What time is it?

A widely circulated quip says a consultant borrows your watch to tell you the time, then keeps your watch.

In response, consultants smile and say, “We were hired because no one there knew how look at their wrist.”

Apparently, fewer and fewer corporate and government executives have the ability to tell time without assistance. A report in UK newspaper The Times includes:

The Big Three and the Big Four have also been hired to help design smart cities, develop national net zero carbon strategies, propose education reforms, counsel armies, manage the construction of hospitals, draft medical ethics codes, write tax legislation, oversee the privatisation of state-owned enterprises, manage mergers between pharmaceutical companies and govern the digital infrastructure of countless organisations. Consulting contracts affect all levels of society.

The Big Three strategy firms? McKinsey, Boston Consulting Group and Bain & Company. The Big Four? PWC, Deloitte, KPMG and E&Y (the “Big Four” accountancies).

Of course, there are countless consultants not involved with those firms. Some are individuals — often former executives — and some are medium to large organizations. Like the ones that British Columbia has been paying steadily increasing amounts.

By no means is this a complete listing of professional services paid for by the BC government. Nor does it show payments by crown corporations or public agencies. For example, during the same five-year period, BC Hydro paid these four groups about $60 million more.

The business of consulting groups is largely opaque. While exercising great influence on public policies, they are unaccountable to voters. Their business is highly rewarding. Under Trudeau, Canada’s federal government has awarded consulting firm McKinsey over $100 million dollars in contracts.

Writing for the Washington Post, Michael Bobelian reviewed a book about the world’s largest consulting firm:

…in Bogdanich and Forsythe’s “When McKinsey Comes to Town: The Hidden Influence of the World’s Most Powerful Consulting Firm.” The authors expose the firm’s unsavory work with fossil fuel companies, cigarette-makers, opioid distributors, regulatory agencies and autocratic regimes. In a masterful work of investigative journalism building on their reporting for the New York Times, Bogdanich and Forsythe pierce through McKinsey’s “culture of secrecy” — a process they describe as “akin to chasing shadows” — to unearth conflicts of interest, corruption, hypocrisy and strategic blunders that read like a prosecutor’s indictment...

The scandals and hypocrisy behind McKinsey’s sterling reputation

McKinsey & Company, the consultant to blue-chip corporations and governments around the world, has agreed to pay nearly $600 million to settle investigations into its role in helping “turbocharge” opioid sales, a rare instance of it being held publicly accountable for its work with clients.

McKinsey Settles for Nearly $600 Million Over Role in Opioid Crisis – New York Times

Co-authors Mariana Mazzucato, Professor of economics at University College London, and economist Rosie Collington think democracy is endangered by the growing involvement of consultants in public policy development and implementation.

Many governments have stopped investing in their own capacity and capabilities, and because they fear failure, they do not take risks. Many businesses have shirked responsibility for change and are focused on earning short-term profits through easy, unproductive strategies, such as buying back their own shares to boost stock prices, or not paying workers their fair share.

These trends have depleted organisations of knowledge, skills and vision.

…The size of the industry, and the contracts it receives, have become eye-wateringly large.

…The consulting industry today is not merely a helping hand; its advice and actions are not purely technical and neutral, facilitating a more effective functioning of society and reducing the costs of clients. It enables a particular view of the economy that has created dysfunctions in government and business around the world.

What we call the “Big Con” is not about criminal activity. It instead describes the confidence trick the consulting industry performs in contracts with hollowed-out and timid governments and firms focused on maximising shareholder value. These contracts enable the consulting industry to earn incomes that far exceed the actual value it provides — “economic rents”. These rents are not necessarily derived from the ownership of scarce, valuable knowledge assets, but more often from the ability to create an impression of value. The immense resources and networks of big consultancies help to instil confidence in the value of a consultancy and the consulting profession.

…The more governments and businesses outsource, the less they know how to do, causing them to become hollowed out, stuck in time and unable to evolve. With consultants involved at every turn, there is often very little “learning by doing”. Consultancies’ clients become “infantilised”, as the former Cabinet Office minister Lord Agnew described the effects of outsourcing on UK civil servants in 2020.

…in no area might the Big Con have greater consequences than in the fight against climatic breakdown. The consulting industry helped to embed forms of production that have intensified carbon emissions. Now, in the face of growing concern about the climate crisis, it is riding a new wave, obstructing the large-scale transformations that are needed across our carbon-intensive economies. It is providing governments and businesses with frameworks that offer a veil of commitment without a requirement for action

Trillion-dollar con trick: advice that makes things worse

Categories: Democracy, Economics

4 replies »

  1. Confessions of an Economic Hit Man by John Perkins

    “Economic hit men,” John Perkins writes in his controversial new book, “are highly paid professionals who cheat countries around the globe out of trillions of dollars. Their tools include fraudulent financial reports, rigged elections, payoffs, extortion, sex, and murder. They play a game as old as Empire but one that has taken on terrifying dimensions during this time of globalization.”

    John Perkins should know about economic hit men–he was covertly recruited by the U.S. National Security Agency to be one. For years, he worked for an international consulting firm where his job was to convince underdeveloped countries to accept enormous loans, much larger than what was really needed, for infrastructure development–and to make sure that the development projects were then contracted to U. S. multinationals. Once these countries were saddled with huge debts, the American government and the international aid agencies allied with it were able, by dictating repayment terms, to essentially control their economies. It was not unlike the way a loan shark operates…


  2. Well sure, but look how much less red tape there is… Less government is a good thing. Government should be run like a business. And assorted other words of wisdom. And look what we end up with, governments that are run like businesses, clueless, always needing more, and corrupt.


  3. In Canada and the USA, consultants receive about 20% of the cost of a new transit system for consultation fees, thus it is in their interest to gold plate new transit systems with expensive gadgetbahnnen such as SkyTrain or just about any new transit system built. Both Ottawa and Seattle’s LRT systems are light-metro, costing far more than they should.

    Consultants get away with it because politicians have the daft belief that the more you spend on transit, the better it is.

    In Europe, transit planning is more organic, with in-house planners investing in new transit lines which best suits the transit customer and in general new rail transit lines are far cheaper to build.

    In North America, taxpayers pay up to ten (10) more for their rail transit, with no extra benefit for the premium price.

    Most new transit projects in North America would not past muster in Europe, where transit is far more customer oriented and user-friendly tan in Canada and the USA.


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