I have been thinking more about the comments and the discussion in the last couple of postings about the pensions, and so on. So far what I have said sounds rather incoherent, so I thought that I would try and put it on a more rational basis. What I have an issue with is the allocation of the wrong job to the wrong mechanism within the social network.
For example, if we take a fairly basis set of requirements of a human being, in no particular order of importance:
Water to drink and food to eat
Shelter, including heating, lighting, etc.
Love and companionship, including sex.
Friends and relatives
A community in which to live
Employment, or at least a recognised social role
Transport and freedom of movement
Education, both general and specifically task or role orientated
Freedom from unreasonable interference and criminal activity
A means of storing value for the future when times are good
Access to information to allow reasonable individuals to plan and manage their lives
Access to entertainment and other activities
Health-care and medical intervention if health-care fails
Now, my view would be that some of these are well provided for by capitalism and the activities of individuals and corporations in the free market. However, equally, many are not. I also so far have expressly avoided any mention of government or business as a delivery mechanism. If we look at the needs first, then we could think about how this is best delivered. After that, in an ideal world, the support and delivery mechanism is then allocated to one of the following kinds of social process:
Familial Network
Social Network
Local Governance
National Governance
Charitable or Faith Organisations
Business Activity
Corporate Activity
Now the point of this is not that corporation per se is broken, although it has specific issues, but that the tasks to which the mechanism should have been applied are misdirected in some cases. Indeed, you may end up with different models that are equally valid, but I would suggest that none that place too much emphasis on a single mechanism is going to succeed very well in the long term.
Now, I would say that some of these have a clear correlation, in that for example:
A familial network will give you companionship and shelter.
Your social network will give you a place in life, and a chance to met people, and maybe this way find a close significant other, and love, etc.
Faith may move mountains, and help those in need, but does not generally build mass transit rail networks, for instance.
Local Governance is best enabled to provide resources such as schools and basic local administration. In Switzerland for example, I live in a Commune, which has 1,100 people, and is responsible for providing schools, local amenities, etc. The Canton, (Geneva) has about 370,000 people, and provides almost everything – roads, hospitals and medical care, etc. Bern (the Federal government) provides the army and the post office, and they are having second thoughts about the post office.
National Governance is good at providing the real macro infrastructure, and services that depend on spreading costs and risks over a large population – rail networks, armies, and some kinds of health-care spring to mind. Also provision of a diplomatic service and relationship with other countries has to happen at this level.
I would differentiate business activity from corporate activity, which may seen strange, but the number of people who work in this kind of small sole trader environment is actually greater than the number who work in the corporate world.
The role of the corporation is to produce the maximum profits for the shareholder, and as description of this, Milton Friedman’s essay on the subject in the NY Times still takes some beating. He is clear that there is no social component to the operations of a corporation, a view that I would actually agree with.
Thus, what is problematic is when the wrong tool is used for the wrong job. Using a central government to run business, a la communist five year plan, is as disastrous as using the corporation to fulfill the roles of the local and central government.
In particular, when the care and long term security of the citizenry (in welfare terms) is allocated to the corporation, then this is a disaster, whence the pensions problems. (For an interesting take on why Governments are actually maybe not the worst provider of pensions, at least for the non-affluent classes, this from Paul Krugman makes a good read. Additionally, it is not for nothing that many pension companies in the UK got fined for pensions mis-selling, where Salespeople lied about the relative returns of public versus private pension funds to make commission. Fancy that...) Or the new fad for privatising government investments, such as the privatisation of government functions, and the private funding of public projects, such as is current with the UK and their Private Funding Initiative, which is mainly a way of taking the public sector borrowing requirement and funding it into the distant future, by turning capital expenditure into a long term leasing agreement.
Moreover, when the government no longer acts as a counterbalance to the interests of corporate power, but only as kind of supine “laws for sale” bazaar as is the case with the current administration in the US, then this is a recipe for a deeply unbalanced society.
There is a second part to the equation, which is the time-frame to realise the benefits of a course of action are severely curtailed in the market driven corporate organisation. It is tricky at best to meet a quarter-by-quarter financial prediction, for an audience who often have only the shakiest notion of the real business issues in the organisation that they have invested in. Volatility is not just driven by rational business reasons, but a lot of sentiment as to where the next short term gains are to be delivered. In effect, by making the stock market the determinant of the planning horizon of the CEO, long term thinking disappears in these cases. Now, I know that this is a simplification, but the planning horizon for product planning in most cases is in the three to four years range, with some exceptions like aircraft building and so on.
It is for this reason that large government sponsored programs of research and development are often helpful, even if for unexpected reasons. We didn’t get a moon base out of the Apollo program, but it did have a lot of spin-off benefits in IT and other areas.
Additionally, this is why the current trend to universities developing patent portfolios is rather worrying. It does monetise the research, but then it introduces a legal and compliance friction to real world product development that I believe in the long term will be much more burdensome in terms of unrealised or unrealisable projects than the gain to the academic institution. Would we have penicillin for general health-care if Fleming had patented it? Or would it have remained a drug for the rich, at least in the intellectually protected phases? Is R&D paid for by Governments to generate corporate IP, or for broader purposes?
The counterpoint to this is when the government takes on the aspects of the military industrial complex, and becomes a mechanism for taking large amounts of worthwhile citizen tax dollars and converting them into pork, as with the current Highways Act in the US, and NASA manned spaceflight post-Apollo, for example.
Once the government has lost sight of its roles, responsibilities, and becomes a means of dividing public cash into private fortunes, then it is difficult to see a way back.
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