BY Abdul R Tresh*
Rationality, in the context discussed here, refers to the quality of logic or reasoning, and it reflects what one considers meriting their attention in justifying decisions and actions. An individual’s rationality is influenced by their social and professional background because it is derived primarily from the accumulative effect of their experiences in life. As such, a particular rationality introduces a bias to an objective decision making.
Any specific rationality appears most prominently when a person holds a responsible position in a public office, through which he could exercise authority and decide on alternative policies. Consider as an example the leader of a country with a military background. Such a leader is more likely to possess a military rationality, in the sense that he would regard defence as his number one priority. He is also more likely to interpret innocent decisions and behavior of other countries at international level as being hostile towards his country and may take aggressive action.
Under a leadership with that rationality, a country’s armed forces would prosper because it would acquire the lion’s share from the budget. This would no doubt be at the expense of other sectors of the economy. If on the other hand, the leader has an engineering background, in some discipline– say civil engineering, he is likely to devote much attention to that sector, which is likely to reflect positively on many other sectors of the economy, at least initially. I say initially because policies that are based on public spending often result in inflation, which eventually leads to inflation. When inflation hits hard, the boom turns to bust.
Similarly, though on a much smaller scale, if a doctor is entrusted to run a surgery or a hospital on behalf his local government, his priority would almost certainly be the treatment of his patients, not the cost of treatment and other associated costs, for as long as he is funded. Perhaps the most dangerous of rationalities is the criminal one, which when it exists, it is evident as corruption in the administrative system, in public and private sector organization, and which could even involve organized crime. Individuals and groups with such rationality, ultimately cause the destruction of the organization in which they operate and could ultimately end up ruining the country’s entire economy. The extent of prevalence of that rationality in an organization dictates the speed with which the affected organization collapses.
Clearly, there is far more corruption in third world countries than elsewhere in the world, and that is not coincidental. However, criminal rationality is not exclusive to third world countries. It is found in almost every country. The more advanced the political and administrative systems in a country are, the greater is their ability to deter would-be criminals, because it is less likely that criminals would consider entering into tightly guarded systems. Nonetheless, now and then we hear of people holding high offices, public and private, being prosecuted for suspected illegal activities and corruption charges.
In general, governments are viewed by public-sector employees and the general public alike as bottomless pits for resources. As such, everyone demands more and expects more from them. The effect of such pressures is exacerbated by the absence of economic rationality in government departments. Thus, those in charge of government spending in different sectors and institutions such as health, education, etc., compete for a greater share of the budget but do not necessarily review their policies with economic rationality, unless they are forced to do so.
On winning the general election in 1979, to become the Prime Minister of Britain, Mrs. Thatcher embarked on a program of privatization, which characterized her era in power. She was insistent that economic rationality was the only rationality capable of optimizing the performance of the economy in general and nationalized industries in particular. That rationality, she believed, was capable of delivering the desired changes, much need to overcome the stagnation, and in some cases degeneration of some of those industries. Thus, she began by privatizing the communication division of the post office, which became known in 1980 as British Telecom, followed by the electricity and gas boards, various sectors of the transport system including British Rail, and the water authorities.
By privatizing those industries, while keeping them under the watchful eye of the government and various watchdogs, to deter any monopolistic tendencies, their primary measure of performance was no longer the quality of the products and services they provided, but their economic indicators. The idea was to break up each of those industries and sell them off to the public on the London Stock Market. By so doing, they became businesses in which management is no longer responsible to the government, but to the shareholders. She redesigned and restructured companies out of those industries and opened wide the doors for competition, making those companies subject to market forces. Thus, their ability to register profit for the public, who were the stakeholders, became their indicator for success or otherwise, and as such, they had to compete and perform to stay in business.
With that policy of privatization, Mrs. Thatcher was able to rescue the then loss-making nationalized industries from the brink of collapse, making them profitable companies that became the pride of the nation. However, it now seems that people in charge of the offshoot companies from privatization have learned how to control them for their and perhaps the benefit of selective investors. Salaries and bonuses have since continued to spiral up as profits increased, eliminating the envisaged benefits to the public as shareholders and as costumers. To pay for the increasing benefit of those in charge, costumers, who are supposedly the shareholders, have had to continue fitting the bill for that benefit through continually increasing prices, as the seemingly competing organizations have learned how to get along, without ever being subject to investigation by the Mergers and Monopolies Commission.
Now, after forty years, two lessons could be learned from Mrs. Thatcher’s program of denationalization. One is the accountability of management to stakeholders rather than to the government, which has proved to be extremely vital to the success of the organizations. Two, in time, those in charge of organizations learn how to manipulate the safeguarding systems that keeps them in check for their benefit. Therefore, governments are required to ensure fair trading and protect the public interest.
* A structural engineer and a projects director.