Nice little piece today from Ross Gittins on suggestions for a "relational business charter".
In part it goes to the same territory as my comments on the corporation. But only in part.
The question is more how would you get firm's to pursue the objectives given the myth of "maximising returns". The answer is more that the public policy debate needs a better understanding of the role of the firm and feel comfortable regulating them to achieve the wider objective.
Novae Meridianae Demetae Dexter delenda est
Showing posts with label Gittins. Show all posts
Showing posts with label Gittins. Show all posts
Wednesday, December 07, 2011
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
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
Monday, November 14, 2011
Regulation or Deregulation
I reckon everyone who talks about deregulation of the Labor market should read this Ross Gittins piece.
As he says;
Here's the point: the labour market has always been highly regulated. It remained highly regulated under Work Choices and it's still highly regulated under Fair Work. It's always likely to stay highly regulated for a simple reason: unlike all other markets, the labour market deals with human beings rather than the exchange of inanimate objects.
As a matter of politics, common humanity and common sense, the treatment of people in the labour market will always be carefully regulated. We are, after all, running the economy for the benefit of people.
What changes from time to time is not so much the degree of regulation as the objectives of that regulation. There's a fundamental imbalance of bargaining power between an individual worker and even the smallest employer.
The scope of regulation is about how that imbalance is addressed. The way "the market" deals with it is actually that workers have an incentive to collectively bargain.
The Australian innovation was the concept of conciliation and arbitration as an alternative to simple clashes of collective power.
Novae Meridianae Demetae Dexter delenda est
As he says;
Here's the point: the labour market has always been highly regulated. It remained highly regulated under Work Choices and it's still highly regulated under Fair Work. It's always likely to stay highly regulated for a simple reason: unlike all other markets, the labour market deals with human beings rather than the exchange of inanimate objects.
As a matter of politics, common humanity and common sense, the treatment of people in the labour market will always be carefully regulated. We are, after all, running the economy for the benefit of people.
What changes from time to time is not so much the degree of regulation as the objectives of that regulation. There's a fundamental imbalance of bargaining power between an individual worker and even the smallest employer.
The scope of regulation is about how that imbalance is addressed. The way "the market" deals with it is actually that workers have an incentive to collectively bargain.
The Australian innovation was the concept of conciliation and arbitration as an alternative to simple clashes of collective power.
Novae Meridianae Demetae Dexter delenda est
Monday, August 15, 2011
Gittins great again
It is hard to understand accusations of a left-wing bias in the press when Fairfax still provide weekly columns by Paul Sheehan and Gerard Henderson.
It is interesting though that it is their economics editor who has a consistent "market sceptic" view. This month he has already once this month written a column explaining that more reform designed to get Government out of the action isn't necessarily good.
Having jumped into praise for that contribution I need to do it today for another great contribution.
He develops the theme of understanding the decline in the rate of productivity improvement and posits that the decline may well be the consequence of a market failure than a government failure. After all, it is the market that has failed to deliver the productivity improvement.
He does so by focussing on the question of public infrastructure - primarily through education - and also analyses how various competition reforms have also weakened human capital.
Gittins asserts;
As part of our abstemiousness, we've gone for several decades underspending on all levels of education and training: early childhood development, schools, vocational training and universities.
I'm not going to subject this view to critical analysis. I happen to agree with it, especially in relation to secondary schooling (see note) and Universities.
In the area of competition policy Gittins sees the very real issue that by lauding competition we under-value co-operation;
But the human animal has achieved the great things it has not only as a result of competition between us but also as a result of our heightened ability to co-operate in the achievement of common objectives. The economists' conventional model is big on competition, but sets little store by co-operation, since it assumes we're all rugged individualists. Could it be that, by greatly increasing the competition most firms face in their markets, micro reform has reduced the amount of productivity enhancing co-operation?
A further possibility is that, in turning up the heat of competition in so many markets, and in spreading market forces into areas formerly outside the market, micro reform has diminished our ''social capital'' in ways that adversely affect economic performance.
There's no place for trust, feelings of reciprocity or norms of socially acceptable behaviour in the economists' model, so they tend to under-recognise their importance. But you only have to observe a loss of trust within the community to realise the high cost that loss imposes on the economy as well as society.
The less we feel we can trust each other, the more avoidable costs we impose on the economy in spending on supervision and monitoring, security devices and security people.
I could add that the "market model" as applied to human resources has seen an under-investment of in-firm people development. he solution to a skills shortage (or worse change in skill requirements) is to simply "go to the market".
To remind us of what Gittins is arguing against let's consider this rant in The Punch. The person asserts they've lost faith in Labor because it isn't economically rationalist but is instead "a party of protectionism, intrusive government, wealth redistribution and union power."
I won't repeat my comments from The Punch. Here I want to merely note the incredibly productive role Unions have made over time in insisting on the development of human resources, not least in requiring firms to train and re-train employees.
Contrast this with the bellowing of the still new Member for Bennelong. John Alexander reckons we need to review penalty rates because they impeded economic activity. His example?
We have many examples in our region of coffee shops and the like not trading on weekends because of penalty rates. It is something that must be addressed and it must be addressed without the position of the worker is king and must be given these rights. There's no benefit in having the right but not having the job. The consumer loses, business loses and the employer loses.
I live and work in Bennelong. No coffee shop that I wish to use on a weekend is not open on a weekend. But since when were we going to have a "coffee shop led" economy? (Don't get me wrong, the service sector is large and important, it is just...well...coffee shop? And why not cafe?)
"Reform" is a much more complex concept than merely "less government".
(More generally the role of government is to make markets that work).
Note: I've written previously about the issue of maths and science education in high schools. I asked a casual maths teacher about it - what would they do. His simple answer was pay Maths teachers more. Because it is a compulsory subject maths masters always have full classes and have a higher ratio of kids not interested in being there.
Novae Meridianae Demetae Dexter delenda est
It is interesting though that it is their economics editor who has a consistent "market sceptic" view. This month he has already once this month written a column explaining that more reform designed to get Government out of the action isn't necessarily good.
Having jumped into praise for that contribution I need to do it today for another great contribution.
He develops the theme of understanding the decline in the rate of productivity improvement and posits that the decline may well be the consequence of a market failure than a government failure. After all, it is the market that has failed to deliver the productivity improvement.
He does so by focussing on the question of public infrastructure - primarily through education - and also analyses how various competition reforms have also weakened human capital.
Gittins asserts;
As part of our abstemiousness, we've gone for several decades underspending on all levels of education and training: early childhood development, schools, vocational training and universities.
I'm not going to subject this view to critical analysis. I happen to agree with it, especially in relation to secondary schooling (see note) and Universities.
In the area of competition policy Gittins sees the very real issue that by lauding competition we under-value co-operation;
But the human animal has achieved the great things it has not only as a result of competition between us but also as a result of our heightened ability to co-operate in the achievement of common objectives. The economists' conventional model is big on competition, but sets little store by co-operation, since it assumes we're all rugged individualists. Could it be that, by greatly increasing the competition most firms face in their markets, micro reform has reduced the amount of productivity enhancing co-operation?
A further possibility is that, in turning up the heat of competition in so many markets, and in spreading market forces into areas formerly outside the market, micro reform has diminished our ''social capital'' in ways that adversely affect economic performance.
There's no place for trust, feelings of reciprocity or norms of socially acceptable behaviour in the economists' model, so they tend to under-recognise their importance. But you only have to observe a loss of trust within the community to realise the high cost that loss imposes on the economy as well as society.
The less we feel we can trust each other, the more avoidable costs we impose on the economy in spending on supervision and monitoring, security devices and security people.
I could add that the "market model" as applied to human resources has seen an under-investment of in-firm people development. he solution to a skills shortage (or worse change in skill requirements) is to simply "go to the market".
To remind us of what Gittins is arguing against let's consider this rant in The Punch. The person asserts they've lost faith in Labor because it isn't economically rationalist but is instead "a party of protectionism, intrusive government, wealth redistribution and union power."
I won't repeat my comments from The Punch. Here I want to merely note the incredibly productive role Unions have made over time in insisting on the development of human resources, not least in requiring firms to train and re-train employees.
Contrast this with the bellowing of the still new Member for Bennelong. John Alexander reckons we need to review penalty rates because they impeded economic activity. His example?
We have many examples in our region of coffee shops and the like not trading on weekends because of penalty rates. It is something that must be addressed and it must be addressed without the position of the worker is king and must be given these rights. There's no benefit in having the right but not having the job. The consumer loses, business loses and the employer loses.
I live and work in Bennelong. No coffee shop that I wish to use on a weekend is not open on a weekend. But since when were we going to have a "coffee shop led" economy? (Don't get me wrong, the service sector is large and important, it is just...well...coffee shop? And why not cafe?)
"Reform" is a much more complex concept than merely "less government".
(More generally the role of government is to make markets that work).
Note: I've written previously about the issue of maths and science education in high schools. I asked a casual maths teacher about it - what would they do. His simple answer was pay Maths teachers more. Because it is a compulsory subject maths masters always have full classes and have a higher ratio of kids not interested in being there.
Novae Meridianae Demetae Dexter delenda est
Monday, August 08, 2011
Yet another great Gittins column
A great column by Ross Gittins in today's SMH.
Today he takes solid aim at people clamouring for more "micro-economic reform" but rightly points out that such reform has never provided enduring changes to productivity improvement rates. What does that is technology and innovation, a subject standard economists still treat as "exogenous" to their models.
What I loved though is his very simple explanation for how it is that economists (and business people) who have unbounded faith in markets are forever calling for some kind of government action. Partly paraphrased he wrote;
We need to remind ourselves that governments don't actually run the economy, business people do. So if businesses aren't generating much productivity improvement, the obvious place to look is at the behaviour of business people.
Conventional economics' foundation assumption that economic actors are always and everywhere rational [and] as a general rule markets get it right.
It follows that, if the market isn't delivering satisfactory outcomes, it could be a case of ''market failure'', but it's much more likely to be a case of ''government failure''. It must be something the government's doing that's stuffing things up. Thus does every problem in the private sector become the government's fault.
Beautiful when you think about it. As he says this is the complete rationale for "micro-economic reform" which is coded as "government does less".
I would note one deviation from the Gittins position. He notes that the only exception to the rule that reform is less regulation is in the area of market power (basically monopolies and collusion).
It is interesting to note that in the 1980s and 1990s all of Australia's big businesses were clamouring for competition in some other sector, the banks wanted competition in airlines, the airlines wanted competition in banks, while everyone wanted competition in telecommunications. But by the 21st century big business - as largely represented by the BCA - took the position that Australia's small economy needed these firms of big size to achieve scale efficiencies.
And this is (as Gittins notes) the dirty little secret of technological advance - it increases economies of scale - big firms get bigger.
It will be nice when echnocrats and business writers start getting it that the challenges of the new economy are much different to simply getting less government intervention.
Novae Meridianae Demetae Dexter delenda est
Today he takes solid aim at people clamouring for more "micro-economic reform" but rightly points out that such reform has never provided enduring changes to productivity improvement rates. What does that is technology and innovation, a subject standard economists still treat as "exogenous" to their models.
What I loved though is his very simple explanation for how it is that economists (and business people) who have unbounded faith in markets are forever calling for some kind of government action. Partly paraphrased he wrote;
We need to remind ourselves that governments don't actually run the economy, business people do. So if businesses aren't generating much productivity improvement, the obvious place to look is at the behaviour of business people.
Conventional economics' foundation assumption that economic actors are always and everywhere rational [and] as a general rule markets get it right.
It follows that, if the market isn't delivering satisfactory outcomes, it could be a case of ''market failure'', but it's much more likely to be a case of ''government failure''. It must be something the government's doing that's stuffing things up. Thus does every problem in the private sector become the government's fault.
Beautiful when you think about it. As he says this is the complete rationale for "micro-economic reform" which is coded as "government does less".
I would note one deviation from the Gittins position. He notes that the only exception to the rule that reform is less regulation is in the area of market power (basically monopolies and collusion).
It is interesting to note that in the 1980s and 1990s all of Australia's big businesses were clamouring for competition in some other sector, the banks wanted competition in airlines, the airlines wanted competition in banks, while everyone wanted competition in telecommunications. But by the 21st century big business - as largely represented by the BCA - took the position that Australia's small economy needed these firms of big size to achieve scale efficiencies.
And this is (as Gittins notes) the dirty little secret of technological advance - it increases economies of scale - big firms get bigger.
It will be nice when echnocrats and business writers start getting it that the challenges of the new economy are much different to simply getting less government intervention.
Novae Meridianae Demetae Dexter delenda est
Wednesday, June 08, 2011
Social Exclusion
This column by Ross Gittins is a maust read.
He gets stuck into those complaining about "tough times" in the middle of a boom and talks about the real issues of social exclusion and contrasts it with measuring outcomes by money income.
...the concept of 'social exclusion' focuses on how relationships, institutions, patterns of behaviour and other factors (including lack of resources) prevent people from participating fully in the life of their community.
Australian research has divided social exclusion into three domains: disengagement, service exclusion and economic exclusion.
Novae Meridianae Demetae Dexter delenda est
He gets stuck into those complaining about "tough times" in the middle of a boom and talks about the real issues of social exclusion and contrasts it with measuring outcomes by money income.
...the concept of 'social exclusion' focuses on how relationships, institutions, patterns of behaviour and other factors (including lack of resources) prevent people from participating fully in the life of their community.
Australian research has divided social exclusion into three domains: disengagement, service exclusion and economic exclusion.
Novae Meridianae Demetae Dexter delenda est
Subscribe to:
Posts (Atom)