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This updated article  examines the ‘Grinding Square Wheels of Bureaucracy’.   Includes pertinent observations on HMRC the UK Tax Office; Government; Councils; and of course the European Commission.

The Slow Grinding Square Wheels Of Bureaucracy

The mechanics of a bureaucracy in ‘action’ can be best illustrated with a number of examples; and where else to commence proceedings than with the Tax Office.  The collection of tax is full of paradoxes.  On the one hand a Tax Office does not have business customers to worry about, they can create as large a bureaucratic empire as desired, reinforced by the law (and on occasions working beyond the legal system) they can impose long winded bureaucratic routines, in conjunction with draconian, threatening, and harassing collecting tactics to  strictly enforce tax collection.  However, what isn’t always obvious that all this can be self defeating in the prime task of efficiently collecting tax.  If a country’s tax collecting regime is too strict, time consuming, or simply too high - the earning business or individual ultimately relocates out of the regime with net result of nil tax collected.  A successful business generally minimises bureaucracy, this can be the difference between the winners and losers.  If a bureaucratic tax regime imposes too much time wasting ‘red tape’ onto the businesses it wishes to collect from, this imposed inefficiency results in less or even nil tax collected.  It is an ironic and recurring feature of burgeoning bureaucracies that they can lose sight of their original aim, and act in a manner that generates the polar opposite of their advertised purpose.

The United Kingdom’s Her Majesty’s Revenue and Customs (HMRC) department is a prime example of an out of control bureaucracy .  By way of example:  the UK’s HMRC requests information from new businesses registered as a limited company with a three month deadline.  The company is then harassed and threatened with various fines, in the period preceding the target date.  Most private companies on chasing up clients, say for overdue bills, are normally very conciliatory on the first hastener.  Not HMRC they issue threats two months before expiry of their own deadline!  The United Kingdom tax system is currently so complicated that you can get numerous calculations, deadline requirements, and varying answers to straightforward enquiries depending on whom and what section of the Tax Office is approached.  It is also known that if HMRC wrongly assesses tax in the taxpayers favour and issues a small rebate, on discovery it will treat the taxpayer as a backdated debtor, and in conjunction with its poorly design computer system, bully and harass the taxpayer with threats of legal action and bailiffs, again a month prior to the publicised date a debt is due.  

Local government can also exhibit an immense amount of bureaucracy, albeit generally not on the sheer scale and audacity of main government.  Examples are numerous, here’s one as a sampler.  Located in the area of  Ryde St John’s on the Isle of Wight is a recently introduced elaborate and costly traffic light scheme.  This has resulted in:- a waste of electricity, an eyesore, conversion of a smooth traffic flow to constant queuing blocking side roads, a timing system resulting in setting drivers to perpetually drive through red lights, an illogical ‘no-man’s land’ where cars can be trapped on a light change into an illegal parking position, and a hazardous environment for pedestrians to cross.  This illustrates one of the problems with a bureaucracy, once it makes and implements a bad decision; it is next to impossible to make the bureaucracy change its mind.  It must be said to be fair, that the Isle of Wight council is considered one of the more efficient councils - there are some truly horror stories from ‘loony’ councils in the United Kingdom that would fill a book of monumental proportions.

However it does appear a truism that the larger the bureaucracy the more inherently inefficiently it becomes.  The true nightmare evolves when a number of countries combined to form a joint bureaucracy of colossal proportions.  In Europe they have done just that, with the ever growing European Commission (EC) trashing all sense of a fair democracy to apparently head towards the ultimate super state.  The USSR tried this and the rest is history.  There really is far too much material to consider in this article, but inefficiency and European Commission are true soul mates.  Even the EC’s own auditors have refused to sign the accounts for years!

One can only really fight a bureaucracy with two weapons.  These are fear of adverse of publicity and the threat of legal action.  To achieve this, an individual needs to be meticulous in documentation, complete with as much supporting evidence as possible.  If there is a dispute, often the best strategy is to covertly operate within the bureaucracy’s (legitimate rules) and expose a breach by the organisation or individual working within the bureaucracy.  Nobody likes bad publicity, and even the most soulless bureaucratic organisation does not relish being front page of a national tabloid newspaper!

People can wonder what purpose a bureaucracy serves.  If they are inherently inefficient, what is the point?  The answer is remarkably simple, and it is perhaps easiest to think of bureaucracy as akin to a living organism.  There can be no wider motive, than to simply exist, grow, and multiply.  Within a bureaucracy an individual or section may release that the same functions can be achieved with, say 25% of the existing staff.  However, whoever dares to propose such a suggestion, may well find themselves in the 75% redundant!  Furthermore in the real human world people tend to look after themselves and their colleagues. If their wider circle of family and friends can be accommodated with employment within the organisation so much the better. 

Another factor not to be overlooked is the type of people attracted to working for a bureaucracy.  The risk taking, entrepreneurs are not likely to be attracted to such a position.  Indeed for the Richard Branstons and Alan Sugars of this world, a pure bureaucracy would be highly counterproductive to achieving a successful business.  Wasteful routines mean wasted resources, which equals loss of profit.  It is no coincidence that the very worst and most inefficient bureaucracies are found in taxpayers funded government organisations.

It is therefore no surprise that government agencies are the ones that tend to implement political correct policies with gusto.  Companies that want to be productive and show a meaningful profit generally pay lip service to political correct ideology.  Yet again the recurring theme of a bureaucracy resulting in the direct opposite of what is supposed to be achieved can be highlighted by political correct organisations.  By simple way of illustration in the interests of eradicating alleged discrimination (notwithstanding successful companies are primarily interested in profits) on the sole grounds of sex, orientation, and ethnic group is to issue quotas and standard manipulation to discriminate on the sole grounds of sex, orientation, and ethnic group!   For any bureaucracy there is a wealth of material here, for needless regulation, creation of meaningless non-productive jobs, and to generally justify needless and expensive expansion. 

Government bureaucracies, whether centrally or locally governed invariably fail to live up to expectations.  This is simply because unlike successful free market enterprises that has the consistent marker and incentive of ‘profit’; markers in a government are often intangibles or politically determined, the incentive to the bureaucracy is survival and expansion.  Indeed government bureaucracies can have a perverse financial incentive to fail and be inefficient, as this can result in an increased budget to solve the further problems.  Yes, bureaucracies do exist in the private market, but ultimately market forces will favour the more efficient (and hence profitable) company over the one that is more bureaucratic. 

Government bureaucracies invariably fail to live up to their promises because they are not market institutions. As such, there is no possible way of ascertaining how efficiently the bureaucracy is run since there are no profit-and-loss statements in the government sector, only ‘budgets’ and often meaningless ‘targets’.

All government bureaucracies have powerful incentives to grow, regardless of whether or not such growth actually serves the public. To survive the bureaucrat must inherently be an empire builder, because that is how he advances in his career. The route to promotion in managing a bigger and better-paying bureaucracy is to prove that one can ‘manage’ a large number of people.

Returning to the European Union, this really ticks all the dismal boxes of an inefficient and ever growing bureaucracy.  Five years ago the Eurozone currency crisis kicked off with Greece getting into deep trouble.  The currency Euro, really cannot ever work, unless the European Countries who belong to this dubious club work like a country with common tax, benefits, and fiscal policy regimes.  As it stands it makes no sense that Germany shares the same rate of exchange than the Southern Mediterranean countries such as Greece and Italy.  The EU seems to be looming towards disaster, still retains a huge debt problem, growth has been stifled, and possible deflation is looming.  Democracy is conspicuous by its absence, and the EU has failed to have its own accounts passed in 19 years.  The bureaucratic nature of the EU will not see that its own structure and decisions is the source of these problems - and similar to the former USSR will reach a point in the future where it will collapse - the ultimate fate of ever enlarging inefficient bureaucracies.

To quote Ludwig Von Mises from his classic 1949 book ‘Human Action - A Treatise on Economics’:- ‘Whenever the operation of a system is not directed by the profit motive, it must be directed by bureaucratic rules.’  This cast iron law of bureaucracy means that in the final analysis, no government bureaucracy could ultimately be operated in an efficient manner.

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John D. Henry BA BSc

ARTICLE - Slow Grinding Wheels of Bureaucracy

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Bureaucracy in the opinion of many is the absolute scourge of modern day living.  The word certainly does not conjure up efficient and essential administration.  On the contrary this term is associated with meaningless procedures, and organisations riddled with bungling red tape that achieve little, if anything.  The apparent sole aim is of pure frustration, often contrary to any concept of meaningful logic or ‘common sense’.  Bureaucratic officialdom can be compared to a living organisation, existing purely to grow. 

This article is updated from the original one posted by Datalite UK Ltd in 2008.  Really to show that if anything the endless and senseless march of bureaucracy in the Western World has got worse.

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John D Henry BA BSc, Managing Director of  DATALITE UK LTD
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