Review of Mazzucato and Collington’s ‘The Big Con’

My review of Mazzucato and Collington’s ‘The Big Con’ was published in the Business Day today, below I repost the article.

An unfair critique of the consulting industry

Management consultants are fixtures in boardrooms, for better or worse, but a recent book suggests that their work with governments often turn out for the worse. ’The Big Con’ by Mariana Mazzucato and Rosie Collington caused quite a stir in public sector and consulting communities as it lists multiple case studies that (they argue) show that consultancies have been responsible for ‘infantalising’ governments around the world and, in countries like South Africa, have enabled large scale corruption.

Their central claim is that global strategy consultancies and major accounting firms perpetuate confidence tricks used to create the ‘impression of value’ in the delivery of their services.  They argue that large consultancies overstate their competence to develop and implement strategies to governments, and that using consultants stops governments from developing internal expertise or learning how to improve their processes, leaving them dependent on consultancies.

Most troubling is the evidence on the conflicts of interest involved in many consulting contracts, such as when a firm advises a government on regulations while also advising private sector clients how to avoid related regulations. As an example, they zoom in on climate change strategy formulation, providing examples of firms helping with drafting of net zero emission strategies, while helping fossil fuel producers ‘greenwash’ their reporting.

They also list South African examples of large contracts won by McKinsey and Bain that have been linked to corruption at state owned enterprises and government entities. The book makes a convincing case for reforms of current practices around contracting public sector services.

While the claims are supported by extensive footnotes, it is a pity that it does not present a more balanced assessment of the net impact of consulting across governments and projects over the long term. It is easy to point to examples of unsuccessful consulting projects at different levels of government, across both countries and time. Service providers by nature (and terms of contract) stand back once a project has been successful to let the client take the praise.

It is a shame the authors do not consider international evidence of the costs and benefits of outsourcing government projects or services to enable a more nuanced discussion of the conditions under which contracting public services may not be appropriate.

The book ends with some high-level proposals for reform. These include enhanced disclosure around conflicts of interest, enhancing governments’ internal capacity, and shifting to more outcomes-focused performance assessments of contracts. These recommendations have a ‘motherhood-and-apple pie’ flavour that make them hard to argue against. What is missing is tangible examples of how to assess the value of consulting projects, evaluate how successful capacity building has been or how to think through the appropriate role of government in different contexts.

A lack of state capacity is an important reason why governments’ draw on the services of private sector providers. In South Africa, government has demonstrated a lack of ability to sustainably provide even basic infrastructure such as electricity or roads. The private sector therefore plays an important role in cost effective delivery of public services and a couple of examples of projects linked to corruption are not sufficient evidence of the wholesale failure of outsourcing practices.

One way to assess the role the consulting industry plays in the South African economy is to look at government’s spending on such services.  The national and provincial government spent around R10 billion on consultants and another R10 billion on auditors and contractors in 2022/3. This is likely an underestimate of the amount spent on consultants and contractors, as it excludes spending by local government and state-owned entities such as Eskom that do not report such information, as well as capital expenditure on things like computer systems or other technologies from the private sector.

Mazzucato and Collington do draw attention to the importance of enabling more effective assessment of consulting engagements and the value taxpayers are receiving, as well as whether government has been following an appropriate strategy to foster capacity creation in the public sector. Overall, the authors advocate for a shift away from outsourcing to redefining the role of the state to be more of an ‘entrepreneurial and mission-oriented public sector’. The lofty ideal of a mission-driven government is broadly in line with South Africa’s National Development Plan, which is built on the idea of a ‘capable and developmental state’.

However, recent history suggests that the conditions for the government to play a more active leadership role in economic development might not currently exist in South Africa. South African policymakers have not managed to design policies in a way that foster public and private investment and innovation towards national priorities in many key areas. Unfortunately, the authors’ do not provide a blueprint for designing private sector involvement in different contexts.

But the book does highlight the importance of disclosure of detailed information regarding the value taxpayers are getting from outsourced projects and having a bureaucracy staffed by a country’s brightest minds.

Despite mounting evidence of improprieties that global consulting companies have been involved in South Africa as well as poor project delivery, little detail is publicly available about their role in provision of services by government and related entities. ‘The Big Con’ warns of the dangers society faces from failing to hold government accountable for its expenditures on unaccountable consultants.

Key to this is public disclosure requirements for all branches of government and state-owned entities and maintaining a meritocratic state bureaucracy with expertise in strategic planning and coordination of projects involving public and private stakeholders.

Dr Steenkamp is CEO at Codera Analytics and a research associate at Stellenbosch University.

Review of ‘The Big Con: How the Consulting Industry Weakens Our Businesses, Infantilizes our Governments and Warps our Economies’ By Mariana Mazzucato and Rosie Collington.