Consultancies Have Been the Handmaidens of Neoliberalism

Corporate consulting firms like McKinsey attribute their industry’s success to its capacity to increase efficiency and add value to the economy. In fact, there isn’t a single major act of state or corporate malevolence in our lifetime free of the big consultancies’ fingerprints.

The McKinsey & Company logo is seen during the first day of Mobile World Congress 2023 at the Fira de Barcelona in Spain, February 27, 2023. (Davide Bonaldo / SOPA Images / LightRocket via Getty Images)

During the most recent French general election, a Senate commission’s conservative president and communist rapporteur jointly attacked the “influence of consultancies on public policy” in President Emmanuel Macron’s government. That morning, as Macron was meeting voters, one yelled “McKinsey” at him until being escorted away. At the time I was in a provincial Auvergnat town, where “Vote McKinsey” had been angrily scrawled over the president’s posters.

Some months later in the United States, veteran journalists Walt Bogdanich and Michael Forsythe published a 350-page investigation into the world’s oldest and largest consulting giant. Reviewer Laleh Khalili describes it as “a damning account of the way McKinsey has made workplaces unsafe, ditched consumer protections, disembowelled regulatory agencies, ravaged health and social care organisations, plundered public institutions . . . and increased worker exploitation.”

Economists Rosie Collington and Mariana Mazzucato return to this ground in their new book The Big Con — excoriating McKinsey, its close peers Boston Consulting Group and Bain & Company, and a host of similar firms. The authors race through a medley of involvement in misconduct — price gouging vital medicines; corruption in South Africa and Angola; forest destruction from Brazil to Guyana; ICE detention camps; the asset-stripping of public services from health care to railways; brutal economic restructures of struggling economies; mass layoffs; tax-dodging; the 2008 crash; and the Enron scandal, to name a few. One quickly gains the impression that there isn’t a single major act of state or corporate malevolence in our lifetimes free of the big consultancies’ fingerprints.

But despite a roll call of cartoonish villainy, The Big Con is more of an academic intervention than a boilerplate attack on unscrupulous businesses. First, it challenges the consultancies’ fundamental value proposition: that the industry’s success is based on increasing efficiency and profits even in a narrow sense. Second, it interrogates and historicizes consultancies’ success, rooting it in the peculiar history of recent capitals. And finally, it makes a strident call not merely for undermining the power of McKinsey and similar companies, but for reinventing how we produce value in a time of huge challenges.

High Priests of Financialization

One of the earliest consultant case studies in the book is a positive one. It concerns the appointment of managerial cyberneticist Stafford Beer to design what has been termed the “socialist internet” in Chile, before the project was cut short by the US-backed coup of 1973. The authors do not dispute the value of “consulting” in a more general sense. Indeed, they argue, organizations will always need external advisers, be it for short-term support, for sounding boards to challenge internal orthodoxy, or for expertise on niche topics.

Instead, Collington and Mazzucato focus on several particular forms of business. There are the “Big Three” strategy consultancies; the “Big Four” accounting firms whose profit is today based far more in consultancy than in their original functions; the “outsourcing” firms that claim to offer specific services to government such as IT or security but in practice effectively perform the role of government; and smaller firms based in similar models.

This sector has been at the heart of a decades-long transformation in both business and government. In-house expertise and specialized knowledge have been eroded and replaced by dependence on consultancies and their short-term, one-size-fits-all methods.

Mass privatization is, of course, a far broader phenomenon than consultancies. NATO’s wars in Iraq and Afghanistan saw private military and security contractors explode in size relative to the armed forces, resulting in both huge financial costs and human tragedy.

The UK — one of the most deregulated and privatized economies in the West — has seen vast cuts to some areas of state spending, at the same time as there have been significant increases in other areas of state spending, such as on substandard services outsourced to the private sector. This has created disasters for asylum seekers, schoolchildren, transport passengers, and indeed public health as a whole during the pandemic. The privatization doctrine has also been enforced on the developing world, with brutal results. In every case, the public purse assumes most of the risks and the private sector profits most of the rewards.

Twin ideological doctrines have underpinned such a shift. In business, the “managerial revolution” — in which internal expertise is deprioritized, workers are ignored, downsizing solves everything, and all incentives are subordinated to short-term shareholder value — has been comprehensive. Recently the Boeing 737 MAX incident, in which passenger aircraft were effectively programmed to crash themselves, was attributed to the consequences of this revolution.

And in government, the historic experience of state-led innovation from NASA to the UK National Health Service (NHS) has been forgotten, and replaced with the inflexible view that the state is always less efficient than the private sector; public servants cannot be trusted to work for the common good; and where government has to exist it should resemble business.

While these doctrines purport to be based in science, they are resistant to all evidence contrary to their findings. Though the big consultancies are not primarily responsible for the wider processes of privatization and financialization, they have certainly been its high priests. As early as 1974, a McKinsey-led reorganization of the NHS produced the opposite result to its intended aim: a “proliferation of paper” that increased rather than reduced bureaucracy.

This would set a thirty-year pattern of continuous reforms of the British state intended to “cut red tape” and introduce market discipline. It was a pattern that ended in bloated middle management and organizational chaos. Meanwhile in the private sector, Collington and Mazzucato point to one illustrative case in a pharmaceuticals business where, according to one source familiar with the process, the contracted consultant’s motto was “don’t bet on science, bet on management.” Research was defunded, drug prices were gouged, and in the ensuing outcry, 90 percent was wiped off the value of the company’s share.

Merchants of Disaster

If the authors’ thesis is indeed accurate, why is it the case that clients continue to employ such consultancy firms? Why do these disaster merchants keep getting invited to town? The authors propose several explanations.

First, Collington and Mazzucato do not dispute that the industry produces some value, certainly in the region of increasing short-term profit margins. Of course hardworking teams of top graduates will sometimes produce knowledge or results of utility. The question is: Do consultancies organize those capabilities well? Many former consultants do not seem to think so, and Collington and Mazzucato spend some time interviewing those who joined to make a contribution and quickly became disillusioned.

More pressingly, the authors attribute much of the industry’s commercial success to what they term “The Big Con,” a reference to the confidence tricks played by wily businessmen-criminals in the wild frontier of Gilded Age US capitalism.

Consultancies operate by initially offering cheap or free work to understand an organization and ultimately to make it dependent. They approach organizations in crisis and offer quick fixes. They exploit other relationships with organizations — like accountants — to cross-sell services. And often, organizations bring them in to invoke deniability for unpopular decisions. If a McKinsey report says that a firm must, for instance, cut a thousand jobs, management can present it as a fait accompli — especially if, as The Big Con points out, the consultants also help with breaking union resistance.

Elsewhere, many organizations simply lack the ability to break with parasitic consultancies. In the case of government, decades of privatization, lower state salaries, and the doctrine of state inefficiency have created a self-fulfilling prophecy: states no longer know how to perform key functions. The authors point to early state innovation in IT which would be almost unthinkable now. Worse, not only have states lost the ability to perform — they have lost the ability to know what it is they are asking for, and so have little way to effectively evaluate or discipline the work of consultants. Knowledge, like any muscle, atrophies, and cannot simply be revived by a brief transfusion of semi-relevant experience from elsewhere.

Again, the consulting industry is not responsible alone for this process. But nor has it been, in the authors’ account, simply a canny operator exploiting developments in capitalism. The industry has indeed sought to — often successfully — reshape capitalism. McKinsey, for example, pioneered a range of management theories that became doctrine across the West. Its success was based less on the strength of those ideas than its ability to exploit the Great Depression and later the ready availability of Cold War defense contracts, but its ideas became dominant, nonetheless.

Today, the consulting industry relentlessly exploits its revolving doors with government and policy makers, the diffusion of its alumni across industry, and its ability to fund research institutes and pseudo-academia. If the advice it gives clients is short-termist, its own strategies are not; many are aimed not at winning immediate clients but shaping thought about how societies should work.

Beyond Consultancies

This is where the authors’ argument becomes more existential. The pandemic, they argue, was a striking example of large-scale state failure, both in hollowed-out national states and in a global health governance system riddled with consultants and market doctrine. Meanwhile, Collington and Mazzucato point to poor but well-organized and dedicated states with recent histories of effective crisis management that performed well.

Major economies like the United States and the UK — with states weakened by austerity and privatization that had farmed many of their core functions out to consultants and outsourcing firms — performed extremely poorly. This raises a broader question. We are in a world full of emergencies, and often emergencies which are themselves driven by capital’s excess — most notably, climate breakdown. If our public services aren’t up to the task of managing crises, and the external advice these services depend on don’t have our interests at heart, how does that affect who lives and dies?

The Big Con’s penultimate chapter is, therefore, a grim reflection on the climate emergency. The consultants are working for both sides, of course. They are talking up their green credentials while contracting out to fossil fuel companies and land destroyers. The situation is worse than them simply servicing the needs of conflicting clients. The authors point to the example of Australia’s McKinsey-drafted supposed strategy for reaching net zero, a document which does nothing of the sort. And it’s more than just greenwashing or botched commissions — as with public services, the industry evangelizes for “market based solutions” to climate change, especially those that don’t work.

The final section returns to Mazzucato’s best-known idea: the mission-driven entrepreneurial state. She and Collington prescribe four recommendations: to reimagine the role and purpose of civil services; invest in state capacity; reform and regulate the scope of consulting contracts; and enforce transparency. It is essentially a policy brief for an incoming social democratic government.

Though there is little to argue with regarding these recommendations, there is a lack of detail, and the end of the book leaves one wanting more. How do these laudable recommendations actually get achieved in the face of heavy resistance from those who stand to lose? If we are skeptical of the metrics of efficiency proposed by the consultants, what might a better theory of value creation look like?

A book that leaves one thinking at the end, however, is a book worth reading. Collington and Mazzucato have provided a meticulously researched anatomy of an industry not widely understood by those outside it. They have explained complex ideas and processes in clear terms, and brought them to life with a rich and engaging narrative style. They have eschewed a simple narrow moral attack on a few parasitic firms in favor of a clear-eyed view of the industry’s origins and drivers, and they have outlined the stakes for the future in no uncertain terms. That last is the most important. The Big Con may present itself as an exposé of the consulting industry, but behind it lies a bigger and more urgent warning to reshape social priorities in an age of crisis.