Just as technological development has led to new forms of management in private companies, across the ages it has also influenced political development. Just think of the political effect of the Industrial Revolution. Industrialisation generated unprecedented increases in prosperity, which had an infinite number of positive effects for both states and their citizens. However, the new technologies also generated long, inscrutable value chains. These led to increased specialisation, so people no longer understood one another's lives and jobs to the same extent as before. Under these new framework conditions, three new principal philosophies emerged: Liberalism, Socialism, and Fascism – besides their many spin-offs, including Anarchism, Communism, and National Socialism. These societal models clashed and led to a great deal of violence and suffering.

The reason for mentioning this, of course, is that the technological and commercial predictions I have tackled in this book will also have political implications that we must include in our thoughts about how the future may proceed. This chapter is my take on the subject.

Three social standard patterns that often undermine civilisations

Before really going into the specific political implications, I would like to underline three permanent phenomena in civilisations, which I will believe will have a significant impact on political development in the decades to come: (1) the Karpman drama triangle, (2) over-institutionalisation, and (3) shifts in dominant moral instincts.

The future welfare society – pyramid states or agile app stores?

As far as I am concerned, the aforementioned phenomena constitute general threats to our civilisations. But there are also more specific problems in modern mixed economies, where the public sector is predominantly, in Frederic Laloux's terms, conformist: method-driven and hierarchical. I believe that these organisations carry the seeds of their own destruction.

The first is the so-called Baumol effect, or ‘Baumol's cost disease’, named after the American economist William Baumol. One can easily raise wages in one sector if productivity per employee increases accordingly. Great. But then take a string quartet, which is one of Baumol's favourite examples. String quartets have not experienced any increase in productivity for hundreds of years. Nevertheless, like other people, musicians expect pay rises. That means that consumers see their services as increasingly more expensive when compared to all sorts of other things. That is why professional classical music also requires large amounts of public subsidy for its survival.

Now, string quartets are not a major factor in global economy. But the big problem is that public sectors throughout the world suffer from the same problem. Unlike private companies, they do not work under competitive pressure so have limited incentives for innovation and productivity improvements. Nor do they reward them. On the contrary, because if the public sector rationalises, some of their staff will simply get fired. In fact, as a result, over time they have nigh-on zero productivity gains, so they feel increasingly more expensive and engulf increasingly larger amounts of the GDP – even though the quality of these services does not improve. And if, as an alternative, we freeze the public sector's budgets’ GDP share, due to the Baumol effect, their quality will be ever poorer.

One of the main reasons for the lack of productivity growth in public services is the use of monopolistic method management, which is a feature of Laloux's conformist organisations. This means that those who decide what to deliver, even at retail level, through laws and directives, determine how the tasks should be solved – in other words, the exact opposite of Auftragstaktik.

Method management can be justified in certain contexts – both in the public and private sectors. McDonald's, for example, is very method managed, because uniformity here is a big priority. However, there are also a number of disadvantages associated with it, because when you take away responsibility from people, they easily become irresponsible, and when you deprive them of power, they often feel powerless. In addition, method management creates an atmosphere of distrust, because it shows that those who make decisions do not trust those who work. Method management also stifles creativity, because it puts a stopper on experiments.

Similarly, over time, method management leads to such complex regulatory jungles that increasingly fewer people can find their way through them. On top of that, administration costs constantly grow – partly because, as Laloux pointed out, conformist organisations generate very large staff functions. And finally, it should be noted that method management freezes organisations or societies in states that totally hamper them from keeping step with an ever-evolving reality. In other words, excessive method management amounts to over-institutionalisation and, the faster technological development proceeds, the more hopeless the states’ lead-footed method-management model becomes.

Another reason for the Baumol problem is that, in general, we manage other people's money less responsibly than we manage our own. One example is the so-called budget-maximising model in public sectors, which was scientifically described for the first time in 1971 by the researcher and university professor William Niskanen. Public servants typically attempt to increase their own organisations’ budgets in order to gain more subordinates and more power. This is a lot different from private companies, in which managers typically try to maximise their profits by reducing costs and thus headcount and generally improving performance.

We also have Mancur Olson's Non-Work Law. Large bureaucracies typically produce a myriad of working committees and sub-committees, each of which works increasingly more slowly, creating unproductive work for each other. The sum of all this is rather disheartening:

48. Public institutions tend to gobble up increasingly larger amounts of a society's economy, while their efficiency lags increasingly further behind.

Due to the combination of Baumol's cost disease and norm degeneration, modern welfare states have often had a steadily increasing tax burden, which I regard as a major problem in itself. In fact, the aforementioned Ibn Khaldun had already described at as follows: ‘It should be known that at the beginning of a dynasty, we get substantial tax revenue from low tax rates. When it ends, we get poor tax revenue from high tax rates.’ I can elaborate on this with some obvious examples of the harmful effects of too high a tax burden:

• It is mainly detrimental to creative enterprises, since many artists, athletes, entrepreneurs, and others, who work with great uncertainty and variable earnings, have very uneven incomes. They often alternate between being top taxpayers and being in financial distress, when they then apply for social security. The distress is very much a result of the fact that, because of their sporadically massive tax bills, they were not able to save in good times for the subsequent bad times.
• Excessive taxation destroys division of labour and jobs. If Mr Smith, a tradesman, offers to paint a wall for a homeowner, Mr Brown, and if both pay a marginal tax rate of 50% plus 25% VAT, Mr Smith has to be about five (five!) times better at painting than Mr Brown before it makes sense for Mr Brown to pay for Mr Smith's services. And, if the marginal tax rate is increased to 70%, the requirement for greater efficiency increases to 14 times. This phenomenon pressurises many people to leave the labour market, and they become welfare recipients instead.
• It leads to more undeclared work, since the temptation for this increases with the tax burden.
• It causes more social fraud. People who live off undeclared work seek social benefits to justify the fact they do not have an official job.
• It increases the brain drain. The most talented, risk-taking, hard-working professionals flee from countries with excessive taxation.
• It results in less physical mobility. Particularly high car taxes reduce people's willingness to work, where there is no easy access to public transport.
• It leads to unproductive saving. Instead of investing their savings in productive companies (shares), where the money is taxed, people conceal their profits in unproductive things such as gold, jewellery, or home improvements, which the tax authorities have a harder time spotting. This is especially true if the money comes from undeclared work or crime.
• It hampers innovation. It makes less sense to take risks as an entrepreneur if any winners are taxed to the hilt.
• It counteracts job mobility. Heavy taxes prevent people from saving. Therefore, they dare not change jobs or industry, let alone start their own business.
• It costs a fortune in administration. The more punishing taxation becomes, the more resources are deployed on administration, collection, optimisation, punishment for evasion, etc.

While public administration continues to be based on Laloux's conformist management model, the overall consequence of the above-described challenges is a tendency for tensions to get even worse over time.

There is also a threat that a so-called ‘welfare coalition’, most of whose income is from the state, and who can vote to get the money of a minority, which could also ultimately lead to collapse.

Forces that lead to chronically low growth or stagnation in welfare states

The sum of the aforementioned societal problems is, as mentioned, that modern mixed economies contain the seeds of their own potential destruction. The Karpman drama triangle, persecution culture, over-institutionalisation, moral decadence following crisis-free periods, Baumol's cost disease, negative norm degeneration, and sky-high taxation can lead to persistently relative, and finally maybe absolute, deterioration. That is what happened, for example, over many decades in Argentina and is often somewhat similar in the second, third, or fourth generation of successful families.

The battle for top–down management and decentralisation

In my view, there is a huge underlying tension in society between those who are mainly advocates of public power concentration and a hierarchical society, and supporters of more decentralised, grass-roots communities.

When it comes to the public sector, hierarchical models took over a long time ago. In my native country Denmark, for example, until the 1970s just over a few thousand parishes were important power entities, but then most of that power passed to the municipalities, which were then merged, just as the counties had been merged to form regions, which were then again merged. And while all that was happening, more and more power was channelled to parliament, which then forwarded increasing parts of it to the European Union, the United Nations, and other international organisations. In other words, the power was continually moved further away from individuals and local communities and concentrated at the top of increasingly larger entities. Arguments on behalf of this trend have often relied on the benefits of ‘common solutions’ and ‘harmonisation’.

As we have seen primarily in China, centralisation can be promoted with technologies such as IoT and big data to monitor people via sensors and behavioural analyses, and AI to locate threats to the system. It is thus possible to take centralisation far.

So, the public sector has predominantly centralised, which is a natural tendency for Laloux's conformist organisations, whereas the private sector – as we saw, for example, in Chapter 11, predominantly through apps, crowdsourcing, blockchain, MOOCs, the sharing economy, the rating economy, 3-D printing, and DAOs – has decentralised. This is an often profitable opportunity which we see in Laloux's achievement organisations, and which is key to his pluralist organisations and essential for the evolutionary ones that are now emerging.

Technologies that can promote decentralisation

In this context, it is important to understand that a decentralised market economy is at the heart of creativity. For example, it has a built-in sorting mechanism, in which ideas are constantly filtered through the ability to attract the right team of entrepreneurs, to convince financiers like me, and appeal to commercial customers like us all. Overall, a market economy is thus evolutionary, even if its companies are not individually so.

This is supported by the fact that today information flows much more freely. Traditional media such as books, radio, and TV were all based on top–down methods to spread information from the few to the many. But the Internet enables information to flow up, down, and sideways – you name it – completely freely, based on grassroots models and through millions of interlocked seek–sense–share loops. Thus, the information flow has become evolutionary, undermining the assumption in conformist organisations that the elite knows much more than the rest of the people.

Currently, ground zero for the debate on centralisation versus decentralisation is perhaps the European Union. Here, two very different views are confronted. Germany and especially France – albeit with considerable internal resistance – are pioneers of the view that the European Union must be centrally controlled like a kind of Roman Empire with common solutions and harmonisation. Conversely, a number of peripheral countries are more in favour of becoming an EFTA for free, autonomous nation states: free trade and political diversity. This tension also involves a clash between a conformist and an evolutionary societal model.

If this conflict is not to end up as a very bad marriage, it may be necessary to divide into two or more EU membership provisions, ranging from large-scale to small-scale centralisation. If this does not happen, I predict that the bad marriage may get really ugly, as such marriages often do.

Openness or closedness?

We have seen that, unless there is immigration, people in wealthy nations have too few children to stabilise their populations. At the same time, there are prospects of major population growth in the poor parts of the Middle East and large parts of Africa. This will of course continue to support mass migrations, which again will cause many countries to restrict immigration. One argument for this is that welfare states would soon go bankrupt if they had open borders and offered welfare to every Tom, Dick, or Harry that came in. Conversely, inhibiting migration can be costly when it comes to people who could play important roles in the labour market. Indeed, some of the most creative and economically well-functioning regions in the world have highly international populations.

In this context, I think that countries – for example, EU countries – will gradually come up with models in which borders are conditionally open, the conditions being that immigrants can support themselves and abide by the rules. This is, for instance, the basic model in Switzerland, which, besides having a relatively evolutionary social model, is one of the most international countries in the world. But it is also pretty good at preventing immigrants from draining public funds or making a living from crime. I can imagine a future in which that kind of ‘smart openness’ will gain ground.

The information problem in public management

Public sector management also has a growing information problem, since the difference between the population's vast collective knowledge and the state elite's comparatively limited insight is increasing. It is fair to say that a clan leader in the Stone Age probably shared a significant part of his clan's overall knowledge with others, but this is, of course, not the case in highly advanced modern societies with extreme division of labour and much larger entities.

Two of the first people to highlight this central theme – and at a time when it was a lot smaller – were the Austrian economists Ludwig von Mises and Friedrich Hayek, both of whom described how information in a society is spread everywhere. Every day, every single person – the schoolteacher, the craftsman, the businessman, the researcher, and everybody else – collects and processes complex information from his or her own world. Assuming that an elite is supposed to control the behaviour of all these people on the basis of the hierarchical model, it is unlikely that it can possess more than a fraction of a percent of an entire society's overall knowledge and insight. So, supposing optimistically that it has 0.1% of the total knowledge, on the basis of that 0.1% of society's knowledge, should it have the right to tell the people, who have the remaining 99.9%, what to do about most things in life?

Hardly. And that is why decentralised systems tend to perform best. Decentralised systems also gain in the long term, because they have far more experiments and much more competition; and since the trinity of knowledge, responsibility, and consequence is united in decentralised systems, they motivate people to a much greater extent. Incidentally, Nassim Taleb presented this theme very nicely in his book, Skin in the Game (2018). The book's main point is that, if people will not live personally with the consequences of decisions, then they should not be making them. Consequently, I will take the liberty of naming this book's penultimate law after him:

49. Taleb's Law: The systems in which insight, responsibility, and consequence are closest to one another usually do best in the long run.

When client–server computing made it big, it outperformed many companies, who still advocated master–slave computing. And that has also been the case with every subsequent computer paradigm. The strong philosophies of decentralised intelligence and information, which form the basis of recent computing paradigms, such as client–server computing and later personal computing, network computing, edge computing, and cloud computing, also annihilated companies that did not keep up with the progress, and they continue to do so. But, in my view, the really striking phenomenon is that states are allowed to base their behaviour on conformist organisations, who not only resemble the master–slave computing model of mainframe computers, but who also increasingly do so. So, my prognosis is partly that, going forward, power and prosperity will be concentrated in those countries that best understand how to convert from a master–slave societal model to personal network–edge–cloud-like systems divided into countless discreet, logical entities, each with a fusion of its own insight, responsibility, and consequence: cf. Taleb's Law. In other words, the future will be dominated by states that depart from conformist organisation in favour of achievement, pluralist, and – last, but not least – evolutionary organisation forms.

Laloux compares impulsive organisations to packs of wolves, conformist organisations to military ones (without Auftragstaktik, I would add), achievement organisations to machines, pluralist organisations to families, and evolutionary organisations to living organisms.

Yes, living organisms. In this respect, it is interesting that Taleb's Law also works in nature. Just think about how nature is organised: in a myriad of small, rational, and autonomous cells, each with its own chemical algorithms for making useful decisions. A human body, for instance, consists of billions of cells that together create organs etc. And each cell of every single organ is programmed to filter what is going in and out, and to respond logically to external impulses. Biology, which could not be more evolutionary, is thus very much based on edge computing. It is this organic decentralisation principle that we elegantly copy in a predominantly market economy society or in a technology such as IoT and a business model such as the sharing economy – and in evolutionary forms of organisation. In other words, from the outset, nature has dangled this in front of our noses, and now we see its principles deftly applied to electronic ecosystems and increasingly to private business models too.

That is the next thing for states to learn. Thus, in the public sector management of the future, we must seek more evolutionary and hacker-friendly societies, which consist of smaller autonomous entities, each of which can easily be substituted with others via an open platform, and in which money to a greater extent follows the citizens, who can then choose their providers in publicly sponsored ‘app stores’. This could be done, for example, by offering people certain amounts of crypto money, which could each be used specifically for special purposes such as education. Originally, economists called this phenomenon a ‘coupon economy’. But, if it were based on blockchain, ‘token economy’ would be a more appropriate expression.

Government as a platform: small government – big services

One way to mitigate the risk of systemic political crises is to pursue government as a platform.

In this context, think of smartphones. These provide access to millions of apps, all of which have been tested to meet certain legal, security, and quality requirements, but which were developed externally. In other words, smartphone providers crowdsource the vast majority of their services, which users then rate. This creates a huge range of different services at very competitive prices (many services are even free) and promotes incredible innovation.

One prerequisite for this has been the fact that smartphone providers offer Application Programming Interfaces (APIs): in other words, well-defined software interfaces that facilitate the easy integration of foreign software with theirs. Similarly, in a government-as-a-platform model, you could imagine that public data and services would be very open, so that individuals could work with them and make extensions, plugins, etc.

But that is not all. Imagine a state that says: ‘We want to offer all citizens tax-funded access to a range of services such as education and health insurance, and we will ensure that they comply with certain requirements. But each citizen can choose his or her own providers.’

This is the platform concept in a nutshell, abandoning method-managed monopolies and instead promoting competition and choice, and thereby generating innovation and productivity gains. In such a system, insight, responsibility, and consequence will also be more closely linked in a number of local units, which corresponds somewhat to converting from master–slave, mainframe computing to networked and edge computing. The consequence is that service providers spend less time fulfilling the requirements of public method-management systems, instead focusing more on their customers.

But how would customers choose? Through rating systems, which would emerge spontaneously. However, in addition, the state may require any service provider on the public platform to disclose certain information, such as average grades in a school or current waiting times at a clinic. Smartphone providers and other modern companies almost always have online dashboards, which display in real time their most important target figures such as sales, complaints, revenue, data flows, etc. In other words, they know precisely – here and now – where the proverbial shoe pinches. But if public services are offered by private or autonomous companies, customers must also know where the shoe pinches – here and now.

Another development in public services may be that an increasing number of approvals etc. can be booked online via small smartphone apps and websites, which provide immediate answers to most of them, similar to how people get order confirmations and delivery estimates in seconds when ordering online from private providers like Amazon.

And when the state itself provides services, it can offer real-time tracking of case handling. It is rather like having packages shipped by private providers, where you can usually see online exactly where in the system your package is at any moment, or where, in the case of Uber, the car you ordered is in real time and when you can expect it to arrive.

Moreover, such real-time feedback is not only useful for the customers/citizens, but also for the providers. Politicians and public sector administrators will also become much more efficient if they see how well the systems are working via online, real-time dashboards. And when something does not work, it will be clear to everyone who is responsible.

The growing attraction of basic income

Another aspect of technological development may be an increasing argument for basic income. As mentioned earlier, I am personally not so concerned about mass unemployment as a result of new technologies, but it seems likely that welfare states in the West, in their current forms, will run into some major problems. First, experience shows that welfare states create incredibly expensive management and control regimes. Welfare, machinery-related administration costs for both a state and its citizens combined can easily reach 20–25% of the revenue collected in taxes. Secondly, welfare states can maintain clients in inactivity, because even the slightest sign of willingness/capacity to work can lead to loss of benefits: a relationship that ends up attracting some people to assume chronic client roles, akin to the perpetual Victim in the Karpman drama triangle. This is why basic income may be chosen to replace lots of the traditional elaborate welfare system.

In fact, there have been experiments with this in several places in the world with limited success. See, for example, Rutger Bregman's book Utopia for Realists (2017) for a description of such attempts.

However, the success criterion for introducing a basic income must be, partly, that such a system only ensures a quite limited lifestyle and, partly, that any work can actually be worthwhile, so the basic income in no way becomes unnecessarily passivating.

It is also interesting that basic income has advocates from all parts of the political spectrum. For this reason, too, it seems likely to me that different countries will experiment with it again and perhaps eventually find a model that works. If I have a single major fear vis-à-vis such a project, it is that it will make it easier for parts of the population to live like totally pacified screen zombies, sinking into the digital world and becoming totally cut off from real life.

Value-based public management – good or bad?

In Chapter 11 I described how, more than ever before, in a turbulent future, private companies will need to have, and communicate, clear values. Value-based management in a company means you only hire people who agree, and that is what you then try to do.

But does the same apply to future states? In this context, the answer is somewhat less black and white. Every nation has a set of basic values expressed in its constitution, and I believe that most people in most nations support their constitutions. However, major migrations mean that increasing numbers of population groups are migrating to countries whose constitutional values are not theirs, and to which they are sometimes directly opposed.

The basic problem is that you can only have value-based public management if there is overwhelmingly common support for these values in the country's population – and that requires a certain degree of internal homogeneity. This particular issue, by the way, is described excellently in the last chapter of the classic book State, Anarchy, and Utopia (1974) by the philosopher Robert Nozick. If states are, or become, too large or multicultural to meet this criterion, the tasks of that state should be reduced to the purely practical. If this does not happen – if the state pursues core values that large parts of its population disagree with – you will lose trust and coherence. And that is happening in quite a few places.

If I have to draw a general conclusion about how technical development both challenges and offers new opportunities to public management and administration, the overall task must be to gradually reduce the use of conformist organisational models with their vast legislative jungles and frequently unrealistic leaders, and to arrive instead at something that combines achievement, pluralist, and evolutionary forms of organisation. In this context the keywords include ‘government as a platform’ and maybe ‘basic income’.