Keep the revolution rolling? Or bring back the cardigan?

Colin James, Australia New Zealand School of Government seminar, Wellington,
5 August, 2016

This is work and thought in progress. Constructive comments welcome to

A public service serves the public, or should. It is, or is supposed to be, the instrument of the collective public will and interest. When the public changes, or changes its mind, so logically does, or should, the public service.

The collective public will arrives on the desks of public servants via the cabinet and ministers, who apply some mix of ideology, personal prejudice, hubris and intelligent inquiry and distillation to what they hear, mishear or selectively hear from constituents, polls, interest and pressure groups, consultants and experts. Public servants’ role is to disinterestedly examine, test and critique the ministers’ wishes and offer advice on that or an alternative course of action, then work out how to give effect to ministers’ final words on the subject and do what they are lawfully told to do.

Too many public servants these days, some senior officials tell me, stop there: subservient to the point even of binding themselves, in their policy advice, to what they anticipate ministers want to hear and not hear, whether that is in response to a minister’s initiative or in relation to some issue the minister has not until then thought much, or at all, about. That encourages ministers to expect subservience, even obsequiousness. After all, ministers’ egos and, related to that, their political futures, are at stake and ministers know best, or think they do, what will best serve their egos and futures. To backstop their political needs, ministers have in their offices personally appointed political advisers, paid for by the taxpayer.

At the point when ministers issue their instructions, they are ministers of state. The state is independent of and distinct from the people. It has a monopoly on power and coercion to defend the realm and maintain law and order. It has full executive authority, inherited from once-plenipotentiary monarchs, to deal with other states, including on military matters and on trade and other treaties. Ministers, for example, conducted negotiations for the Trans-Pacific Partnership trade agreement in high secrecy, out of keeping in a democratic age.

Serving ministers involves, in consultant-speak, “managing up”. Serving the public, as the name “public servants” says is what they do, is “managing down”. That brings us to the collective public interest.

The collective public interest may coincide or not with ministers’ interpretation, misinterpretation or distortion of the collective public will. The collective interest is the interest of the public as a whole and over time into the future. The public service has a duty to be custodian, or steward, of that lateral and longitudinal interest. It runs wider than the interests represented by any set of ministers, whose political parties at most represent half of the votes at election. It runs beyond ministers’ time horizons because few hold their posts more than five years and all are at least partly distracted by the looming next election. Next decade’s issues such as climate change, pension fund adequacy and the health impacts of sugar addiction are future ministers’ worry. Career public servants, or at least their institutions, will still be around in that next decade and even the next generation. They will see, and see off, cabinets of different makeups and preoccupations and cabinets of successive generations. The wider and longer-run collective public interest which they serve requires they mine public, local, not-for-profit, business and interest group thinking, trends, probabilities and possibilities and test what they find against the best available international and national evidence and theory. The public service needs to be resilient, even if ministers aren’t.

This state-versus-public tension – collective will versus collective interest – is one of four tensions. We conflate state and public. The State Services Commission’s very name implies state incorporates public, that serving the minister is the public servant’s whole job. Until the early 1960s we had a Public Service Commission.

Serving the minister, of course, is not necessarily what those directly serving members of the public have front of mind. Those on the front line who want to do a good job and thereby get job satisfaction want to do well by those they are serving. A good employer encourages that. A satisfied employee is likely to be get better results for an employer, public or private, than an unsatisfied one carrying out orders.

That leads us to the second tension: between public and private. Up till the 1980s the public service conceived of itself as distinctly different from private suppliers of goods and services. The public service delivered services, funded by taxes paid by the public, to groups or all of the public, without choice (except through the blunt, indirect mechanism of elections). With that came a moral responsibility. Private businesses made and sold goods and services in amoral markets to individuals who chose to buy from them. Businesses’ singular responsibility was to their owners, not the wider public interest.

The 1980s reformers drew on business school theory and private consultants to introduce private-sector accounting and managerial practices into the public sector. They classed some activities as businesses, which they required to operate commercially (in actual or quasi markets) and/or sold them off – privatised them.

There were some definite gains, notably in managing finances, chief executives’ autonomy and accountability for operational matters, including staffing, clarity of functions and a focus on what agencies actually did, their “outputs”, for which ministers contracted chief executives (in theory at least). These have been well documented over the past 25 years, including a useful summary by Deputy State Services Commissioner Al Morrison in an internal paper in February 2014 (1) and an article in Policy Quarterly by the present State Services Commissioner, Peter Hughes (2) and James Smart which may have provided the title for this seminar.

Also well documented have been the shortcomings, including “silo-isation” which hampered cross-agency cooperation, degeneration of “outputs” into glorified “inputs”, which prompted a variety of measures in the 1990s to try to focus on “results” and “outcomes”, and, as a result of countless restructurings and reorganisations, the destruction, discounting or erosion of institutional knowledge – skills, experience, knowledge of past errors and failures, understanding of those with whom agencies deal and linkages with other agencies – at a cost to effectiveness and staff commitment. All featured in high-level roundtables I chaired in the mid-late-1990s for the Institute of Policy Studies.

Moreover, this 1988 “revolution” also did not make public services (as distinct from the trading activities) private. Markets, and their associated “creative destruction”, cannot be simulated when there is one buyer and one seller, one supplier and one recipient. Contracting out services to supposedly more efficient private or not-for-profit suppliers, another 1980s import, did not substantially change that. Public and private did not merge into a continuum.

Nor, apart from shedding the trading departments, did governments get dramatically smaller as some of the revolutionaries intended, according to a range of measures analysed by Normal Gemmell and Derek Gill.(3) It did get smaller in one respect they did not measure, the reliance on markets and self-regulation to align business activity with the broader public interest. This has periodically failed, as the finance company collapses and the Pike River Mine disaster illustrate. More recently there has been casual importation of junk steel from China, to which the Transport Agency responded initially by saying it was a matter for the contractors – travellers would have preferred an independent assurance bridges were safe. Too often private businesses do not bother to obtain what consultant-speak calls a “social licence to operate”. The government’s response, when things go wrong, is to return to statutory regulation. So maybe over time Gemmell’s and Gill’s conclusion about the size of the state will apply also to regulation.

In the 2010s under the Better Public Services rubric – the 2010s “revolution”, or not, that is today’s topic – Bill English has had another go at getting more “private”, including “markets”, into “public”. First, strapped for cash after the global financial crisis and the Christchurch earthquakes, he needed efficiency: “more with less”. More recently, as “more with less” has morphed into “no more with less”, then “less with less”, he has in effect recognised that effectiveness is a more reliable route to efficiency, if by efficiency is meant using money well, not just using less of it. That led English to the “investment approach”, “results”, “outcomes” and the “CBAx”, to which I will return later.

English reckons a service’s recipient doesn’t care who delivers it as long as it is of quality, on time and fit for purpose. He has pushed hard to devolve service delivery to not-for-profits and private companies. He has even extended that to social housing, though hasn’t yet found many takers. His argument is that companies and not-for-profits are, by choice or by necessity, closer to the people they are serving (and logically will bother more about their “customers”), are more efficient (the companies) and effective (some not-for-profits) and companies and not-for-profits can be more innovative because less rule-bound. He has also tried to launch “social bonds” which is a way of enticing private funding into social services to replace taxpayer funding but so far without success. Public-private partnerships to build infrastructure are also on the agenda, though little used so far.

All this is helping to render the boundary between “public” and “private” more porous. Changing work practices in the evolving society and economy of the 2010s – contracts and flexible hours instead of permanent, regular employment, career shifts, including into individualised enterprises, in and out of agencies and across the public/private line – are punching more holes in the wall. Even within agencies the workforce will need to be much more flexible in how they work and whom they work with as new mechanisms are developed and digital technology opens opportunities and sets challenges. And some activities seem to straddle the wall: car-sharing as a substitute for private vehicles and buses, an irrigation scheme funded by taxes to provide water for farmers’ profit, charter schools bound by a public curriculum, a working group of private sector people teasing out the basis for public policy, “distributed generation” of electricity from photovoltaic panels on a private residence.

And contracting out has its hazards. Serco mismanaged Mt Eden prison and Compass supplied some substandard hospital meals. Profit trumped quality. The way agencies commission not-for-profits can stifle innovation and enterprise. Understandably risk-averse agencies, who must answer to hyper-twitchy ministers, typically tie up not-for-profits in stifling contracts of dozens of pages of complex legalese, in effect binding them in public-service-like rules. Narrow briefs and/or time limits of a year or so make it impossible for not-for-profits to operate strategically. Contracts require multiple audits which eat up administration time and add to costs. Agencies prefer nationwide to local not-for-profits, which is the opposite of “closer-to-the-people”. And ministers squeeze funding to a level that could be mistaken for forcing public services partly back into a pre-1935 charity frame.

The Treasury and State Services Commission are trying to work out better commissioning protocols. And, if ministers learn from finding they could tolerate failures and worse in the expanding whanau ora programme without the sky falling in, perhaps they will become less ready to dump on public servants who encourage experimentation to promote innovation. Perhaps something like “creative destruction” might emerge over time.

Whanau are local. So, still, are a lot of not-for-profits. Innovation doesn’t happen in a head office but in the workplace or in a small start-up.

That takes us to the third tension: national-versus-subnational or local.

New Zealand is the most centralised government system among democracies. The central government habitually overrides local initiatives and preferences and even bylaws, complains about local plans, accuses councils of inefficiencies and pettiness while leaving them liable to civil action if they aren’t strict enough, is forcing councils in legislation now before Parliament to form joint council commercial enterprises to deliver some services, dumps extra duties on councils without funds – and then attacks them on the levels of rates (land tax), their main source of income while denying them alternative self-funding sources. The long-uneasy relationship with the biggest council, Auckland, is still evolving as the political limits to ordering the council around become clearer. The principle of subsidiarity is an anomaly in the Beehive.

But Local Government New Zealand has been trying to be proactive, to develop ways councils can improve their performance – and, most recently, publicly measure that performance – and to generate nationwide initiatives. And the future may be on councils’ side as “localness” gains room in people’s minds and preferences and as some councillors begin to argue that councils are not just deliverers of services but, to use Peter McKinlay’s words,(4) should “determine what mix of services, to what standards and how produced, will best meet their [communities’] needs.” One ingredient may be councils’ response to demographic change, which on current trends, as Natalie Jackson has demonstrated, will change the populations and economies of provinces differently from those of cities. Another will be the differential need to adapt to sea-level rise driven by climate change, where the central government has so far been missing-in-(in)action. Another might be if citizens, disgruntled with or disappointed by central government (in)action, turn more to local councils to do more than fill potholes and keep the water on. There is also an argument some advance (5), plus some supporting research, that new technologies and communication channels enable niche upstarts to worm-eat large centres of power such as big corporations and central governments which, if that turns out to be a trend, could give councils more room in the government space.

If councils were to gain more traction and widen their range of activities in response to citizens’ wishes, the central government public service and its servants would need to develop ways to better cooperate – or, in some parts of the public service, start cooperating – with council staffs. Some services now delivered by central agencies might logically be devolved, similarly to the devolution to not-for-profits, which are themselves subnational.

One possible additional driver of “localness” might be the erosion of the sovereign state as a result of the fourth tension: national versus global.

As the globalisation of information, finance, production, work and people (migration) has intensified over the past three decades, national sovereignty has been eroded: by global value chains; by free trade agreements (which these days are as much about regulatory convergence as about trade barriers) and myriad other treaties; by international regulatory agencies, such as for civil aviation and marine navigation; by sectoral and business-led informal arrangements, such as for forest products; by other bottom-up arrangements such as for climate change and, probably in the future, for other natural resources, including water and fish; and by the spread of terrorist incidents. (See the appendix below.)

There is some public pushback against state-to-state globalising measures, particularly free trade agreements. This is most visible right now in the United States, in Britain’s referendum decision to exit from the European Union and in populist movements across much of Europe. There will be periodic resistance to, and even retrenchment from, other state-to-state and corporation-to-corporation globalising measures, including in New Zealand. But another globalising force, digital technology, is highly likely to continue and over time supplement or pick up from state-to-state arrangements as the principal driver of globalisation. Digital technology, particularly for younger generations, knows no national borders (a headache for autocrats, for example, in China). Moreover, global and international issues such as climate change, water and management of natural resources, finance regulation and taxation of foreign trusts and global companies and terrorism will not disappear and will almost certainly at times trigger interstate and intrastate conflict, which will be compounded through the next 10 to 20 years by the disordered state of geopolitics, exemplified now by Russia, militant Islam in the Middle East, China’s assertiveness to its east and south and European and American populism. To the extent solutions will be found to such posers, they will be found only in collective global action or “coalitions of the willing”, which imply a degree of submission of national sovereignty and freedom of action.

These factors sharpen the focus on the public service’s role as custodian of the longitudinal collective interest, especially if popular pressure builds to withdraw from or repudiate, in whole or in part, some treaties. The public service will need to be increasingly global- and international-literate and it may need to rethink and redevelop external relations management but at the same time attend to public insistence on national action, especially if, in the next while a global shock punctures the little bubble New Zealand is now in: no terror attacks (yet), no floods of refugees clambering ashore, no sudden sharemarket plunge, economic output and wages ticking along and business and consumer confidence firm (though also with high household debt and some other destabilising factors such as high net immigration). Reconciling those conflicting demands will be a challenge.

Life in New Zealand’s bubble in effect shields us from full view of the deep social change technology, geopolitical, geo-economic and geo-demographic change are driving in liberal advanced-economy democratic societies. This upheaval is at least as big as the 1930s and the coming to power of the baby-boomers in the 1980s. In those two eras structured solutions were at hand and were applied by established political parties in the political system: the welfare state, founded on good wages, in the 1930s; and the liberal-market-economy in the 1980s. But now the established political parties of the centre-right and centre-left which between them dominated liberal democracies in the twentieth century do not have a ready-made structural response. Here Labour is searching for such a response in its “future of work” programme but does not have the policy certainty of its forebear governments in 1935 and 1984. Instinctively conservative National remains wedded to the now badly fraying 1970s-80s orthodoxies, albeit with some increasingly large tweaks. In the northern-hemisphere liberal democracies there is a turbulent debate on how to reform or replace those orthodoxies, with many and wide-ranging proposals. But there is no agreement and no major party has a structured response at the ready that can command an electoral majority. In fact, (New Zealand apart for now) the long twentieth-century era of centre-right/centre-left command in liberal democracies has ended. Voters are increasingly turning to populists and populist parties which preach simple catechisms. As a result, liberal democracies, including this one when its bubble is eventually pricked, may well be – or are – entering a period, perhaps even an era, of erratic political policymaking. If so, that will sorely test the public service’s stewardship of the lateral and longitudinal public interest. (Liberal democracies, by the way, are not alone. China’s deep economic, social and technological imbalances pose near insurmountable challenges to its thuggish technocrats. Few of the “emerging economy” societies are in any better shape. If there is a new orthodoxy lurking among them, the pedagogues have yet to show up.)

One possible reason for the lack of an on-tap structured response is that we are in a period akin to the first industrial revolution, which fundamentally reshaped societies, their hierarchies and their values. (Some distinguish one or two intervening revolutions but they were more new phases of the first than distinctly new revolutions.) This revolution is multiple times faster than the first and has caused some to proclaim, prematurely, “the end of capitalism”.(6) There is no Adam Smith, David Hume, David Ricardo or Karl Marx to give us revolutionary new ways of thinking about our changed world – or at least they are not yet in view – nor would we expect there to be, given how long it took for the Smiths, Humes, Ricardos and Marxes to emerge and become known.

If there is no new orthodoxy, the prime requirement of a true public service – one that not only carries out ministers’ lawful instructions but assumes a wider and longer stewardship of the public interest – will be resilience. By that I mean maintaining clear guiding principles, such as a tight focus on the collective interest, but with the flexibility to adopt new ways of serving that interest: searching through the international research, thinking and innovations and testing them to destruction against our present and future conditions; experimenting with new regulatory concepts and ways of delivering services; thinking through the ingredients of a 2020s cohesive society, including education; redefining “privacy” in a data-rich age; figuring out where best to make, and where to implement, particular policies, nationally or locally; and much else.

This is a stretch beyond, or at least on from, the 2011 Better Public Services, though, besides a focus on “outcomes”, that programme has sought, in Al Morrisons’ words, “to improve the quality, responsiveness and value-for-money of state services”.

In this context, note the Ministry of Transport’s work on regulation for a future when mobility is an element of “access” and there are new modes of physical conveyance. Note the recent regulation of space, to enable Rocket Lab to launch commercial satellites from Mahia Peninsula. Note the Treasury’s exploration of “wellbeing economics” and measurement of success and failure against whether they add to or subtract from the four capitals, natural, human and social besides financial. Note the beginnings of rethinking of what education is in this digital, global age. (My simplistic view is that it is no longer to “lead out of darkness”, e-ducere, but to “lead towards a way of living in a changing world”, ad-ducere).

None of this was on the radar when the Better Public Services team reported five years back.

CBAx wasn’t on that radar but it is a logical child of it. Last year the Treasury insisted, with Bill English’s determined backing (despite some grumping by ministers), on funding bids for the 2016 budget being subjected to a Treasury-designed cost-benefit analysis spreadsheet it called CBAx. Agencies had to specify the “outcomes” – real changes in people’s lives – proposed programmes would deliver. These were tested by a committee of departmental science advisers, which sent deficient bids back for more evidence. The policy analysts were not pleased and complained the CBAx was too clunky. But they did more work and the Treasury slimmed down the CBAx. It will need a lot more refinement but the agencies are said to be beginning to see advantage in the process if their programmes pass muster and other agencies’ programmes don’t. It ties in with the “investment approach”, which I will come back to.

“Outcomes” are not “results”, Bill English’s ersatz Better Public Services 2012 requirement for agencies to meet 10 narrow numerical targets in defined areas, expanded in 2015 to 12. Meeting these targets has become an obsession of ministers (rather like collectivising the last farm in the 1930s Soviet Union) which risks short-changing other necessary or worthy programmes and taking the focus off bigger matters. Genuine “outcomes” are more likely to involve two or more agencies, with costs and kudos allocated differently. They will need to be driven from the top by collaboration between chief executives, not just operated at the front line.

As I read it from the outside, the objective is still a distant ambition. But the “justice pipeline” is a small step down that line. It takes a slug of money from each of the five agencies dealing with criminal activity and applies it to interventions designed to reduce the costs each agency imposes on the others when it acts alone.

The new children’s ministry, yet to be established from the Child, Youth and Family division of the Ministry of Social Development, is another illustration. It is supposed to be able to buy the services it needs, with funds diverted from other agencies as necessary. This is not necessarily a transplantable model: it has a data-defined cohort of “most vulnerable” children, that is, a specific group. Sceptics worry its tight targeting might siphon funds off the “children’s teams” who deal with the next 20,000 “at-risk” children and, more generally, off the next 200,000 living with some scarcity of necessities.

Supporters and optimists say that if it can be shown to work, it will point the way to similar innovations. That would be a major departure from the 1988 reforms and also reach beyond the Better Public Services. If widely applied, specifically tasked agencies with power to purchase services could have a balkanising effect on established ministries and reduce their efficiency and effectiveness. That would raise systemic issues for the public service.

There is also an issue of how the new ministry will handle the data it uses and builds. In the data-rich mid-2010s this is a rising issue. So meet another new creature, the Social Investment Unit (SIU). Advice and guidance on handling data is, among other things, its role.

The SIU head is Dorothy Adams, who comes from the Ministry of Social Development, has a State Services Commission email address and, pro tem, is quartered in the Treasury – a sort of everywhere-and-nowhere wisp, a “virtual” being. It has to find its own premises but how will it pay the rent if it exists in some virtual space, not as a legal entity, a formal part of the public sector? Asked about this, Bill English says it has a cabinet space: him.

It owes its existence to his demand for more rigorous information, measurement and monitoring. It also has an evaluation role – in effect measuring outcomes – which English sees as a public service equivalent of the Accounting Standards Board, keeping agencies up to the mark. Might we expect to see more such wisps, floating free of silo boundaries?

Put this with another poser: what to do with the Chief Information Officer, now parked in the Department of Internal Affairs but with a brief stretching across the whole public and state sector.

These misfits tell us that the 1988 structure is starting to be adjusted, not just to identify, pursue and be judged by “outcomes”, as mentioned above, but to accommodate different ways of doing the work to get those “outcomes”. This may not be revolution but it is evolution and substantial. And it is in part enabled and driven by technology that has evolved fast since the Better Public Services report.

And how are trans-silo roles to be supervised? The State Services Commission has been widely criticised within the public service, including at senior levels, for not fulfilling its role as the corporate head office and for not backing chief executives strongly enough in their relations with ministers and not ensuring chief executives’ independence and role as stewards of the wider and longer public interest. Encouragingly, Peter Hughes, as an experienced chief executive himself, is keenly aware of, and wants to fix, those defects and make the SSC the “systems steward”. He says he takes seriously his role as head of the public service. Interestingly, the term “steward of the public sector” is also heard now in the Treasury, evoking its role as the driver of major policy change in the 1980s.

Certainly, the Treasury is deeply involved in what could turn out to be the most important policy innovation of the 2010s: the investment approach, now called social investment but aimed much more widely.(7) This was an import from the Accident Compensation Corporation on the recommendation of the Welfare Working Group. It was first applied in mid-2011, four months before the Better Public Services report, which mentioned it but didn’t make much of it.

The investment approach started as a way of reducing future fiscal costs and was initially called the forward liability investment approach. The future fiscal cost of someone spending a lifetime on a benefit was calculated actuarially and from that was derived the return on investment in interventions which diverted that person into work and kept him/her in work. The justice – actually crime – sector is integrating it into its “pipeline”, focused on trying to keep people out of prison, not in.

The forward liability dimension has attracted some heavy criticism for too narrow a focus on just getting people off benefits. But there are now signs it is might be beginning gradually to evolve beyond avoidance of a future liability – now seen as a measure, not an objective – to something that in future might look more like what a capitalist would call investment – building assets (which is not the same as just noting there are co-benefits). An example of an asset would be a child who grows up capable of being educated and joining the workforce and paying taxes and bringing up the next generation well, that is, a person with greater human capital. The children’s ministry noted earlier is at least in part being seen in this light. It also potentially delivers the highest return. Nobel prize-winning economist James Heckman, using the Dunedin longitudinal study, has demonstrated that the earlier a successful intervention, the higher the return on investment.(8)

This way of thinking has spread into the Treasury project mentioned earlier, still in its very early stages, which aims to measure the stocks of natural resources, social and human capital (a project has just begun to try to assess the return on investment from early childhood education) and assess social and economic progress against changes in those capital stocks. This in effect treats natural resources as infrastructure, investing in and maintaining which is necessary for a well-functioning society and economy. Logically, that approach would also see social cohesion as infrastructure. That in turn ties into another project, to convert the budget from a profit-and-loss account (surplus or deficit) to something resembling a balance sheet which is still in its early stages.

These are grand ambitions which, if successful, could profoundly alter the premises on which policies are developed and government business is done and success or failure measured. The project is at a very early stage and there is no guarantee of success – or, yet, of survival through a change of government. Not least, critics, including the Labour opposition, say that a real investment approach, a term borrowed from capitalism, would entail new funds and building assets, not diversion of funds from other programmes and avoiding a future liability. Capitalists invest new capital to build new assets. Also, as it stands, one agency might spend but another might gain: a health system project might show up as success in the welfare system’s measured number of dependents.

All this is systemic. But a system is subject to outside influences and pressures. The global and technological changes noted above are one source. Another might come from citizens. As noted in passing above, users of government services are expecting them customised, personalised, accessible and responsive. If anything that will intensify, applying operational pressure. Another dimension may come from a more diverse way of expressing democratic preferences than simply through triennial elections, occasional referendums and interest and pressure group activity. Expectation of some measure of engagement (akin, perhaps, to the expectation of customisation of services) is growing, if very unevenly. Social media facilitate collective discussion and action, viz the crowd-founded purchase of a beach for the national estate. Down the track, a range of mechanisms used overseas such as citizens assemblies and juries and deliberative polling might be ways in which some decisions are informed or even made in addition to government-commissioned expert working groups and collaborative governance forums.(9) If public servants are to fulfil their responsibility as custodians or stewards of the collective interest, they will need to keep abreast of public opinion and the directions public opinion might flow through these and other channels.

The pre-1988 image of a public servant was of a cardigan-wearing, rule-bound, time-server, devoid of imagination and flair. The 1980s “revolution” aimed to transform them into smart, focused, efficient deliverers of services in a nation of freedom-loving citizens. It was driven by baby-boomers who had as 20-somethings pushed a “values revolution” and once influential in the arts, then in business and then in power in the ministries and the cabinet, drove through radical changes in economic and related policy, pitched us into an “independent” foreign policy and facilitated the shift from a monocultural to a bicultural society – all in the context of an “independence revolution”, the coming of age of a nation no longer an extension of Britain.(10)

Better Public Services aimed to turn public servants from efficient deliverers of services to effective investors in making citizens’ lives better – that is real “outcomes”. This involved going beyond collaboration on the front line to collaboration mandated from the centre, requiring collaboration among chief executives and, in Hughes’ and Smart’s 2012 vision of its application to social services, “acting as a large network” with “‘virtual’ organisations … built around individuals, families and communities”. This would be “complemented by evaluation”. (11) As the new children’s ministry, the Social Investment Unit and the Treasury’s focus on “capitals” indicate, something of this vision is beginning to take shape in practice. This may be seen as evolution but, if so, it is the evolution of a revolution, that of the 1980s.

Revolutions are unstable. So the changes of the past few years and particularly the past year have yet to become a new norm. Whether they do will depend on their surviving a change of personnel in the Beehive. As time passes “investment” is becoming less of an ideological abhorrence to Labour and the Greens and more of a potential way, if adjusted in form and language, of justifying their social and environmental ambitions. The Xs and Ys who are now in the ascendant in those parties, are more open to new variants in the ways of doing old things.

This takes us to a fifth tension in the public service: across generations. The baby-boomers who stripped public servants of their cardigans, are moving on. The Xs and Ys are taking over, with the millennials in the wings. The Xs and Ys are not revolutionary sorts and, while the millennials might turn out to be, they are 10 or 20 years away from power. But these are revolutionary times, as digital technology and global turmoil tell us, and revolutions don’t wait for managers. Can the public service ride that revolution? Or will it be time again for the cardigan?

1. Paper in writer’s files.

2. Hughes, Peter, and James Smart, “You Say You Want a Revolution … The Next Stage of Public Sector Reform in New Zealand”, Policy Quarterly, Volume 8, Issue 1, February 2012. Hughes was at the time Head of the School of Government at Victoria University of Wellington, in between stints as chief executive of the Ministry of Social Development and the Ministry of Education.

3. Gemmell, Norman, and Derek Gill, “The myth of the shrinking state? What does the data show about the size of the state in New Zealand 1900 – 2015”, to be published in Policy Quarterly, School of Government, Victoria University of Wellington, August 2016.

4. McKinlay, Peter, MDL’s Monthly Insights (McKinlay Douglas Ltd), Issue 41, August 2016, p3.

5. For example, Moises Naim, The End of Power (Basic Books, New York, 2014).

6.For example, Paul Mason, Postcapitalism. A Guide to Our Future (Allen Lane, 2015), summarised in Paul Mason, “The end of capitalism has begun”, The Guardian, 17 July 2015. Mason is economics editor of the Guardian.

7. I traversed most of these issues in a Treasury lecture in March, though there has been some development since then. The lecture is on the Treasury website and also at

8. “Inquiry into improving child health outcomes and preventing child abuse with a focus on preconception until three years of age, volume 1”, report of the health select committee of Parliament, 18 November 2013, p1.6Aff.

9. There is a very wide range of such mechanisms, canvassed in section 4 of Colin James, “Making big decisions for the future”, 3 December 2012, a paper prepared for the Treasury’s long-term fiscal forecast,

10. James, Colin “When the cord breaks: the Fourth Labour government”, talk to Canterbury Labour, 19 May 2016,

11. Hughes and Smart, ibid.

A more turbulent globe
• Through the 2010s the globe has got more turbulent in a number of ways. New Zealand is not immune because we are in an era of hyperglobalisation.

• Geopolitics are disordered. The relative stability of the bipolar cold war standoff between “west” and “east”, with conflict mostly at the margin, has given way (via brief unipolar dominance by the United States) to a multi-polar, fragmented disorder: China’s territorial claims; Russia’s destabilisation of Ukraine and eastern Europe; Europe’s populist upheavals, including Britain’s exit from the European Union; and the Arab chaos, which has reverberations in bordering countries (Turkey), Muslim societies worldwide and, by generating mass refugees, Europe.

The disorder is compounded by terrorist and anarchist disruption of civilian life in liberal democracies and some other places. Al Qaeda and the Islamic State organise some of this disruption. Some is perpetrated by alienated or angry individuals who align themselves to militant Islam as a kind of personal redemption or invoke it as, in effect, a slogan to add to their notoriety.

The internet aids and encourages this activity. It also aids widespread spying on states and businesses, with consequential potential threats to essential services and commerce.
These factors add up to increased insecurity, requiring heightened intelligence activity. No country is immune, including New Zealand, from this geopolitical globalisation.

• Demographic remixing of societies through immigration is an additional factor in geopolitical disorder. This is weakening national identity and cohesion, creating ethnic minority ghettos in which alienation and potential radicalisation is more likely and in turn helps fuel populist reaction to that. Some 250 million live outside the borders of their birth countries. War or severe economic hardship has displaced around 60 million.
This geo-demographic globalisation (ironically) threatens to drive states from being outward-looking to inward-looking.

• At the same time there is a growing prominence of global issues – notably climate change, energy, water and pandemic diseases but also activities such as aviation, shipping and space and other activities for which transnational rules are needed to protect citizens’ interests. This regulatory globalisation requires international cooperation, which in turn requires submission of national sovereignty to wider objectives.

• Another driver of regulatory globalisation is economic globalisation, driven by continued geo-economic rebalancing of jobs and production and by inter-state bilateral and plurilateral trade deals, which increasingly focus on regulatory convergence. While there is evidence of growing protectionism, so far modest but with the potential for a wholesale retreat from free trade – in response to populist reaction in advanced economies to static or declining real standards of living for large numbers – this is likely to be offset, and maybe outweighed, by internet-driven economic (and social) globalisation. (See next.)

• Disruptive technological change is transforming communications, finance and capital-raising, manufacturing and services, education, health care and social assistance, globalising previously national or local markets by enabling global purchasing by individuals and global selling by previously local suppliers, promoting networks as an addition to, or replacement for, complex value chains, intruding deep into private lives and aiding insurgency and terrorism. This technological globalisation both builds huge power centres (such as Google and Facebook) and undermines them, as hitherto dominators of traditional market activities, including commodity and retail chains, are beginning to find, faced with niche operators and consumers expecting diversity and customisation – and even choosing, in a globalised world, to “go local”.

• In this hyperglobalised world there is globalised uncertainty and instability. The meshing of societies and economies opens them to contagion. In advanced economies it undermines personal security of those whose livelihoods have stalled or worsened or who feel threatened or displaced by inward migration, for which they blame the established elites. That has fuelled the rise of unconventional or fringe parties or politicians (far left parties in southern Europe and far right parties across northern Europe and Donald Trump and the Tea Party in the United States) who pose as opponents of the elites. That in turn is undermining the settled orthodoxies of the past three-four decades and has ended the long dominance of alternating centre-left and centre-right parties in liberal democracies.

An ingredient in that uncertainty and instability is the wavering global economy and the policy response in most advanced economies of ultra-low interest rates and printing of money to try to boost consumption and output and avoid deflation. Eight years on from the global financial crisis, this has not generated a “normal” recovery in GDP output (the proceeds have gone more into building asset bubbles) and five central banks have taken their rates negative, driving $US12 trillion of sovereign bonds into negative yields. That puts pressure on banks. There is no obvious way out, though some advocate showering “helicopter money” on consumers and/or expansive fiscal spending because the central banks’ actions have benefited the wealthy. Some analysts think the world economy has moved into a permanent lower growth phase, with accompanying low inflation; others think orthodox GDP and inflation measures are not working in the modern digital-intensive economy, and so deflation fears, are inappropriate/out of date.

As a result, in liberal-capitalist democracies there is a first-principles debate on the political economy. A local example is a 2015 paper by Treasury chief economist Girol Karacaoglu introducing “wellbeing economics” into Treasury thinking, aimed at measuring economic success not just by GDP growth but also by how well social, environmental and cultural capital are maintained. In 2016 the Treasury has been developing this by looking for ways to measure the value of natural resources and social and human capital outcomes from policy interventions.

In short, the 1970s-2000s Friedmanite market-liberal orthodoxy is not just under question but on notice. A change of government would make that more apparent.

There is as yet no apparent replacement orthodoxy. That may be because the shift under way is not just comparable with the shift from classical to Keynesian economics and then from Keynesian to Friedmanite economics but comparable with the fundamental shift in society and thinking that accompanied, and was driven by, the industrial revolution. Some liken the current transition to that transition. If so, the organisation of society, politics and the economy may need a fundamental rethink – and there is no compelling reason to think that rethink will come from Europe and its offshoots across the Atlantic or in the South Pacific. That 500-year hegemony of ideas is ending.

Instability makes a disjunctive shock a very real possibility. That would alter the landscape. The global financial crisis was such a shock. World War I was a far bigger one.