Tag Archives: poverty

The Gig economy and the rediscovery of the bad employment practices of the 19th century

Economics, Neo-Liberal economics, , , , , , , , ,

There has been a lot of excitement in the media about the gig economy, which ‘whatis.com’ defines as ‘ an environment in which temporary positions are common and organisations and organisations  contract with independent workers for short-term engagements’. One study estimates that by 2020 40% of American workers will be free-lancers employed on a temporary basis. In the media there have been positive accounts are given of this development, in fact one journalist Deborah Orr explained how gig work was much superior to a boring job for life, as the individual worker was no longer stuck in the same job for all there working life, but they were now free to change from one job to another once the first became to “samey’. The gig economy for her was a liberation from the 9 to 5 five day a week job.

In fact there is nothing new to the gig economy, as its a reversion to a much older and more traditional form of employment. There is in Thomas Hardy’s book ‘The Mayor of Casterbridge” an account of how farm labourers attended the fair hoping to attract the attention of farmers who would offer them employment for the coming year. Employment on a temporary basis in that come the winter the farmer could dismiss the labourers for who he had no  use. Those left unemployed at the end of the fair had to ‘go on the parish’, that is with no means of support they had to look for to the parish for support. This meant going to the workhouse, an option so bad that families would rather go without and risk starvation than go to the workhouse. More recently such employment was known as the lump in the building trade. A practice whereby workers would be paid daily (if there was work) and work under an assumed name for an agency to avoid tax and national insurance payments. This work was so poorly regarded that most building workers strived to go on the lump. Given this history of the gig economy it is puzzling while it is greeted with such enthusiasm. 

Those who either were victims of the gig economy or knew its workings wanted it abolished. The 19th century and the early twentieth century witnessed action by trade unions and enlightened politicians to provide security of employment for all. In the 1970’s the last major example of gig economy was ended, with the Dock Labour Registration Scheme. Prior to that dockers turned up each day for work, hoping to be taken on for that day to work unloading a ship.

The only area of employment in which the gig economy remained was in the media world. one such example were actors who were employed only for the period in which a play lasted or which a film or television programme was made. This was considered acceptable as actors had the possibility, if successful, of earning substantial sums.

Today there are over 900,000 workers on zero hour contracts. It is claimed that this is made inevitable, because of technological change. New technology it is claimed is ushering in a world in which the nature of work will change, as most new jobs will be on of a temporary nature as the economy is subject to constant change. However while it is true that in some industries such as printing technological change has made many jobs redundant, many of these workers on zero hour contracts are in jobs which have been little affected by technological change. Care assistants in nursing homes or those attending the housebound have had little experience of technology affecting their work. Baristas, waiters, chefs, hotel cleaners are doing more or less the same job that they would have done 50 years ago. The cleaning of hotel rooms is still  largely a ‘hands on job’ that has to be done by a human being. The machinery they use has remained largely unaltered, that is the vacuum cleaner. Yet these thousands of people are all on zero hours contracts and part of the gig economy.

All new technology has achieved is to make the gig economy work for employers. The mobile phone means employers as employees are  constantly on call and can be called in at a moment’s notice. Making something possible does not make it inevitable.

There is another example I can give. Teaching is largely labour intensive and there does seem to be a limit on the numbers that teachers can teach effectively it is  about 30 students in a class. This has always seem a bugbear to right wing economists and politicians, as they see teaching as a prime example of a profession using wasteful labour practices. During the 1990’s there was great excitement in political circles about new technology making it possible for a teachaer to teach classes of a 100 or more. What they envisaged is remote teaching, whereby a teacher in a distant studio using computer technology would teach several classes at once in different schools.  This would have greatly increased the productivity of teachers and reduced the education budget, as many thousands of teachers could be let go. However anybody who knows children realises that they cannot be left to themselves, being remotely directed by a teacher hundreds of miles away. If such a system was introduced these  classes would require human assistants or guards to ensure that the misbehaviour of the few would not disrupt the class. However these children would have questions that could not be answered by the remote teacher, because there would be so many requests for help that this remote teacher would be unable to cope. A qualified teacher or teachers would have to be on hand to help the children with the work. This can be translated into economics by stating that the optimum economic unit of teaching is 1 teacher to 30, any substantial increase above that number will lead to diseconomies of scale.

Despite this it remains the holy grail of the ministry of education to develop that education technology that will reduce the need to employ expensive qualified teachers and so cutting the cost of education. Schools have been flooded with new technology aimed at achieving this end but so far none has succeeded.

There are areas of employment that have been revolutionised by the introduction of new technology. When I started work in an insurance office it included a typing pool, which contained 20  typists who produced typed copy from the hand written copy provided by the clerks. These typists have long since gone replaced by the word processor as have the messengers who have been replaced by email. The same applies for manufacturing industry where millions of production workers have been displaced by computers and computerised manufacturing. The argument is that this process is continuing and we all will have to be prepared to have several jobs in our lifetime, the old job for life has disappeared.

I am not convinced that this obsolesce of jobs will continue. Many of the jobs that can be done by the new technology have disappeared already and there does no seem likely that this technological change will continue at the same rate. The rate of innovation in the new technology is slowing, the RAM memory of my computer is that which was achieved a number of years ago. What my one year old computer has gained over its predecessors is portability, computers have shrunk in size.  This new miniaturised technology is set to revolutionise delivery services, greater control over delivery times is now possible making delivery services more efficient. Employers now can employ drivers for the time that they need them only. Delivery drivers are now self employed often owning their own van. Computer technology means that delivery companies need only employ drivers when they need them, getting them when needed from the pool of waiting drivers. This reduces costs and makes delivery services profitable.

However the possibilities of huge profits have caused many businesses to set up as delivery companies, so many that there are too many companies in the business. The opportunity for making profits is so reduced that for many businesses it can be achieved by reducing the costs of employing drivers. Incomes are driven down to the bare minimum and drivers conditions of employment are worsened so the companies can maximise the productivity of these drivers.

What makes the gig economy so necessary for the delivery trade is the low level of profits in the delivery trade. Without the benefit of casualised working practices and low driver incomes many of the delivery companies would be forced into bankruptcy. It is not so much new technology, as the weak financial position of many delivery companies that make the bad working practices necessary.

There is an alternative scenario if delivery drivers were paid higher wages and given better working conditions, the delivery business would not seem to be the goldmine that it appears to be at present. If that was the case fewer businesses would be attracted into the delivery business and these fewer businesses would gaina larger market share and the much greater certainty of being profitable.  In such circumstances the worst abuses of the gig economy would not  be needed to make the businesses profitable.

While it cannot be doubted that technological change will continue to change the employment market, it cannot be predicted how employment practices will change. Inevitably in some industries there will be the need for the working practices known as the ‘gig economy’ but a great deal of scepticism is required, as much of the changes that have brought about the adoption of the gig economy have little to do with technology but more to do with changes in business practice. All governments of the Western world have been in thrall to  the philosophy of Neo-Liberalism for the past three decades which teaches that the supply of goods and service is best done by the private sector and that the government is best kept out of the market for goods and services. One key element of Neo-Liberalism is what called ‘supply side economics’ and the key element is reform of the labour markets. What these economists teach is that the greatest threat to economic well being are the restrictions imposed on the labour market by trade unions and government. Employers are prevented by these restrictions from using labour in the most productive manner and so these restrictions need to be eradicated. Politicians have introduced laws to emasculate trade unions and removed much employment legislation, so much so that there are almost no restrictions on employers to prevent them from using the most abusive of the practices of the gig economy go maximise worker productivity and their profits.

Some of the very worst practices of the gig economy at be laid at the door of government, whether it be centre right or centre left, conservative or labour, Republican or Democrat, Christian Democrat or Social Democratic. As believers is Neo-Liberalism they believe that wherever possible government service provision should be transferred to the private sector, as private sector providers are more efficient that those of the state. The worst effect of this practice is shown in the care services in Britain. Care for the sick , the elderly, the house bound has been transferred to for profit service providers. Transferring care provision to the private sector has reduced the cost of care. However rather than it being due to efficiency it is due to hypocrisy. The government can squeeze the private sector care providers by paying less for their services. This squeeze on their incomes means that they have to cut costs and the biggest cost is that of labour. These companies adopt a variety of exploitative practices to keep costs down, such as the use of zero hour contracts and were ever possible reducing the income paid to care workers. Those workers that provide care for the housebound are not paid for the time travelling between housebound clients, only the time they spend with each client. This means that the bad publicity that goes with treating care workers so badly attaches to the private companies and not the government. The dirty secret of both the Labour and Conservative governments of the recent past is that they and not the private care providers are responsible for care workers being subjected to some of the most exploitative of working practices. Governments of both parties have refused to end the practice of zero hour contracts and the various abuses of care workers, because to do so would mean that they would have to increase by a substantial sum the money they spend on care services. Unfortunately these guilty politicians are unwilling to do anything to improve the conditions of care workers as any improvement in there working conditions would mean having to find more money for these workers out of taxation, which they believe would be unpopular with the electorate.

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Ugly economics an explanation of why we are in a mess

economic history, Economics, Greek Drama, Philosophy, Uncategorized, , , , , , , , , , , ,

Plato developed the theory of forms which stated that all the virtues such as good and beauty were but mere copies of their ideal forms that existed beyond the sphere of life inhabited by humanity. In Plato’s creation myth the demigod who creates mankind makes mankind from the only material available, clay. A being made up of inferior materials unlike the Gods could never see the virtues in their true forms and would never able to appreciate true Good or Beauty. These inferior beings could only apprehend what were in effect rough and ready copies of the true virtues. Men could only know an approximation of the virtues. Although Plato was writing two thousand years ago his theory of the forms describes accurately the state of current economic knowledge, it is but a very imperfect copy of what might constitute true economics.

When I read economics what is striking is the lack of beauty in the subject, unlike for example physics there is no beauty in its formulations. Physics reveals the beauty of the universe, whereas all economics does is to reveal the ugliness of human society. The words of Gordon Gecko that ‘greed is good’ can be taken as the principle from which all current economic analysis derives. Our current Chancellor of the Exchequer believes that rewarding greed through  tax cuts for the wealthy is good, whereas helping the poor through welfare payments is bad, as it merely rewards a group of losers who are deprived of the incentive (compulsion) to work to provide for themselves and their families.

As a NeoPlatonist I recognise that although all the human sciences cannot be one or another form of moral philosophy; I do believe that a good social science should be informed by at least some of the virtues. Whenever I read an economic text it is very rare that I am grabbed by the beauty of the writing. All too often it is a struggle to get through some poorly written text.  A text that is peppered with difficult to understand economic terms, words that disguise the emptiness of the written text.  I believe that a text that is ugly in its construction can only create something that is ugly.

Good writing is that which contains understanding of beauty and as such moves the reader bad or ugly writing lacks any of the other virtues and as such has lost  touch with humanity. The government by constantly referencing ugly economics to justify all forms of unpleasant policy measures. One of the hidden scandals is the number of disabled and ill people who have succumbed to sudden death, as a consequence of sudden and unexpected benefit cuts. There are those ill and disabled who have resorted to suicide in consequence of the sudden loss of the income on which they depend.  Normally in such situations policy measures that have caused death would produce some contrition within political classes. The harsh welfare polices of the past few years have produced no such reaction. Instead ugly economics gives the justification to such measures, as what counts is the effectiveness of the whip that compels people to work. Government policy seems to a perverted inversion of Plato’s theory of forms. The supreme good is the balanced budget and subordinate policies such as welfare cuts are intended to make possible the attainment of this supreme goal. If this is the supreme good of human society it must be a very poor or mediocre society that sees this as its supreme good, a society which has rejected any sense of the grand vision that society’s of the past embodied. Athen’s with the construction of the Parthenon is one example of the grandeur of the human vision, contemporary Britain in which the only large constructions are shopping centres or malls sense to represent the very rejection of the grandeur that is humanity.

If Britain is to be judged by it’s leaders it is a nasty society bereft of any of the virtues that make a great society. A society which uses hunger as a scourge to make the poor work lacks any of the virtues that make a great society. All it’s leading politicians are like Socrate’s Alcibiades, a physically beautiful young man in appearance but in an inversion the Silenus dolls were ugly only on the inside he was ugly on the inside. Physical beauty concealed an ugly soul. It is not a true demonstration of the ugly society that politicians take great pains over their appearance, maintaining their youthful image through jogging or other forms of exercise and cosmetic surgery, What matters is their image, how they appear on the media. All our leaders tend to exhibit that fatal Alcibiades trait, beautiful on the outside ugly on the inside.

Perhaps it is being too unfair to blame the proponents of ugly economics for the mess that we are in. Could it not be equally possible that it is the ugly society which has created an ugly economics to match its essential ugliness. If economists are merely responding to the demand from the major power holders in society for a theory to justify their existence, they are culpable of devising a message that enables the ugly society to thrive. Their privileged role as the sanctioned intelligentsia serve to suppress any alternative voices. They are like the garden weed that denies those food plants we desire the space in which to grow and thrive.

Scroogism the principle at the heart of the New Economics

Economics, Politics, society, , , ,

  

Washington University Political Review

Scroogism is key principle at the heart of the new economics, that is economics as practised since the 1980’s. This can be explained by reference to the opening pages of Charles Dicken’s novel Scrooge. When he arrives home from the office, Scrooge gets an unwelcome visit from two of men collecting money for distribution to the poor at Christmas. His famous answer is, are there no longer any workhouse or prisons in which the poor  can be housed and fed. The assumption at the heart this tirade is that money should go to to those who deserve it most and who will make the best use of it. Men such as Scrooge a banker and trader who will invest it wisely to create more wealth. Any money going to the feckless poor is wasted, as in their folly they will only squander it. A philosophy best expounded by the politician who said installing bathrooms in the houses of the poor was the height of folly, as they would only use their baths to store coal. 

The belief that money is best kept in the hands of the deserving rich and out of the hands of the undeserving poor, is one of the core beliefs of the new Neo-Liberal economists. If money is in the hands of the entrepreneurs of society, ‘the great movers and shakers’ society will benefit from the activities of these people which creates more wealth for society to enjoy. Fairness is redefined, the majority of wealth created in society should goes to those that deserve it most, that is the wealth creators. The poor are poor because they create little in the form of wealth, their poverty level wages are fair recompense for their lack of effort and skill. The beggar who so inconveniences the theatre goer by asking for money at the entrance to the theatre is there because he deserves to be there, it’s his own fault.

Whenever their is any debate about welfare or the plight of the poor in Parliament Scroogism is seen at its most active. When parliament ever approves giving money to the less well off its only ever given on the most niggardly of terms, the unspoken assumption is that he poor are poor because of their own failings. Benefit caps are imposed or penalties are imposed on the most of undeserving of the poor. Parliamentarians are loath to throw good money after the bad, that is giving it to the poor, whereas they are over generous in giving tax breaks, subsidies and grants to the deserving  rich. Some of the richest landowners in the country receive hundreds of thousands of pounds from the tax payer in agricultural subsidies. 

Scroogism is the hypocrisy of the well-off, it’s provides a moral justification for ignoring the needs of the less well off.   This hypocrisy is best demonstrated in the debate on social mobility. Rather than give money to the poor, they will be given ever opportunity to better themselves, that is become one of the better off. In what can only be described as cover for the inherent meanness and nastiness of the prevailing philosophy of Neo-Liberalism, the poor are to be helped to become one of the well off. A good education is seen as the best means of achieving this, consequently there is in education a ‘constant revolution’ in teaching methods and practise. While  this ‘constant revolution’ has achieved little in practice, it gives politicians the sense of moral superiority in that they are doing their best to help their inferiors. If the recidivists among the lower orders reject there help its nobody’s fault but there own. 

There is one fact ignored by the politicians who preach the virtues of social mobility, if people are to move up the social scale this can only be made possible is some move down. Whether well off parliamentarians and the class of well to do, recognise this fact either unconsciously or consciously, they do their best to prevent anydownward movement as this would harm them and their families. In Britain the barriers of  social exclusiveness give it one of the lowest rates of social mobility in the developed world. Education provision is strictly rationed according to income. The quality of education varies according to the income of the pupils, an apartheid of wealth applies. In the wealthy suburbs pupils receive an education that is beyond the dreams of those living within the impoverished areas of our cities. Given that the children of politicians are educated in the wealthy suburbs, it is going against human nature to expect them to sacrifice the advantages that their children enjoy to benefit the poor. 

The only effective way of increasing social mobility for the poor is to increase their income. If a family has sufficient income they will keep their children in school to enable them to gain a higher education. Wealth is a qualification for citizenship, the individual on a low income, who perhaps has two jobs, who suffers from insecurity of employment and tenure, will lack the time and confidence to participate fully as a citizen. They know that their social situation excludes them from full citizenship.   A confident well resourced class of the less well off would exert pressure on the socially exclusive social system to provide ‘real’ opportunities for their children to join the social elite.  What is needed is a political and social revolution similar to that which developed forbtge organised working classes of the nineteenth century.

What you thought about globalisation is probably wrong.

Economics, Politics, , , , , , , , ,

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What you thought about globalisation is probably wrong. Globalisation is associated with a race to the bottom with employers cutting wages, so they can compete with producers in the third world. Employers have been so successful in Britain that they have made Britain the low wage, low cost capital of Northern Europe. Many of the conditions that are associated with third world economies are now to to found in Britain. Millions now receive inadequate wages, live in squalid accommodation that was last seen in the slums of the Victorian era, children malnourished and many thousands forced to rely upon charity handouts to survive. The justification for this imposition of mass misery, is that to compete in the world market Britain needs cut to costs, better to have a poor wage than no wage at all. However the prevailing view is wrong, it need not be a race to the bottom.

The advocates of the globalisation theses conveniently ignore world agriculture, which demonstrates the contrary of the usual globalisation argument. Probably because much agricultural land is owned by big corporations or the super rich. The example I want to use is the beef trade. In the nineteenth and early twentieth century Argentina and Uruguay grew rich from exporting beef to Europe and the USA. Now that trade is effectively prohibited and the reason given is disease control. Beef imports are prohibited from countries that lack effective controls on cattle diseases, that is Argentina and Uruguay. The disease they fear in ‘foot and mouth’, a disease which if it got established in the UK would decimate the British cattle herd according to the farmers union. In fact it does something much worse than killing cows, it is a flu like disease from which the cattle recover but with a permanent weight loss. As beef cattle are sold by weight it means less the cattle would sold for less than they would otherwise. Cattle barons would lose thousands of pounds when selling their vast herds, therefore extreme measures have to be taken. I don’t wish to go into detail about agri-business and its pernicious effects on the world economy, but want I to do is demonstrate that world trade even in an era of globalisation can be regulated for the benefit of European and American producers.

The case for paying low wages has many flaws. One is that many low wage occupations in the service industry don’t have any real foreign competition. Services such as hairdressing and coffee shops are not going to disappear abroad if the wages of hairdressers and baristas are increased. Starbucks cannot relocate from Britain to a foreign location to avoid higher wages.

Some of the worst abuses of the free movement of labour could be stopped with effective legislation and law enforcement. The current system encourages employers to use foreign agency staff, who can be paid less than the minimum wage. As the workers are employed at arms length from the company they do not have to take responsibility for the wages paid to them. They therefore ‘unknowingly’ pay workers at less than the minimum wage, pricing British workers out of a job. Making large companies responsible for the conditions under which agency staff are employed would end this abuse. Particularly if large fines were imposed on firms that tolerated such abuses. This would discourage firms from hiring agents to import low cost workers from Europe, it would reduce the pull factor which attracts the low paid to work in Europe.

While there must inevitably be the move of some manufacturing to the low cost economies of the third world. The race to the bottom could be minimised if there were regulations about unfair competition imposed on third world suppliers. Why should there not be a world wide minimum wage for all workers? It need not be so high that it would put third world producers out of business. A doubling of the wages of garment workers in Bangladesh would only have a minimal impact on prices paid for clothes in Britain as the wages of such workers form only a small part of total costs. What it would do is reduce the excessive profits of the Bangladesh garment markers and the various traders in cotton goods.

The advantage of paying a worldwide minimum wage is that it would discourage the default setting in the mind of British businessman, that the only way to increase profits is to relocate abroad. There has been a steady flight of manufacturing and service industries from Britain to the third world. The move to low cost locations cannot be justified if the only reason is to exploit the lowly paid in a third world country.

This could be achieved quite simply by making use of the current organisations that regulate trade. In Europe at present the European Union regulates trade within Europe but that regulations n has been to the benefit of large corporations. It has opened European markets to the low cost out of Europe subsidiaries of large business corporations to the detriment of Europeans. Instead the European Union could work to the benefit of the population by ensuring that all imports from third world countries are from importers that adhere to fair market competition. This would benefit the Italian clothing industry which is struggling to compete with low cost out of Europe producers. Perhaps even encourage the revival of the much decimated British clothing industry, as clothing manufacture becomes more profitable. Slowing the gadarene rush to the exit would enable European industry to adjust to changing market circumstances and maintain the employment of local labour. Globalisation cannot be stopped but it cannot be allowed be imposed in terms that penalise the people to the benefit of large corporations. Why should not European manufactures have the same rights as farmers?

Britain provides one of the best examples of how not to manage globalisation. The Labour government of the 1970’s financed the equipping of the Swan Hunter shipping yard at Sunderland with the most modern of shipbuilding equipment, so it could compete in the international markets. The incoming conservative government thinking only in the short term and ignoring the long term prospects, shut yard. All they could see was the costs of supporting this ship building yard, not the long term benefit from ship sales. The ship building equipment was sold at a knock down price to Korea. No doubt the Korean ship builders used that equipment to make ships to sell to Britain. It is such short sighted action that makes globalisation so unpopular.

One objection to my proposals is that insisting on high standards of manufacture in third world countries would interfere with their sovereignty. The right to national sovereignty does not override the right to fair treatment at work. Why should not Europe insist on that countries which trade with it uphold the universal right to a fair wage? With Europe being one of the largest importers of goods from the third world, this action would lead to rise in living standards there, not a perpetuation of misery.

Globalisation cannot be halted but for the benefit of the people’s of the world it must be regulated. There is little benefit to be gained from an unregulated market in global trade, that is run in the interests of big business. There is no reason why globalisation should mean the reduction in living standards in the West. What is required is some protection for European industry from unfair competition. Competition which is dependent on paying poverty level wages to workers. There is no logic in Britain readily embracing third world standards in its desire to remain competitive. Making people poor is rarely a solution to any problem.

Lies told by economists 2 – the economy is always managed so as to maximise the welfare of all

Economics, Politics, , , , , , ,

One of the constantly repeated stories told by economists is that the current programme of austerity is for the good of us all. The austerity programmes adopted by Western governments are necessary to root out from the economy of the excesses of the past spendthrift governments. The austerity programme will restore the economy to health and all will benefit from a new era of economic prosperity. A story that is so untrue, as acute observers will have noticed that it is the less well off who have suffered disproportionately in this recession, while the incomes of the better off have hardly been touched. Despite the recession, London for instance is home to a record number of billionaires.

There is another story that needs to be told and that is that economies very rarely work in a way that maximises the welfare of the majority of the population. They instead maximise the welfare of those groups with the greatest market power, who use that power to gain the largest share of wealth for themselves. Only very rarely does market power reside with the majority as happened in the social democracies of Europe after the Second World War.

This is demonstrated in the current time period which its one characterised as the time of Neo-Liberalism. A misnomer as it is a period that has seen the ever increasing accumulation of market power by the owners of capital at the expense of those who depend on earned incomes. Neo Liberalism is a political doctrine that these wealth holders have cleverly exploited to aid their rise to power. This doctrine states the the greatest impediments to the free market and the maximisation of wealth are over powerful governments and power trade unions, both of which impede the workings of the free market. Strong Governments and trade unions are the two factors that place obstacles in the path of those who wish to acquire unlimited wealth.

Growing up among the serving classes in the 1960’s, I observed close up the anxieties and fears that gave rise to the putsch against the strong governments and trade unions of the social democratic state. The 1960’s were a period of relative prosperity, there was full employment, constantly rising incomes and people were well housed, yet the rich hated this period. All they could see was the threat to their social and economic status from the newly prosperous working and middle classes. It seemed to them that all the barriers that preserved their social exclusiveness were under threat. Students from the working class now attended the two bastions of educational privilege, Oxford and Cambridge. Working people could own cars and more threateningly rise up the social and occupational ladder and threaten to displace the previous incumbents.

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Tunbridge Wells and its environs where I grew up were home to exiled European aristocrats forced into exile by the communist revolutions of Europe. Travelling on local buses you would come across impoverished Eastern European aristocrats talking about their lost estates and wealth. I lived near a family of White Russians who were so worried about the possibility of a communist uprising that they were only family locally permitted to keep fire arms. It was this anxiety that fed into the paranoia of the wealthy who feared for their social position.

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One of the most frequently expressed concerns was that people no longer knew their position. Servants would talk back to their masters and mistresses. The relative prosperity of the times meant it was difficult to get servants, as who would want the demeaning job of servant when a job a sales assistant in a shop gave gave greater freedom and a better wage. It was this newly acquired power to be no longer beholden to The Lord of the Manor for employment, that empowered servants. This group looked back to the horrors of the Great Depression as a ‘golden age. Then servants were plentiful and people knew their place. On the estate in which I lived prior to World War 11, it was a dismissal offence to talk without being first addressed by old Lord ***, now the very real shortage of estate workers and servants meant at worst all that could be done was reprimand the worker. I can remember a servant at the castle being reprimanded for being cheeky to her ladyship, an offence that would have warranted instant dismissal in the 1930’s. How the rich hated the prosperous sixties, with their indolent and independent minded workers.

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Even in these social democratic times the rich had begun to regain their former powers. The setting up of trusts encouraged by a friendly judiciary enabled the aristocratic owners of the great estates, meant that these aristocrats could claim that their estates were held in perpetuity by a trust and therefore not subject to estate duties.

The determination of this group should never be underestimated, they worked constantly to weaken their two enemies over mighty governments and trade unions. Rather than going through the details of how they achieved this weakening it is sufficient to say that in their enterprise they were greatly aided by the naivety of social democratic politicians. Today the most powerful groups in society are the financial, business and landowning elites. Given the lack of restrictions on their power they are able to abuse that power to award themselves an increasingly disproportionate share of the nations wealth. In 2000 the average company directors pay in Britain’s top companies was 69 x that of the average employee and by 2009 it increased to 149x that of the average employee. This disproportionality in income take demonstrates why the British economic recovery will be good for the rich and the super rich but less good for the majority.

Economists fail because they see a society as one atomised individuals, who are best off if they can trade freely amongst themselves, as they individuals know what they want. Any intervention by a government no matter how well meaning, could not second guess the wants and wishes of individuals and they whatever they did would lead to people being more dissatisfied that satisfied. The only social group that they recognise are trade unions which they identify as malignant growth which disrupts the efficient running of the business enterprise. They never recognise that owners of capital might group together to abuse their market power to gain a disproportionate share of society’s wealth. For an economist bankers, financiers and land owners only act in a benign way for the benefit of society.

Society in reality is divided up into a number of social groups competing for power and wealth. This power and wealth is distributed disproportionately, the owners of capital compared to the owners of labour have disproportionate power. This disproportionality of power and its potential for harm was recognised in former times. Durkheim in the 19th century wrote of the essential role of the state to protect the individual from local bullies and tyrants. He knew that employers had unlimited power to abuse their workers, with their being no labour protection legislation, they could pay as little as possible, work them for long hours, subject them to unhealthy and unsafe working conditions and dismiss them if they fell sick. The state was needed to regulate conditions of employment and protect the worker against unfair exploitation by bad employers. A lesson forgotten by the current generation of economists and politicians.

I can as a child of the serving classes quote an example. A remember an old servant telling my mother of the bad country house in which she worked. The men of the house if a young pretty house maid took their fancy, they would abduct her and rape her in the cellars. Staff were powerless to intervene and the abusive males never faced any sanction. It is this story that springs to mind whenever I hear a politician or economist advocating the removal of yet more labour protections.

Today Britain is a country that is safe for the rich, but unsafe for the poor. The poor can be housed in unhealthy private rental homes for which they pay exorbitant rents and dare not complain for fear of eviction. A good government would legislate to prevent such tenants as recommended by Durkheim, instead we have a bad government, supported by bad parliamentarians of all major parties who would never countenance such a measure. In contrast the government does its best to make life comfortable for the rich by co-operating in all schemes to protect their wealth, most notably in the emasculation of the tax collecting agencies.

The Musings of a Bad Economist

Economics, society, , , , ,

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While studying economics in the 1960’s, I always had the feeling that something was missing from the subject I studied. It was not just the absence of left thinkers amongst economists, I had the nagging feeling that there was a lack of a fundamental something. In a subject that is essentially about people there seemed to be a complete absence of the people factor. I was a bad economist who failed to grasp that in essence people were just another unit of production and their humanity did not entitle them to any special privileges. Only a ‘good economist’ (of which I am not one) could understand that the free market represents the epitome of human organisation in the economic affairs. Alternative such as the mixed economy, the planned economy have all failed and it is only the free market that can maximise wealth and human happiness.

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Bad economists such as myself always fail to see the bigger picture, we focus on the misery suffered by individuals as a result of economic change, failing to realise that this misery is the necessary price to be paid for changes that benefit society as a whole. We focus on the suffering caused to people by the changes that have accompanied the introduction of the deregulated and flexible labour market; ignoring the benefit to employers who now have the power to adjust the hours their staff work to fit in with the needs of business. All supermarkets now benefit from the split shift system. Formerly they had to employ staff for fixed hour shifts, so they could end up with having too many shop floor staff in slack periods. Now they can send staff home during the slack periods and recall them for a second shift during a busier part of the day. Then there is the beauty of zero hour contracts, where employers can call staff in when they need them and they can include an ‘exclusivity’ clause which means that the employee cannot take on any other work when not required by their employer, meaning they are always available for work. Being able to treat people as if they where just another resource such as a machine which can be switched on and off when needed, enables employers to maximise their profits. Good economists see the necessity of relieving the workforce of their humanity, as sick and maternity leave do little more than disrupt the productive process.

There was recently a Question Time programme on radio where an employer and ‘good economist’ lauded workers in an American factory where the workers had agreed to incremental increases in the hours they worked (without compensatory wage increases), so that in the end all staff were working ten hours a day for six days a week. They had the good sense to realise that trivialities such as the right to a family life, were merely impediments that prevented the achievement of the greater good, that is the increased profitability of the business. That in turn meant that the owners would not feel compelled to relocate their business to a country where wages were lower, accepting inhuman working conditions were a price worth paying for keeping your job.

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Income inequality is a subject that I constantly fail to understood. The ‘good economist’ sees widening income inequality as an unqualified good. Today company directors pay is about 128 times greater than the average wage of their employees, whereas in the 1980’s it was a ratio of 1 to 35. An economist would explain to an ‘economic dimwit’ such as myself, that the high pay for company executives was a necessary reward for talent. They could point to the recent example of the Co-op, where business consultants decided that the going market rate for a CEO was £3.5 million per annum. If the boss of the lowly Co-op supermarket chain can command that salary, obviously the boss of a giant bank such as HBSC deserves a much higher salary. By paying astronomically high salaries we would attract the best people to run our companies. We would all gain from the high growth that these companies would experience. The fact that I as an individual don’t seem to have benefitted from this upsurge in prosperity is that I am one of the unskilled apathetic who don’t deserve a wage increase.

Perhaps the doyen of free market economists or ‘good economists’ was the Chicago economist Milton Friedman. He understood why President Pinochet’s government on seizing power had to lock up and kill many of their political opponents. It was necessary for attainment of a greater good the introduction of a free market economy. These opponents, many of whom were trade unionists, would have opposed the free market reforms that the government intended to introduce. He could see that in the greater scheme of things, the death of a few trade unionists meant little compared to the increase in wealth for all from that came the introduction of the free market economy. There are right greater than the right to life, if you are the wrong kind of person. Death was merely one way of marginalising opponents of the free market.

When the reforms failed to deliver the promised wealth for all, it was pointed out by economists that it was the fault of individuals not the system. The talented and hard working had become rich, while those lacking the true entrepreneurial spirit remained mired in poverty. It should not be expected that economy should provide for those lacking in skill or drive.

I confess to be an economic slower who would want to reserve all the changes in the labour market, that have led to Britain becoming the low wage capital of Europe. It was not so long ago that a Korean company opened a factory in Wales because wages were lower there than in Korea. To reverse these changes I would introduce tougher wage regulation imposing a minimum wage never the ‘living wage’ and ensure that it was enforced. At present it is left to the goodwill of employers to pay the minimum wage. Since its introduction there have been no prosecutions of employers who flout this law. Job insecurity which imposes untold misery on millions I would reduce by re-introducing the job protection measures removed by successive governments since 1979.

A ‘good economist’ would see this as folly, he would gently take me aside and tell me that my proposals would work to the detriment of the labour force. They would point out that Ian Duncan Smith’s reforms that have reduced many to living in poverty are in reality a good thing, it is misguided individuals such as myself that misunderstand their purpose. Before the advent of Ian Duncan Smith far too many individuals were mired in the dependency culture. They had become individuals with no purpose in life other than to collect state benefits on which to subsist. These apathetic, aimless creatures spread misery, neglecting their houses and letting them and their neighbourhoods deteriorate too such an extent that they resemble Victorian slum areas. Reducing their benefits to a level less than on which it is necessary to subsist means they will be forced to find work. Once in work they will learn the pleasures of a life independent of benefits and they will gain immeasurably in self respect. Pushing these people into a poverty enforced misery will make them change their ways, it will eventually create a race of sturdy self reliant individuals.

Such a person would tell me that I misunderstand the benefit of low wages, it gives the worker the incentive to work harder. They also would say that what is wrong with the low paid worker having to have two or three jobs to make ends meet. It teaches them that nothing comes to them unless they work for it. They are incentivised through poverty level wages to work for self improvement. We need to instil into the workforce the work ethic that would be the most effective driver for prosperity. A living wage would have the reverse effect, it would mean that the lazy and incompetent would get the same wage as hard working and clever. This would be self defeating as the costs of production would be pushed up through having to over pay poor workers, thereby increasing prices, reducing sales, followed by staff lay offs. The poor need to be motivated by fear, they are a different in nature from the talented company directors who need high pay to be incentivised to perform at their best. They are a totally different type of being that responds better to rewards than fear.

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As a bad economist I have this nagging feeling, I do not see after having thirty years of the free market that it has delivered on the promises made by its advocates. Certainly a small elite group have done excessively well out of the reforms, but what of the majority. Incomes for the majority have in real terms remained stagnant since 2003. House prices are spiralling out of control to such an extent the trend to home ownership has gone into reverse. Surveys suggest that the sense of national well being peaked in the mid 1970’s, not in the free market noughties. Is it possible that the benefits of the free market economy are merely illusory? In Stalin’s Russia of the 1930’s one five year plan after another was produced, always promising that at the end of each plan the communist nirvana would be achieved. All that happened was that nirvana seemed to recede further and further into the distance, somewhat like George Osborne’s plans. He promised remove the structural deficit by 2015, now its 2018, whereas in 2017 it will be put back to 2020 and so it will continue. Can I suggest that instead that a change of direction in government policy, one that takes account of the hesitations of bad economists such as myself. Bad economists prefer to look at the world as it is, not try to make it conform to some imaginary model.