McKinsey and Co: The Anarchist Austerity Cult

Robin’s Book Report #51
by Robin Kaiser-Schatzlein

-recent writing
-my round-up about McKinsey and Company, the transnational management consulting firm

I recently wrote for the Baffler about Bill de Blasio’s failure to address the housing crisis in New York. He claims to be the candidate for “working people,” but it’s not really true. The housing crisis is working people’s largest problem, and depending on how you look at it, he either did nothing or made it worse.

Unfortunately for me, de Blasio’s campaign is so doomed I’m not sure anyone cares to read a critical take-down of the dunderhead. However, it’s an important article because it says a lot about why Democrats often posture as defender of the working class but flail once in office. They employ regressive market mechanisms to solve problems instead of considering alternatives. De Blasio continued to use Bloomberg’s housing mechanisms, which are really just expensivization techniques. He demonstrates a disgraceful lack of imagination. Enjoy!

McKinsey and Company is an anarchic cult out to extract the wealth of nations

McKinsey and Company, as you may know, is the transnational, ultra high-end management consulting firm, founded about a hundred years. I wrote about them a little bit in a review of Louis Hyman’s Temp earlier this year. McKinsey is not a publicly traded company; it’s a partnership. This means they are free to be completely secretive. McKinsey is not unlike Skull and Bones or other secret societies; former members are proud to have belonged and loathe to reveal information about inner workings. To be made a partner (of which there are now thousands) at McKinsey is to be given a boat of money and a golden ticket to the executive class. Many make partner and move on after a few years.

McKinsey is an advisor to a large majority of the biggest corporations, governments, and NGOs in the world. Management, executives, and people in power love to hire McKinsey: it’s a signal that greater efficiency and larger profits lie just beyond the horizon.

But there are some structural deficiencies with McKinsey that are worrisome. As they expand across the globe, spreading the gospel of austerity, they have run out of stand-up clients to work for and have extended themselves into some unsavory relationships. This has revealed that at their core, the consultancy is an amoral, anarchic organization just as likely to aid legitimate groups as they are criminals. And they’ll always push for what the best for those in power (who, of course, hired them), which is austerity. Today I am reviewing some material that reveals why McKinsey is an anarchic cult out to extract the wealth of nations.

McKinsey & Company: Capital’s Willing Executioners

An insider’s perspective on how the world’s most elite consulting firm spreads the gospel of capitalist by Anonymous (Current Affairs)

Not a great article but does highlight the structural flaws of McKinsey, namely, it has no structure:

“McKinsey’s governing model, when compared to other firms of its size and age, is anarchy. The Managing Director (CEO equivalent) has surprisingly little ability to control who the firm serves (said a partner about the Managing Director, “you are definitely not in charge”). McKinsey remains the world’s largest partnership, and partners rule. The general rule of thumb is that if a partner can staff a team, the firm will do the work.”

This is something that is disturbing about capitalism: that unregulated, it is highly amoral. You can’t predict whether McKinsey will be good or bad for the world because you can’t necessarily predict how people will act inside the firm.

The firm is pervasive, global, and influential:

“McKinsey serves more than 2,000 institutions, including 90 of the top 100 corporations worldwide. It has acted as a catalyst and accelerant to every trend in the world economy: firm consolidation, the rise of advertising, runaway executive compensation, globalization, automation, and corporate restructuring and strategy.”

The firm claims to be ethical, but it doesn’t work in all directions:

“The closest value is a commitment to “observe high ethical standards,” but I only ever saw this applied to the treatment of clients: don’t lie to them, don’t fudge your expenses, etc. If McKinsey had values that considered the human impact of its work and attempted to honor Sneader’s pledge, it would need to pull out of engagements all over the world.”

Why would consultants go into a room and present a Powerpoint that didn’t argue the powerful people who hired McKinsey shouldn’t get more money? Austerity always sounds good to those who hire McKinsey, whether they are business owners who free up capital by firing a bunch of employees or governments who free up capital by cutting social services.

The McKinsey Way to Save an IslandWhy is a bankrupt Puerto Rico spending more than a billion dollars on expert advice? By Andrew Rice With Luis Valentin Ortiz (New York)

McKinsey’s secretive internal hedge fund bought Puerto Rican government debt, and now its consultants are on the ground trying to find ways for the government to pay back it’s debtors with financial austerity, essentially trading public services for debt repayment. Is Mckinsey engaging in high level bankruptcy fraud? They are essentially running the Puerto Rican government:

“With consultants taking on more and more responsibility, McKinsey has virtually become a shadow agency of the government, and a powerful one at that — feeding a colonialist dynamic that PROMESA was supposedly designed to avoid. In January, a federal official familiar with McKinsey’s work in Puerto Rico told me: ‘They’re doing everything. If McKinsey leaves, the board essentially ceases to operate.’”

McKinsey is a secretive group that is out to suck the wealth out of businesses and countries:

Already the island is an object lesson in what happens when the logic of capitalism overtakes the structure of government. It is an article of faith at McKinsey that the same management theory that makes businesses run more profitably can be applied to further the public interest.”

Governments can’t be run like businesses, often because the government can’t really dissolve like corporations might. Governments have responsibilities to people regardless of profit, or any other kind of bottom-line analysis.

How McKinsey Has Helped Raise the Stature of Authoritarian Governments” By Walt Bogdanich and Michael Forsythe (New York Times)

Once again, as McKinsey has expanded globally, they have run into problems.

“In Ukraine, McKinsey and Paul Manafort — President Trump’s campaign chairman, later convicted of financial fraud — were paid by the same oligarch to help burnish the image of a disgraced presidential candidate, Viktor F. Yanukovych, recasting him as a reformer.”

The implication of all this is that in absence of global governance, we essentially have McKinsey:

“While the United States pulls back from international cooperation and adopts a more nationalist stance, major companies like McKinsey are pursuing business in countries with little regard for human rights — sometimes advancing, rather than curbing, the contentious tactics of America’s biggest rivals.”

Reporting on McKinseyHow We’ve Reported on the Secrets and Power of McKinsey & Company by Walt Bogdanich and Michael Forsythe (New York Times)

McKinsey likely encouraged or simply fueled the opioid crisis:

“That point was driven home in startling fashion when we recently reported that the Massachusetts attorney general had accused McKinsey of fanning the flames of the opioid epidemic. In legal papers, the attorney general alleged that McKinsey had instructed the maker of a powerful opioid on how to ‘turbocharge sales’ of the drug, how to counter efforts by drug enforcement agents to reduce opioid use and how to ‘counter the emotional messages from mothers with teenagers that overdosed’ on the drug.”

The Country That Exiled McKinsey” A dubious project raises serious questions about the world’s most prestigious consulting firm and its work for corruption-plagued regimes.

by Ian MacDougall, ProPublica, and Anand Tumurtogoo (Propublica)

McKinsey entered into a consulting relationship for infrastructure contracts, to build railways to transport minerals out of Mongolia, that were shared by a company owned by the government official who brokered the deal:

“But as the Cold War’s end opened new markets worldwide, McKinsey reoriented its priorities toward aggressive expansion. Between 1989 and 2019, the firm vastly enlarged its global footprint, from offices in 44 cities across 23 countries to offices in more than 130 cities spread across 66 countries today. McKinsey reported $10 billion in revenues last year.”

“To sustain that kind of growth, McKinsey had to push into less familiar territory, like Mongolia, and into sectors, like government contracting, that the firm had traditionally eschewed. Government contracts often require more disclosure, bring more scrutiny, and are subject to more rules than corporate ones. ‘McKinsey has grown to the point that it is taking on work that prior incarnations of the firm would have turned down due to the political risk involved,’ a former McKinsey consultant wrote in an anonymous recent essay in the magazine Current Affairs.”

Foucault suggested that the term for our current economic arrangement is anarcho-capitalism (he said this in 1978 but it’s still applicable). McKinsey and Company, in many ways is the model of this idea. Secret, unstructured, influential, powerful, and pervasive, they are in some ways a catalyst and some ways a menace.

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