Reds Under the Unmade Bed

Those of you with long enough memories will remember the Cold War fear that there were Soviet sympathisers everywhere, just waiting for their opportunity to overthrow capitalism; "reds under the bed" was the common turn of phrase.  But then came Gorbachev, the fall of the Berlin Wall and the discrediting of the Soviet economic model.  At the same time, Western leaders such as Thatcher and Reagan provided new impetus for market based economic reforms.  This trend continued into the 1990s, converging around centrist policies promoted by Blair, Clinton and the EU.

The next turn came in 2008 with the crash of the financial system, and holes began to rapidly appear in the consensus as the debt fuelled expansion in the private, public and banking sectors all came to a grinding halt and the full difficulties in paying back those debts became apparent.

In Britain, one of the main focuses of the coalition government has been to reduce the ever growing welfare bill, and this has created one of the biggest fault lines in British society, and one that is likely to grow wider.  On the right, the argument is that a system of welfare dependency has been created, leading to large numbers of people for whom living off benefits is preferable to low paid and/or unfulfilling jobs.  The evidence for this is that Britain has more people in employment than ever before, but with increasing numbers of those  low paid and/or unfulfilling jobs taken by immigrants, as benefit drawing Brits either refuse to take them, or are so unemployable that no sensible employer would hire them.  On the left, the argument is that the the poorest members of society are being blamed for the chaos caused by the reckless behaviour of financial institutions (they never blame over borrowing individuals or governments, who must also surely share the blame?) in the pre-crash period, and that a return to economic growth will solve the ballooning welfare costs.

I want to reflect on a slight tangent - is this British underclass starting to to resemble aspects of Soviet era society?  I know it sounds crazy, but here is my thinking.  In the Soviet bloc unemployment was practically non-existent, but productivity was almost practically non-existent; if they had not, their economies would not have collapsed in the way that they did. The Soviet bloc economies could not meet the requirements of their population due to the ever increasing productivity gap with the west; just compare east and west German industry - Trabant -v- Volkswagen.  Capitalism works because it makes people hungry, sometimes literally, sometimes metaphorically in terms of what they wish to achieve or acquire. The benefit system creates a kind of mini-Soviet bloc society within a broader capitalist society, with people paid low amounts but with no expectation of productivity or profit. Like Soviet society, its members live with petty, often vindictive rules, and a standard of living that does not compare to the mainstream capitalist economy, but it is also undemanding on its citizens. They receive free healthcare, sufficient income for a basic standard of living and none of the issues associated with life in the tooth and claw of capitalism. Somebody recounted the experience of a job centre advisor (albeit in Canada) about people returning to work not being psychologically prepared; I would argue that it is not work but capitalism that they are unprepared for, and when they then try to enter or re-enter the mainstream workforce, they find similar cultural difficulties to those experienced by Soviet bloc citizens post the collapse of communism and their attempts to join the capitalist economic system.

The question is, will this sub-economy collapse in the same way that the Soviet economy did?

Nick

I can see clearly now

It struck me today that the latest Budget is tangible evidence of the path down which the Coalition Government wants to take the country, and the radical nature of this path.  I think Cameron is portrayed as a smoother but more limited version of Thatcher, but the policies are possibly more radical, albeit in a different direction.

20% Corporation Tax was never even remotely achieved in the 1980s.  The reform of the benefit system creates a much greater incentive for people to move to work than anything attempted under Thatcher.  But most significantly, inflation, the totemic enemy (along with the Soviet Union and the left in general) of the 1980's now appears to be the unspoken ally instead.  Inflation will erode the horrific debt levels (both in the state and private sectors) and the accompanying depreciation of the Pound will increase the competitiveness of exports (at least in the short term), but it will result in a continuing erosion of living standards.  The big gamble is will this lowering of real living standards, reduced corporate taxes and tougher benefit rules turn Britain into a lean, cost competitive but also high value added economy, or will it just lead to constant decline?  It is one hell of a bet.

Nick

Credibility in the Vatican

I can't say I know that much about the new Pope, but the election of a non-European Pope appeared to indicate a modest move in terms of realising the world in which the Catholic Church now exists.  However the sight of a despot like Robert Mugabe being treated with such reverence at the inauguration suggests that they have learned little, and that the Catholic Church remains one of the more reactionary institutions on this earth.  To denounce contraception, abortion and homosexuality while laying out the red carpet to a murdering thug who has destroyed the second strongest economy in Africa seems perverse in the extreme.  I can't somehow see Jesus giving the thumbs up to that one.

Nick

It's the end of the tie as we know it

I work in the financial sector and have done for over 25 years, so I am no stranger to suits and ties, but I think it is time to commit them to history as work attire.  The world is moving in a different direction and the formal business suit and tie will soon be gone the same way as the telex machine and the typing pool; a relic of 20th century business culture that has outlived its usefulness.  They are uncomfortable and impractical, so why do we persist with something that adds no value?

I work advising entrepreneurs, in particular in the technology and natural resources sectors; they want advisers that they can empathise with and trust to be a key part of their business, not someone who seems distant and condescending.  How many clients (not other advisers like lawyers and accountants) actually wear suits and ties?  Certainly a minority of the ones I come across, and the number shrinks every year.

The last decade has seen has two of the greatest seismic shifts in the business world of modern times: the rise of the internet from the play thing of geeks and pornographers to become a dominant and still growing part of modern business life and the financial crash of 2008.  One of these was led by guys wearing hoodies and chinos and the other wearing Saville Row suits; who have been the successes and who the failures?  Bankers, politicians and estate agents are all reviled by the public and all well known for their suit and tie wearing; where does the trust lie?

I am someone who reads widely on business, economics and society, and the key to the future is not to be left behind.  The business world of the next decade will be about being smarter in the non-sartorial sense.  We should be worrying less about whether we wear ties and more about how much we know; that is what our clients and prospective clients are worrying about.  

Instead of worrying about whether we look like a GQ model, we need to seriously increase the level of learning and development we undertake, and by that I do not mean the box ticking of "continuing professional development"; we need to be smart in the networked, global, 21st century sense of the word.  The world is moving so fast that to rely on knowledge acquired 20 years ago and just keeping up to date through experience will just mean that you fall behind.  Unless you have the knowledge you cannot know whether you can deliver what is needed or not.  

I work at a small firm that cannot rely on a big balance sheet or captive customers; we need to be both the smartest guys in the room and the one that the client feels in their bones to be the closest aligned to their interests; we need to be more Steve Jobs and less Bob Diamond.

Nick