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Best Management Talent

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The Royal Mail's Retiring Chief Executive

The Royal Mail’s Annual Report was published on 3 June, containing details of its executive pay for the previous year. According to the figures, Adam Crozier, the retiring chief executive, received more than £2.4m in the year 2009-10. With bonuses and pensions that figure rises to £3.5 million. Ian Duncan, the group finance director, took home a total of £1.4m, while Mark Higson, the managing director of Royal Mail Letters, received a total of £1.7m. Adam Crozier is the highest paid public sector worker in the country and his income puts the paltry figures earned by top Whitehall mandarins to shame.

I earn £8.98 an hour. I work a 20-hour week. I’d like to work more but there are no full-time jobs available. My basic pay is £177.28 a week, before deductions. That’s about £9200 a year. That means that I would have to work for nearly 380 years to earn as much as Adam Crozier earned last year.

Fair enough. Adam Crozier obviously has 380 times my needs. He must have a house that is 380 times the size of mine. He is 380 times taller. Maybe he has 380 stomachs to fill. Perhaps his dick is 380 times bigger than mine and he needs 380 partners to service it. He must have 380 times the intellectual capacity as his brain is clearly 380 times more developed than mine. His value to the world is 380 times greater.

I’m reminded of those giant statues the pharaohs used to build of themselves. Ramses II had a statue at Memphis which was 36 feet high and weighed 83 tonnes. It used to stand in Cairo Square, but has recently been moved so it can be restored. Ramses was worshipped as a god. The size of the statue reflected his inflated view of himself. An equivalent statue of Adam Crozier, proportional to his relative income, would have to be more than 2000 feet tall.

From that great height he must look down on most Royal Mail employees the way Harry Lime looks down on the people of Vienna in the famous scene on the ferris wheel in The Third Man.

Would you really feel any pity if one of those dots stopped moving? If I offered you £20,000 for every dot that stopped would you really, old man, tell me to keep my money, or would you calculate how many dots you could afford to spend?

Donald Brydon, the chairman of Royal Mail Group, has said:

These Directors are running a business with a turnover in excess of £9 billion in a tough marketplace and Royal Mail needs to be able to attract from the commercial market the best management talent.

Brydon, of course, considers himself to be some of that ‘best management talent’. It’s a self-perpetuating system. The ‘best management talent’ employ ‘the best management talent’ in order to ensure that ‘the best management talent’ are always in control.

As for that old ‘marketplace’ excuse, I think we’ve all see through that by now. These bloated wages are not imposed by some outside force, but by themselves. The marketplace is the euphemism by which these huge disparities of income can be spun. Executive pay is on the rise while our wages are being squeezed and the service is being run down.

Comments on “Best Management Talent”

  1. ski says:

    Executive pay is one (further) example of how the current model of Anglo-Saxon capitalism has gone completely awry. Of course the shareholder value model is great in theory. But in practice, even shareholders, or should I say, especially shareholders, who are supposed to own the corporation and in whose interests the board and management are supposed to act, are completely f**ked over.

    A example from 2007, pre-crash, will illustrate these insane remuneration schemes: Robert Nardelli, CEO of the huge retail chain Home Depot, was awarded $240 million in salary and bonuses over a six year period during which the stock price of the company remained flat and shareholders became increasingly unhappy with the strategy pursued by management. But they found it difficult to remove Nardelli – because of the way institutional shareholdings were held and the voting rules etc. When he did go eventually, it was with a payout of a further $210m. This kind of lunacy is so plainly wrong, so indefensible, that it is shocking that it can continue.

    We all know as you say that this elite effectively set their own pay and that their claims about great talent is bogus. There is another claim they make which is also bogus. It is that today, they argue, large corporations are increasingly complex and geographically diverse and require the best of the brightest to run them. But that has always been true of multinational organisations. Even the governor of the East India company had to deal with complex issues for his time. I thought we had been training people – via business school and the cumulative knowledge down the years about management – how to do better with the resource they were given – a human brain. It is no different in any sphere. Over the last 30 years executive pay has risen exponentially. Yet the idea that an even greater kind of hero is required to run a company today than was the case in 1980 is simply nonsense.

    What has happened is, in part, I believe, a kind of celebritization of executives. A CEO is now seen as part of that small group who have powers beyond the human: sports, music, and films stars, television ‘personalities’, fashion, and so on. It is very interesting how the CEO of BP is now beign treated as a devil-figure by American tabloid journalism. Typical treatment of a wrong-footed celebrity.

    On one level, even if all CEOs had pay reduced to 20 times the average industrial wage, as opposed to 300, nothing would change for the rest of us. In the end, as a percentage of our resources (because CEOs aren’t numerous) they don’t eat that much of the cake. But the obnoxiously high yet arbitrary reward for their effort is one other pillar in the ugly edifice of inequality. It is there along with the other pillars that solidly prop up the various power elites who have managed for the most part to write the rule book to preserve their postion of privilege.

  2. pinhut says:

    Excellent post. I was heartened to see that you don’t earn a fat lot, actually, as journalism has suffered too as its practitioners command large salaries and buddy up to rich folks. I don’t know how many times I’ve recoiled from the word “We” in some broadsheet story about “Why we are all going to Tuscany this summer” etc.

    I spent a year recently in Taiwan working in the largest corporations there – Canon, DeLoitte, Tai Shin Bank, HSBC, AIG, etc. The senior managers there have been with the corporation their entire careers. There is not this idea of a CEO being a sort of brief that somebody else simply steps into at a moment’s notice, nor is there the idea of one person ‘stamping their identity’ on a company. Unfortunately, and anybody who has read my other posts will know what’s coming, the UK is suffering from a culture of individualism, and this is why there are these big paychecks for the lastest ‘Messiah’ figure, whether it is Crozier to ‘save’ the Royal Mail, Cameron to save the UK (The Sun – Our Only Hope) or Rooney to win the World Cup. Anybody who can convince a bunch of other people that they are one of these Messiah figures then collects an enormous prize. Adorno talked about this, too, that modern society becomes so difficult to progress in, that to have the skills is not enough and to succeed becomes effectively a lottery. He wrote that 50 years ago, but he would’ve appreciated the logic behind X Factor, Pop Idol, and the career of Adam Crozier.

    In Taiwan, when a senior manager is rumoured to be in the vicinity, there is an electricity that develops, and when the man comes in, generally some little old smiling dude, a sense of awe permeates proceedings. No stage management is required, no selecting who attends and who doesn’t. Then he says some words and is applauded fervently and shuffles off. The point is, it’s understandable that those at the middle-level will respect a guy like that, he’s given his entire life to the business they work for, he does represent a possible destiny for their own careers, too, because he is marked out by his ability to work hard and make sacrifices, not by the fact that he belongs to some Alpha category of humanity and is fundamentally different in every respect to his charges, as Roy alludes to with the Croziers of the world.

    I wonder how the above works for Crozier, he probably just makes a point of saying hi to the tea lady to show his ‘man of the people’ credentials and that’s about it.

    • Camus123 says:

      I once attended a meeting at which the chairs of two international companies chatted about the possibilities of ‘cooperation’. One rather brash junior spent twenty minutes pointing out all the reasons why Company X was not compatible with Comapny Y in terms os shares, profits, assets and whatever. The CEO of Y slept through the whole preformance, woke up (He’d had along flight) and said. ‘Well, thanks you – you’ve just showed how much our two comapnies have in common.’ The takeover went through a few weeks later. So much for high-powwred bosses earning a fortune.

  3. While you are right to be hugely skeptical of the value of specific executive “talents”, there is an important distinction to be made.

    Like most people, my use of the postal service (i.e. the monopoly aspect of it: letters) has practically vanished over the last decade or so, due to email, texts, etc. Yet despite this, like all tax payers, I have to contribute to Crozier’s salary, via various subsidies and dodgy “loans” from the government. This is what makes his “package” a matter of public debate. He is, as you say, essentially presiding over the winding down of a huge public sector liability. Exactly how special does he have to be? We have a right to know.

    On the other hand, for corporations that are accountable to shareholders or private equity, if they really think they need to spend what seems to us to be a silly amount to attract the right CEO, that’s their own decision, and their own risk to take. The example of Home Depot is not unusual, and is ridiculous, and yet whose fault and problem is that? The shareholders effectively hire the CEO in the first place. If they don’t even read their _own_ fine print, that’s their own look out.

    A commenter referred to the East India company – this is hugely relevant to the example of the Royal Mail. Neither are businesses in the modern sense – they are monopolies backed up by government force. This has more in common with anachronistic mercantilism rather than modern capitalism.

  4. pgrundy says:

    It seems no matter what kind of work I do, no matter what kind of education I put myself through, I make about what you do, which here in the U.S. is not nearly enough to get by on. Now I don’t even make that.

    Lately there aren’t even ‘jobs’ here to speak of–I’m grubbing money piece rate doing this and that most of the time. Much of what used be put together as a paid job is now farmed out as subcontract work with no bennies and at even lower pay–pretty soon I imagine we’ll pay for the privilege of working instead of vice versa. Even the horrid call center work I did for 8 years is being subcontracted through temp agencies now. Lower wages, no overhead, and the corporations can just ditch the workers every so often and get ‘fresh meat’. No need to pay into unemployment either. Many people have to buy their own equipment and work out of their homes. This is the new ‘electronic feudalism’ I suppose.

    I don’t believe for a second that most of these men are one whit better than either you or I am. They are wrecking the planet pretty much. Corporations are like a big grinder. You set one in motion, it grinds out profit, grinds up people, offers less and less, takes more and more. Until that fact is addressed, nothing changes.

  5. Roy Mayall says:

    Hi pgrundy, it’s not nearly enough to live on over here either. Luckily I have my writing work to supplement it. Most of the posties I know do second jobs. We wouldn’t survive otherwise. I was interested in your phrase “new electronic feudalism”. I think this is exactly what’s happening. The elites have known for a long time that their economic system is fucked. At the moment there’s a sort of slash and burn mentality going on. They’re retreating to their bunkers and taking as much as they can with them, but ultimately they’re going to have to control the populations that are left outside once the system collapses. I think then we’ll see a return to full-scale feudalism. I don’t know what we can do about it, all I know is we have to be prepared.

  6. Just Wage says:

    Thanks for this, Roy. If only every sector with massive wage differentials had whistleblowers like yourself. I’m starting a campaign calling for fixed wage ratios. For more info see the blog: http://justwage.blogspot.com/

  7. ski says:

    Roy,

    Please don’t hold your breath while you wait on the system to collapse! State assisted capitalism has been around for a very long time now in one form or other. It certainly changed down the years and the extent of state influence on the freemarket rose and fell in waves down the centuries.

    The combination of effects from the fall of the Berlin wall, the spread of cheap internet and communications technology, and, relatively speaking, cheap transport, have resulted in a major acceleration of economic and financial interdependency which, as we have seen, over-leaped the outdated systems that were there to manage these matters.

    The result has been a shockwave across advanced economies – but, at least for now, nothing like the kind of catastrophe that would be massive enough to shove globalisation into reverse.

    My view is that the proposed modifications to the various financial and economic mechanisms, while hopefully doing enough to at least reduce the chances of a repeat crash, will not fundamentally alter the bigger picture of : a late but extremely rapid industrialisation of Asia, an increased penetration of technology into everything we do, a further deepening of economic interdependency, a major rebalancing of power between East and West, and crucially in terms of our debate on this page, an even firmer grip of the power elites over our economic future, with all the attendant consequences for politics and society.

    So, far from the eiltes’ economic system being ‘fucked’ it will be shaken yes, like Blairs famous kaleidoscope, but the powers that be will make it reform in their own interest as they always have done.

  8. Roy Mayall says:

    Ski, shall we hold a bet on this? I think the system is unsustainable and will be in a heap of shit within five years. “State assisted capitalism” is one thing but full-scale industrial feudalism is another, and I think that’s where we’re heading. I guess this is what you mean by “an even firmer grip of the power elites over our economic future”, it just that I wouldn’t put it in such pretty terms. It’ll be naked power and the jackboot and it’s already marching our way.

    • Camus123 says:

      I think we are talking about two diffrerent concepts. SYSTEM means to me the structures of an economic organisation that click together in order to create wealth. There are always differences in the amount of wealth produced and of course in the distribution of that wealth. Roy, you are at the long end of a service chain in the capitalist system and your chances to increase your wealth are quite limited. If you buy a horse (or a bike) and start doing courier work you might earn a bit more but the cost might be high. We need strong unions and well-educated people who know how to support each other.

  9. Roy Mayall says:

    danielearwicker: you say your use of the postal service has practically vanished over the last decade or so. So, tell me, when did you last send your Mum a Mother’s Day text, or your Granny a Christmas e-mail? And who brings you your e-bay or your amazon purchases? What about LoveFilm? How about your bills and your bank statements? I bet your use of the postal service is a lot more than you imagine, and even if it is private companies who you are paying for these services, I can assure you it is Royal Mail postal workers who actually deliver them. It might be out of date, but it’s not going away any time soon. And I’ll predict something else too: even if “state assisted capitalism” does collapse – which I believe – we’ll still need a postal service after.

  10. Camus123 says:

    The SYSTEM has been chugging along for about two hundred years and as the bosses always invent new ways to increase their takings there will be no collapse of the system I’m afraid, Roy. 1929 – wall Street crash and ten years of poverty and the Dole in the UK and the rise of Nazism in Germany. Economic disaster in the forties, with only USA coming out absolutely loaded with cash and lending it out all over. Remember what Schumpeter called it – creative destruction, not collapse. The only conceivable alternative would be the dictatorial capitalism practised in China behind a financial barrier that allows their fat cats to buy up everything that’s going in the uS and most of Africa too. Not my idea of heaven. That is just on your premise in imminent collapse. As far the wage rates in US and in the UK, you are competing with these new low cost comapnies that hire and fire as pgrundy points out. I don’t have the answer – that’s why I have time to read your post.

  11. ski says:

    I completely agree with Camus123 : the system has been through massive turbulence before. There is no sign, as far as I can see, that the current crisis is any greater than say the Great Depression. Even if it takes another dip and matches the Great Depression – which I fervently hope it does not – then we must bear in mind, as Camus123 says, that capitalism emerged from even that Crisis.

    Roy, you argue that the system is unsustainable: do you mean environmentally or financially? What are the key elements you think are going to lead to the system unravelling?

    I think the term “full scale industrial feudalism” is a bit extreme. On many levels people have more liberty now than at any time in the past. I cannot think of a time when people could express their views so fully (though I acknowledge the curtailments in the UK under late Labour), and express freely their identity and differences, say sexual, religious, or other matters of conscience.Or travel so widely and so swiftly. But the paradox of course is that we are more constrained in other ways. The centralised state intrudes into our lives in ways now that would never have been imagined a couple of generations ago. And big corporate life is shockingly sophisticated at getting its way. The picture is not a simple one – indeed it is bewlideringly complex. That is one of the frustrations of modern existence – everything is too big and complicated, hideously complex.

    Yet I don’t see any evidence for an immenent collapse. Turmoil, adaption, uncertainty yes, but not an outright collapse.

  12. Roy Mayall says:

    I got the idea of neo-feudalism from Michael Hudson, who I would thoroughly recommend as a good commentator on what the real picture is behind the corporate spin. Actually wealth creation is not so complex, it’s the parasitic economic system that rides on the back of it that likes to make it look complex. Wealth is created by human beings, that’s all. We do the work. The banks and their tame economists do a lot of noisy gesturing while they are picking our pockets, so that it makes it look as if they are essential to wealth creation, when they are not. I don’t know what the alternative is, I only know there has to be one as the current system is unsustainable on every level: cultural, political, economic, spiritual, environmental, human.

    • Camus123 says:

      I have to disagree with you on that. The system produces its own catastrophes and then goes on to new heights or depths as the latest thing to speed up wealth creation gets under way. Remember the days when we all used the good old telephone? There was a nice red box at the corner. Nowadays you can use a phone for just about everything from photos to lovemails for a few pence. A whole new world of communication has sprung up making a vast profit for that Apple man and a dozen other entrepreneurs, ruining the livelihoods of thousands whose jobs have been swept away in the floods. Sorry to say, it works -look at the blog on the profits made out of the oil spill and then tell me that the system is unsustainable. What happened to the Irish in the 1840s? capitalism struck and a million died. They always take a long view, the profitmakers.

      • Roy Mayall says:

        I guess it depends what you mean by “wealth creation”. If it just means more and more noughts being added on to the end of a few people’s bank statements, then that’s not really wealth is it? It’s false wealth, a chimera. Wealth creation, innovation and profit are different things. I’m not sure the profitmakers are taking such a long view. Ours won’t be the first civilisation to go down, and your illustration showing how the oil spill has generated profit shows just how unsustainable the current economic system is. I do recommend Michael Hudson for a more balanced view. http://michael-hudson.com/2010/05/neoliberalism-and-the-counter-enlightenment/

        • Mike says:

          Roy, what Crozier and the others earn is mostly what economists call “rent”. They don’t talk much about rent because to do so would create what physicists call a “three body problem” (the other bodies in this case being labour and capital) in which the maths is fiendishly complicated at best and simply impossible at worst. And in economics – largely speaking – no equations, no policy implication.

          “Rent” is far more prevalent than you may think. I would estimate that the bulk of your own pay is “rent” in the sense that, unlike – say – a woman who makes silicon chips, your job can only be done by people based in the UK. (The same is also true of train drivers, FWIW.)

          • Roy Mayall says:

            Hi Mike, yes, Michael Hudson talks about rent too, as “a free lunch”, and says that the classical economists wanted to tax rent as a way of levelling the playing field. Not quite sure my wages constitute rent, however. Maybe you could explain?

  13. “you say your use of the postal service has practically vanished over the last decade or so. So, tell me, when did you last send your Mum a Mother’s Day text, or your Granny a Christmas e-mail?”

    I feel I should point out that I have nothing personal against postal delivery workers – my mum spent a few very happy years in that job as a break between teaching jobs (far less stressful and allowed her to do some gardening in the afternoons!)

    But my Granny is sadly no longer contactable by any means, and I like using phone, texts, emails to talk to family and friends. Of my bills, my bank statements and my phone bill(s) are online now. I look forward to them all being. To be honest I’d love to seal up my letterbox, as it is mostly abused by nearby pizza companies to deliver their advertisements by hand, which I shove straight in the recycling.

    As for parcels, I did take the trouble to specifically say “my use of the postal service (i.e. the monopoly aspect of it: letters).” Larger items like parcels are different – they make good business sense, and the Royal Mail doesn’t have a monopoly in the delivery of more valuable items – we already have a choice of commercial alternatives for that. There is no reason to expect the parcels business to die out, nor is there a need for a monopoly, and happily there is no monopoly.

    Though even there, I foresee my use dwindling: DVDs and books come in the post, but downloadable ebooks and video may soon take over, who knows.

    This whole phenomenon is typical of human history for centuries – we find cheaper, more convenient, less labour-intensive ways of doing things, and the old way dies out.

    There are occasionally extreme and perverse reactions to this from groups of labourers who find the price of their labour falling as a result: e.g. breaking into the home of the inventor of the Spinning Jenny and smashing all his machines.

    The reality in these situations is that although in the short term it makes a small minority worse off, in the long term it makes the overwhelming majority much better off. Those who today are being put out of work by the latest technological progress are in fact already massively better off, thanks to the cumulative effect of previous inventions, than they would have been otherwise.

    What if those protesters in the 18th century had won the argument, and yarn was hand-spun on single wheels today? The cost of textiles for everyone would be massively higher. On the plus side, a few thousand people would be able to enjoy working very hard at spinning wheels all day to produce their small quantity of extremely expensive yarn. Some victory!

    “And I’ll predict something else too: even if “state assisted capitalism” does collapse – which I believe – we’ll still need a postal service after.”

    Depends what you mean by “need”. If we also had the internet, we wouldn’t need to employ so many postmen. So I’d argue that we “need” the internet, partly to avoid unnecessary wasted effort delivering bits of paper by hand.

    The funny thing is, under a purer form of capitalism, if you thought we needed a postal service, you’d set one up. If you think the current ones are poor, you’d set up a better one. If it turns out you’re right, you’d have a successful and growing business, and who could argue with a demonstration of obvious success? You’d end up rich, and good for you. If you’re wrong, it was your risk to take and the impact is limited to you and those who agreed with you. It’s only under state assisted capitalism (or full socialism, directed by a single hierarchy of political power) that it is necessary to have a political argument about such things at all, because everyone has to bear the consequences, not just those who choose to get involved.

    Regarding your end-of-days prediction: “The elites have known for a long time that their economic system is fucked. At the moment there’s a sort of slash and burn mentality going on. They’re retreating to their bunkers and taking as much as they can with them, but ultimately they’re going to have to control the populations that are left outside once the system collapses. I think then we’ll see a return to full-scale feudalism. I don’t know what we can do about it, all I know is we have to be prepared.”

    I can see you’re going to be hard to persuade. But try considering this: let’s define a really rich person as someone who can afford one of those yachts, a ridiculously enormous one that has its own swimming pool, helipad, cinema, etc. Now, when the rest of society collapses, how rich is that person going to be? Bear in mind that you can’t eat a yacht. The wealth of the “super-rich” is utterly dependent on the wealth of everyone else. If they go and hide somewhere, they will be just as poor as any human being ever has been when surviving on their own in the wild – i.e. permanently on the edge of starvation.

    So how does it make sense to speak of an elite “retreating to their bunkers and taking as much as they can with them”? What exactly are they going to take with them? All the wealth they really have consists of their relationship with the economy. The only way they can turn money into tangible wealth is by buying goods and services from others – if they never spend their money they needn’t have ever had it, so either their money ends up in the hands of others in the end, or the owner never benefits from it.

    From another of your comments: “Actually wealth creation is not so complex, it’s the parasitic economic system that rides on the back of it that likes to make it look complex. Wealth is created by human beings, that’s all. We do the work.”

    It’s misleading to equate wealth creation with the doing of work. It’s more accurate to equate it with the invention of new ways of avoiding work. It’s ideas, discoveries, finding shortcuts, mechanisms, automations that create actual new wealth. If you never invent any new ways of avoiding work, but just keep labouring away on the same old treadmill, you’re unlikely to be actually accumulating any wealth. You’re stuck in a static arrangement, always having to work the same hours to produce the same thing. Wealth creation generally involves disruption to established ways of life.

    • cigar says:

      “The reality in these situations is that although in the short term it makes a small minority worse off, in the long term it makes the overwhelming majority much better off. Those who today are being put out of work by the latest technological progress are in fact already massively better off, thanks to the cumulative effect of previous inventions, than they would have been otherwise.”

      In my copy of the Oxford Book of Work I can find plenty of quotes saying the same thing, all coming from Liberal luminaries such as Keynes, plus the usual futurists, the bards of technology, such as the Fascist Marinetti and the “Liberal Fascist” (his own phrase) H.G. Wells. Like you, they made these predictions without any serious research. So here are some facts you should consider before coming up with your futurist apologies: since the 1970’s, middle and working class income has remained stagnant or fallen, while that of the wealthiest one percent has more than doubled. Germany owes its economic power in the EU to the falling wages of its workers relative to that of its neighbors. The debt crisis in the US and much of Europe is largely a product of a boom based on massive debt expansion, not on the growing wages of the middle classes, whose consumers have provided the foundation of post war growth. On the other hand, since the 70’s in the US and UK, and since the adoption of the Euro in much of Europe, that growth has been based on debt, above all from credit cards and mortgages. But then real state prices in the US and much of Europe went into free fall, mortgages went bad, and so banks were forced to cut on their credit. Now that the consumer is broke and increasingly unemployed, consumption and tax receipts (which come mainly from income taxes) have fallen. The virtuous circle of the economy has been broken, and been replaced by a vicious one based on generalized cost cutting to pay off impossible debts.

      And that is why the futurist ode that closes your comment is also wrong:

      “It’s misleading to equate wealth creation with the doing of work. It’s more accurate to equate it with the invention of new ways of avoiding work. It’s ideas, discoveries, finding shortcuts, mechanisms, automation that create actual new wealth. If you never invent any new ways of avoiding work, but just keep laboring away on the same old treadmill, you’re unlikely to be actually accumulating any wealth. You’re stuck in a static arrangement, always having to work the same hours to produce the same thing. Wealth creation generally involves disruption to established ways of life.”

      Where, please tell me, do the majority of consumers get the money to buy all the things that allow them (or rather, will allow them) to avoid work? How has it come to pass that, after the coming of the “Information Revolution”, after the appearance of the web, the spread and development of third generation mobile communications technology, and so on; how is it that much of the developed world is stuck in a serious recession, with talk of a Depression worse than that of the 30’s filling the pages of many newspapers? What’s more, the misery that Roy Mayall and others are facing, which can be confirmed by income and other labor statistics, does not point to the mass of humanity in the developed world having more leisurely lives. Rather, it points to the opposite. The average employee, temp or freelancer, is working more. And to top it all, they are doing so in a deteriorating work environment, in which fear of unemployment is compounded by that of homelessness and ill health, as the post war social safety net is destroyed for the benefit of the cheating, bailed out few.

      In a way people have stopped working thanks to technology: through outsourcing, which has increased the number of unemployed in the US and West Europe, and in some cases in the developing world.

      Frankly, your paean to technology reminds me of the propaganda that filled the media during the late 90’s, the heady days of the “dot com” boom. That boom, like the real state one, was based on debt, on creating money out of thin air. The dot com boom’s IPOs are the real state boom’s subprime mortgages and CDOs. Carbon credits and “green jobs” were supposed to be the new catalyst for another debt based boom, but that one went bust before leaving the ground. The banks are loaded with too much toxic debt to start the debt carousel rolling again, and there are not enough investors out there willing to fork out the billions required by central banks to bring these zombie banks back from the dead. In fact, it is quite possible there simply isn’t enough money out there to do it. Most of these investors are from the developing world, and like China, as things get nastier they will definitely need the money for themselves.

      I don’t agree with Roy Mayall’s fashionable catastrophism, also common among environmentalists. Panics and absolute chaos are rare, and like a storm they don’t last forever. But the present economic system is broken, and no amount of wonderful gadgets will bring it back.

      • @Cigar

        “So here are some facts you should consider before coming up with your futurist apologies: since the 1970’s, middle and working class income has remained stagnant or fallen, while that of the wealthiest one percent has more than doubled.”

        Close, but no, Cigar. From a paper written prior to Gordon Brown’s huge public-sector spending increases, mostly concerned with the dark days of the last 18-year period under the Tories:

        “It appears that over the thirty year period, there were income gains at all points along the income range. This was so even at the bottom: the income of the person one twentieth of the way up the distribution (the fifth percentile, p5) rose from about £55 per week in 1961 to just under £100 per week in 1995/6. (Incomes are expressed in January 1994 prices.)”

        From this paper: http://www.iser.essex.ac.uk/publications/working-papers/iser/1999-22.pdf – a mostly left-ish analysis concerned with income inequality.

        So, buried in the middle, grudgingly admitted and then ignored, is the fact that during a period that included the 1960s Sterling crisis, the 1970s oil crisis and the recessions of the 80s and 90s, the real (inflation adjusted) income of the poorest 5% nearly doubled. For all other income groups the line goes steadily up.

        Yes, income inequality worsened; the well-off saw their incomes increase significantly faster. But the point is, the paper is not complaining that anyone got poorer. It can’t, because they all got richer. It’s complaining that the rich got richer faster than the poorer did. All income groups saw a significant increase in their real incomes.

        It is often claimed that if there is income inequality, the wealthy cause prices to rise and this hurts the poor. But the figures in that paper are all adjusted for inflation. The real spending power has increased across all income groups. It’s important to grasp the point about inflation, because I’m going to get into an example of massive reductions in prices later. You will be tempted to say “Ah, but what about the prices of every day items like food? They’ve gone up.” But people’s real incomes have risen much faster – inflation measures always include basic requirements like food.

        “Germany owes its economic power in the EU to the falling wages of its workers relative to that of its neighbors.”

        I’m having trouble finding anything to back that claim up. The figures available online suggest a significant real average income rise for Germans in recent years.

        Your summary of the credit crunch doesn’t make much sense to me either. It sounds like a lot of different threads mixed together.

        A key point is that there was a global economic contraction, which is significant because there hasn’t been one of those since the last World War. What this means is that although the world economy shrank by a few percentage points, for the preceding several decades it had been growing cumulatively. This means that the contraction only took us back a few years. Even in the depths of the recent recession we were still far wealthier than we were a couple of decades ago.

        The debt crisis is easily explained, and despite the protestations of those to blame, many did see it coming. Low interest rates are politically popular, so they were set too low in the US, UK and continental Europe for at least a decade. In the US banks were encouraged by political programmes to lend huge sums to house buyers with no job. And previous banking crises were always met with a bailout to return money to creditors who would otherwise have lost out, which over time made investors believe that lending money to people was essentially a risk-free enterprise – the government would always step in to bail you out if anything went wrong. The rating agencies have been criticised for giving AAA ratings to financial products that were based on thousands of mortgages that were practically guaranteed to collapse, but those ratings were accurate if you factor in the likelihood of a government bailout, which yet again appeared like magic to cover the losses with freshly printed money. There really was no risk, if you were a bank!

        None of this is a product of market-led wealth creation. Nor is it a product of technological advances making people redundant. It’s a product of idiotically poor policy decisions, going back decades, and duplicated by the treasuries and central banks of the entire developed world.

        “Where, please tell me, do the majority of consumers get the money to buy all the things that allow them (or rather, will allow them) to avoid work?”

        Since you ask so nicely I will tell you. But surely you know already? The majority of consumers work, but examine what they have to do. Where their grandparents typically had to perform back-breaking manual labour, today’s workers are more likely to spend 7.5 hours sitting at a desk. The simplest metaphor to explain this is the lever. By using a lever, a weak person can move an object that could otherwise only be moved by a super-strong person. The mechanisms that our economy has built all work together like a giant lever, multiplying the wealth-generating capabilities of everyone in the economy, so that an equal amount of effort (or even less) now produces far more valuable outputs.

        “how is it that much of the developed world is stuck in a serious recession, with talk of a Depression worse than that of the 30’s filling the pages of many newspapers?”

        But that talk was/is wrong. It’s not worse than the depression of the 30s. That there is talk of something in newspapers is not really evidence of anything.

        A few years back the newspapers were full of talk of how the MMR vaccine causes autism, a story fed to them by a single researcher, widely criticised by all other researchers in the same field, and who has since been struck off the medical register. As a result of his scaremongering, measles is now a serious life-threatening condition again because parents believed what they read in the newspapers and so didn’t get their children vaccinated.

        “What’s more, the misery that Roy Mayall and others are facing…”

        To quote Roy from elsewhere in this thread:

        “Luckily I have my writing work to supplement it. Most of the posties I know do second jobs. We wouldn’t survive otherwise.”

        So apparently the crisis here is not a lack of employment, but specifically a lack of _postal_ employment. His complaint is not that he can’t find work, but that he can’t find work solely in the line of delivering letters. Would Roy really prefer a full-time letter delivery job so he can at last give up his writing work? Only he can clarify, but as I’ve explained, the reduction in the number of jobs in letter delivery is not actually a sign of economic crisis. It’s because people aren’t sending as many letters as they used to. So Roy’s difficulty in living solely off of the proceeds of delivering letters is not in itself a sign that society as a whole is heading for neo-feudalism and the proles rising up and beheading Marie Antoinette, etc.

        “… does not point to the mass of humanity in the developed world having more leisurely lives. Rather, it points to the opposite. The average employee, temp or freelancer, is working more.”

        As hopefully I’ve clarified for you, real incomes have risen significantly over the decades at all income levels. If someone can now earn more than previous generations could have earned for working the same hours, that means they could earn exactly the same as previous generations by working part time. But people on the whole don’t choose that option – they prefer to work full time for greater income.

        You may think they’re making the wrong choice, but I suspect the only way you’re going to change this is by passing some kind of law banning people from working as long as they want to, forcing them to accept a lower real income. This is indeed proposed by the more infuriating breed of “well-intentioned” politicians, and an EU directive (which the UK is fortunately exempt from) sets a maximum limit on working hours. Of course it does nothing of the sort in practise: you can work as many hours as you like. You just can’t necessarily get paid for them in terms of salary. However, a company can reward you in other ways, so it’s just another silly law that our ingenuity has to be wasted on circumventing when we could be applying it to actual wealth creation.

        “… fear of unemployment is compounded by that of homelessness and ill health, as the post war social safety net is destroyed for the benefit of the cheating, bailed out few.”

        No, public spending on welfare is massively greater than it was in 1945. Even as a share of the national income (which has sky-rocketed) it is still greater. Tax revenues rose after the war until they reached just under 40% of GDP and have stubbornly remained at about that level ever since. (But since 1999 spending has been a much higher proportion of GDP, the gap being met only by a steadily accumulating government debt).

        During the immediate post-war years, the golden age of the welfare state, it would be absurd to imagine something like a couple raising ten children without either of them having any job at all for fifteen years. But today that is not only possible but there are widely publicised examples.

        I strongly support a safety net, and that is what Beveridge called for in his original report into the welfare state. But that is not what we now have! We have something far more “generous” – I put that in quotes because I strongly believe the net effect is highly detrimental to the worst-off. I think our present welfare system is a massive contributor to income _inequality_, as it serves to create and maintain an underclass who are totally detached from the productive economy. They are treated by the government as if they were animals in a zoo, being trained to behave in a certain way that makes them easier to manage.

        So several generations live in households that do not participate in the economy, while at the same time there are jobs that pay well over the minimum wage that no British workers ever apply for. And then the migrant workers are used as scapegoats, blamed for “stealing our jobs”. Search You Tube for “The poles are coming” and “The day the immigrants left”, two excellent BBC documentaries that vividly document this issue.

        “In a way people have stopped working thanks to technology: through outsourcing, which has increased the number of unemployed in the US and West Europe, and in some cases in the developing world.”

        Outsourcing alone cannot cause a net increase in unemployment across the world. If anything it causes a net reduction (because employers can afford to employ more at lower wages), or else it increases the wages of the poorer workers in the developing world. Usually it’s a mix of these two effects. How is this morally wrong? The poor get richer – again. They just happen to be abroad.

        And you are oddly in denial about the way technology makes us all so much richer. Consider computers. In 1992 the only PC I could get access to belonged to a university and probably cost them around 2000 pounds – so no way I could afford one myself. It was bulky, noisy and used a lot of electricity. It was connected to the internet… but via a 64 kbps connection shared by the entire campus, which cost a fortune to maintain, probably working out at thousands of pounds per computer. It was – strangely – an expensive, unattainable piece of advanced, specialised equipment, not something most people would ever consider personally owning. Businesses and universities had them, for professional reasons. You wouldn’t give one to a child.

        In UK shops today, you can spend around a tenth of that and get a slim, silent “netbook” computer that uses a trickle of energy compared to the 1990 PC. It will have a CPU 100x faster, 1000 x as much RAM and 10,000 x as much disk space. And you can buy a USB dongle giving you a private internet connection faster than that entire campus-wide shared link (and it’s mobile! And it costs a few pounds a month!)

        If I’d had that much computing power in 1990, it would be housed in a special building containing 10,000 hard drives, 1000 sets of memory chips, and hundreds of CPUs, all with some kind of embedded cooling system. Presumably it would have its own power generator as it would consume so much electricity. And I would have needed millions of pounds to get online and discuss economics with you. And you’d have needed the same kind of private supercomputer.

        We each would have needed to hire a lot of people to work full time, to run our supercomputing facilities for us. So from a Luddite perspective, the technological advances since then are a disaster! So many jobs have been destroyed, because now it can all be replaced by a tiny device that fits into a shopping bag and runs for hours off its own batteries.

        But on the other hand, access to the power of computers is available to practically everyone, whereas two decades ago only a minority had access to far more feeble machines.

        Can you see that technological labour-saving improvements, while they render some types of job unnecessary, have an overwhelmingly positive effect on society as a whole, and that this explains why everyone (yes, everyone) is better off in real terms than they were a few decades ago?

        Seriously, if you deny this, you are effectively saying that humanity should do everything the hard way, because then it would be better off. Which wouldn’t make any sense at all.

        • ski says:

          @danielearwicker,

          I found myself in agreement with much of what you have said in the comment above. Technology has always been at the heart of progress. Some naysayer will challenge this at a philosophical level – yes, we now have facebook and the ipad but they hardly add any meaning to our existance. But on the whole, not only has technology removed countless millions from hard physical labour, it has been instrumental in pushing out the boundaries of the human experience. From the invention of writing to the jet plane, technology has continuously been the ingredient that revolutionised our existence.

          I agree that welfare, far from liberating the poor, locks them in to a culture of dependency. In poor (I don’t like the word deprived) inner city neighbourhoods whole communities have spent several generations in almost complete dependence on state support. But breaking the cycle of poverty and dependency is incredibly difficult. I don’t buy the idea that cutting away the safety net would automatically shunt people from poor communities into productive employment and from there into education and back into participation in wider society. It is terribly difficult to forcibly change the values and self image of a community (or a nation – certainly the US and UK have found out that there is more to implanting democratic values than building voting booths). And values – in relation to education, employment, nationhood, civic society – I believe are key to getting people to see a different path for themselves and their children.

          Yet to say that welfare is massively greater than it was in 1945 is a little bit misleading when you imply that the income safety net is massively greater. True there are far more income supports available nowadays and in real terms they are larger. But you hide more than you reveal by lumping this with the percentage state spending as a percentage of GDP. The nature of state spending since the post war era has changed greatly. For example the chunk of the spending pie taken up by ‘welfare’ in 1950 was about 15%, and it is still about 15%. The portion spent on health went from 9% to about twice that. And the allocation of ‘other’ went from about 10% to about 38% (these are percentages of total spending not of GDP). I don’t know what ‘other’ means but I presume that it includes all of the layers and layers of managment that an increasingly (if not frighteningly) centralised state entails. My point is that pure ‘welfare’ hasn’t accelerated by anything near as much as the headline state spend as a percentage of GDP.

          I can largely agree with your main argument about technology, progress and wealth creation. And in particular, it is true that the latest surge in the breadth and depth of globalisation has seen major net gains among the poorer nations. The Industrial revolution was late arriving on the periphery but when it did – these last twenty years or so – it arrived explosively. The likely outcome is a fairer balance of wealth (and power) between nations – though not necessarily within nations.

          The last point is important: inequality within nations has increased. Leaving aside the debate on the underclass mentioned above, a growing income inequality, I believe, is concerning. The divide between those in the bottom percentiles (the loosers) and those in the top (the winners) will lead to problems in the long run. A disparaty in wealth will build up quickly and lead to hard social and political divisions which in themselvers are the enemies of progress.

          Finally, while the relationship between technology and human progress is fairly clear, I’m not at all certain that the run-away, globalised, market-led wealth creation always delivers a gain for most citizens. I emphasize “always”. That it can deliver gains is not in question. But I cannot accept that it is, under all circumstances, always benign. It seems clear to me that over the last twenty years or so there have been some very disconcerting developments. I’m thinking of the volatility in employment in particular – owing to the speed with which capital now ebbs and flows into one country and out of another. I’m thinking of the way pensions have been weakened and devalued. And clearly our market-led wealth creation can quickly become market-led desctruction. The juggernaut it seems can swing into reverse.

          You could argue that this is all par for the course and a bump on the ride to greater prosperity for all. But I think that would really downplay the very real suffering that has resulted from the recent crisis. When you take in sum the numbers of jobs lost and the sum of the other nasty side effects (like huge sovereign debt which will burden the next generation or two), the recent malfunction of the market has been devastating. Not a Great Depression, no, but to say it isn’t the worst collapse ever is not a convinving way to minimize its severity.

          What I’m saying is that market-led wealth creation is not always and everywhere positive. Rather, it has some very serious shortcomings. How those shortcomings might be mended or how their effects might be reduced is another says work.

        • Thomas Jones says:

          This comment is much too long. If you want to write this much, put it on your own blog and link to it.

        • cigar says:

          The main problem with your reply is that it hardly deals with my main complaint: that technology won’t save us from our present predicament. If this were just a question of technology saving us from, say, increasing fossil fuels scarcity, then I would have to agree: drivers in 1950’s America would faint if they were to be told how much mileage your typical compact European car can get out of gallon of petrol. But here the problem is with the system – it is a political, social problem. And to top it all off you almost admit that technology increases inequality, as when you deal with outsourcing:

          “If anything it causes a net reduction (because employers can afford to employ more at lower wages), or else it increases the wages of the poorer workers in the developing world. Usually it’s a mix of these two effects. How is this morally wrong? The poor get richer – again. They just happen to be abroad.”

          This reminds me of the chauvinistic propaganda put forward by certain states in the developing world to justify the spread of increasingly fraud-ridden carbon credit markets. It goes like this. “The rich white man murdered and pillaged his way through our nations, then poisoned the environment, and now should pay us back for it all!” This is collective punishment, specially considering that with states still favoring big business in Europe and the US, excessive green taxed would hurt the poor more than the rich. I live in Latin America, and I am pretty much aware of what the Spanish did here, but I don’t think even the most humble miner in Bolivia would like to see a fellow miner and his family in Wales get kicked out into the street just so he can get a TV and PC. Or do you mean to say that inequality between nations, an increase in per capita wealth in the developing world relative to the developed one, will make up for increasing poverty and inequality in the latter? I wonder what post-colonial intellectuals would have thought about that: European colonialism is wrong, but colonialism conducted by the wretched of the Earth is pretty much ok.

          Your explanation of what’s wrong with the latest boom, how it was based on easy money is indeed better, more effective and clearer than mine, but your are wrong about German wages. Here’s a quote from a 2007 article on this matter. It is from a socialist website, but its analysis is based on official statistics and research:

          “While wages have sunk in the recent past, business profits have risen. Work and Social Affairs Minister Franz Müntefering (SPD) called this “a clear imbalance”. According to his ministry, the share of wages in the national income fell in the last ten years by 4 percent, while the share of business incomes and private wealth rose by 4 percent! However, between 2000 and 2006, business incomes and private fortunes rose by 42 percent, while employees’ incomes increased by only 4.5 percent, behind the rate of inflation.”
          http://www.wsws.org/articles/2007/oct2007/wage-o11.shtml

  14. Jon Day says:

    “And I’ll predict something else too: even if “state assisted capitalism” does collapse – which I believe – we’ll still need a postal service after.”

    Reminds me of Kevin Costner’s ‘The Postman’.

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