Wednesday, November 16, 2011

The Digital Economy, Globalisation and Change

I gave this paper at CPRF 2011 last week on Competition Policy for the Digital Economy. My core thesis was that policy makers refer to "competition" as a policy goal with little understanding, and what understanding they do have needs to change.

The paper traces the evolution of "competition policy" from its anti-monopolisation US origins, through the regulatory state of the post-Depression (and post-War) eras ending with the pro-market orientation of the 80s. I note that these three phases were triggered by economic events - the rise of economies of scale and scope in the late 19th century, the depression and the oil price shock of the 70s.

I then outline a conception of the Digital Economy which regards it as the transformation that flows from a General Purpose Technology. I explain how that impacts economic organisation and indicate ways competition policy needs to change.

I found a nice connection between it and a column by Ross Gittins today which the SMH titled Change is workers' only certainty, but Chris Wallace at Breakfast Politics called linked to as Why Qantas is a warning to us all.

Gittins places his piece with this introduction;

The greatest force driving structural change is technological advance: the invention of better ways of doing things, new things to do and countless labour-saving machines. Globalisation has been driven partly by government policy, but mainly by the information and communications technology revolution, which has hugely increased the speed and reduced the cost at which information, money and people move around the world. ....

The trouble with structural change, of course, is that the benefits go to the customers - new products, wider choice, lower prices - while all the problems go to the people working in the disrupted industries.

He goes on to (correctly I think) intimate that the problem at Qantas is the need to change created by the marketplace changes. He notes that this necessarily involves changes affecting workers.

He then discusses the transition from an industrial relations system dominated by a central "arbiter" to one based on negotiation and agreed outcome. He picks up the theme that some have suggested that unions should only be concerned with pay, writing,

The goal was a new era of reduced industrial disruption as the parties recognised the great extent of their common interests and put less emphasis on their (undoubted) conflicting interests.

Right on. So I don't think banning debate about management decisions is the smart way to go. That would mean the law advantaging one side, giving managers permission to ride roughshod over the interests and even the opinions of their employees.

Half the trouble at Qantas is the employees' failure to recognise how the game has changed for their company, robbing them of their former bargaining power. The other half is the arrogance of management in their resort to ''managerial prerogative'', in their failure to explain and debate the new realities with their staff.

The subject of technological change is not a new one - maybe its time we dusted off the reports from the 1980s which dealt simply with "computers" and technological change. And at the same time be mindful of the other comments he made (which I previously posted about) that labour markets are of their very nature heavily regulated.

What we need is the ability for management to engage staff in the conversation.

Corporations too often rely upon the rules of the equities markets to argue a need for secrecy in their strategic development. I have a general feeling that management and boards use these rules as ways to deny shareholders information rather than the reverse.

The real question is, is there something in the way we model "governance" that results in secrecy and impedes the ability to constructively engage with employees.

Novae Meridianae Demetae Dexter delenda est

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