The Gresham’s Law of Public Life: Why Bad Systems Drive Out Good Leaders

We often look at the state of our public institutions—from the ugliness of modern buildings to the hollowing out of our political parties—and wonder where the good leaders have gone. But what if the problem isn’t the people? What if we have built systems that actively punish virtue and reward careerism? It is time we looked at the invisible mechanics driving our decline.

The Loss of Intrinsic Value

Let me offer you a fairly big claim. I think the notion of intrinsic value has dropped out of our civilisation.

Somewhere between the Renaissance and modern times, we set up these Newtonian systems where we think of a satisfactory outcome as a mere equilibrium between forces. We think the competitive market gives us what we want, so we don’t need virtuous merchants. We think electoral competition gives us good government, so we don’t need virtuous politicians.

We instinctively believe that if we set up a competition, the best will rise to the top. I am not saying competition is bad. But I am saying that we are perhaps the first civilisation without a sense of intrinsic merit or beauty sitting at the centre of our public life.

You can see this in our physical world. If you go to the railway station in Queanbeyan, it’s a small, modest building for what was then a small country town. Then was the 1880s. It is a picture of loveliness. The legislative buildings in Melbourne, built in the 1880s, are sublime. It is very hard to find a major public building built before World War I that isn't beautiful.

Compare that to today. We have privileged utility over all. We turned functionalism into an ideology, brought in the property developers to minimise costs, and let the sense of craft atrophy. We created a world where the best doesn't always do well; often, the mediocre flourishes because it scales better.

Gresham’s Law and the Bureaucratic Game

This decay isn't just aesthetic; it is institutional. It is driven by a cultural version of Gresham’s Law.

In economics, Gresham’s Law states that "bad money drives out good". If you have a pile of coins, some pure silver and some debased, you will keep the good ones and spend the bad ones. Eventually, only the bad money remains in circulation.

The same thing happens in large organisations when you introduce the wrong metrics.

Rory Stewart shared a story with me of his father who was an intelligence officer. He observed a shift when management consultants came into the British intelligence services. They decided to reward intelligence products based on who read them. If a junior civil servant read your report, you got one point. If the Minister read it, you got three points.

The incentive became to produce an enormous quantity of stuff and to sensationalise it to grab the Minister’s attention. We saw the catastrophic result of this with the Iraq War. When a report came in from an unreliable agent suggesting Saddam Hussein had weapons of mass destruction, the system didn't ask "is this true?". The system screamed "The Minister will read this!".

They released it. They got the points. As Rory explained, “It turned out to be complete bullshit”. But the system was designed to produce that bullshit, just as surely as a factory is designed to produce cars.

From Taylorism to Toyota: Where Intelligence Lives

So, how do we reverse this? How do we build systems that honour truth and craft rather than gaming the metrics?

We can look at the evolution of manufacturing for a clue. We started with Taylorism (time and motion studies). The "knowledge folks" sat above the poor mugs on the assembly line, measuring them to minimise costs.

The Japanese took this and transcended it with the Toyota Production System. They realised that the workers on the line were the main node of human intelligence. They empowered them to stop the line, to suggest improvements, and to own the quality of the product.

It is a socio-technical shift. It acknowledges that you cannot just have a "brain" at the top directing the "hands" at the bottom. That is a recipe for mediocrity, whether in a car factory or a government department.

A Venetian Solution for Modern Democracy

If we want to fix our democracy, we need to stop relying on the "red in tooth and claw" competition of election campaigns, which are now machines for disinformation and polarisation. We need to look at mechanisms in which competition doesn’t destroy every other value in the system. We need systems which appeal to and harness citizens’ own sense of intrinsic merit, their own desire to do the right thing.

The Republic of Venice did this successfully for 500 years. They used a system for choosing leaders that involved:

• Sortition: Random selection of electors.

• Seclusion: Keeping them away from bribes and threats (like a Papal conclave).

• Secret Ballot: Allowing them to vote their conscience.

  
  

This system killed the gaming and careerism that is eating out modern politics and bureaucracy.

I am not suggesting we overthrow our current system. I am suggesting we enrich it. We are at a Magna Carta moment. In 1215, we injected the "life world" of the community into the judicial branch via the jury system. We must now do the same for the legislative and executive branches.

We could have citizens' assemblies auditing electoral funding and the salaries of our elected politicians. We could have them drawing electoral boundaries (as they do successfully in Michigan). We could inject a new DNA into our institutions that is based on the collective judgment of our peers, not just winning a PR and popularity race.

When people see this working—ordinary citizens making sensible decisions without the performative circus of party politics—they will have a "When Harry Met Sally" reaction. They will point to that functional, truthful system and say: "I'll have what she's having."

It is not about destroying the old structures. It is about saving them from their own advanced state of decay.