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Efficiency or resilience?

Robin McAlpine – 30th September 2021

An economist would approve of a cost-saving proposal first to appear in Viz magazine. Buying expensive wall-to-wall carpet is inefficient when you’re only standing on a very small proportion of the carpet at any one time. Instead buy two high-quality carpet tiles, strap them to your feet and you’ll have luxury carpet wherever you go.

An economist could convert this into a mathematical formula which proved conclusively that, yes, carpet is highly inefficient and yes, person-centred individualised carpet solutions increase the efficiency enormously. And this in a nutshell is a key reason everything is going wrong just now.

Our hospitals are at breaking point because we’ve handed them over to financial management regimes which use exactly the kind of formulaic analysis of ‘cost centres’ to seek to drive any inefficiency out of the system to achieve ‘maximum impact from public investment’. By default, this makes the goal of hospital administrators to run hospitals at 100 per cent capacity all the time.

Other European national health services would consider this a crazy policy. What about staff burnout? What about differing capacity demand at different times? What about the unexpected?

If an event like the pandemic comes along and you are operating at 100 per cent efficiency, there is absolutely no give in the system. Under this administration there has been a substantial reduction in hospital beds in the pursuit of that kind of efficiency target and we are now seeing the consequences. Occupancy has risen from 84 to 87 per cent in ten years.

Similarly with the global problem of shortages. The drive towards ‘just in time’ stock management where, rather than holding a ‘buffer’ amount of whatever a shop sells, it holds the least amount it can which it replaces constantly means there is no leeway if there is a problem anywhere along the supply chain.

Similarly with public procurement where ‘efficiency’ demands that the money spent on the things government purchases must always be cut in any way possible, even if the way the money is spent actually works against the public interest (for example by cutting out small, local suppliers in favour of big corporations).

Since the adoption of ‘New Public Management’ in the Thatcher years, almost all government across the UK has been driven by the setting and subsequent pursuit of ‘performance indicators’, the translation of policy objectives into simple numerical measures of progress. Assumptions about ‘efficiency’ are built into all of these and so are pursued in and of themselves.

But we do not live in an economist’s formula – the only thing unexpected about the unexpected is its form, not whether unexpected things will happen (they definitely will). A public sector (or private sector for that matter) without ‘inefficiency’ will be unable to cope with the unexpected.

Inefficiency has an even more critical role in the delivery of public services than being ready for big, unexpected events. They must also meet the needs of all those small, individual unexpected events which make up our lives.

If you have a small, local minor injuries clinic, you want it to be open when your child needs it. Perhaps it was only operating at 60 per cent yesterday, 75 per cent tomorrow. So what? You need those few percentage points of ‘inefficiency’ today.

If you want to get from one place to another outside peak hours, you want the bus or the train to be there anyway, even if it is running ‘inefficiently’ at half capacity. If you phone the police you want someone to answer, whether you are calling at a time which falls within their statistical models or not.

The spreadsheets might predict that you can run a responsive service or that you can always have stocked shelves in shops or that you can get an atypical problem solved while at the same time running everything to maximum capacity in an uncertain world – but the spreadsheets are wrong.

That is why Common Weal developed the concept of ‘resilience’ as soon as the pandemic hit. It gave a name to a concept we’ve had built into policy for a while now. An efficient system may theoretically be the best use of resources, but a resilient system is one that can still deliver even when the unexpected happens, to you, to your community or to your country.

A resilient Scotland makes more of what it consumes, so we can all sleep better at night knowing we’re not wholly reliant on delicate supply chains. A resilient Scotland generates and manages its own energy, so the lights stay on. A resilient Scotland demands higher quality of products so they don’t keep failing, leaving you to replace them again.

A resilient Scotland doesn’t boast about its natural assets, it uses them to increase its self-reliance. But equally a resilient Scotland manages all aspects of its environment with the expectation that it may take a little more effort, be a little less efficient, to use them in a way that also looks after them, but that means they’ll still be there next year and the year after.

Efficiency has meant ‘maximum exploitation of everything’ and it has done a lot of damage. A substantial proportion of the degradation of the world’s environment can be traced back to ‘slightly more efficient’ ways of doing things, like letting trawlers dredge the sea floor, destroying entire environments for the sake of ‘efficiency’.

Nor does efficient in any way mean better. Efficient food is cheaper and lasts longer but tastes worse, is much worse for our health and involves very large volumes of plastic waste.

And efficiency has also played an important part in the transfer of wealth to the wealthiest. Efficiency sees wages as a problem and monopolisation as the solution. But that’s only efficient if the state then makes up for the impacts of the low pay through public services and social security.

The goal of resilience is to deliver the opposite of these phenomena. Things get better, taste better, work better, last longer. The economy shares wealth better, creates jobs here, supports diversity, gives people security. The environment is protected, regenerated, supported and respected.

And public services are reliable, flexible, high-quality and prepared for the inevitability of the unexpected. Yes we pay a bit more to get these outcomes, but it also means we earn more. And we get so much more than we pay for in a resilient world.

So unless you’re tramping around your house with carpet tiles strapped to your feet, celebrate the benefits of a little inefficiency in your life. You’ll be grateful in the long term.

10 thoughts on “Efficiency or resilience?”

  1. Not much brings cheer to my heart this days, but a brilliant article like this does. In fact, that opening paragraph alone does it. And this is from the man who is to write the ‘Wee ALBA Blue Book’ in time for next year’s local elections, with a little editing help from, ahem, you-know-who.

    Which means there is more cheer to come!

    Meantime, well said, Robin.

  2. Spot-on Robin, only the effects on employees was not explored (perhaps a blind spot for a hard working chap like you).
    Here is a poem I wrote on this aspect;

    Efficiency
    Their god of efficiency gnaws our bones
    dictates your work, invades our homes,
    wanting more for less and faster too,
    it burns you out, it leaches you.

    Our God created a bountiful earth,
    enough for all, each one has worth.
    By the sweat of our brows and healthy toil
    we’ll eat, get fat, enjoy, extol.

    So I’ll avoid debt and acquisition
    empowered in simpler position,
    watch the clouds sail by in frugality
    and potter inefficiently.

    Richard Bond
    September 2017 (rev April 2020)

    1. Robin McAlpine

      A friend got a substantial pay rise. I was talking to him in the pub and he was kind of musing about what to do with it. He was thinking about a new, bigger house. “But do you need a bigger house?” I asked. “Not really” he said. “Well honestly, you’d be better with a cocaine habit because there’s no rehab for a 25-year mortgage so don’t trap yourself and enjoy life”. I really believe that (not the cocaine habit…). We trap ourselves into debt and then complain about the hours we work and talk wistfully about the things we wanted to do instead. Be like William Morris – ‘be surrounded only by that which you know to be useful or believe to be beautiful’.

      Robin

  3. Efficiency = extracting maximum output from given input; as you say running an emergency hospital at 100% efficiency does not bode well for crises;
    Effectiveness = a broader definition, looking at how public spending/policies/resources have achieved defined objectives. We are rubbish at this, we “throw money” at problems e.g. addiction, without clear strategies, objectives and holistic measures of outcomes.
    Economy = spending the least amount of resource usually as a consequence of macro economic limits, e.g. we will spend £10m on addiction cos that’s what we spent last year plus standard inflation. Like taking half of a prescribed dose of meds, this “saving pennies” approach can result in po!icy failure and wasted resources.
    Other issues: cost benefit analysis tools often biased towards big projects based on dodgy info. E.g. If we spend £1b on a new road, journey times for 1m annual vehicle journeys reduced by 10 mins, at value of £1 per minute. That is £10 m “boost” to economic growth per annum. Plus the £1b construction costs can be counted as a one off add to GDP etc. Who actually benefits is never fully discussed.
    Public spending can be classified as a “boost” or a “drag” depending on perspective. Taxing the rich to give benefits to the poor is a “transfer payment” which does not affect the totality of GDP, it is a redistribution (albeit the poor are then likely to spend 99% of the income and thus boost growth in local economies).
    It is all “pure magic”/presentation is everything.

    1. Robin McAlpine

      Here’s something people often don’t know. When we model the economy we use an input/output table and a series of assumptions which were developed in the 1970s (the standard model of output prediction modelling). There are thousands of assumptions in it – if you do this, that happens. A number of times are assumptions that if we tax less, people will spend more and boost the economy. It means that the whole system has an inherent bias towards the growth impact of reducing taxation (towards – other factors push in the other direction). The real-world evidence shows that actually there is a wider range of behaviours people enact when there is a tax cut, but the model hasn’t been updated in light of that. It doesn’t make the model useless, it makes saying that the model ‘shows X will happen’ unreliable. But it is very rarely that we ‘open the bonnet’ to see what is inside.

      Robin

  4. Typically brilliant article Robin, fantastic.

    However, as an economist who has thought about things along these lines before, I don’t feel particularly delighted at the attack on a whole area of study. Old ideas need challenging, and in writing like this (in which you are doing this whilst thinking about the workings of the economy) you ARE an economist! When Planck, Einstein, Bohr etc were developing quantum mechanics in the early 20th century, they didn’t attack “physicists” or “physics” (or natural philosophy as was), they just advanced their new ideas and *extended* physics.

    The efficiency resilience trade-off is something that we should see much more acknowledgement of in economics and in economic policy. And when we do, that consideration will be part of an “economist’s formula”!

    1. Robin McAlpine

      How dare you! An economist?

      Actually you’re spot-on right. I wrote this fairly quickly yesterday and when I just re-read it I actually thought I should have pointed out that the numerically-focussed formula-driven branch of economics is very much only one strand of economics and it has been declining in its dominance for a while now. There are entire strands of economic enquiry which are really crucial and which we will rely on going forward. And funnily enough, quite often those who are most reliant on ‘algebraic economics’ are often closer to ‘accountancy’ than economics. If we are going to ‘fix the system’ we need to understand the system and economics is key to that.

      No, I’m actually a sociologist – and don’t get me started on THEM.

      Robin

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