Reviewing The Unaccountability Machine (May 2025)

The Unaccountability Machine: Why Big Systems Make Terrible Decisions—and How the World Lost Its Mind by Dan Davies was published in spring 2024, i.e., before the presidential election that returned Trump to the White House. This is significant because the book would not have been so appropriately timed had Kamala Harris won the election. This is made clear as Davies develops a cybernetic explanation for the autocratic turn of the early 21^st century, now including the U.S.

In the opening pages, Davies shares this brief synopsis of a sometimes complicated text—difficult for those of us who are not formally acquainted with the systems theory of cybernetics.

This is a book about the industrialisation of decision-making – the methods by which, over the last century, the developed world has arranged its society and economy so that important institutions are run by processes and systems, operating on standardised sets of information, rather than by individual human beings reacting to individual circumstances. This has led to a fundamental change in the relationship between decision makers and those affected by their decisions, the vast population of what might be called ‘the decided-upon’. That relationship used to be what we called ‘accountability’, and this book is about the ways in which accountability has atrophied.

For Davies, the 2008 global financial crisis was a catastrophic system failure that can be attributed to the unaccountability machine. No one person was responsible for the meltdown. It just happened. But it ‘just’ happened because the ‘machine’—the subsystems of policies, rules and processes constituting the global financial system—were allowed to run amok and without the discretionary corrections that could have been implemented had the proper feedback loops been in place and operational. However, without proper system feedback mechanisms in place to compel corrective actions, what former Federal Reserve Chairman, Alan Greenspan, termed ‘irrational exuberance’ proceeded apace until the financial system was glutted with bad debt and could engorge no more. It finally exploded. The so-called Great Moderation of low inflation and sustained economic growth ended in a collapse of confidence and a dramatic downturn in the familiar pattern of capitalism’s business cycle of boom and bust. That it had been allowed to happen with so many financial and economic experts watching illustrates what Davies means by an ‘accountability sink’ where the system is left to work itself out as if by the magic of an infallibly functioning machine and no one is held liable for disasters.

For Davies, the bottom line is that there was no higher order system capable and responsible for making sure the machine could curb the runaway ‘irrational exuberance’ of the market for accelerating high-risk debt, i.e., below prime adjustable rate mortgages that were repackaged (securitized) multiple times at higher rates of return. For that, the institutions of government finance, central banks and commercial banks should bear responsibility notwithstanding cybernetic excuses. Despite their reckless and frenzied buying and selling of repackaged debt, financial institutions were rewarded with bailouts. Meanwhile, the heaviest punishment fell on those who lost their jobs and income in the recession and were pinched further by government austerity programs.

Davies points to three accountability sinks that exacerbated the suffering of those hit hardest by the financial crisis: inflation targeting by central banks, the European Union’s (EU) Stability and Growth Pact (SGP) and the International Monetary Fund’s (IMF) structural adjustment programs for countries hit hardest by the financial crisis. All three were developed as systems capable of functioning independent of the ‘whimsical’ discretionary interventions emanating from the political system. Nearly four decades earlier, the inflation target of two percent had been introduced to restrict discretionary countercyclical fiscal policy (increased government spending) and monetary policy (lower interest rates) that politicians routinely propose during periods of rising or high unemployment. The central bank policy of inflation targeting shifted significant economic authority away from elected officials to unelected financial and economic experts. Inflation targeting functions as an accountability sink insofar as central banks adhere very closely to the two percent target regardless of unemployment numbers in the job market. Experts are governed by the system’s non-discretionary rules and processes, and politicians are likewise constrained. Naturally, this raises accountability concerns and doubts about responsible government.

The same is the case for the deficit and debt limits that the SGP sets for EU member states that use the euro currency. Under the SGP, annual budget deficits must be kept below three percent of GDP, and national debt must be maintained below 60 percent of GDP. Eurozone member states effectively cede part of their sovereignty over their respective national economies, and this becomes especially problematic during periods of high unemployment and severe reductions in government services. Germany and France, being the dominant economies in the EU, have enjoyed some latitude, but this does not sit well with the rest of the union. Just as the regime of inflation targeting sets constraints on the ability of democratically-elected officials to respond to hard times, so the SGP proscribes member states’ independent exercise of national economic policy. This gives rise to issues of accountability and sovereignty.

Much the same applies to the IMF’s structural loan programs. Monies for financially desperate countries come with strings attached. These strings, or conditions, compel borrower countries to comply with fiscal and monetary policy directions coming from Washington, the headquarters of the IMF. More often than not, government austerity is the ‘condition.’ This translates into hardships for the general population in the form of lost jobs, reduced incomes and scaled back government programs. Again, as with inflation targeting and the SGP, an accountability sink is created, such that no one in particular can be blamed, because it is the system of non-discretionary rules that makes the decisions. Thus is created a democratic deficit, the more common term used to characterize the failure of democratic institutions to govern on behalf of the people.

The imposition of these unaccountability machines is not presented as such in press releases and media analyses. Rather, there are tried and true rationalizations for why governments cannot and should not be more responsive to economic hardships. One of the most important is the dogma that the market knows best, performs best and achieves optimal outcomes when government is hands off (laissez-faire). Davies writes,

‘Market outcomes’ are a huge accountability sink, but there’s also a philosophical blind spot. Policymakers and their advisors have internalised the belief that the market is a greater intelligence than anything humanity can offer. The combination of political convenience and intellectual rationalisation is a powerful one; when a possible market solution presents itself, it has a huge advantage in consideration against alternatives, whether or not it deserves one.

Davies also draws on the economic philosophy of Milton Friedman, the champion of the free market and critic of government intervention. According to Davies,

The thread running through the ideological shifts associated with Friedmanism – the neoliberal revolution in public policy and the post-1970 turn in managerialism – is that of a deep, almost nihilistic lack of trust in human judgement. If fallible people were put in charge of something, they would generally be lazy, careless or dishonest; the only way to make it otherwise was to harness their selfishness, making sure that they were personally bearing the costs and gaining the benefits. The market transaction was important to Friedman because it was the only human relationship that you could be sure was honest.

Government intrusions in the market that benefit the private sector such as favourable tax treatment, free use of government R&D, grants and subsidies, government contracts as well as the rarely mentioned social investment of government in education, telecommunications and transportation infrastructure, and the rule of law meet with little to no pushback from laissez-faire economists and the business community.(1)

Davies likens such a market to an ever-present, all-knowing and all-powerful artificial intelligence. He then illustrates how effectively the illusion can be created. Thus,

[F]inancial markets do give answers to these questions [of resource allocation to future production], thousands of times a day, in a way that can seem miraculous. When you look at the capital market in this way, you might be briefly overwhelmed, to the extent that you wonder whether it might be a magical computing fabric after all. It’s an extraordinary thing; walking across a trading floor is a tangible experience of what it might be like to live inside an artificial intelligence. This sense of getting out more than you put in certainly helped the Friedman doctrine to gain acceptance; as well as being a wonderful accountability sink, ‘the markets’ do feel like they might be better decision makers than any individual human being, or any small group of people that you might be able to gather together in a boardroom.

But there are problems with excessive deference to the market. Those playing the markets speculate (or gamble with uncertainty) and make a fortune when they're right. And when they are wrong, they are often protected by investor-friendly tax laws—approved by legislators and presidents/prime ministers—that mitigate their losses. The incentives are intended to promote old-fashioned rent-seeking (i.e., passive profit seeking) behaviour, but they also generate moral hazard, which is something that clients of the IMF in the Global South routinely get chastised for. The real losers are those who lose their homes when a housing bubble bursts, who lose employment income when the business contraction sets in and who are adversely by government austerity measures, especially those that negatively impact unemployment insurance, worker pension plans and government assistance to the lowest socioeconomic percentiles.

This disproportionate and perverse allocation of rewards and punishments creates fertile ground for populist demagogues who loudly proclaim themselves to be the only ones listening to the marginalized and dispossessed. Those who are crying for help may look to any quarter, as they believe the Establishment has failed and then abandoned them. Cybernetically speaking, the Establishment failed to build in the higher order systems that control the outcomes of the complex network of economic and governance systems. And, as long as no communication channel for incorporating system feedback exists, when things are going off the rails, proactive intervention is unlikely and corrective action is delayed until the system has broken down, as in 2008.

The consequence is what the world experienced in the first decade of the 21^st century. It all came apart. Suddenly, the tap was turned off. The business cycle was back. Chairman Greenspan had not tamed it after all. In fact, in some post mortems, it was argued that he greatly assisted in perpetuating the myth.

For fifty years, the free market played that role; the underlying guarantee was that all decisions would get taken care of, even if nobody made them. When that fell apart, the ultimate basis of the system . . . sounded the alarm. Ever since then, we’ve been looking for a new organising principle.

And this is where Davies connects the accountability sinks to the rise of the autocrats.

I think this is what explains the common thread between MAGA, Brexit, the Five Star Movement, Hindutva and all the rest. The populist movements of the 2010s all promised a simpler world; they were . . . taking on the great anxiety of their people and addressing it. They were also promising to restore the broken communication channels – to make voices heard.

The populists who emerged in the 2010s were a phenomenon directly attributable to the unaccountability machine finally having been fully exposed by the 2008 financial crisis.

Narendra Modi in India, Beppe Grillo in Italy, Donald Trump in America, Nigel Farage in Britain or Recep Tayyip Erdoğan in Turkey instinctively realised that they were on the same side; each of them, in their own culturally specific context, was acting as a communication channel for a population which wanted to convey a single bit of information: the message that translates as, ‘Help! the Current State of Affairs is Intolerable to me.’

That leaves the question about just what can be done now. Davies is much briefer in his prescription than in his analysis.

Management cybernetics doesn’t give any clues as to how such a profound social change might be achieved, unfortunately. . . . My only guess is that it might be that what’s really intolerable about unaccountability is the broken feedback link, and that if we can solve the problem of communicating with the system – pay more attention to the ‘red-handle alert’ mechanisms that indicate an unbearable outcome – people might not be so furious about the death of personal responsibility. In general, people in my experience are a lot less angry about everything when they feel like they’re being listened to.

Perhaps his next book will be more prescriptive. Granted the kinds of changes required to fix the problems of a badly designed and failing system will not be easy or simple. So, there is good reason to start with the identification and assessment of system failure in order to foster a more vocal public demand for accountability, which if persistently loud and visible may engender more sincere and committed efforts to fix the system. But, MAY is the operative word.

Endnotes

Today . . . the world is filled with hybrid knob twiddler-auto pilots who run the money machines the world over. They are highly educated, well intentioned, removed from the distractions of fractious politics, and capable of judiciously balancing multiple conflicting interests. They understand the limits of (others') human knowledge. They understand the weakness of (others') human nature. They promote the superiority of (their) expertise in resolving public policy disputes. They profess scientific objectivity in pursuit of good governance. They proclaim the practical imperative that the good of the many exceeds the sacrifice of the few. Finally, they bring order and predictability, as governors of the money machines, into a world otherwise characterized by conflict and uncertainty.