One of the craziest things about Brexit (I know, there’s plenty of competition) is choosing to impose it on what is now a branch economy to the rest of the world.

With its chronic trade gap (a record 5.2 per cent of GDP in 2015), the UK has long been dependent on ‘the kindness of strangers’, as Bank of England Mark Carney memorably put it last year, to cough up the difference when confidence in the economy is weak and sterling under pressure.

This vulnerability has long been camouflaged under weasel words about Britain being ‘open for business’ and ‘a magnet for inward investment’ because of its free-for-all market for corporate control and ‘flexible’ labour market. Indeed, a bit like Northern Rock basing its business model on tapping the day-to-day money markets rather than doing the work of attracting long-term depositors, successive governments have made a deliberate policy of soliciting easy money from fair-weather friends by offering low corporation taxes and non-dom residence deals for individuals.

But relying on inward investment is a dangerous game. In this case, foreign investors have enthusiastically taken us at face value (why wouldn’t they?), snapping up many of our most advanced, firms and leaving a few branch assembly plants and if we’re lucky localised R&D facilities behind to take advantage of the UK’s cheap labour. The family silver having long been flogged off, what remains is a few workaday pots and pans.

As a former adviser to George Osborne, Lord Jim O’Neill, recently noted, as a strategy to improve Britain’s competitiveness the policy has been a flop. Investment has remained ‘very weak absolutely and relatively to many other countries. Despite this remarkable drop in ongoing corporation tax and rising profitability’ – not to mention a weak exchange rate – ‘… it’s not done the job it’s supposed to do.’ These days the biggest manufacturing sector of the erstwhile workshop of the world is food processing.

Meanwhile, few substantial companies today are wholly domestically focused, and to that extent their loyalty to one geographical territory is limited. For some large firms (WPP, HSBC come to mind) switching nationality is barely more emotionally charged than changing an overcoat. But as President Trump has discovered, even for an entity as iconically and profoundly American as Harley Davidson there comes a point when hard economics has to take precedence over national sentiment, however deeply felt.

In the UK’s case, the City, the motor industry and suppliers to the aerospace and defence industries – in other words, some of the country’s last purveyors of traditionally skilled jobs and regular pay packets – are first in line if tariffs and border controls go up when we leave Europe, making a mockery of the idea of Brexit as a means of taking back control of our economic destiny. Rather, it reveals its fragility.

Airbus – which directly employs 14,000 in the UK and whose supply chain supports an estimated 110,000 more – has spelled out the consequences. ‘Until we know and understand the new [post-Brexit] relationship,’ it said in a recent internal risk assessment, ‘Airbus should carefully monitor any new investments in the UK and should refrain from extending its UK suppliers/partners base.’ If the UK leaves without a deal, it will be obliged to ‘reconsider its footprint in the country, its investments in the UK and its dependency on the UK’. Even a planned departure will impose a penalty in terms of red tape and operational friction.

The wider significance of this is hard to overstate. As James Bloodworth eloquently recounts in Hired: Six Months Undercover in Low-Wage Britain, his sobering account of spells working for Amazon, Uber and as a carer for the elderly, swathes of the UK’s small-town hinterland have never recovered from the last great industrial retreat in the 1980s.

What replaced factories and mines, and their supporting services, were first call centres, then retail and warehouses, now increasingly delivery and care homes; full-time jobs became part-time, then self-employed and finally zero-hour gigs; and pay packets have shrunk accordingly. For all sorts of reasons, those industrial jobs aren’t going to come back, but their careless abandonment has come back to bite us with a vengeance. The delayed price we all are now paying in terms of personal disengagement and despair, the unravelling of communities and local pride, and not least political unrest is higher than ever imagined at the time. Call it ‘shit life syndrome’.

Ironically, Theresa May’s instincts after the botched election in 2017 were the right ones. Her espousal of industrial policy and workers on boards apparently aimed to address some of the long-term underlying economic discontents that were eventually manifested in Brexit. But the fraught process of leaving has sucked so much energy out of politics that none remains to do any of the things necessary to make it a success, or at least limit its failure. When Northern Rock’s access to short-term cash was cut, its business model collapsed and it went broke. The UK economy won’t fold like an insolvent building society. But make no mistake: Brexit puts its business model (such as it is) on the line. In the absence of deliberate action to strengthen it, all we have is hope that in the long term it doesn’t suffer the same fate.

You can read my article in EFMD Global Focus for the 2018 Peter Drucker Forum here

You have to admit that there’s nothing, not even a royal wedding, that the British do better than a management cock-up.

The great rail timetable revision was already an Olympic-class act to set alongside other collectors’ items such as Big Ben and the crumbling Houses of Parliament, Grenfell Tower, NPfIT and Universal Credit among a number of major computerisation disasters, and of course the mother of them all, Brexit.

The story of a Newcastle to Reading cross-country train getting lost and ending up in Pontefract may have been a bit embroidered, but not the accounts of undelivered trains, untrained drivers, the wrong kind of holes for the masts bearing overhead cables on newly electrified lines, pantographs on trains that were too short to touch the power lines once they were installed, not to mention communications that could have been bettered by pigeon post between a hapless Department for Transport, Network Rail, where timetabling is centralised, and train operating companies which seemed not to be able to tell one end of their units from the other.

All this was bad enough, making the UK a laughing stock in modern European nations like France, Germany, Switzerland, Belgium and even Italy where efficient, on-time public transport is taken for granted rather than a matter for dazed congratulation (even with a strike on, the French SNCF does a better job of timekeeping than we do running normally). But the award of a CBE to the outgoing chief executive of Network Rail in the middle of what one commentator described as ‘the most chaotic, fundamental, and humiliating failure it has been my misfortune to witness in 40 years as a rail journalist’ took the biscuit, adding a grade-A PR disaster to the unending litany of operating failures. Do we laugh or cry?

Whatever, we shouldn’t be surprised. If there’s one sector that sums up all the debilitating British talent for dither, fudge, short-termism and political zigzag it is the railways. Even the excuses put forward for chronic underperformance and overcost are as rickety as the bus-on-bogies ‘Sprinter’ trains left over from the 1980s.

The fact that the UK’s rail network is the oldest and reputedly most complex in the world should have given us a priceless advantage in terms of both managerial expertise in running a railway and industrial expertise in building an industry around it.

But while France, for instance, singlemindedly electrified its network starting in the 1950s, and launched its high-speed network (with trains that were partly British designed) in 1981, the UK bumbled along on a mixture of steam, diesel (preferred, because it was cheaper) and various kinds of electrification until the 1970s. Even now only 40 per cent of the network is electrified, and as late as last year the government was cancelling long-promised projects to complete an ‘electric spine’ in Wales and the Midlands because it would cost too much. Some observers believe electrification is now so expensive that even for main lines it will never be completed.

The legacy of these stop-start projects and failure to invest long term is not just a network that is incoherent and overcomplex technologically (it sometimes seems surprising that it’s all standard gauge) but also a paucity of engineering knowhow that has to be recreated or reimported for every new programme. This is directly responsible for some of the timetabling chaos. Instead of experienced teams using familiar technology moving seamlessly from one electrification project to another, each has to be created anew every time. The result: huge time and cost overruns, leading to more cancellations and disruption. As for train-building innovation and capacity, it is now almost nil.

The final and perhaps biggest handicap for UK rail industry is its byzantine structure and governance, if it can be called that. Based on a mixture of ideology, political expediency and operating convenience, it features a sort-of-nationalised Network Rail that owns the infrastructure, in semi-permanent warfare (and expensive monthly legal negotiation) with train operating companies that have more regard for shareholder profits than passenger needs, all overseen by a jittery DfT that interferes at every turn. The result is a uniquely British muddle that once again manages to lock in the worst of both private and public sectors and the advantages of neither. As John Harris put it in The Guardian: ‘[It] is yet another example of one of the great ironies of recent history: that Thatcherite believers in the liberating wonders of markets have proved to be very good at creating byzantine, top-down, endlessly failing systems rather suggestive of the worst aspects of the old Soviet Union’. Small wonder that the UK rail industry’s operating costs are reckoned to be 40 per cent higher than in the rest of Europe.

There’s another irony. There is a respectable case for arguing that the broken-down physical infrastructure mirrors, and is at least partly responsible for, the social and poltical fracturing that divides the rest of the country, particularly the north that has suffered the brunt of the great rail timetable meltdown, from the better-provided capital. If the politicians had noticed, we might never have become embroiled in the management omnishambles that is Brexit, which will do not one jot to remedy the real grievances of the austerity-hit regions. Yes, many weary Britons would surely be tempted to vote for someone who just promised to make the trains run on time.

Layoffs are in the news. BT is axing 13,000 middle managers and back-office staff. Marks & Spencer is closing 100 of its High-Street shops, mainly big ones, with as yet unquantified job losses. In the US Tesla followed up a spate of executive departures with the announcement of a broad reorganisation in an attempt to bring down record losses at the company as it ramps up production of its Tesla 3 saloon.

There is a glaring omission in the reporting of these events. Although they merit plenty of coverage, it all centres on the future of the company, the future of the CEO and even the future of middle management. But completely absent from media or public concern in such episodes, points out Jeff Pfeffer in his urgent and angry new book, Dying for a Paycheck, are those most directly affected by the decision – people losing their jobs.

As anyone who has suffered it will testify, being sacked is one of life’s more bruising experiences, up there with divorce and loss of a family member, and its personal sequels – anxiety and depression, substance abuse, family breakdown – are often similar.

Yet as Pfeffer, one of the most respected US academic researchers, shows, this is far from the full price exacted. Those who keep their jobs pay heavily for the redundancies too. Because it is easy and there is no disincentive – companies do not pay the knock-on costs of redundancy; society does – firms invariably take out more people than they do work. The result is added pressures on the survivors, and in some cases dysfunction for the company as it transpires later that the amputated middle managers were an essential repository of corporate memory and order. What’s more, if the company’s underlying problem is lack of orders rather than excess costs – as at M&S – it’s not obvious that getting rid of people is a useful or relevant response. A smaller company is just smaller, not necessarily better. The damage layoffs do often far outweighs the ‘benefits’.

As Pfeffer demonstrates, the toxic effects of layoffs are replicated in other common workplace arrangements such as shiftwork, long hours, jobs with low control, little social contact and poor employment security. All of which are on the increase as work becomes more contingent and fragmented. To put it bluntly, the human consequences of modern performance management in the form of overwork, stress, lack of work autonomy, low pay, inequality and precarity, mean that for many just going to work is as dangerous to health as breathing second-hand smoke.

The costs are mind-bending. Pfeffer and his co-researchers estimate that toxic workplaces are responsible for 120,000 excess deaths a year in the US, making employment the country’s fifth largest killer, at an additional $2bn cost (at least) to the health system. Let that sink in. Most absurd and tragic, these effects are not only preventable, but preventing them would benefit employers too. Writes Pfeffer: ‘Unhealthy workplaces diminish employee engagement, increase turnover and reduce job performance, even as they drive up health insurance and health-care costs. All too many workplaces have management practices that serve neither the interests of employees nor their employers, truly a lose-lose situation’.

Europe is not as bad as the US, where employees largely depend on employers for healthcare coverage, but the UK with its proud emphasis on ‘flexibility’ (aka ‘insecurity’ for employees) is not far behind. So how on earth have we come to this pass? After all, we’ve abolished child labour. Physical accidents at work have been steadily reduced by health and safety regulation: workplace fatalities have fallen by two-thirds in the US since the 1970s. No one argues that health and safety, food and drug quality, or environmental pollution should be left to CEO discretion. So how come they can slave-drive their employees at work without anyone even noticing?

‘What kind of a company keeps you away from your family for that amount of time?’ asked a senior executive bitterly of a travelling routine that had him travelling 200,000 miles a year and on the road for three weeks at a time (GE, since you ask). Or pressures an executive on maternity leave to return to work two weeks after giving birth to make a keynote presentation at a corporate event (Salesforce)? Or apparently without irony recommends taking ‘a call from a client while having sex’ (freelance site Fiverr)?

Pfeffer caustically details the care lavished on tree-planting in the grounds of his university, Stanford, at a time when hundreds of people were being made redundant in the financial crisis. He comments: ‘At Stanford, you were better off being a tree than an employee. At too many workplaces, trees…fare better than people.’ Why? Why is there no business school research or teaching on this stuff? Why is it apparently of no interest to HR departments, whether in public or private sector?

The obvious answer is that this stunning erasure of humanity is the delayed cost of the still unfolding catastrophe that was triggered by the hijacking of the corporate form by the shareholder interest in the 1970s.

The doyen of management gurus, Peter Drucker, warned that the corporation was too important for society as a whole for its control to be monopolised by any one constituency. He was right. When the sole end of corporate activity is to maximise shareholder value, everything else becomes a means. In company accounts, humans are a cost, not an asset – just another resource to be exploited and disposed of, with the wider costs relentlessly exported to society as a whole.

In such a context, technology will intensify and speed the process. In the longer perspective, the gig economy is nothing new – just the logical end point of the unpicking of companies as human communities and their reconstitution, as Pfeffer notes, as the affectless, loyalty-less nexus of labour market contracts that the shareholder-primacy theory proposed – a remarkable if depressing piece of self-fulfilling prophecy.

One of the more poignant ironies – which Pfeffer himself has pointed out in another context – of this narrative is that according to repeated Gallup polls, more than anything else, most people in the world today desire a job and a paycheck. Perhaps that’s why we’re willing to put up with such shit – not to mention bullshit – when we get one. Pfeffer ends his important, indignant book as he begins it. If there is something special and sacrosanct about human life, he argues, then we should accept that it is indefensible morally to trade it for organisational considerations of cost and efficiency. The fact that cost and efficiency are also served by treating people properly – so that, to spell it out, the latter comes at no extra cost – is important but subsidiary. Most people have come to accept that environmental sustainability is essential for planetary survival. What about human sustainability?

The Windrush debacle – there is no word in English that does justice to its multilayered disastrousness – is some kind of apotheosis of hapless British management. First, there is the whelk-stall political version. As FT commentator Janan Ganesh notes, with its ceaseless ministerial musical chairs and unshakable faith in intellectual generalism, at the highest level the British state is unerringly ‘set up for low-key [sometimes not so low-key] shambles’.

It’s hard not to suspect that the replacement of Amber Rudd at the Home Office by Sajid Javid owes more to opportunism – smart move to have the son of an immigrant in charge of immigration policy – and the fact that, this being his fourth ministerial post in as many years, he is used to switching portfolios at short notice, than any managerial prowess. After all, with less than a year in any one job, how could anyone tell?

So day-to-day continuity is provided by civil servants, a bleakly anonymous policy inherited from previous incumbents – and the uniquely unpleasant culture of the Home Office. You could hardly invent a more favourable recipe for disaster.

It will not have escaped notice that Windrush is yet another in the UK’s unmatched line of grim targets fiascos. As usual, none of the right lessons will be learned. No matter how often it happens, ministers always dismiss the unacceptable consequences of target regimes as surprising one-offs that are the fault of bad apples, bad managers, or bad luck rather than their own management blindness. It’s true that Rudd was unlucky to be be left holding the can – it could easily have been May – when the disaster that was waiting to happen actually occurred. But nothing she has said subsequently suggests she has a clue that the trouble with targets is systemic, or that she did anything to soften the fierce target culture that reigns at her now former department.

Many of the press reports on the saga fulminate about the incompetence of Home Office case workers. Of course the episode is incompetent politically, falling flat on its face in the court of public opinion, which in timely fashion has reasserted ‘British values’ of fair play and tolerance that Whitehall officialdom has casually abandoned. In fact it is much more sinister than that. The ‘hostile environment’ for illegal immigration and a ‘deport first, appeal later’ priority that can make someone illegal for making a minor mistake on a form are the outward features of an immigration policy whose purpose is effectively to find a way of saying ‘no’. To serve this end, incompetence, whether willful or not, is an extremely effective means, and used as such along with inscrutable bureaucracy, arbitrary decision-making, excessively detailed forms and exorbitant fees charged for every form submitted. Since the purpose is to make people give up and go away, the fact that so many of the decisions are ‘wrong’ and overturned later by tribunal is beside the point. Officials have obeyed instructions and said ‘no’. We know that some Home Office staff receive bonuses; we don’t yet know to what extent they reflect achievement of targets set for enforced expulsions.

Of course, under austerity, saying ‘no’ has become the de facto purpose of many social services and indeed much of the public sector, including the NHS, where protecting budgets has become paramount. When Rudd admitted that a casualty of the Home Office regime was ‘the individual’ and that the process had taken priority she was right, but also stating the bleeding obvious. That was the point. As she should have realised, this is a travesty of management, management used as a force for ill rather than good. For individuals, many of them UK citizens, what they receive from their government is not just ‘no’, but a side helping of indifference to individual circumstance that splits families, destroys livelihoods and leaves others homeless and destitute. It needs hardly saying that the corruption of government is just as deep. In a truly Orwellian inversion, under this reductive regime the Home Office which ought to be the custodian of British values has become its opposite, a purveyor of fear and paranoia worthy of the Stasi, while the DWP now dispenses not welfare but illfare.

Both are simply unworthy of a civilised nation. There must be a serious case for breaking them up and reconstituting them as institutions with a positive purpose in keeping with a country which once had a history of enlightened treatment of migrants.

At least there are three cheering things to come out of the whole sorry Windrush episode. The first is the astonishingly dignified response of the Caribbean leaders to the unfolding revelations. In the face of their restraint, UK ministers’ desperate attempts to find someone to blame simply shrivelled, leaving the government looking even more shifty and contemptible than before. The second was the public outrage at the story, which only strengthened the same effect. The third was the trigger for the furore, in the shape of brave and persistent reporting by the Guardian’s Amelia Gentleman – a vindication of the values of proper journalism at a time when surveillance and restrictive legislation have pushed the UK down to 40th place in current world press freedom rankings – another British value that badly needs reasserting.

Modern-day management is subject to several debilitating diseases, but the most damaging and pervasive may be the measurement fetish. As Jerry Z. Muller puts it in his new book The Tyranny of Metrics, we don’t just live in an age of measurement – ‘we live in an age of mismeasurement, over-measurement, misleading measurement, and counter-productive measurement’. Despite the manifest and mounting costs of measurement failure, there’s no sign of the fetish diminishing; if anything the reverse.

The first reaction on reading Muller’s concise and non-strident study is relief: we’re not actually alone, or mad, to believe we are surrounded by measurement madness. As Muller confirms, it is rampant in public and private sector throughout the US and UK, the chief subjects of the book, and its unintended consequences – distortion of purpose and effort, fake figures, short-termism, discouraged risk-taking, innovation and cooperation, burgeoning bureaucracy, degradation of work and worker demoralisation, and costs both direct and indirect – are the same, equally huge, and equally disregarded, everywhere. As Muller remarks: ‘A question that ought to be asked is to what extent the culture of metrics – with its costs in employee time, morale and initiative, and its promotion of short-termism – has itself contributed to economic stagnation?’

Leading on from the first, the second reaction is a mixture of stupefaction and rage: in view of the evidence, including ‘a large body of literature’ dealing with, say, the problems with goal-setting, pay for performance (P4P), and performance rankings, why does this dysfunctional obsession persist and even grow, spreading like a virus from the source of infection in the US and UK to the rest of the Anglosphere and thence to other countries in Europe and the rest of the world?

Muller attempts to answer this question. ‘In a vicious circle,’ he writes, ‘a lack of social trust leads to the apotheosis of metrics, and faith in metrics contributes to a decling reliance on judgment’. He shrewdly notes that a metrics of accountability appeals equally but for different reasons to both the political right and left – the right being suspicious of public-sector empire building and protectionism (Yes, Minister, public choice theory), the left from the 1960s onwards distrusting authority and being convinced that leaving things to experts was to limply accept the prejudices of established elites. Both wings therefore wanted to make institutions more accountable and transparent, ‘using the purportedly objective and scientific standards of measured performance’, while the institutions themselves had no choice but to use similar performance data to defend themselves.

These tendencies were turbocharged both positively and negatively by related developments on the business front, where growing distrust of managerial motives led to the recasting of management into a system of goal-setting, monitoring and incentivisation, all dependent on standardised measured performance. New Public Management applied the same principles to the public sector, supplemented by consumer choice theory which held that giving people the right information to make rational choices was the basis of economic democracy. When this didn’t work (as it couldn’t), the response was not to change course but to try harder, using technology to measure more things and invent new rules about how to do it, giving another savage twist to the measurement ratchet.

The massive irony is that the choice of measures may be the most important thing that management does. And that being so it is subject to measurement’s all-powerful Catch-22: the point of measurement is assumed to be to supplant fallible human judgment and thus enable better decisions; but the choice of measures itself requires human judgment, and without it measurement is actually worse than useless – it misleads and hides the real situation, both from management and everyone else. This is why no one knows the real demand on the NHS or social care, for example; why politicians are puzzled to see services that win stars and plaudits from regulators and inspectors getting a resounding thumbs down from their constituents; and why none of the figures reported by the public sector – whether schools, universities, medicine or the police, all covered in the book – can be relied on.

The truth is that today’s metrics fixation has produced a culture of gaming and manipulation worthy of the Soviet Union – a resemblance that Muller does not fail to observe: ‘Just as Soviet managers responded by producing shoddy goods that meet the numerical targets set by their overlords, so do schools, police forces and businesses find ways of fulfilling quotas with shoddy goods of their own: by graduating pupils with minimal skills, or downgrading grand theft to misdemeanor-level petty larceny or opening dummy accounts for bank clients.’

In the age of Big Data and the gig economy where tasks are measured by the second, it is hard to see the measurement obsession diminishing any time soon. It’s not that the alternative to dysfunctional measurement – choosing measures that relate to purpose and that support rather than degrade professional judgment – is conceptually or practically more difficult; it just requires a different kind of thinking (and an implicit admission that previous methods were wrong) – which is why companies that model the alternatives are treated as one-off curiosities rather than exemplars to emulate.

But as a sobering reminder of how far we have strayed from the ideal of minimal (self-)management ideal, consider the example of the Medical Research Council’s Laboratory of Molecular Biology in Cambridge. The most successful biological research lab in history, the LMB was set up after the war by Max Perutz, who had arrived in the UK in the 1930s as a penniless refugee from Vienna. Recognising that creativity, in science as in the arts, can be fostered but not organised, still less planned, since it arises from individual talent, Perutz saw his task as removing anything that got in the way of his recruits following their desire to do the best possible science. (Compare with Peter Drucker’s rueful observation that ‘So much of management consists of making it difficult for people to work.’) Lab administration was kept to a bare minimum: ‘No politics, no committees, no reports, no referees, no interviews – just highly motivated people picked by a few men of good judgment,’ as pharmacologist Sir James Black, another Nobel prizewinner, described it. The result of this recipe for anarchy? Not surprisingly, the lab became a magnet for scientific talent, and while the MRC may not have got much paperwork from Perutz in return for its cash, by the time he died in 2002 it had chalked up the extraordinary total of nine Nobel Prizes, four Orders of Merit and nine Copley Medals (the highest honour from the Royal Society). London Business School’s Jules Goddard comments that Perutz deserves to be feted as much for the brilliance of his management as for his scientific example.

Data and algorithms and artificial intelligence to manipulate them are all the headlines these days. A few weeks ago AI experts were highlighting some of the more extreme dangers of intentional misuse of these technologies. The large-scale hacking of the physical infrastructure that they warned of hasn’t – yet – come to pass, but the recent Facebook/Cambridge Analytica revelations are proof enough of what can be done without going to those extremes to be disquieting.

But just as concerning if much more insidious are the underlying changes to the economy brought about not by malicious intent but by the evolution of technology itself, with AI to the fore.

And here’s the thing. I am not a techno-determinist. I strongly believe that the course technology has taken has been shaped directly or indirectly by ideology, incentives and tax regimes, among other things, and if we put sufficient mind to it (a big if) we are capable of shaping it in other directions, towards other, more socially favourable outcomes, for example. That said, however, it is impossible to go back. We are where we are. And that is at a point, or so some people think, where today’s technology, formed by the influences mentioned above, is becoming self-organising. It is evolving semi-autonomously, outside conscious human control, and as it does so it is creating an invisible second ‘intelligent’ economy that is steadily subsuming parts of the physical one. Software is eating the world, in the famous phrase – including companies and jobs that will not reappear.

In two articles in the McKinsey Quarterly, 2011’s The Second Economy and Where is technology taking the economy? In 2017, Brian Arthur explains why. Arthur is a highly regarded complexity scientist and economics professor at the multidisciplinary Santa Fé Institute, and several years ago he wrote a highly original book about technology that I reviewed here. He said that technology is more like chemistry or biology than physics, building out from itself in ways that were non-linear and organic.

In the two essays he takes his insights further. Basically, he argues that just as steam power and then electricity bulked up the pre-modern economy by supplying muscle power that enabled mass-production and the huge increase in physical stuff that accompanied it, so the combination of computers, the internet and now cheap ubiquitous sensors is supercharging it by backing up the physical economy with a neural system – a virtual back office if you like – where more and more of the coordination, administration and linkages get done.

Perhaps more accurate than software eating the world is that it is modularising it, generating ‘libraries’ of digital modules available for use, with transformational effect, right across the old industrial landscape. Take driverless cars. It’s no accident that the frontrunners in autonomous vehicles are tech titans like Google and Apple, or start-ups Uber and Tesla, rather than traditional automakers, struggling to stay in the race. Data will be the most important component of the cars of the future (as long as they exist), not metal.

Modularisation is increasingly breaking down conventional industry sectors, blurring their boundaries and reshaping them into loose clusters of technology-linked suppliers, competitors and customers that behave more like ecologies than separate industries. In transport, some observers see the outlines emerging of a ‘mobility ecosystem’ based not on car ownership and mass production but on flexible individual preference – expressed perhaps in subscription models providing access to a variable combination of private, public and shared transport, refined as data from vehicles, the road and personal preference is collected and processed in the virtual economy. If the data and connections are valuable enough – for example generating a market for onboard information and entertainment – the transport element might eventually come free.

Even if it doesn’t, the direction of travel is clear. Increasing portions of the physical economy will migrate to the hidden digital one – and all industries will be affected. Arthur doesn’t mince words: ‘I think it may well be the biggest change ever in the economy. It is a deep qualitative change that is bringing intelligent, automatic response to the economy. There’s no upper limit to this, no place where it has to end’.

He is in no doubt that as with previous great economic shifts, many jobs will disappear – as they are already doing – but after agriculture and manufacturing, this time it is the last repository of employment, the service sector, that is in the firing line. It is correspondingly harder to see where new ones might come from. As Arthur notes, invoking another historical precedent: ‘Offshoring in the last few decades has eaten up physical jobs and whole industries, jobs that were not replaced. The current transfer of jobs from the physical to the virtual economy is a different sort of offshoring, not to a foreign country but to a virtual one. If we follow recent history we can’t assume these jobs will be replaced either’.

That of course poses a problem. Jobs don’t just provide work. Up to now, they have also been the vehicle for distributing wealth and ensuring access to the fruits of production (thank you, Henry Ford). But this benevolent circle is now breaking down under pressures that are partly ideological but increasingly technological, as networked developments feed on each other. The issue now, at least in the leading economies, is no longer production. In the US, for example, if total household income were shared among all households, the mean would be a enough for a decent middle-class living. Instead the agenda-topping item is distribution.

We are shifting, suggests Arthur, from the age of production to the age of distribution. Distribution being political rather than technical, like production, it is likely to be trickier to deal with – although Europe, with its experience of social legislation and safety nets and suspicion of free-market fundamentalism, may be in a better starting position to do it than the US. But there is no doubt that just as past dislocations needed far-reaching institutional innovation (pensions, the welfare state, trade unions) to palliate transitions and smooth rough edges, similar large-scale adjustments will be required this time.

Meanwhile, technology will continue to feed off itself as it grows like an invisible root system beneath the tangible economy. It’s a remarkable thought, if slightly creepy in its implications, given how effectively the unscrupulous have learned how to bend existing technologies to nefarious ends. ‘We just put information [like ‘crooked Hillary’] into the bloodstream of the internet and watch it grow,’ explained Cambridge Analytica CEO Alexander Nix before he was suspended. ‘Give it a little push now and again over time to watch it take shape… So this stuff inflitrates the online community with no branding, so it’s unattributable, untrackable.’ As well as economists, those anxious AI experts may just have landed themselves something else to worry about.

I was in the middle of writing about something completely different when I read a piece in the FT lamenting the UK’s mediocre management record. At the same time financial journalist Ian Fraser, a tireless critic of the UK banks, particularly RBS, and their auditors, sent me an incredulous tweet – ‘Sir Win Bischoff: “25 years on from the original Cadbury principles, the UK’s Corporate Governance Code has greatly enhanced the quality of corporate governance and is now rightly globally renowned.” Seriously??’

The two things taken together are such a magnificent illustration of what might be the UK’s most glaring and neglected long-term problem that they are impossible to ignore. Of course Gavin Kelly, who wrote the FT article, is right: with employment regulation as business-friendly as any in the world, busted unions and management as free to manage (and pay itself) as it could dream of, there is no longer anywhere to hide: in the aggregate UK management is just not very good. Conspicuously there has been no protest about the diagnosis on the FT’s letters page,

At the end of his piece, Kelly goes off on a riff about the harm bad bosses do to worker engagement and the quality of working life in general. Well, yes. But pace Kelly the question is not about making nice but giving workers a good job to do, which plays into the bigger issue: that management has a lot more than that to answer for. If jobs, growth, dependable infrastructure and services are lacking, it’s because of management shortcomings in the widest sense. In other words, as I bore myself repeating, management has macroeconomic consequences. And, via the macroeconomy, great and unpredictable political consequences, too.

The truth is that hapless UK management is a knotty systemic problem of which people making poor decisions in offices and boardrooms are just the symptomatic part. Apart from companies, business schools, the big consultancies, the education system, politicians, civil servants and the public sector are all implicated, not to mention the large gap where an informed business press ought to be, in a web of self-reinforcing ignorance and complacency which seems impervious to assault from outside.

You might have imagined that getting something as important as this right would be a national priority. But imagine again. Perhaps the most damaging aspect of this willful blindness – a problem within a problem – is that we have no idea how bad we are. As Kelly notes, managers, like motorists, ‘tend to think they are better than average’. Exhibit no 1 in this chamber of horrors: the aforementioned Sir Win Bischoff, chairman of the Financial Reporting Council, who in a speech of astounding complacency in January celebrating 25 years of the UK governance codes, showed no sign of appreciating how deeply they are implicated in what has gone wrong.

Thus the UK’s ‘globally renowned’ governance code signally failed to stave off Carillion’s collapse. Nor does it offer any protection to the likes of Unilever or GKN, two substantial corporate citizens obliged to make damaging concessions to bribe shareholders not to sell out to opportunist bids from break-up artists. There was not a word from Bischoff about the code’s failure to nurture a viable UK manufacturing sector, nor about long-playing conflicts of interest at the banks and their auditors. Most of all, not a hint of acknowledgement that the shareholder-first ideology that the code explicitly enshrined for the first time in 2006, just before the 40-year experiment proved its failure by almost blowing up the world financial system, is directly connected to the finding, which Bischoff did deign to note in passing, that ‘public confidence in business has been diminished’ and the ‘perception that business is not delivering for all’.

The fact is that the regime prescribed by the City code is no healthier for a corporation than a diet of fast food is for humans. It provides a short-term hit but in the long term leads to obesity, a weak heart, myopia and early demise. It locks in place the sterile, bureaucratic, command-and-control management that makes for the destructive workplaces that Kelly complains of; it also anchors the obsession with budgets and control that prevents managers seeing how their sky-high costs and dismal service are two sides of the same coin, and kills off customer-focused innovation at birth. No wonder people are unhappy. The same killjoy methods have been imported into the public sector via the New Public Management, with predictable results; and possibly most insidiously have encouraged politicians to outsource their most important capabilities to the market, so that – ironically, despite the Brexit vote – the last thing the UK has the ability to control is its own destiny.

The Brexit omnishambles is of course the culmination of UK management fecklessness, undertaken apparently without any system awareness or anticipation of likely consequences, eg for Ireland. Could the bruising negotiations, plus the mockery of the rest of the world, at last cause people to make ‘a link between the state of British management and national prosperity’ and ‘trace persistent managerial weaknesses back to root causes’, as Kelly hopes? It would be nice to think so.

For the first time, Davos man seems to be genuinely freaked.

Although it surfaced only indirectly in the World Economic Forum’s final communiqué – in measures such as the setting up of a Global Centre for Cybersecurity to counter cyber threats – the scare quotient in the annual survey of WEF members’ concerns was at an all-time high. The main worries are no longer to do with finance and the economy, but above all politics – social turbulence, populism (as reflected in giant hedge fund Bridgewater’s famous memo last year), even war. Ninety-three per cent of of those polled thought that political and economic conflict would rise this year: two-thirds believed the world was becoming a riskier place.

They are right to be concerned. We should be too. We have after all been here before – many times, according to Stanford economic historian Walter Scheidel, author of The Great Leveler, a study of inequality from ancient times to the present, which was shortlisted for the FT’s Business Book of 2017. Inspired by Thomas Piketty’s work to extend the latter’s research to the long term, Scheidel discovered a grim and unmistakable pattern.

In good times, a rising tide initially floats all boats. But some rise higher than others, and at a certain point a self-reinforcing cycle kicks in. Wealth begets power and power begets wealth, and not surprisingly,, equipped with such advantages the wealthy and powerful from the earliest times have done a pretty good job of entrenching and extending their (and their offspring’s) interests. Until, at a certain point, the social strains become so intolerable that one of Scheidel’s four ‘great levellers’ – war, pestilence, revolution or famine – intervenes.

All these catastrophes have a side-effect of compressing inequality. War massively raises taxes and creates full employment. It also has to offer recompense for suffering, which is why it is so often followed by social reform: think of ‘homes fit for heroes’ after WW1 and the welfare state in the 1940s, together with extensions of the franchise, the growth of trade unions and more liberal attitudes. Redistribution, including direct confiscation of the assets of the wealthiest, is usually one of the first items on the agenda of revolution. Epidemics and famine decimate the workforce, but also raise wages for the survivors and depress rents and other returns on capital.

At which point the cycle begins again. So is there a way of heading off the apocalyptic ending? In theory, yes. That the tendency towards growing inequality can be offset by political choices is shown by the relative stability of the more egalitarian economies of Northern Europe – the Nordic countries and to some extent Germany (although the latter is also experiencing some of the populist strains affecting other advanced economies).

But in the UK and US especially, but also in many other advanced economies there is little sign of countervailing measures – rather the reverse.

As we saw in the Great Financial Crash of 2008, the fiercest capitalists are like sharks devouring their own tails – the last people on earth to trust with the future of capitalism. Sure enough, since the crash instead of recognising that their period of grace is over and only serious institutional reform can save it, and them, the powerful and wealthy, together with their political allies, have strained every muscle to restore business as usual, doubling down on the fundamentalist free-market measures that brought us to this perilous pass in the first place – austerity, hatred of state action, and determination to throw people back on their own resources rather than collective solutions. President Trump’s ‘pluto-populist’ tax policies, and to a lesser extent dogged UK insistence on ‘business friendliness’ are classic examples of this willful blindness.

Which is where the insights of another perceptive observer suddenly take on a new relevance.

The work of social democrat thinker Karl Polanyi, part of the extraordinary flowering of Austrian intellect that also produced Sigmund Freud, Joseph Schumpeter and Peter Drucker, has unsurprisingly been eclipsed in a period when the thought of his neoliberal opponents Friedrich Hayek, Ludwig von Mises (also Austrian) and followers such as Milton Friedman has been hegemonic.

But Polanyi’s insights now look prophetic. He would have seen Brexit, Trump, the not-so-stealthy rise of populism, nativism and retreat from democratic principles as more evidence for his proposition that the unfettered free market delivers not proletarian revolution, as the other Karl proposed, but mounting instability and inequality leading quickly to protectionism, nationalism, and demands for strong leadership to make the US (UK, France, Hungary, Poland, the Netherlands…) great again. In other words, something resembling fascism.

Polanyi used the example of 19th century Britain to show that there was nothing natural, or inherently democratic, about free markets: they were the construction of the rich and powerful, for the rich and powerful. ‘Laissez-faire,’ he famously declared, ‘was planned’. But its champions neglected the historical evidence that markets only work sustainably when embedded in society and tempered by politics, not the other way round. Ultraliberalism eventually endangers democracy itself, as it did before WW1, before WW2 and, is doing again today.

As it happens, one of Polyanyi’s friends in Vienna was Peter Drucker, who helped him find a job in the US in 1940. Like Polyani, Drucker was a humanist who insisted on management’s importance as a social as much as an economic institution. ‘The very survival of society is dependent on the performance, the competence, the earnestness and the values of their managers’, he wrote in 1993; and he would certainly maintain the same today.

The difference now is that management, at least in the UK and US, has unmistakably become a constituent part of the wealthy and powerful in whose interests society has been reshaped. Does it have the foresight to look beyond its own self-interest to mitigate the dangers swirling through fractured, unequal, austerity-gripped societies? Two contrasting post-Davos developments spring to mind. On one hand the announcement by Amazon’s Jeff Bezos, Berkshire Hathaway’s Warren Buffett and JP Morgan’s Jamie Dimon that they were setting up a non-profit company to disrupt the dysfunctional US healthcare system directly answers the Viennese call for productive innovation around a social need to temper capitalism’s excesses. On the other hand, Amazon’s patented wristband for tracking worker movements in its warehouses, the use of algorithms rather than humans for performance management and growing threats of ‘data dictatorship’ points management in a different and much darker direction. It now has to choose between the two. If Scheidel and Polanyi are right, the effects of the decision will ramify much wider than the organisations that they work for.

The opening words of the 2016 Carillion annual report, signed by chairman Philip Green and published less than a year ago, run: ‘In 2016, we made good progress in a number of our markets, while managing and mitigating the effects of more difficult trading conditions in others. Importantly, the Board maintained its focus on overseeing and developing the Group’s strong governance and management framework, on scrutinising the Group’s performance, on assessing the Group’s risk management and control processes and on constructively challenging the Executive Directors’. The whole report is written in the same comforting vein, with soothing sections on risk, vision and values, and why investing in the company would be a good idea.

It’s easy to mock. But given that four months later the company issued a substantial profit warning and the CEO departed with instant effect, Green – formerly adviser to David Cameron on corporate responsibility, no less – was either in the dark about the real situation or being exceptionally parsimonious with the truth. And where were the auditors? It’s hard to know which is worse and where to start. Either way, it’s a brutal slap round the face for current governance practice, which has been singularly unable to head off, or even warn of, one more spectacular corporate disappearing act.

Why did Carillion evaporate so quickly? The answer is that it was really a shell company. As a fully financialised product of the neo-liberal political philosophy ‘that for years has elevated financial engineering above real engineering; off balance-sheet finance above paying for things openly; and lauded the private sector above the public sector’, as the Evening Standard’s Tony Hilton noted, it had nothing meaningful to sell.

It grew to be the UK’s second largest construction firm and a member of the FTSE 250 not organically but through a flurry of acquisitions of facilities management and other service companies including Mowlem, Alfred McAlpine, John Laing and a several others. But as with other other large outsourcers such as Serco, G4S, Capita and Atos (incidentally all equally reviled), its main expertise, such as it was, was not in operations – much of the messy real business was subcontracted – but in doing deals and managing outsourcing contracts. When that became harder to pull off, Carillion had no option but to up the stakes and add bigger construction contracts, such as £1.4bn of work for HS2, to keep the cash coming in and the bailiffs away from the door. Eventually, in the colourful phrase of Matthew Vincent in the FT, it had become ‘a sort of lawful Ponzi scheme’ in which new or expected revenues went straight out again to pay pressing current demands. Pay incentives may have played a part in this, bonuses in the industry frequently being tied to increasing revenues rather than profits. In its 2016 ‘Say on Pay’ report, shareholder adviser Manifest noted important reserves about Carillion’s remuneration policies, raising doubts about quantity, lack of ‘forward-looking’ and stretching targets, and the exemption of share-based awards from clawback provisions.

Carillion’s demise shows in sharp relief the real toxicity of most large public outsourcing deals, which might have been designed to be poor value for money for the public and encourage wrong behaviour by companies. Politicians think it’s a simple matter of pricing, but the real problem is design and the thinking they reflect. In effect, deals are constructed zero-sum games in which one party can only gain at the expense of the other. To some extent outsourcers are hoist with their own petard. Taking advantage of naive negotiators, they comprehensively won the opening rounds, getting themselves typically paid by volume (number of calls answered, appointments made, applications processed) rather than service improvement. They compensated for low opening bids by back-loading contracts and making changes subject to punitive cost penalties – in effect locking in existing high-cost, low-quality designs.

But this triggered an arms race which no party could win. To avoid accusations of waste, Whitehall slashed margins and drove ever harder (but not smarter) bargains. Operators responded by cutting costs, their own and those of their subcontractors, the burden of which fell heavily on labour – substantially contributing to the explosive growth of zero-hours and other exploitative contracts – and cutting corners. There is no incentive to understand demand and improve response to it. One branch of this path to destruction leads to Carillion, and the multiplying knock-on effects through the wider economy. Another ends at the burnt-out shell of Grenfell Towers. A third is the dismal overall state of public services, with low pay, low productivity and no innovation co-existing with gross inefficiencies.

Pace Jeremy Corbyn, it’s not outsourcing of itself that is to blame. It’s perfectly possible to devise positive partnerships rewarding innovation that pays off in services that are both better and cheaper. But not with present ideologically blocked thinking. As Hilton puts it: ‘The collapse of Carillion is an indictment of management, but one in which the government, Whitehall, City bankers and even investors are complicit’. It is yet another example of the UK’s unique penchant for ending up with lose-lose: pseudo-marketisation without any of the benefits on one side, intense but ineffective government involvement on the other. The biggest loser of all in the Carillion debacle is the rest of us.