage	their	accounts,	minimise	their	investment	and	training	and	tosweat	their	public	contracts	and	employment	conditions	to	maximise	profits.	The	result	is	a	new	systemic	risk	inwhich	the	state’s	structural	dependency	upon	these	archetypes	of	rent-seeking	makes	them	‘too	big	to	fail’.The	neoliberal	argument	for	state	failure	that	helped	bring	it	to	power	in	the	late	1970s	was	built	on	an	argument	bytheoretical	analogy:	that	the	state	is	a	monopoly	firm	and	hence	the	presumptively	‘rational’	economic	actors	whorun	it	will	tend	to	exploit	their	position	until	the	state	expands	into	a	totalitarian,	socialist	Leviathan.	There	is	noconcept	of	public	service	here.	The	neoliberal	‘solution’	proceeds	to	build	in	corporate	state	capture	via	an	analyticalratchet	effect	in	which	even	chronic	failures	of	neoliberal	policy	are	assumed	a	priori	to	be	the	fault	of	publicservants	and	their	lingering	attachments	to	the	privileges	of	monopoly.	It	follows	as	a	matter	of	logic	that	the	answeris	to	bring	in	further	corporate	‘expertise’	to	bear.In	the	meantime,	privileged	corporate	access	skews	ministerial	interactions	with	other	interest	groups	andunbalances	the	playing	field	between	them.	The	extension	of	public	services	markets	to	encompass	as	many	statefunctions	as	possible	encourages	escalating	corporate	donations	to	parties	in	search	of	favouritism	within	thatdynamic.	Contrary	to	the	neoliberal	and	indeed	Leninist	fantasy	in	which	the	state	will	wither	away	to	its‘nightwatchman’	minimum,	the	centralising	neoliberal	state	has	become	a	giant	of	procurement.	Governmentdepartments	are	tied	into	a	complex	web	of	relationships	with	large	enterprises	scarcely	less	than	in	Soviet	centralplanning,	only	now	in	super-fragmented	form.	Those	relationships	shift	whole	bodies	of	public	spending	fromstatutory	to	contract	law	and	under	the	cloak	of	commercial	confidentiality.The	combination	of	state	failures	and	corporate	state	capture	is	tailor	made	to	undermine	public	trust	because	itbreaks	the	democratic	fiscal	contract	in	which	tax	is	paid	on	a	fair	basis	and	revenues	never	confiscated.	Thiscorporate	penetration	of	the	state	has	occurred	even	as	the	dogmatic	principle	of	‘self-regulation’	has	been	appliedby	politicians	and	there	remains	a	near	total	lack	of	legal	regulation	around	some	of	the	most	serious	risks.British Politics and Policy at LSE: Corporate state capture: the degree to which the British state is porous to business interests is exceptional amongestablished democraciesPage 2 of 4		Date originally posted: 2021-04-16Permalink: https://blogs.lse.ac.uk/politicsandpolicy/corporate-state-capture/Blog homepage: https://blogs.lse.ac.uk/politicsandpolicy/‘Regulatory	drift’	occurs	when	formal	rules	are	deliberately	held	constant	in	the	face	of	major	shifts	in	context,	sothat	outcomes	change.	The	UK’s	cross-party	Committee	on	Standards	in	Public	Life,	the	Public	Administration	andConstitutional	Affairs	Committee,	and	the	Public	Accounts	Select	Committee	have	repeatedly	called	ongovernments	to	tighten	the	rules	around	conflicts	of	interest,	second	jobs,	party	finance,	consultancy,	lobbying	andrevolving	doors.	All	of	them	have	been	rebuffed.	To	regulate	political-corporate	ties	would	have	violated	many	of	thecore	assumptions	of	the	neoliberal	project:	that	business	actors	are	only	ever	honourable	wealth-builders,	that	self-regulation	is	always	superior	to	state	action,	that	rational	self-interest	confers	no	unacceptable	social	losses.The	public	reaction	has	been	one	of	rising	public	distrust	in	political	elites,	the	oxygen	in	which	populism	thrives.The	most	recent	(2013)	Transparency	International	Global	Government	Barometer	showed	the	following	attitudesfor	the	UK:65%	of	people	believe	corruption	has	increased	in	the	last	2	years67%	of	people	believe	political	parties	to	be	corrupt	or	extremely	corrupt;55%	believe	the	UK’s	political	system	to	be	corrupt	or	extremely	corrupt;90%	believe	that	the	UK	Government	is	run	by	a	few	big	entities	acting	in	their	own	interestsThese	numbers	might	seem	conspiratorial	but	what	other	terms	should	we	use?	We	might	have	called	it	idealisticzeal	in	the	early	years	of	Thatcherite	‘enterprise’	and	New	Labour	‘modernisation’,	the	utopianism	of	the	projectnotwithstanding.	At	what	point	does	it	stop	being	‘good	faith’,	however,	when	governments	persist	in	themarketization	of	the	state	even	in	the	face	of	systemic	failures	of	neoliberal	policy,	strategy,	and	increasing	costs?How	high	has	the	capacity	for	governmental	self-delusion	become	when	corporate	actors	are	parachuted	into	thesenior	civil	service	and	allowed	to	direct	hard-earned	public	monies	into	even	the	most	dubious	of	private	hands?What	else	is	it	but	corruption	in	its	classic	form	when	as	‘consultants’	or	on	retirement	ministers	and	even	primeministers	charge	rates	of	remuneration	beyond	the	wildest	dreams	of	the	average	voter	in	return	for	their	knowledgeand	influence,	from	the	very	businesses	they	were	supposed	to	govern	in	the	public	interest?	Since	even	small‘side-payments’	are	toxic	to	public	trust,	the	current	dispensation	is	surely	mortal.	Already	by	2015	there	were	some4,000	people	working	professionally	in	the	UK’s	£2	billion	lobbying	industry,	which	made	it	the	third	largest	lobby	inthe	world.	Everything,	including	the	climate	transition,	is	at	stake	unless	we	reverse	the	dynamics	at	hand	beforethey	reach	their	full,	kleptocratic,	‘Trumpian’	potential.The	political	culture	of	public	service	inherited	from	the	post-war	era	has	been	weakening	with	each	new	intake	ofConservative	MPs,	though	many	persist	with	it	against	the	odds.	However,	a	fifth	of	the	Conservative’s	2019	newMPs	had	a	background	in	lobbying	or	public	relations.	By	2020,	the	economic	values	of	the	party’s	MPs	were	far	tothe	right	of	even	their	own	councillors	and	party	members,	let	alone	the	wider	electorate.	Johnson’s	second	Cabinetis	comprised	of	the	parliamentary	party’s	most	committed	economic	libertarians	and	since	coming	to	power	theyhave	sought	to	shatter	this	culture	from	the	top.	The	Prime	Minister	himself	has	shown	an	overt	nihilism	aroundstandards	in	public	life,	as	indicated	by	the	resignation	of	his	Advisor	on	those	standards	and	the	failure	to	replacehim.	Even	as	tens	of	thousands	of	people	died	needlessly	of	Covid-19	because	of	late	intervention,	a	VIP	lane	forprocurement	was	organised	so	that	suppliers	with	government	contacts	were	ten	times	more	likely	to	be	awarded	aprocurement	contract	than	those	who	applied	to	the	Department	of	Health	and	Social	Care.What	comparative	history	teaches	us	is	that	once	the	dynamics	of	corporate	state	capture	take	hold	the	risk	is	thatpolitical	parties	themselves	become	targets	for	those	who	choose	politics	for	primarily	private	gain.	If	they	rise	to	thetop,	the	risk	is	that	elections	cease	to	be	about	representation	and	become	the	point	of	market	entry	and	exit.Political	parties	become	corporate	brokers	who	oversee	the	continuous	distribution	of	public	revenue	and	rents	intoprivate	hands.	A	populist,	authoritarian	politics	becomes	the	effective	way	to	corner	this	market.Even	in	the	context	of	a	public	health	crisis,	the	Johnson	Government	exhibited	an	ideological	allergy	to	engagingwith	public	sector	expertise	and	capacity	until	absolutely	forced	to	by	events.	For	economic	libertarians,	it	is	reallynot	clear	that	there	is	any	intrinsic	moral	injunction	against	their	own	private	enterprise	en	route.	Just	as	Leninismand	Stalinism	had	stripped	out	the	radical	democratic	republicanism	of	Karl	Marx,	so	too	neoliberalism	in	its	purestform	picks	liberalism	clean	of	its	nineteenth	and	early-twentieth	century	ethical	debates	about	the	nature	ofrepublican	virtues.British Politics and Policy at LSE: Corporate state capture: the degree to which the British state is porous to business interests is exceptional amongestablished democraciesPage 3 of 4		Date originally posted: 2021-04-16Permalink: https://blogs.lse.ac.uk/politicsandpolicy/corporate-state-capture/Blog homepage: https://blogs.lse.ac.uk/politicsandpolicy/For	economic	libertarians,	in	principle	the	marketplace	is	designated	as	the	sphere	of	true	freedom:	the	onlyrepublic.	The	history	of	late	stage	materialist	utopias	in	practice,	however,	is	that	in	the	absence	of	a	viable	socialcontract,	the	nexus	between	the	governing	regime	and	its	society	becomes	that	of	a	protection	racket.	Insofar	asRishi	Sunak	has	proved	keen	on	public	spending,	it	is	directed	far	more	obviously	at	political	self-perpetuation	thanthe	public	interest:	in	the	new	£1billion	Town’s	Fund	justified	as	a	way	to	‘level	up’	deprived	communities,	40	of	the45	chosen	areas	had	a	Conservative	MP.	An	additional	£4.6	billion	fund	was	likewise	found	to	include	wealthyConservative	constituencies,	even	as	some	of	the	poorest	cities	in	the	country,	such	as	Salford,	which	votedLabour,	were	relegated	to	a	lower	funding	tier.	As	the	sociologist	Ken	Jowitt	concluded	of	the	USSR:	‘Brezhnev’snovelty	seems	to	have	been	to	take	the	Party’s	organizational	corruption	and	elevate	it	to	the	status	of	anorganizational	principle.’	The	serious	question	for	Conservative	backbench	MPs	is	whether,	on	reflection,	they	arewilling	to	participate	in	their	party’s	final	ruin	as	a	democratic	entity,	and	to	see	the	concepts	of	liberty	and	love	ofcountry	deployed	as	their	alibi.______________________About	the	AuthorAbby	Innes	is	an	Assistant	Professor	at	the	European	Institute	of	the	LSE.	She	has	writtenextensively	on	the	political	economy	of	corruption	in	Central	Europe	and	is	part	of	a	UN/NYUtransnational	working	group	on	corporate	state	capture.	She	is	completing	a	manuscript	on	thesystematic	affinities	between	Neoliberal	and	Soviet	economics.	Its	working	title	is	Late	SovietBritain:	The	Political	Economy	of	State	Failure	in	Materialist	Utopias.	Photo	by	Ehimetalor	Akhere	Unuabona	on	UnsplashBritish Politics and Policy at LSE: Corporate state capture: the degree to which the British state is porous to business interests is exceptional amongestablished democraciesPage 4 of 4		Date originally posted: 2021-04-16Permalink: https://blogs.lse.ac.uk/politicsandpolicy/corporate-state-capture/Blog homepage: https://blogs.lse.ac.uk/politicsandpolicy/

Corporate state capture: the degree to which the British state is porous to business interests is exceptional among established democracies

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Corporate state capture: the degree to which the British state is porous to business interests is exceptional among established democracies

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