March 2010 Archives

I have been in love with Dilbert for a long time. It's funny how popular he is, because it presumably means that lots of people understand the underlying message of the strip, which is that bad decisions happen all the time in real businesses because of perverse incentives experienced by everyone, but particularly by management.

I knew a guy who was, and possibly still is, in a senior management role who was a fan. I always thought of him as a bit pointy-haired, but he clearly admired the strip. Maybe he just saw the funny side of his own position.

The above strip (sorry if it doesn't fit properly in my narrow content column - just click on the image to see the whole thing on Scott Adam's site, is the first in a series about how the latest CEO drags along a series of cronies with him and puts them in senior positions for which they are ill suited. The joke is how management knows nothing about what the company actually does, but it's OK because they know about important things like negotiation and marketing, and tax planning, and mission statements.

I tend, as regular readers will have noticed, to try to understand what happens in the world of commerce using the tools of economics. I think that when it comes to companies and society, the tools of anthropology probably are as relevant. Dilbert is about inter-tribal conflict: the engineers against the managers, the senior managers against the workers, the engineers against the support staff, the engineers against the sales staff, and so on. We need to belong to a tribe, and we want to support other members of our tribe. Managers are not in the same tribe as shareholders, or ordinary workers and so are happy to screw both of them. The board at Goldman Sachs are, plausibly, in the same tribe as the workers, and, although they have pretty daunting initiation rituals, they do not treat them as badly as, say, the board of an engineering company treats the shop-floor workers.

I have to acknowledge a debt of gratitude to Flip Chart Fairy Tales for this insight into the idea of how tribalism is more important in setting worker compensation than anything strictly to do with added value and merit or even supply and demand for workers with the relevant skills. It seems that Barbara Wootton understood this and wrote about it in her 1955 book "Social Foundations of Wages Policy", which, unusually, seems difficult to get hold of.

Gillian Tett has said that her training in social anthropology was hugely helpful in understanding how the credit crunch developed. She studied for a PhD on the subject. I'd like a simple primer to get me started on understanding the basic principles of this obscure discipline. Anyone got any suggestions?

Grant Shapps is the MP for the constituency immediately to the south of Knebworth. It's interesting to see how this is put together. Note that there is plent of coverage of hospital (preventing the closure of), post offices (ditto), ethnic minorities (showing interaction with), public services and homelessness. There is even a little 'Dave' magic dust sprinkled on the video, and the MP looking authoritative. Sadly there is no mention of deficits, taxes, planning, bad public services, or the private sector (apart from retail). This, like all recent elections, is one fought on Labour's home turf.

Darling's budget was the usual politics-as-theatre show that so damages politics as a means of deciding about things in a grown-up way. As usual it comes down to individual bloggers like Wat Tyler and independent pressure groups like the Taxpayers Alliance to make sense of what is happening.

The major problem is that we, like Greece, cannot run up debts indefinitely without suffering the consequences. That is, we, the taxpayers, cannot dodge the consequences, but of course the politicians can, with their 'resettlement allowances' and consultancy fees.

Amazingly the BBC put a lot of emphasis on the fact that the deficit for this year will actually come in slightly below the forecast £178 billion. No mention, naturally, was made of the off-balance-sheet liabilities that mean that the public sector debt of £1.4 trillion is actually only around half of the true figure. Yes, we are talking about £2.8 billion here. Just to put that in context, that means around £47,000 for every man woman and child in the UK. According to the ONS there are 22.76 million people employed in the private sector, which means that out of their taxes, and the taxes of their private-sector children they are going to have to come up with a sum of £120,000 each.

But it's actually a lot worse than that, because before long interest payments on the national debt alone will be costing 10% of GDP. The unfunded liabilities held off the balance sheet will also be growing at some inflationary rate, so will increase the burden just as much as the on-balance sheet liabilities. The end result is a huge, utterly huge, burden of debt for the country for a generation or two.

I know that Gids rambles on about how serious the deficit is, but I think that most voters just think 'yeah, yeah, yeah, but we can just introduce a caviar tax, or stamp duty on Rolexes and everything will be fine'. I suppose this is a rational response to the fact that there are around 40 million people in the UK who are either not working, or working in the public sector. Of these, approx 14 million are under 18, leaving 26 million voters who may well be dependent on the generosity of the government (i.e. the taxpayer) for their income. Obviously there will be some non-working spouses and people with private income in there somewhere. However, what we are left with is around twenty six million out of a total of 48 million voters who, on balance, will prefer to see taxes go up than go down. This is about 54%. No wonder all parties are being economical with the truth.

I have heard a theory that, actually, David Cameron would prefer to see Gordon Brown win the next election, on the basis that the pain and suffering that is going to be inflicted on the population, through 'cuts' and increased taxes is going to be so severe that whichever government is in power when this is happening will be then unelectable for a generation: the so-called 'poisoned chalice election' theory.

There is, of course, an alternative to all this pain. We look to that master of economic theory, Robert Mugabe, and let the pound take the strain, stitching up those nice Chinese lenders, but, as an unfortunate side effect, wiping out the savings and pensions of a vast swathe of the population through rampant inflation. Currently the gilts markets don't buy into this theory, but Bill Gross, who has made more than his fair share of good calls on government bond markets in his long career is not so convinced.