Tag Archives: Swiss model

Good and Bad economics or Creative and Destructive Economics

From the very beginning of my teaching career I felt that I was not giving my students the complete story. Then just recently my son-in-law who is a joiner taught me something about economics that I should have known. The market is but one strand of the economic complex, what I and other economists have ignored is collaborative or creative economics. An economic practice that is not based solely on price, but other values, such as trust, respect and quality of work. Self employed construction workers such as my son-in-law, may work singly or with others when the task requires it. When a task calls for collaboration, collaborates are chosen on the basis of respect, trust and work ethic. They all know the profit maximiser who will cut costs and corners so as to achieve the maximum profit. These men make poor work colleagues and are best avoided.

This does not mean that there are not a number of bad tradesmen, who will produce a poor quality product or service. Men who make a good living from their trade but who former customers are desperate to avoid using again. Our local internet network is dominated by requests for the names of tradesmen who can be trusted to deliver a good quality service. While the market economists would say that the customer looks for the tradesmen who charge the lowest price, what most people want is quality of service. If a potential customer tried to force the price down to the lowest level, my son-in-law and his colleagues would just walk away.

While in the building trade there is a rogue element of profit maximisers, who cut costs to the bone to earn maximum profit, I suspect the majority are like my son-in-law ‘profit satisfiers’. Given the ignorance of the building trade potential customers find it hard to identify these rogue traders. Rogue traders who in the present shortage of tradesman can make a good living. However that does not discredit my belief that in the building trade, quality of service is valued more than price. Obviously price matters to both the customer and tradesmen, usually what is valued is the fair price, a price for the job that satisfies both customer and tradesman. It is a deal founded on trust, a trust that can unfortunately be abused. There are the customers who are tardy payers and the rip off merchants on the traders side.

What is required to make the construction market work more effectively is more regulation, of the right kind. Electricians are compelled to take regular tests to ensure their fitness to work in electrics. Unfortunately there is no effective mechanism from preventing the bad or poor electrician working in the trade. Anybody can advertise themselves as a builder qualified in all trades. A regulated market such as that found in Germany or Switzerland would improve immensely the work undertaken in the building trade.

From my knowledge of people working in the small and medium trader market, the same standards apply there. Even businesses solely driven by profit and not quality of service, such as the banks and other financial services, the success of these profit maximisers depends on their staff adopted collaborative working practices. If staff felt they could not trust each other, the business would soon collapse. Businesses don’t thrive if their staff are constantly at each other’s throats.

In this respect the practice in call centres, where staff are constantly monitored and required to meet performance tasks have a high turnover of staff. This works when unemployment is relatively high, as unemployed young people can be quickly trained in the simple skills required. Given the high and wasteful staff turnover such call centres find that treating staff well, equals higher productivity and higher staff retention. In even this industry values other than cost minimisation are adopted, contrary to market economics.

Collaborative working of the type undertaken by my son-in-law is creative economics, he is a profit maker. Whatever he makes or does adds value to the property. This is contrary to destructive economics, whereby the trader or business literally diminishes the value of the nation’s wealth. In economist’s terms, the profit taker or in common sense parlance the robber baron. Private equity companies are one of the worst practitioners of destructive economics. They loot the company of its most profitable assets and then return the ‘efficient’ business back to the market. Adding the resale price to the profits gained by selling the companies assets. These enfeebled businesses rarely survive long once returned to public ownership.

Another term for these non creative looters, is rentier capitalists. One example of this is those business that buy the copyright of a particular musician. Then with the ownership of these rights they can charge exorbitant sums to those who make use of this artists music. They are assiduous in keeping control of the right to profit from that artist work, often resorting to court when they believe their rights have been infringed. Unfortunately a list of these corporate looters is most endless.

China had its cultural revolution in the 1960s and Britain hers in the 1980s. Although the British free market revolution did not produce the huge loss of life that China’s did, it was in some ways equally destructive. Rather than freeing Britain from the shackles of government and liberating the market for the benefit of all, it has created an unregulated market which in essence is becoming a thieves paradise. Only a return to a regulated market that prioritises the creative economy over the destructive economy, can return us to an economy that works for the benefit of all. What I treasure is the Code of Hammurabi which threatened bodily mutilation to profiteers and speculators. He as a successful ruler knew that he would only remain successful, if he reined in the excesses of the market.