Cameron’s red tape challenge to ministers – produce as much red tape as possible

My last blog post was on recycling so I guess it is appropriate if I recycle some material from an old blog post to deal with Nick Clegg’s latest attack on the  ‘it’s not what you know, it’s who you know society’.

Today Nick Clegg has announced that Britain’s top 100 firms have agreed a code on recruitment and work experience schemes that will involve payment to interns and the restriction of information that appears on application forms so that firms know less about people’s names, schools and so on. Furthermore, the businesses have agreed to promote work experience programmes much more widely. This is a voluntary code but businesses that do not agree will be  ‘named and shamed’.

Of course, this is just what we need – more employment regulation. It comes in a long line of announcements and enactments over the last two weeks about executive pay, council house tenancies, the disastrous implementation of the moratorium on employment regulation for small firms, alcohol regulation, the extension of employment rights to temporary workers and the regulation of the scrap metal industry. I am wondering if I have misunderstood the government’s red tape challenge – is the challenge to ministers to produce as much red tape as possible?

The first question Mr Clegg might try to answer is  ‘why is recruiting on the basis of  “what you know” more moral or fair than recruiting on the basis of  “who you know”‘? It happens that Mr Clegg is both quite clever (I believe) and exceptionally well connected as a result of the start in life that his family gave him. Both his intelligence and his initial connections from Westminster School are a matter of pure luck. Both his intelligence and his networks will have been enhanced by a combination of luck, hard work and skill. If somebody is not very clever but good at building networks, why should they be looked down upon more than somebody who is clever but not good at building networks? The hard work that one puts into networking is not obviously less virtuous than the hard work that one puts into developing one’s intelligence. The good luck that comes from being born with a good brain is no more virtuous (indeed it is not virtuous at all) than the good luck that comes from being born with a set of well-networked parents.

Secondly, taking decisions about who to hire is difficult. You need information about a whole range of qualities many of which are quite subtle. Do people have the right skills? How well do they communicate? How honest are they? How hard working are they? And so on… It is incumbent on employers to do what they can to find out about the skills and attitudes of their potential employees. Preventing them from using some mechanisms will cause them to take bad hiring decisions, risky hiring decisions or make it less likely that they will take hiring decisions at all.

Clegg seems to want a rationalist world which takes its cue from those who believe that all knowledge is explicit and formal and where employers completely remove the human element from employment decisions. This is simply a way to make employment more risky and, as such, reduce the number of non-standard hires. The most disadvantaged in society may suffer most from this. Let’s suppose that I had an application form from an ex-convict and all I had to go on was the application form. Would I employ that person? It is highly unlikely. On the other, let’s say that my next-door neighbour said to me:  ‘I am a prison visitor; there is somebody leaving prison for theft, but he was largely set up by a gang that he got involved with. From the moment he came into prison he tried to get more qualifications. Could you give him a chance?’  According to Nick Clegg, if I were recruiting for Tesco, then, no, I could not. What a pity. Why should we penalise good, honest, sociable people who were unlucky to be born with not-very good brains but have worked hard and built up good connections? Why should the state tell private firms how they should recruit their employees? What would society look like if we tried to eliminate every aspect that contributed to the advancement of particular persons that was not determined by  ‘what you know’?

The last thing my elder son said to me this morning before he went to sit his Economics AS-level was  ‘does the state have to provide public goods?’ Rushing out of the door, I said:  ‘Not necessarily. Remember there is a textbox in your book about lighthouses being a public good but not being provided by the state.’ He might use that information; it might get him an extra grade. It would not have been  ‘what he knew’ but  ‘who he knew’ that would lead to that extra grade. How utterly dispiriting life would be if we tried to eliminate the subjective and the social aspects of employment and other decisions. Perhaps children should just be taken away from their families at birth and stuck in state nurseries and schools, never to see their parents again. That might make it easier to ensure that personal contacts, networks and ‘who you know’ have nothing to do with employment prospects. Though, I am sure that the networks would spring up in another guise.

Philip Booth is Senior Academic Fellow at the Institute of Economic Affairs. He is also Director of the Vinson Centre and Professor of Economics at the University of Buckingham and Professor of Finance, Public Policy and Ethics at St. Mary’s University, Twickenham. He also holds the position of (interim) Director of Catholic Mission at St. Mary’s having previously been Director of Research and Public Engagement and Dean of the Faculty of Education, Humanities and Social Sciences. From 2002-2016, Philip was Academic and Research Director (previously, Editorial and Programme Director) at the IEA. From 2002-2015 he was Professor of Insurance and Risk Management at Cass Business School. He is a Senior Research Fellow in the Centre for Federal Studies at the University of Kent and Adjunct Professor in the School of Law, University of Notre Dame, Australia. Previously, Philip Booth worked for the Bank of England as an adviser on financial stability issues and he was also Associate Dean of Cass Business School and held various other academic positions at City University. He has written widely, including a number of books, on investment, finance, social insurance and pensions as well as on the relationship between Catholic social teaching and economics. He is Deputy Editor of Economic Affairs. Philip is a Fellow of the Royal Statistical Society, a Fellow of the Institute of Actuaries and an honorary member of the Society of Actuaries of Poland. He has previously worked in the investment department of Axa Equity and Law and was been involved in a number of projects to help develop actuarial professions and actuarial, finance and investment professional teaching programmes in Central and Eastern Europe. Philip has a BA in Economics from the University of Durham and a PhD from City University.

4 thoughts on “Cameron’s red tape challenge to ministers – produce as much red tape as possible”

  1. Posted 12/01/2012 at 17:42 | Permalink

    The philosophical implications of Dr Booth’s essay reminded me of a critical policy implication arising from the Enlightenment — the hubris of politicians, another characteristic of that time, has become an unfortunate given.

    Who can now begrudge when the rule of man was superseded by the rule of law? Yet, pushed to extremes, this impersonal reliance on a written code crowds out all competing — and arguably more nuanced — manner of inter-personal relationships. Think of the rise of legislative statute law over the common law tradition (not unconnected is the subsequent growth of government), and the contemporary reliance, in Oliver Letwin’s terminology, of rule-based regulation over judgement-based regulation.

    It seems that Clegg remains consistent with his Europhile sympathies in preferring the dogmatism of Continental rationalism to the pragmatism of British empiricism — that is, of privileging ideology over what works. His prescriptions for Lords reform are a case in point.

    Edmund Burke wrote of the French rationalists who ‘despise experience as the wisdom of unlettered men’, though there were exceptions:

    Many of our men of speculation, instead of exploding general prejudices, employ their sagacity to discern the latent wisdom which prevails in them. If they find what they seek, and they seldom fail, they think it more wise to continue the prejudice, with the reason involved, than to cast away the coat of prejudice, and to leave nothing but the naked reason; because prejudice, with its reason, has a motive to give action to that reason, and an affection which will give it permanence.

    Burkean prejudice, it should be remembered, was simply a preference for the tried and true over the untested and therefore unknown. Is there any question where the deputy premier’s sympathies lie?

  2. Posted 13/01/2012 at 11:31 | Permalink

    Although I heard of the intern programme I wasn’t aware that the firms had to suppress information on their application forms. I blogged about this issue some time ago and pointed out some of the unintended consequences.
    In some ways voluntary codes backed up by naming and shaming – an unpleasant form of “nudge” – are worse than laws, which at least get discussed by Parliament.

  3. Posted 13/01/2012 at 14:30 | Permalink

    It has always struck me that luck plays a bigger part in life than most economics textbooks recognise. It seems self-evident that there’s no merit about being lucky. Yet taking advantage of good luck, or finding ways to mitigate bad luck, is probably rather important. My philosophy is that good and bad luck even themselves out over a lifetime. Of course one can’t prove that; but it just seems quite a sensible basis on which to proceed. At any rate, that’s how I persuade myself that being lucky isn’t ‘unfair’. Not that I would mind too much if it were. As Oscar Wilde said: ‘Life isn’t fair; and perhaps it’s a good thing for most of us that it isn’t.’ Exploiting good luck then becomes an important way for some people to better themselves. What is the alternative? Sir Michael Edwardes’s famous preference for leaving North Sea Oil unexploited.

  4. Posted 13/01/2012 at 15:53 | Permalink

    It is interesting that “Britain’s top 100 firms have agreed a code on recruitment and work experience schemes”

    I think it’s fair to say that big firms will find it much easier to manage the convoluted process of recruitment and ensure compliance with a code of conduct than will a small firm. Now, so far this is a voluntary code, but if it becomes less voluntary, it will put smaller firms at a competitive disadvantage, which I’m sure will be a great disappointment to their larger rivals.

    On a general note, it is interesting how much big business has embraced much of the government’s interventionist agenda. One might almost think that government intervention was playing right into their hands!

    “If somebody is not very clever but good at building networks, why should they be looked down upon more than somebody who is clever but not good at building networks?”

    It depends very much on the job, I imagine. I would hope that an academic was recruited based on intelligence rather than whom they know. OTOH, if one is recruiting a salesperson, or a public affairs professional, the ability to network is far more important than raw intelligence.

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