After news broke that the consulting giant KPMG signed a clean 2022 audit for Silicon Valley Bank just two weeks before its collapse, the Wall Street Journal promptly asked, “[D]id KPMG know or should it have known what was going on?”
This question sits at the unsettling core of Mariana Mazzucato and Rosie Collington’s new book, “The Big Con: How the Consulting Industry Weakens Our Businesses, Infantilizes Our Governments, and Warps Our Economies.” From the collapse of Enron to the disastrous launch of HealthCare.gov, from the IMF’s country-crushing Structural Adjustment Programs to the government’s deadly COVID-19 response, the authors ask repeatedly: Did the consultants hired to manage our most important institutions know what was going on?
As it turns out, our inability to answer this question or place blame is the key to the consulting industry’s business model. “Evade risk, reap the rewards” is the golden rule of Deloitte, KPMG, EY, and others. Contracts are written to maximize payments and minimize liability for any disasters that ensue. After the Silicon Valley Bank meltdown, the Wall Street Journal reported that “[KPMG] said it isn’t responsible for things that happen after an audit is completed.”
One bad audit of a bank, no matter how insufferable its boosters, would be bad enough. But the influence of the consulting industry has gone far beyond a few banks and corporations. As the competence and strength of central governments have been sapped by decades of deregulation and tax cuts, consulting firms have stepped in to deliver (and profit handsomely from) basic social services. Mazzucato and Collington make clear that although consultants were not the main drivers of the privatization of the public sphere, they have become its clearest beneficiaries.
Consider: In one major loan to the country of Guinea-Bissau, the World Bank required the country to “employ a team of project management consultants and experts” to restructure its loans and meet its debt obligations, which entailed major cuts to public spending and social services. If consultants are the winners of privatization, the great mass of people who rely on governments for assistance are its obvious losers.
It is here that we should pause and ask what the benefits of the massive, global shift to subcontracting are. Does the private sector provide services to the public more efficiently and cheaply than governments themselves can, as is frequently promised? “The Big Con” answers emphatically, “No.”
The over-budget and under-functional healthcare.gov site, which was supposed to help millions access healthcare, was itself the work of more than 55 consulting firms, Mazzucato and Collington write. In 2020, ProPublica reported that McKinsey had made “$100 million (and counting)” assisting the federal government’s COVID-19 response, procuring medical supplies and analyzing data, among other tasks.
On page after page, one finds infuriating details of the abject incompetence of government-hired management consultancies. And yet, governments across the globe continue pumping ever-more-awesome sums into retaining their services. In many cases — such as McKinsey’s well-known role in the opioid crisis and FTI Consulting’s work for fossil fuel companies — these firms have been paid to fix the very crises which they have helped create.
The big con, the authors explain, has been the systematic weakening of government to the extent that when catastrophe strikes, the only number left to call is Deloitte’s or McKinsey’s. With slick marketing and MBA-style sales pitches, consulting firms’ immense profits have not been earned by any particular success or ownership of unique skills and knowledge, but rather “the possession of the means to create an impression of value.” In over-relying on flashy consultants instead of developing their own workforces, governments’ abilities to respond to people’s needs have significantly worsened.
Despite the authors’ focus on consultants, they remind us that the easiest targets are not always the root of our problems. While consulting firms have assisted in the decline of governments’ capacities to serve the public, they did not spur deregulation and tax cuts on their own. And of course, there are many reasons one would want to work for a consultancy instead of in government (salary, to name one).
So, what can be done to expel the industry’s stranglehold on public goods? While Mazzucato and Collington admire reporting and investigations that have outed consulting firms as incompetents at best and frauds at worst, most journalism is framed in a way that ignores the more fundamental issue of the destruction of centralized government and its capacity for serving the people.
“Post hoc investigations are not a substitute for regulatory bodies,” the authors write. If that’s so, then this book can be added to the list of valuable but inadequate cries of alarm at the vampiric presence of management consulting in public life. What, then, should we do? Maybe we could hire someone to figure that out.
