Thursday, 20 January 2011

Anti-competitive practices

Das Ungeheuer
How many times do I hear it said that competition has just got to be a good thing? We need to be more competitive and raise standards they say. Competition must be introduced in the health service and education. Doing things just because they need doing is anti-competitive. How long before doing your own housework or giving to Oxfam is outlawed as anti-competitive – denying other people the opportunity to make money cleaning your house and feeding the poor? In business, competition is how you ensure that you get the best.

I can’t think of any other area of life where this would be considered a sensible way to get the best out of people, except maybe sports. In an art class or at a party or even in an office you wouldn’t expect the best results from the most aggressive, controlling, ruthless person there – quite the opposite. (If materials were scarce they might be the only one to produce anything at all, but materials are not scarce – no matter what they tell you. It’s just that some people – the most aggressive, controlling, ruthless ones, hog it all and force the rest of us to squabble over what’s left.)

It’s always assumed that the winners must, ipso facto, be the best. It’s an equation that seldom gets questioned and one of the basic tenets of Free Market Fundamentalism. But it can’t be true. People have different talents. There are all sorts of expertise out there – in my field there are plant propagators, plant breeders, garden designers, gardeners, pest and disease experts, various technologists, writers and so on and so forth. Each has various areas of specialist knowledge – some scientific, some artistic, some commercial, some practical. There are also character traits and outlooks appropriate to their roles – patience, attention to detail, creativity, physical fitness, love of nature and so on, and yet to compete successfully in the market the gardener must be preoccupied chiefly with management, money and publicity. Materials will need to be as cheap as possible. Labour must be as unskilled and low paid as possible. The ‘Products’ ideally should be as gaudy and short-lived as possible so that the customer comes back for more.
In my experience the modern commercial horticultural business is often run by rich retired business people who think they know about plants. (Sometimes they employ actual gardeners but play down their role and pay them very little.) Highly competitive people typically believe they are more knowledgeable than anyone else on their staff but have no real idea of what it means to be an expert in anything (except making money). It's almost impossible to convince them otherwise. Their self-belief is unassailable.
The characteristics that go to make up an expert nurseryman are not the same as those that go to make up a commercially successful nursery owner. In my experience there is very little overlap. People who really care about plants are generally not ruthless careerists. And yet it will be the latter that ends up running the garden centre and putting the real gardeners out of business. In the free market you can be the very best gardener in the world with a generous mix of the qualities mentioned above, but unless you are a good competitor you will get nowhere. On the other hand you can be a good competitor and a mediocre gardener and do very well indeed. (The same applies in almost any area of commerce. I just happen to know a bit about horticulture.)
Being the winner, in practice, is not at all to do with being the best man, but with making the other man the loser.
How then does competition lead to higher standards?

There was an episode of Grey’s Anatomy some while back where Christina Yang (who is proud to tell everyone that she is highly competitive) says that limiting the length of doctors’ shifts is wrong because it favours the weak. It doesn’t. It allows doctors who are in every other way excellent (or possibly better) to work. The requirement to be able to work twenty hours straight is an artificial criterion caused by bad management (like the artificial scarcity mentioned above) that trumps all other qualities. It doesn't matter how good you are - if you can't stay awake you are out. Who knows, perhaps Christina Yang is not the best doctor. Perhaps she is only the best of those that can function without sleep.

Sport is held up as the paradigm of healthy competition. Sport is all about winning after all. Here it is truer than anywhere else that the one who wins is the best. The winner of the gold medal for the one hundred metres sprint at the Olympics really is the best sprinter in the world, isn’t he? Well no. For a start he’s only the best of those who could afford to take the time off to go through the training regime – not a trivial consideration in very poor countries. So in fact he’s only the fastest of the rich kids, which doesn’t sound quite so impressive.
But even beyond that, sheer physical prowess is not the only thing. There’s a lot of psychology involved. A weaker athlete might win by intimidation or bluffing. This may be more of an issue in other sports and games. A weaker chess player can make a stronger one concede defeat by manipulation. Ok, it’s just a game. Sports are entered into voluntarily, unlike the market, which is most emphatically not ‘just a game’. Everyone must take part or starve – a fact many businessmen seem to forget.
In business almost all the success is down to bluffing and manipulation, marketing, pricing and power, and only tangentially about the sheer quality of the goods and services - assuming the customer is well-informed enough to know the difference (more about that another time.)
Competition therefore favours entirely spurious qualities and ignores the real – it’s the Law of Unintended Consequences again.

A highly developed competitive spirit is supposed to be a sign of strength. Women are attracted to it in men apparently. I just wonder though why those men seem to have so much to prove. You see them sometimes when you’re out driving. You’re doing the speed limit (or if you’re honest, somewhat more) and yet this guy’s still got his nose up your arse, trying to get you to go faster. Or you can watch him tailgating the guy in front – his brake lights flashing on and off. What’s he trying to prove? Does he think he looks cool? Does he think we’re all going ‘Wow! Now there’s a Real Man.’ Maybe he’s just mad. Maybe (giving him the benefit of the doubt) it’s an emergency. Then you see him overtake on a bend and you know, if it wasn’t an emergency before, it very soon will be. To me a highly developed competitive spirit is a sign of inadequacy. (There are also those city gents who drive their Jags everywhere at forty mph – presumably to let the rest of us know they’ve arrived. Either way they seem overly preoccupied with impressing the rest of us. Or maybe they're just very old.)
The free market is like a road system without speed limits or traffic lights or roundabouts.
Most people consider themselves to be above average drivers.

Of course I'm not proclaiming that henceforth there must be no competition. I understand that quite a few people rather enjoy the odd kickabout of a weekend and I myself am quite partial to the occasional game of scrabble. Nor am I saying that competition cannot improve services and keep prices down. Some people seem to respond to that sort of motivation. But it can't be trusted. It has a logic all it's own that has nothing to do with what people actually need or want. Like natural selection, to which it is obviously related, it has no forethought and no conscience. It just does whatever works and doesn't care what it extinguishes along the way (including itself). And yet we have elevated competition to the level of a universal panacea for human shortcomings. 'Make them fight' we say. 'Let's see who's the better man.' But instead we only find out who's the most devious, the most amoral, the most venal. And once they have taken what they can, what can the rest of us do but squabble over what's left?
I like the analogy of the football crowd. Once one person stands up everyone behind him has to stand up in order to see. In the end no one can see much more than they could before but everyone's more uncomfortable.

So if you’re planning a garden you don’t just accept that the whole place is going to be taken over by brambles and bindweed. No, if you’re a keen gardener, chances are that a lot of the plants you want will require special treatment and protection. Your veg will need extra nutrients and protection from pests and diseases. Those prize alpines will fail if they get shaded out or overcrowded. No gardener thinks that the best thing is simply to let the biggest most aggressive weeds take over on the grounds that it ‘maximises growth’. The word ‘weedy’ is usually applied to weak and needy people but in the garden it’s the invasive and the opportunistic we need to weed out...

Wednesday, 12 January 2011

The Free Market Fundamentalist

There was Nigel Lawson on Start The Week on Monday - telling us essentially not to worry about climate change because it'll all blow over probably. The important thing is to keep making money. After all,he said, it's making money that causes climate change and er... Where was I?

Nigel I suppose is one of them there Free Market Fundamentalists. I don't know all the details of what his own personal views are and frankly  I don't care, but I've got a fair idea what he thinks - heck, I grew up with these people. He's a type. He'll do for my purposes.
They were debating Protectionism (the restricting of free trade between nations to protect local jobs and/or prices.) Dambisa Moyo was arguing that some protectionism might be necessary if certain developing nations are ever to get their local economies off the ground. Nigel was against, basically because it's not Free Trade, and anything other than totally Free trade is anathema. No restrictions, no regulations, just Free. Anything less would be the start of 'The Slippery Slope'.
Slippery Slope arguments are almost always bogus. In almost every area of life we have to accept that there are shades of grey and we have to make judgement calls, but not for Nigel. People like Nigel like things to be all or nothing, black or white. Simple yes/no answers. Are you with us or are you against us? The ability to make quick uncompromising decisions and stick to them no matter what is taken as a sign of strong leadership and sound judgement. (Look at his old boss for example.)
No doubt Nigel likes to think he's being Realistic - that it's just Human Nature - 'Common Sense'. People like Nigel like to tell the rest of us what we're like (and not just some or part of us, but all of us, deep down, even if we can't admit it) - that we're ruthless, competitive and obsessed with power and material wealth. We might coo over our own children but otherwise it's dog-eat-dog out there. It's the Law of the Jungle - survival of the fittest. And therefore it's Natural. And what is Natural is right isn't it? We all know what is Natural - the Sociobiologists and Evolutionary Psychologists have looked at our closest relatives - the apes and monkeys (and any other species that seem instructive) and confirmed what we always knew about ourselves - ruthless self interest, xenophobia, racism, sexism, internecine warfare...
The Conservatives see themselves as the Natural Party of Government. The reason Thatcher achieved so much is because she took away the restrictions on what would happen 'naturally'. People again mistook this for sound political sense and strong leadership, when what she actually did was squash the resistance, who never had that much power in the first place (unless you count not collecting the rubbish and letting the lights go out, which I agree is a nuisance) and let the powerful become even more so.
The idea that what is natural is good is a very popular philosophy among everyone from hedonistic New Age Hippies ('If it feels good do it') to libertarian Social Darwinists ('Sod you Jack, I'm alright'), but Ethics 1.0.1. when I was at university (Ok, Brighton Poly) told us that 'Is' does not imply 'Ought.' In other words you cannot logically derive what ought to be the case from what is the case. Even if human nature is ruthless, competitive, and obsessed with power and material wealth (and that's a big 'if'), that does not make it right. There is this other thing - ethics, or morality, that tells us how things should be.

Of course, our Nigel would tell us that what he advocates is how things should be as well - because the Free Market is the only guarantor of improved living standards for all, which has got to be good, right? Climate change, mass migration and the odd genocide in Africa is just a temporary glitch.
And he's sort of right in a way. I will argue elsewhere that life for unprecedented numbers of us is safer, healthier and longer than it's ever been at any other time in human history, and a lot of that is due to medical, technological and social advances made possible by capitalism. (Ok, I don't entirely buy that but give them the benefit of the doubt.)
But even if that has been true in the past, is it possible or even likely that it will continue to be true in the future?
Again the 'strong leadership'/'uncompromising decision making' school of political thinking would counsel us not to be pessimistic. Doubt is a sign of weakness.

But doubt is reasonable. Already we're coming to the end of the resources and space we have available to an exponentially increasing human population. Already, we talk about places like China and India - home to vast fractions of that population aspiring to Western standards of living and we already know that for everybody to live to US standards would require, I don't remember the exact figure (probably it's not an exact figure) but it's something like five or six Earths' worth of space and resources. And if climate change takes hold in even the more modest ways predicted there will be less space, not more, to house and feed the world's population, never mind all the other species we share the place with. (That the problems are not certain is no excuse to assume that there will be no problems, as Nigel appears to.)
And yet Nigel simply believes that there won't be a problem because growth in the economy and advances in technology will make everything fine.

As a burgeoning Leftie back in my teens I was routinely accused of being naive and unrealistic. Left wingers also tend to be the ones accused of living by dogma and ideology instead of in 'The Real World'. And yet our Nigel looks at the future described above and says 'Growth and Technology will solve everything.'
Technology is going to have to make us the equivalent of five or six earth's worth of energy and resources in the next  fifty years. And the only way to make this happen apparently is to free up the economy. As his old boss would have said 'There is no alternative'.
Now who's the naive dreamer? Now who's living by dogma?

But what's the alternative? Anything less than unrestrained (wild) Western style growth and development is holding back progress, and the pursuit of happiness. Aspirational is the key word here, and who can deny it? Who does not want to aspire to greatness? It's the one thing the previous government and this agree on - the right to aspire - to want more than the previous generation - to do more - to have more. Who can argue with that?
Well I can. Most of us in The West are already pretty comfortably off materially (People in Ulster telling us their problems with the water supply recently made it 'like living in the Third World' not withstanding.) The fact that we don't seem to be any happier is another thing I'll come back to in another post.
But why are we framing our ideas of Aspiration only in material terms? Surely there's more to life. We've been sold the idea that any pass-time that doesn't involve buying the latest this or the most advanced that is just a bit 'Sad', but is spending so much time at work doing something you don't really care about for someone you don't respect, just to earn the money to pay someone else to do things for you that you could do for yourself if only you had more time, really all that liberating (or aspirational)? And can we really afford to have half as many people again as there are now expecting to live that way?
GMOs are a good example. Normally they are, at least partly, promoted as solving the problem of malnourishment in the developing world. And yet there is already enough food in the world to feed everybody (and well - not just on gruel). The reasons we don't feed everyone are economic and political. GMOs won't change that. Like most new technology, GMOs will mostly be used to provide more choice (aspirations) for those who already have more than they know what to do with.
There is an alternative to growth then, and it's the 'R' word - redistribution. But who wants that? How anti-aspirational is that?

Well Nigel doesn't want it, that's for sure, because the truth is that all this stuff about Capitalism improving life for everyone is Bullshit. (Technically, the difference between Bullshit and Lies is that the bullshitter doesn't care whether what he says is true or not, as long as it serves his purposes.) There is no moral agenda in the Free Market. Nigel Lawson advocates the expansion and deregulation of the Free Market because he wants to make money. Deep down he may even know that there's very little chance of Growth and Technology bringing the benefits to the world he predicts, but he doesn't care. He simply calculates that he will be on the right side of the razor wire when the day comes.

Friday, 7 January 2011

Bank Stains

Not surprised this morning listening as usual to the Today programme on Radio 4 to hear of the bankers once again awarding themselves vast bonuses. Well who wouldn't, in their position? If you're in charge of the money, and no one can stop you, well you'd just take everything you could get your hands on wouldn't you. There's no need for any clever economic theory. This is simply what happens when a small sector of society (I hesitate to call them an elite) is essentially outside the law. They do what they want - and they want money.
That's no surprise either. To get where they are they don't have to be especially intelligent (I mean no more than a nurse or a teacher) they just have to be into money. No surprise then that those most interested in money end up with far too much of it.
They claim of course to be smarter than the rest of us (they've got more money, so that proves it) when in fact all they have is an area of expertise, as many of us do. Theirs happens to be making money. I'm not saying this isn't a crucial role in society, only, can it really be that much more crucial than everything else?

The world being as it is, what a person deserves hardly enters into the conversation. In the free market, we get what we can afford, or what we are in a position to demand, and so it is with wages. It all depends on scarcity. If what you have to offer is rare you can demand more for it. But is the kind of talent needed to work in The City so incredibly much rarer than almost anything else? The way they talk about themselves you'd think they were practically superhuman - with an uncanny ability to function without sleep, an almost god-like ability to withstand stress, and a quasi-omniscient understanding of how the world works. Wow! They're almost too good to be true.

I could say something similar about other high-earning groups - doctors, lawyers, footballers, heads of large corporations, but almost immediately we get into questions about what they do to justify their money. Doctors, probably most uncontroversially get a lot of money because they save lives and we're all grateful for that. We also take into account the length of time they trained and the number of hours they have to put in, especially early on in their careers.
Lawyers are a similar case. If you get into trouble with the law your life could be not worth living without proper representation. Lawyers also go through lengthy and costly training. Unfortunately paying lawyers is a less straight forward 'good' than paying doctors. It's as if we were required to undergo a lot of medical treatment that we weren't entirely sure was necessary and were then forced to pay whatever the doctor happened to come up with. In short, we're not at all convinced that lawyers really deserve what they charge, which often seems extortionate, but we have no choice, because we don't understand  what they do and they all charge more or less the same anyway.
Any profession that involves a specialised training has the rest of us at a disadvantage - even plumbing. We simply have to trust them to know what they're doing and not to rip us off.

Sportsmen and women and other entertainers do what most of us do for fun, but for cash, which doesn't sound very onerous. Certainly there's long hours of training and rehearsals, a lot of travel, a lot of meeting other celebs, but generally the salaries of the best paid entertainers are justified in terms of revenues, both from ticket sales and merchandise. There is a fairly straight line between a celebrity's name and the stuff associated with them that people want to buy. Top entertainers are also considered, by definition, extremely scarce, so they can command very high prices. Whether, for example, good singers or footballers really are that rare is doubtful but because we make them compete, it gives the illusion that only a tiny number are really worth looking at, and everyone else is mediocre or rubbish.
More reasonably, careers can be brief in the sports and entertainments industries, so it makes sense to make as much as possible as quickly as possible. (They could just save it up and then get a job like normal people, but that's not very rock'n'roll I suppose.)

Heads of large companies justify their money in other ways. Long years of training is definitely optional and may be considered detrimental by some, in favour of just some sort of 'common sense', or 'business acumen' or 'killer instinct' or whatever you want to call it. Certainly such people are often very driven and single minded (but then, so are train spotters), ruthless and manipulative almost to the point of psychopathology. They justify their income (if they feel the need to justify it at all) in that they tend to see their enterprise as entirely their own work, with the staff as mere human resources. It's their firm, they worked hard and long hours to make it what it is - therefore it's their wealth, to do with as they alone see fit. Of course the firm might sink without trace and they might lose everything, so they see the ability to take risks also as a justification for taking whatever they can, whenever they can. There's a lot of luck involved too, so there's a large element of gambling.

There is also the emergent property of The Going Rate - a level of remuneration that is accepted as normal. In theory the free market should bring this down to an affordable level as businesses try to undercut their competitors, but in practice it can result in an arms race as companies try to outbid each other for scarce resources, such as talented staff. This is ostensibly why UK banks have been unwilling to reduce exorbitant bonuses - because they are afraid they won't be able to compete for employees with other parts of the world. As a result the going rate has rocketted. This probably also accounts for the inflated prices of legal advice, medical care, bank charges and a whole lot of other unusually expensive items. You'd almost think there was a conspiracy.

So what do we have so far? Being important to society, training and expertise, scarcity, brief career, risk taking, going rates.
A lot of this is bogus. I could not justify charging an extortionate rate as a gardener on the grounds that I was afraid I wouldn't be able work in a few year's time. Many people train hard and work long hours all their lives for almost no return at all, and gambling is just gambling.
In fact only two things on the list really count - being important to society, and scarcity, but they are completely at odds. The former might be considered a left wing approach, the latter, right wing. Those most committed to the free market consider supply and demand the only factors worth taking into account when considering the price of anything, including labour. It doesn't matter how long you work or how hard, or how crucial to the smooth running of society, if you are easily replaced, you can't expect much in the way of remuneration.
Most ordinary people on the other hand will quickly bring in questions of how vital a person's job is, how hard, dirty or dangerous it is. (How tedious it is should probably be included. The hardest job I ever had was on the tills in Sainsbury's before the days of bar code readers. The job was incredibly boring and repetitive but you couldn't drift off for a second. A friend of mine had an agency job standing at a conveyor belt all day watching vitamin pills go by, looking out for misshapen ones. He lasted a week I think. At least with weeding I can think about other things.) The more menial the job, the more easily the workers are replaced, and therefore the less money they attract, and yet if I had to say whether bin men, or hospital cleaners, or potato growers or merchant bankers were the more crucial to society...  well. Its certainly not obvious.
The question is even more pointed when you think about footballers or TV presenters. We routinely use the language of fairness and deserving when we talk about wages but the economy does something completely different. This is the sort of thing I mean when I talk about Economic Reality as opposed to Real Reality. Bankers talk about deserving their money too - they tell us how stressful it is and what long hours they work, but lots of people have stressful jobs and work long hours. My Brighton friend has spent a large amount of his working life in group homes for adults with various kinds of 'challenging' (i.e. violent) behaviour and you can be sure he didn't get millions in bonuses. For most ordinary people, the greatest stress is the fear of losing your livelihood. (There seems to be a belief that low paid people don't care so much because they have less to lose!) Entrepreneurs and financiers on the other hand pride themselves on being risk takers. They love that stuff. If remuneration is compensation for stress it follows that they should be paid less, not more.
The most well paid people among my friends design websites, write press releases or do research for London companies. In fact it seems that those with the most fulfilling creative jobs also get the most money. Pay is not in any way 'compensation' for hard work.

The difficulty for those who would argue that banker's pay is undeserved is the argument that they get paid what they do because they bring in all this revenue, and bin men just don't create that much wealth. If a market trader is involved in a deal that brings in millions or billions - shouldn't he or she be rewarded? This relates exactly to the sports celeb who's name sells millions in tickets and merchandise, or the businessman who risks his house to build a company. Shouldn't they get their cut, for what they did? Isn't that fair? Don't they deserve it?
Frankly I'm not sure. I don't think so, but I'm not sure as yet why not.
When it comes down to it, they haven't actually done that much, any of them, in pure hard work and intelligence terms - not more than a lot of other much less well paid people. Their relatively ordinary amount of effort and intelligence nevertheless can produce massive returns. Probably remuneration should be related to productivity. If I grow more plants - I sell more plants - I make more money. An employee who comes up with an idea that saves his company a fortune should be rewarded. I'm not convinced though that this logic can be extended indefinitely. For bankers, the relatively small amount of work is completely unhitched from the magnitude of the results. Plus bankers, unlike entrepreneurs, are usually in a 'Heads I win, tails I don't lose' situation. The risk is actually rather low.

And there are consequences. The massive wealth of the minority does directly mean that others go without. Even within the UK, the buying power of the few means that most people cannot afford to live in the capital. Natives of rural areas have to move to the town and commute to work in the country because houses are bought up as second homes by the rich. Globally the spending power of the rich nations means that resources are wasted on those who already have more than enough instead of going to those in need. We are all in the West somewhat guilty but the gargantuan extravagance of this bloated minority should be liable for far more of the burden. Instead they pay lawyers and financial consultants to ensure that they pay no tax whatsoever - a luxury the rest of us cannot even imagine. They should be made to pay, or better - not given such ludicrous sums in the first place.
The world is not infinite. It is a closed system - a zero sum game. What is gained by one is lost to another, or in this case, many others. Growth and technology will not save us.
And these people run the world for Christ's sakes, or soon will. Surely we don't want the most powerful people in the world to have the emotional intelligence of spoilt toddlers?

But wouldn't we all, given the opportunity, do the same thing? If we could make millions by doing almost nothing for a few years - wouldn't we all do it?
Of course we would.
But perhaps the issue is that we shouldn't be faced with those sorts of opportunities.
No doubt there are many sordid things we might be tempted to do, given the chance (and if the law turned a blind eye). But that wouldn't make them right.
And there is such a thing as resisting temptation - unfashionable as that might be.
Most people, I believe, think that the pay should reflect how valuable and how hard the job is - that remuneration should be properly deserved, and individually tempted as they may be, they believe that the kinds of incomes we see in certain areas of the economy at the moment are at least undeserved and unfair, and at most, a wank-stain on the underpants of humanity.