What lies outside of organization studies?

I received an interesting email about this blog the other day. As the sender did not post it publicly I won’t reveal his name but I suppose it was what used to be called a ‘green ink letter’ in that the language was a little intemperate and capital letters and exclamation remarks abounded (and I would just mention that this is not necessarily the most effective way to make one’s arguments). The main point he made was that most of what I write about on the blog is not organization studies but economics and politics and he was particularly exercised by my posts on British membership of the EU. Why, he asked, don’t I just stick to writing about what I know about, meaning organization studies?

The answer to that is important to my view of what organization studies is, or should be. Because I don’t recognize any real distinctions between organization studies and economics and politics or, for that matter, social science or social affairs or history (all of which I often write about), philosophy (though I rarely write about it) or literature (which occasionally I do). That’s actually one of the key messages of the book.

One reason for that is the fairly obvious one that organizations exist within an economic, political and social context so anything about that context is relevant to organizations. In Europe (and more widely), the EU is certainly an important part of that context and although my correspondent clearly disagreed with my views on the matter, the robustness of his email leads me to think that he very much agrees about that importance. Another reason is that the organization-context distinction (or, more often in organization theory, the organization-environment distinction) is a bogus one: they are mutually constitutive. As I argue in the book (p.93), somewhat counter-intuitively organizations are part of their own environment. And a third is that politics, economics and the social are themselves organized both in general and in terms of specific organizations (e.g. political parties). No one bats an eyelid if leadership researchers invoke examples of political leaders alongside business leaders – so why should it not be the same for organization studies in general?

All this suggests another, and I think genuinely interesting, question: does it mean that there is nothing that lies outside of organization studies? I am really not sure. Certainly there is little which lies outside organizations, in that all human life has a collective and therefore organized aspect. Even Robinson Crusoe, sometimes invoked in economic theory as an atomised individual, relied upon stuff that he had rescued from his shipwrecked boat, and both the boat and the stuff were there because of organization. And as soon as he met another (black) person he turned him into a slave – effecting an organization on the basis of how he had learned to organize. So maybe organization studies is about everything?

There are parallels in other subjects. Economics is actually a good example in that it often seeks to recast all human experience in terms of its own categories, and politics can claim that everything is in some sense political. In recent years I’ve noticed that geography has become ever more expansive in its scope, perhaps on the basis that everything, after all, occurs in space and in a place. Anything social must in some sense be amenable to sociological analysis. And does anything about human behaviour lie outside the ambit of psychology? I suppose that many facets of art and science lie outside of organization studies, and that it would be immensely and absurdly flattening to try to argue otherwise. Still, all facets of art and science are in some way organized, and in this regard organization studies has (or could have) something to say about them. Perhaps only aesthetic experience lies wholly outside organization studies?

Like many academics who work in organization studies my training was outside of the field. In fact, although the email correspondent suggested that I should stick to organization studies as that is what I know about, the reality is that I probably don’t have anything like the comprehensive knowledge of the subject that I might be assumed to have, and probably should have. In my case my training was primarily in political philosophy and to a lesser extent economics; for others in the field it was anthropology, psychology and sociology amongst other things. This is actually becoming less true, as the growth of organization studies means that younger academics are more often trained in the subject, and usually within business schools. I am inclined to think that this is change for the worse, although it may well be that they have a more thorough grounding in organization studies per se than do I and others of my generation.

Anyway, I don’t propose to limit myself to the conventional repertoire of organization studies, but I can see the danger that the more it is about everything the more it may be about nothing. Even so, what strikes me more, as regards this blog, is that it is actually rather repetitive in the things I write about. So my belated New Year resolution (with no promises that I will stick to it) is to try to extend my range a bit further. That will not please my correspondent, alas, but since his main complaint was about my “fascistic”, “Quisling”, “big business [loving]” and “liberal-left elitist” support for British membership of the EU I fear that I am unlikely to do so. And I am sure I will continue to post about British membership of the EU – in fact something about the extraordinary intellectual legerdemain (if this does not slightly flatter it) by which its supporters can simultaneously be cast as fascists, traitors, corporate lackeys, liberals and leftists would be well worth writing.

More gloom

In the second edition of the book I made some remarks that turned out to be prescient about what at the time I wrote it was the nascent financial crisis. Since it is rather rare for my – or any other social scientist’s - predictions to come true I rather regretted the fact that in updating for the third edition I had to excise them. I’m now working on the fourth edition but by the time that comes out (at the end of this year) I suspect that I will have been overtaken by events and that by then we will be well into another, probably worse, crisis. So I’m going to get my prediction in now.

Of course I’m not the only person saying this. Last week a leading strategist at Societe Generale said the same thing and the Royal Bank of Scotland advised its clients to sell their equity holdings in anticipation. Stock markets across the world are in sharp decline, and the collapsing prices of oil and basic commodities are precipitating a global deflation. At the heart of all this is the slowdown in China and, in particular, the massive growth in corporate debt there, much of it due to a real estate bubble and the rise of a secondary banking sector.

Meanwhile, personal debt in most countries – from Sweden to Thailand - is also rising to higher levels than at the time of the 2008 crisis. Although in the UK and US it is not yet at the same levels as it was then, it is also rising. Once again in the UK much of this debt is related to a house price bubble and lax bank mortgage lending, but also rising is unsecured debt sometimes used simply to cover basic living costs.

If there is another financial and economic crisis the consequences will be much graver than in 2008 for two reasons. One is that the capacity, both financial and political, of nation states to bail out banks will be much more limited. So much the worse for the banks, it might be said; but it will not just be the banks that suffer. The reason why, post-Lehmann’s, the US and other governments stepped in was not because of an outbreak of Keynesianism but because they saw the political and economic consequences that would follow if the cash machines, literally, ran out of money. This time round there's every chance that that will happen.

Second, the intervening years have seen a growing precariousness of employment, symbolised but not limited to the rise of the zero hours contract, as I have written about elsewhere on this blog. At the same time there has been an erosion of welfare provision. Thus the ability of ordinary people to weather another crisis is much more limited. In many countries – Greece and Spain amongst the most obvious examples – the capacity of families to provide support for unemployed young people and pensioners has already reached breaking point. It is one thing to give such support to tide over short-term problems, quite another to do so on a more or less permanent basis.

For, as the distinguished political economist Andrew Gamble (2014) suggests in an excellent book, crisis is now likely to be permanently embedded within the global economy, in the absence of some major shifts in ideology and public policy. Of that, there seems little chance. Despite some initial impetus for reform after the 2008 crash almost nothing came of it. There was no new settlement and no new deal, and every prospect, therefore, of another crash. It looks to me as if 2016 will be the year we see it. 

Reference

Gamble, A. (2014) Crisis Without End? The Unravelling of Western Prosperity. Basingstoke, UK: Palgrave Macmillan.

British election: the leaders' debate

This is the second of my posts on the British General Election, this time on the televised debate between the party leaders which was held last night. This is only the second time there has been such a debate in the UK, and the format was different to last time. In the 2010 election only the leaders of Conservative, Liberal Democrats and Labour participated. This time, following various political machinations, they were joined by the leaders of the Greens, SNP, UKIP and Plaid Cymru (the Welsh national party). Thus the full cast was Natalie Bennett (Greens), David Cameron (Conservative), Nick Clegg (LibDems), Nigel Farage (UKIP), Ed Miliband (Labour), Nicola Sturgeon (SNP) and Leanne Wood (Plaid Cymru). The debate lasted for two hours and was organized around four questions on the economy, the health service, immigration, and the future for young people.

In many ways it was this format that had the biggest effect. It meant that each leader had relatively little time to speak and when they did it was highly structured. There was little audience participation (I think by instruction from the broadcasters) and it was hard for any of the leaders to really get a sense of audience reaction – there was little applause, no catcalling and just one heckle towards the end. In short, the atmosphere felt quite sterile. Certainly it was difficult for any single leader to dominate proceedings, and none did.

Opinion polls and comments since the debates suggest that no one emerged as a clear ‘winner’or ‘loser’, although Nicola Sturgeon has been the most widely praised. I think this is deserved: she gave a strong, calm and confident performance. One quite likely permutation of the election result is a Labour minority government supported by the SNP and if so that will be an interesting outcome, since Sturgeon is some way to the left of Labour and would be likely to push strongly against austerity economics.

As for the other leaders, David Cameron, who had been resistant to the debates taking place, seemed somewhat ill at ease and disengaged. He can be an accomplished speaker and expectations would have been quite high that he would stand out, so I would think his supporters would be disappointed. Ed Miliband, by contrast, started against low expectations since he is widely seen as lacking charisma. Thus it was relatively easier for him to exceed expectations, so his supporters may be relieved. It would be hard to say that either of these two – the only ones with any expectation of becoming Prime Minister – decisively defeated the other.

Nigel Farage will have had high expectations from this debate. He is often an accomplished and effective speaker, skilled in projecting an image of straight-speaking normality. But his style relies a lot on the use of humour and bombast, and the rigid format and stage-managed audience weren’t a good format for these. He wasn’t able to dominate proceedings as he might have done in a head to head, and it was notable that Cameron and Miliband barely addressed him, treating him as almost an irrelevance. He was also the only one of the leaders who looked physically uncomfortable. His supporters profess themselves pleased but there was no breakthrough moment of the sort they would have hoped for.

Of all the leaders, Natalie Bennett started with the lowest expectations given recent painful media performances (which I discussed in another post). To exceed them all she really had to do was not implode, and she easily exceeded that bar. Leanne Wood was probably the least known of the politicians to a national audience and gave an assured performance, albeit one which (not unreasonably) mainlined on Welsh rather than national issues. Sturgeon, by contrast, had tended to emphasise the role SNP MPs could play in Westminster politics. But it was Wood who garnered one of the few rounds of applause of the night, in a sharp put down of Farage’s claim about immigrants using the health service.

Nick Clegg’s performance in the debate has been less commented on in the media than that of the other leaders. It was actually quite punchy and fluent. But whereas at the last election debate his was the runaway success, attracting by far the most praise and interest, the context has now changed and he has neither the edge of being a newcomer challenging the political establishment nor the significance that attaches to the prospective Prime Ministers.

Overall, we didn’t learn very much that was new, and it seems unlikely to me that many viewers will have changed their voting intentions on the basis of the debates. Nevertheless, it was a fascinating evening and, again, this was because of the format. Firstly, there was a far wider range of views represented than has been normal in British politics, and with each leader being given the same amount of air time these views were represented as all having equal weight. That felt like a refreshing change following an era which, as I wrote in my last post, has been dominated by the shared neo-liberal orthodoxy of Conservative and Labour parties. Secondly, the dynamics of the debate felt changed by the presence of three women – who, relatedly, each represented ideologies at odds with neo-liberalism. Since Margaret Thatcher’s departure, British politics has been heavily dominated by white men in suits and suddenly that domination has evaporated (as regards the men, but not the white bit). It was Thatcher who coined the phrase ‘there is no alternative’ (to free markets), otherwise known as Tina. But Tina, for one night anyway, was banished by Leanne, Natalie and Nicola.

Taxing times

Tax evasion, by both individuals and corporations, is the story of the moment, and it’s a global one. In Australia, the Tax Justice Network estimates corporate tax avoidance (we’ll come on to the evasion/avoidance distinction shortly) by the top 200 companies at Aus$8.4bn, prompting a Senate inquiry. The same thing is happening in China, especially as regards the tax location of multinationals. Meanwhile, in Greece, clamping down on tax avoidance and evasion is a core plank of the new Syriza government. Whilst in the UK there has been a huge row this week about the activities of HSBC’s Swiss subsidiary in promoting tax avoidance.

The figures involved here are eye-watering. According to a 2011 estimate, globally tax evasion amounts to $3.1trillion or 5% of global GDP. This matters for all sorts of reasons, but most obviously because of the context of government deficits, which of course represent the difference between what governments spend and what they take in tax. It is these deficits that drive the case for the Austerity economics that characterises the fiscal policies of many countries. Such policies proceed on the basis that the problem is excessive expenditure, when what really drives deficits (apart from the cost of rescuing failing banks) is the erosion of the tax base in many countries.

As an adjunct to that, it is also remarkable how political discourse has prioritised cracking down on welfare fraud ahead of cracking down on tax evasion and avoidance. I give some figures for this, as regards the UK, in the book (p.118), but to update them – for 2012/13 HMRC, the UK tax authority, says that there was £1.2bn of fraudulent welfare claims but £4.1bn of tax evasion and £3.1bn of tax avoidance.

So what about this issue of tax evasion versus tax avoidance? In the book (p.128n5) I offer the standard distinction – that avoidance is legal and evasion illegal. But that is extremely simplistic. What is legal and what is not, within complex tax regimes, is always a matter of interpretation and negotiation, not an iron-clad line. HMRC eschews a definition but offers some ‘signposts’, reflecting the haziness of the concept.

One of those accused of tax avoidance this week in the UK – the splendidly named hedge fund plutocrat Lord Fink - opined that ‘everyone does it’. What he meant is not clear, but on internet discussion board the frequently made point is that many ordinary people make use of tax-exempt savings accounts (called ISAs in the UK) and so in this sense are tax avoiders. This of course is nonsense. Such tax accounts were created by government legislation to encourage saving, and account holders are using them for the purpose intended. Tax avoidance means finding ways, legal in themselves, to exploit tax advantages unintended by lawmakers. Now that is a hazy area – for who can say for sure what those intentions were – but it certainly is not hazy with respect to ISAs because they were explicitly set up as a tax free route to saving. Similarly, charitable gifts in the UK are tax exempt so that the beneficiary can receive the basic rate tax and the donor the balance of any higher rate tax. Again, exactly as designed. It is pure sophistry to call such things tax avoidance.

This issue of tax feeds into many others I’ve discussed on this blog, especially inequality. Within these, one fundamental issue is how economic globalization has not been accompanied by a globalization of politics and regulation. This disjuncture appears in debates about labour standards, immigration and, indeed, tax. In relation to immigration, I’ve written about the contrast of cosmopolitans and locals, and this can be seen in the tax debate, too. Cosmopolitans like Lord Fink see tax avoidance as just what everyone does, reflecting a world of trust funds a million miles away from that of locals. Similarly, there is a temptation to see privilege in local terms – posh judges and snooty civil servants – rather than those of global financial elites.

In the current debates about tax evasion and avoidance there is a moment of possibility – I don’t put it higher than that – of enacting a more realistic conversation about global governance and of the irredeemable interconnection between national polities and the global economy. Meanwhile, in a little-reported move, in Croatia the poorest have had a debt write-off – a local solution to a global issue which some economists, such as the Australian Steve Keen, see as the only way forward: the idea of a ‘debt jubilee’. Now that, truly, would be something that everyone does.

More on power

This issue of how to organize electricity generation and supply is a pressing and controversial one across the globe, from Turkey to Nigeria to India to the USA, and it is at the top of the political agenda in the UK, where the cost of electricity is a hot issue. I heard the government’s energy minister, Ed Davey, interviewed the other day and he was talking about all sorts of complicated measures he had in mind to make the energy market work, including a state-funded network of advisors, state rebates for the most vulnerable and so on. And of course his central idea is about switching between providers - but that is absurd because the big energy companies offer more or less the same prices and because what is the best deal when you sign up will, possibly within a few hours, be a poor deal - and yet typically you are locked into it. Or, if not, then you have to engage in constant market scanning and switching. This is an aspect of the paradox of choice, discussed in the book (p.75).

All these absurd gyrations arise from the refusal to acknowledge a basic truth - electricity supply is a textbook natural monopoly and, as such, the most efficient way to run it is through state provision. That refusal exists as much in the opposition Labour Party, which has proposed a price freeze, as in the government.  It's pointless to blame the electricity companies - the scope they have to compete in the way that, say, supermarkets do is virtually nil, even if they were minded to (and why should they be - as Adam Smith observed long ago, markets do not work on the basis of charity or, as we might nowadays say, social responsibility and we should not expect them to). That comparison is an instructive one: no one thinks that to make the supermarkets be competitive we have to have community advisors, rebates for the poor, complicated rules about switching, statutory requirements to offer the best deal and a government regulator because (whatever one thinks of supermarkets) all that consumers have to do if they are not satisfied is do their next shop somewhere else. With many caveats it more or less works as a market.

This week, the big six electricity suppliers were called to the British parliament, accused of price fixing, because they all more or less simultaneously announce more or less similar price rises. Their defence was that their price rises were because almost all their costs – the wholesale electricity price and taxes – are beyond their control. But if we turn that round, it also means that they cannot compete on price. So what else might they compete on? In most markets it would be product quality and product innovation, but that too is impossible: electricity is just electricity, so there is no way of offering ‘really good electricity’. For the same reason, they can’t even compete on brand image: no one would think there was something especially worthwhile about electricity from, say, E-On as opposed to EDF, would they?

So electricity (like other utilities such as gas and water) simply does not and cannot a function as a competitive market. By pretending otherwise we have to bear all the costs of an entirely ineffective regulatory system in order to pay both in supply and - as mentioned in my previous post - in generation often state owned companies of other countries to deliver the chimerical benefits of privatization and competition.

Thus, to use an over-used phrase, there is a huge elephant in the room that no mainstream British politician will talk about: the whole thing needs to be re-nationalised. And, curiously, given politicians unwillingness to talk about it, this is supported by 69% of the British electorate.

Suicide and organizations

I’ve come across two thought-provoking articles today, and the thoughts they provoked were not pleasant. One is a piece in The Guardian by Seamus Milne about the growth of ‘zero-hours contracts’ in the UK. With such contracts, workers are on standby to work, but with no guarantee of any actual work, and therefore payment, eventuating. In many cases, the contract forbids the person from working for anyone else either. Hailed by neo-liberals as an example of ‘flexible employment’, it is clear that all the flexibility is on the part of the worker. The consequent insecurity is obvious – no guaranteed income from week to week for a start, no pension or fringe benefits, no prospect of buying a home, difficult to sustain a family – in short, the full weight of the new insecurity I wrote about here a couple of months ago. And, although Milne does not make this connection, increasingly, there is little or no safety net, with recent clampdowns on benefits for the disabled in particular leading to a spate of suicides and an even greater upsurge in suicidal thoughts. Meanwhile, as I noted in my book (p.117), suicide rates in Greece have risen alarmingly since 2009 (and the rise has continued since I wrote that)  and there can be little doubt that the cause of this is the social and psychological dislocation caused by the economic crisis.

Suicidal desperation is at the heart of Jenny Chan’s recently published paper entitled ‘A Suicide Survivor: The Life of a Chinese Worker’ in New Technology, Work and Employment. Unusually for an academic article, this is a powerfully written paper and it recounts the life of a Chinese worker who attempted suicide, apparently a growing trend.  We often here of the rise of the knowledge economy and new organizational forms which stress creativity and freedom, but the hidden heart of this economy is what Chan describes as “a production model apparently based on classic Taylorism” (p.88). The intense discipline of life on the line of an outsourcing company producing Apple's i-phones is described in chilling detail, culminating thus: “The accumulated effects of endless assembly line toil, punishing work schedules, harsh factory discipline, a friendless dormitory and, rejection from managers and administrators, compounded by the company’s failure to provide her with income, and then her inability to make contact with friends and family, were the immediate circumstances of her attempted suicide. Her testimony reveals how she was overwhelmed, ‘I was so desperate that my mind went blank’. At 8 a.m. on March 17, Yu jumped from the fourth floor of her dormitory building in despair. After 12 days in a coma, she awoke to find that her body had become half paralysed. She is now confined to a bed or a wheelchair” (p. 91). It is not just in harsh factory conditions that work-related suicides are found. For example, in 2008 and 2009 there was a wave of suicides amongst employees of France Telecom, with many leaving notes blaming work pressures in an organization undergoing massive restructuring.

Suicide is undoubtedly the most powerful and extreme act of the powerless and desperate, a complex response to, and creator, of trauma and its causes are equally complex, and varied. One part of its power is to make it almost undiscussable and, certainly, one should never draw glib conclusions from and about suicides. But, equally, as Salford University academics Jo Milner and Ian Cummins note (and give links to further research on), the links between suicide levels and social and economic conditions are well-established, and have been since at least the publication of Emile Durkheim’s  1897 book, Suicide. So it would certainly be glib to consign suicide to the realms of individual psychology. If we have global economic systems and associated organizational systems of work and welfare which engender suicide then we (including and perhaps especially those of us whose profession is the study of organizations) should not be shy of saying so. Terms like flexibility, welfare reform, global supply chain efficiency and organizational restructuring sound neutral and unexceptionable. What lies behind them may be horror.

Thatcher then and now

As I discuss in the book (pp.108-109), it’s impossible to understand contemporary organizations without knowing something about neo-liberalism and, within the history of neo-liberalism Margaret Thatcher and the UK governments in the 1980s  occupy a pivotal place. So it is not surprising that Thatcher’s death this week has provoked a massive debate and attracted attention not just in the UK but around the world.

In the few days since her death, so much has been written about her legacy that it seems almost pointless to say more. The leitmotif of the coverage has been to highlight has she was and still is a ‘divisive’ figure, yet even that statement has proved divisive, with Thatcher’s supporters saying that to describe her in this way is to denigrate her. The Right seems to want to claim Thatcher as a kind of national icon and hero, but for many British people she will never be that, and attempts to pretend otherwise are nakedly ideological.

For me, as for many, Thatcher was a hate-figure in the 1980s and, at the time, I would have imagined that when she died I would be celebrating in the way that some in Britain have. In the event, I don’t feel like doing so and I think this is because it is really Thatcherism which I loathe and that is far from being dead. In retrospect, as with all political phenomena, the role of individuals looks smaller than it did at the time. Thatcher rode a particular tide that developed from the 1970s and which occurred not just in the UK. She may have inflected it in particular ways, she may have symbolised it, but she did not create it and, had she never been born, I suspect that similar things would have happened under someone else’s leadership. That said, even now I feel sickened by the recollection of her description of striking miners and trade unionists in general as “the enemy within”, a term connoting those who sympathised with and collaborated with the Nazis.

What is clear is that in the UK and elsewhere we continue to live with the effects of Thatcherism. The British Left has never recovered from it and continues, at least in the Labour Party, to accept the broad terms of her analysis of the primacy of markets, in particular. The ‘New’ in New Labour meant exactly this, and the New Labour governments of 1997-2010 enthusiastically followed through on her analysis with the wide scale subcontracting of public services to private providers, a process not continuing under the Coalition government.

More broadly, it is now clear that the global financial crisis and consequent economic crisis since 2007 is rooted in the policy decisions of the 1980s and here the Thatcherite deregulation of financial markets was of huge significance not just for the UK but for the world. Whilst the political right is justified in saying that Thatcherism was transformational, what they do not yet recognize is that it failed. It failed in more particular ways, too. Thatcher’s vision of the future was rooted in her ideas about the past, seeking a return to what she called the ‘Victorian Values’ of thrift, hard work and enterprise. It was a highly romanticised and partial view of Victorianism, of course, but the irony is that what she actually created, particularly through financial deregulation, was the opposite. The economy she left was predicated upon massive indebtedness as a credit-fuelled, hedonistic consumer boom ran out of control.

In some basic way, Thatcher failed to understand how capitalist economies actually work, and especially the role of the state within them. Both de-industrialization and industrial renewal requite state management and investment. That could have been achieved in Britain in the 1980s when massive North Sea oil revenues could have been used to manage a transition from the old industries to the new. Instead, they were squandered on tax cuts and paying for the mass unemployment that Thatcherism created. Her belief – still held by current Tories – that the private sector would spontaneously regenerate the economy proved quite illusory. That is not surprising as, outside of the pages of an introductory economics textbook, the state and private capital are symbiotic. Thatcher simply saw the state as parasitic. That, coupled with her messianic hatred of trade unionism, laid waste to large parts of Britain outside the South-East of England.

Beyond its economic legacy, Thatcherism did a pervasive damage to almost all forms of collective solidarity, both as an idea and in terms of institutions. Although part of the ideological narrative of Thatcherism was and is that it rescued a failing country from its 1970s decline, there is actually plenty of evidence that Britain was more prosperous, more cohesive and happier then than now. Moreover, as Ken Loach’s recent film The Spirit of 45 suggests, Thatcherism eviscerated much of the collective solidarity than re-built post-war Britain.

Anyway, it would be possible to write endlessly on this. And that is perhaps the most important point: all of this still matters, because it is about what is happening now, not just or even mainly about what happened then. Next week there will be a huge ceremonial funeral, ostensibly carrying a message that Thatcher was a great national figure who stands above ideology. But the final irony would be to imagine that the funeral of this most ideologically motivated figure is, or could be, anything but ideological. The funeral will be part of the political right’s ongoing attempt to insist that, in one of Thatcher’s most famous phrases, ‘there is no alternative’. She, and they, are wrong.

A maximum wage?

The Chief Executive of Barclays Bank UK has announced today that he will waive his annual bonus, which could have been worth as much as £2.75M. He will not suffer huge hardship, as his basic salary amounts to £1.1M. What are we supposed to make of this? Should he be applauded for his forbearance? Or should we, as I believe, ask why it might be imagined that he was entitled to this extraodinary sum in the first place? In the book I document the way that the gap between average wages and top pay has grown massively over recent decades, and actually use the example of Barclays Bank (p.116) where the ratio between average pay and top pay grew from 14.5 to 75 between 1979 and 2011.

I don't have any problem with the existence of pay differentials, and I don't have any doubt that the job of CEOs of big companies such as Barclays is a difficult and demanding one. But I don't believe that any job, and any level of skill, is so great as to be worth so much more than someone else's job and skill. There are only so many hours in the day and only so much ability that any one person can have. Let's also clear out of the way two common arguments. It is not the case that these stratospheric payments are a reward for performance because as, again, I document in the book (p.123) executive pay has increased even as share price has fallen. Nor is what is at stake here simply the operation of a free market for talent: these payments are fixed by remuneration committees staffed by a merry-go-round of the same people who receive such exorbitant rewards.

Does anyone actually believe that in the period that senior executive pay has shot so far away from average wages the competence, performance and scarcity of those executives has increased? Was, say, Barclays, so much better run in 2011 than it was in 1979? No. As I said in my previous post on this blog, in a different context, this has been an outbreak of dumb luck not an upsurge of collective talent. Would these companies be so much worse run by someone paid, say, a miserly £500,000? And, in any case, irrespective of what they deserve, how much money does anyone actually need? Meanwhile, some 80% of the world's population subsists on $10 a day or less.

This is not the 'politics of envy' to use a rather hackneyed trope of those who defend such gross inequalities. And, given the relatively small number of people who earn these kinds of sums, it is not that reducing their rewards would enable any great increase in the wealth of others. No, the issue is about the terrible damage done to organizations and to society as a whole by such inequality, which tears apart the social fabric by so polarising life's experiences and chances both now and for generations to come. Actually the politics of envy is more in evidence in the repeated claims that those on welfare are living it up at taxpayers' expense, another socially divisive development. In the book (p.118) I quote official UK government statistics showing that benefit fraud in 2010 totalled £22M. In 2009, the world's top hedge fund manager earned £2.5billion.

In many countries now, including the US and the UK, there is a minimum wage. We need to adopt proposals that have been around for a while now for a maximum wage, too, fixing a maximum ratio between the lowest and the highest paid. Like all radical ideas, such as the debt jubilee, this looks impossible from within the prism of conventional wisdom and of course such proposals are greeted with critical scrutiny as if the arrangements that we actually have have arisen because they were first proposed then scrutinised and then adopted. In any case conventional wisdom has failed. The world we became accustomed to over the last few decades is manifestly broken. It won't be fixed by a few CEOs waiving their bonuses.

Capital

I have just finished reading John Lanchester’s novel Capital. Lanchester is also the author of one of the best non-technical account of the financial crisis, Whoops, which I draw on in my book and list in the suggested reading. But he is first and foremost a novelist and his debut novel, The Debt to Pleasure, is one of my favourite books. That is a subtle, delicate meditation on art, cookery and murder; but Capital is more like an essay in sociology. It tells the story of the inhabitants of a London street and the people who work there during the period of the financial crash. The street reflects a common story in London, with property prices having risen to dizzying levels during the neo-liberal era, so that its inhabitants range from the elderly poor, relics of an earlier era, to City bankers and Premier league footballers. Amongst them work a Polish builder, a Hungarian nanny, a Zimbawean asylum-seeker parking attendant and a Pakistani family of shopkeepers, reflecting the globalised nature of a city like (and perhaps in particular) London. I suppose that listed in this way the characters sound a little clichéd, and there’s some truth in that, but Lanchester’s narrative is sufficiently skilled to make most of them, at least, feel like real people rather than cardboard cutouts.

This is a big, sprawling novel and it brings to mind some others with similar ambitions. It is a bit less raucous than Tom Wolfe’s The Bonfire of the Vanities, a book which still captures brilliantly the social effects of the New Capitalism. It could perhaps be compared to Sebastian Faulks’ A Week in December, although I found it better written. But more than anything else it reminded me of an almost forgotten novel, Norman Collins’ London Belongs to Me (1945). Collins’ book is based on the various occupants of a single house rather than a street, but it shares with Capital a sense of a wide variety of people at a time of transition, namely the period immediately preceding the Second World War.

Like all novels, Capital is open to a variety of interpretations and some obvious ones concern the nature of wealth and inequality. But for me the key motif is that of chance. It is chance that makes those who own the street’s houses into millionaires, chance that determines the outcome of an asylum hearing, an arrest for suspected terrorism, a football injury, the success of an arranged marriage or a date with a stranger, the loss of a job, the growth of a tumour. The inhabitants of the street are brought together by chance, and their lives are also affected by chance.

Much current political discourse stresses not chance but worth. Thus we are invited to think that the unemployed, the poor, asylum seekers and so on suffer by reason of some personal or moral taint: they are lazy, scrounging or bogus. On the other hand, the secure and rich are depicted as being virtuous, prudent and worthy. In the The Bonfire of the Vanities there is a nice line about how when bond traders started to make massive amounts of money in the 1970s they attributed it to the belated recognition of collective talent rather than to an outbreak of dumb luck. That our various fates turn on a knife-edge of luck – where and when we were born, the flukes of our genes and so on – is less appealing. And of course this is all of a piece with neo-liberalism with its emphasis on individual effort and its refusal to consider the social context and formation of individuals. But it is also something with a psychological appeal: if only we can believe that our lives reflect our virtues then we can insure ourselves psychologically against the vagaries of chance. I’m not a bad person, so nothing bad can happen to me.  It’s a kind of secularised version of the idea, analysed in Max Weber’s seminal book The Protestant Work Ethic and the Spirit of Capitalism, that wealth is a sign of being pre-destined for heaven. Appealing as it may be, it is nonsense: life’s chances are distributed, sometimes randomly, often politically, but not morally.

A friend of mine once said to me that The Bonfire of the Vanities was not a great novel but it was a good book. I think the same is true of Capital. It's probably not great literature, but, like a much older realist novel, it discloses something about 'the way we live now'.

Impoverished by outsourcing

Under the cover of the budget deficits which are mainly the result of the financial crisis, the welfare state in many European countries is being rolled back. In the UK, the latest manifestation of this is today’s announcement that much of the work of the probation service is to be outsourced to private providers. These will, it is said, be ‘paid by results’ implying that they will only be paid if re-offending does not occur. This move combines two now familiar claims made by neo-liberal policymakers but is also indicative of the way that neo-liberalism is now transforming into something quite different.

The familiar claims are, first, that private provision is more effective then public provision, with competition driving standards up and prices down and thus offering taxpayers better value for money. The other is something well-known in management theory, namely that motivation comes from economic reward in the way famously envisaged by Taylor.

It’s not hard to predict what the results will be, because it is exactly the same policy that has been applied to workfare to work programmes. Here, the private provider is to be paid according to how many unemployed people are placed in jobs. In fact, the evidence shows that the leading provider in this area, A4E, is less successful at placing people than would be the case if no such scheme existed. Yet they continue to be paid. Moreover, the payment by results system, which is presented as simple common sense, has precisely the kinds of dysfunctions that are well-known in management theory. It incentivises the providers to focus on the easiest cases and to write off those with more complex needs.

The deficiencies of such schemes do not end there. Typically, such outsourcing involves recruiting staff who used to work for the public sector to work for the private contractor but on worse terms and conditions, whilst the contractors themselves are normally global companies who do all they can to reduce their UK tax liability.

However, the idea that what is happening here represents anything like the competitive free market envisaged by neo-liberal theory is quite laughable. What we have is a handful of companies to whom contract after contract is awarded by the UK and other governments despite a track record of persistent failure. Examples include the well-documented case of Capita (discussed on p.87 of the book but see also here) or the high-profile case of G4S which failed to provide the necessary security for the 2012 Olympics and had to be bailed out by the oh-so-incompetent public sector.

What is emerging, then, is not neo-liberalism as normally understood but what might be called neo-mercantilism. Under mercantilism, an economic doctrine of the 15th-17th centuries, companies were licensed by the State to trade, thus stifling competition and encouraging corruption. Ironically, it was Adam Smith, the unwitting poster boy of neo-liberals, who was one of its sternest critics. Now, we see something similar emerging, with the global outsourcing firms being handed licences to milk what were hitherto public monopolies, with guaranteed revenue streams from the taxpayer. We also see something of the corruption, too, with politicians and senior civil servants who bestow these contracts moving seamlessly on retirement onto the boards of the companies who benefit. The overall effect is quintuply impoverishing: poorer public services, higher costs, diminished employment conditions, an erosion of the tax base, and a corruption of politics.

Britain and Europe

I talk at several points in the book, and especially Chapter Five, about the EU and the Eurozone crisis, but say nothing about the complex debate within the UK about its membership of the EU. This looks set to become a matter of interest beyond the UK in the coming year and it has emerged today that other EU countries are beginning to float the idea of creating a new, Associate Member status for the UK and, possibly, Turkey. The details are sketchy at the moment but what seems to be envisaged is a situation in which Associate Members would be part of the single market but not part of the political structures of the EU-proper, for example not having any MEPs or Commissioners. The way this idea plays out will have important consequences for organizations across Europe so in this post I will try to situate it within the politics of the UK’s attitude to the EU. For those unfamiliar with them, these politics are convoluted and filled with ironies.

Although now primarily associated with the political Right, it’s worth recalling that back in the 1970s British Euroscepticism was mainly the preserve of the ‘Bennite Left’ because they saw Europe as a vehicle for capitalist globalization via the promotion of free markets. Although rarely heard in the UK now, where the political centre gravity has moved very markedly to the Right since the 70s, this remains a standard critique of the EU in countries such as France. Indeed, it largely explains the French ‘no’ vote in the 2005 EU Constitution referendum.  But, whilst being a free-market project, the EU was also, for its architects both in continental Europe and the UK, and certainly for Ted Heath the Prime Minister who championed British membership, a response to the horrors of the Second World War. So already, at this early stage, there was an irony: nationalists of the traditional Right saw Europe as a way of healing international divisions, whilst internationalists of the Left opposed it as a free-market project. 

That latter analysis received confirmation when Margaret Thatcher, for all that she is now remembered for her anti-European handbaggings, presided over the crucial transition from the EEC trade bloc to the single market  with the passing of the Single European Act in 1986. It is the consequences of that decision that created the terms of the current debate about Britain and Europe. A single market requires a single framework of regulation and law. Contracts, competition, free movement of goods and people, health and safety, employment law and even weights and measures need to be unified if a single market is to be a reality. And the unification of regulation and law imply the unification of politics, since what is a political jurisdiction separate from control of such things? Moreover, the aim of British foreign policy in Europe for at least two decades was primarily the expansion of the EU eastwards, and as this was achieved the growth and increasing complexity of EU regulation and law was inevitable.

Out of this basic reality two things followed in the UK which have coloured the debate since then. Firstly, for the political Right all this seemed to come as a surprise. They had seen opposition to Europe as anti-business socialism, and they had not understood the key distinction between a free trade zone and a single market. Free trade merely removes tariff barriers to trade; a single market unifies a whole swathe of standards and removes non-tariff barriers to trade as well. The ultimate cause of this failure by the right to understand the consequences of the free market they championed is the assumption at the core of neo-liberal ideology of the market as something existing ‘naturally’ and independent of regulation.  So they understood the inevitable growth of regulatory and political unification in Europe as Leftist and anti-market. Thus, ironically, Tory free-market ideologues, from the Maastricht Treaty of 1992 onwards, have opposed an EU which actually promoted and extended the ideology they believe in.

What is now emerging in the UK is a significant split in the political right. There is growing support for the UK Independence Party (UKIP) which seeks UK withdrawal from the EU (although seems to be happy with the idea of EFTA membership – see below) which is beginning to create a crisis for the Conservative Party. Many Conservatives also favour withdrawal, but they are also beholden to business interests, for example as represented by the CBI, which do not, precisely because they understand its value to them as a free market. Thus the British Prime Minister talks about ‘re-negotiating’ the UK’s relationship with the EU but with little sense of who this negotiation would be with and what its terms would be, in that a negotiation implies both sides making concessions.

The Maastricht Treaty and its aftermath also shifted the British Left’s view of Europe, and for two reasons.  On the one hand, it soon coincided with the emergent New Labour commitment to globalization and free markets, and in that way the main parties became indistinguishable. On the other hand, the development of, in particular, employment and human rights protections within the EU led many on the Left (and disaffected with New Labour) to think that the best hope for social democracy for a UK in the grip of the neo-liberal consensus  was to integrate more closely to Europe. Moreover, the way that the loudest anti-EU voices in the UK have been those of the most reactionary, nationalistic, sections of the Right made Euro-enthusiasm an attractive option, if only on the principle that my enemy’s enemies are my friends. But in supporting the EU the Left became entirely blind to the way that European integration had virtually no democratic institutions or mandate, and ironically supported a EU which actually promoted and extended a free-market ideology they do not believe in.

The consequences of the Right’s inability to see that promoting an expanding single market entailed the diminution of national sovereignty and the Left’s unwillingness to face up to the democratic deficit that accompanied EU-enshrined rights is now becoming clear because of the Euro crisis. For the Left, the role of the EU in enforcing austerity and the erosion of welfare and pension rights without democratic mandate is becoming daily more evident. For the Right, the very lack of the political ‘super state’ they so long opposed and feared means that the kinds of fiscal discipline they would actually like to see are impossible. In short, the Eurozone crisis has brutally exposed the weakness of attempting economic harmonization before rather than after substantive political harmonization, a situation connived at both by the unwillingness of pro-Europeans to be honest about political harmonization and the refusal of Eurosceptics to countenance it.

So what now? In the UK, any and every discussion of the EU leads to calls for a referendum on membership.  The Right want one, believing it a racing certainty that the outcome would be withdrawal. This is by no means certain – current opinion polls are likely to be highly misleading, not least because pro-EU arguments are almost never heard in the UK, as they would be in a Referendum campaign - but even if it were to happen it would immediately expose the longstanding irony of the Right’s position. For what they envisage is a ‘Norway option’ and if this happened it would simply mean accepting EU rules without any involvement in their making and probably higher contributions than the UK presently makes.  So despite being notionally democratic it would actually reduce democracy since at least at the present time the UK’s democratically elected government has some input into EU decision-making.  But suppose the outcome were to stay in. That might silence the Eurosceptic Right (or possibly not, especially if the vote were close), but it would do nothing to make the EU more democratic since it would leave EU institutions unreformed

Within this context, today’s news of the idea of Associate Membership is an interesting one. At first sight, it seems to give UK Eurosceptics what they want, and has already been welcomed by some of their leading figures. In time, and perhaps precisely because it is being proposed by those who want to defend the EU federalization project, I suspect that a different view will emerge (it’s interesting to see the somewhat perplexed responses to this news in the reader’s comments sections of the Daily Mail, a right-wing British tabloid). For in being offered what they claim to desire, it may finally dawn upon Eurosceptics how foolish that desire is: a demand to be subject to a free-market polity without representation or influence. In short, an arrangement unsatisfactory to both the Left and Right in Britain, but one created by their mutual stupidities, cowardices and dishonesties.

Under-employment

Today figures were announced showing that ‘under-employment’ in the UK has risen by 1 million since 2008, to over 3 million, or one in then of the UK workforce.. You can see the report here. Under-employment refers to those people who have jobs but would like to work for more hours if they could. Mostly this means part-time workers, although it can also be full-time workers wanting overtime. This under-employment is hidden by normal unemployment figures, and it links with the wider problem of what Guy Standing calls the precariat, which I mention in passing in the book (p.117). The precariat may have jobs, but these are temporary, insecure or simply insufficient to meet their needs.

This story prompted three thoughts.

One was to reflect that when I was a child in the 1970s, it was perfectly possible, and pretty much the norm, for a family to be sustained in what was generally considered to be a good standard of living by the wage of a full-time earner. Nowadays, that isn’t true: it takes two full-time wages to sustain such a lifestyle. Of course when I was a child the wage-earner was normally the man of a family, and it’s good that we have lost that sexist assumption. But it would have been preferable to have moved to a situation where there was no assumption of the male ‘breadwinner’ yet a family could have sustained a reasonable life with one wage, with either the man or the woman working full-time, or both working half-time (if we are thinking of the stereotypical mum and dad and 2.2 kids set up). What underlies the fact that this didn’t happen is that since my childhood wages have risen much less fast than labour productivity: the fruits of this increased productivity have been unequally distributed. See here.

That links to my second thought. It used to be thought that as societies became richer, people would become more leisured, and use that leisure in culturally enriching ways.  But the way that that has worked out has not been as predicted. Instead of leisure being generally shared out, society is split between those who suffer from too much work and all the stresses and dysfunctions that go with that, and those who have too little and their leisure is not one of cultural enrichment but grinding poverty.
Like productivity gains, leisure has been unequally distributed.

And then I wondered about other hidden features of the economy and work. The work that people (mainly women) do, unpaid, caring for children and, increasingly, elderly relatives. The people who have just dropped out of the benefits system because of its complexity and stigma. The young people staying reliant on their parents into their twenties, thirties or even beyond. Whose work and whose lives are visible is also a matter of unequal distribution.