In the middle of predicting the FTSE crash of 2008 I managed to upset a (now ex) client who advised me that I should stay away from political diatribes. I explained to her (waste of breath) that in the 21st Century the dividing line between business and politics has stopped being blurred and become pretty much non-existent. Nothing much has changed since 2008. So while I acknowledge Bozo's purpose is to discuss business, markets, leadership and communication and not polemics (of any kind) this kind of wrote itself in my head today while I was at the gym.
If you persevere you will find where business fits into all this.
Social welfare isn't very popular among those who feel they pay for it rather than benefit from it. I don't know if you had noticed that? It becomes a lot less popular when it results in higher taxes (or for some people any taxes). It is an entirely valid political standpoint to be against taxes and even against social welfare. That's what democracy does for us, it gives you the freedom to be an idiot. This freedom encourages members of the awful Tea Party to protest carrying signs that say: "You are not entitled to what I earn". Of course I make an exception for the 65% of them who answer pollsters by saying they are 'born again Christians'.
I have been here before, but for new readers, the reason I object is simple. Jesus (who if you are a Christian is King of all Kings, and whose word is quite literally gospel) says they ARE entitled to what you earn! You cannot be a born again Christian and actually be against the concept of social welfare. It is deeply oxymoronic. Of course most teaparty afficionados don't need the oxy.
If you doubt that Jesus thinks they are entitled to it, have a read of Luke 18; 18-23. Jesus tells the rich young ruler to: "Sell all you have and distribute to the poor..."
I think it is worth noting here that he doesn't say: distribute to the poor you are related to; or distribute to the poor who attend your church; or distribute to the well-behaved humble poor. The point is not that it is not allowed to believe the poor can go hang and they aren't your problem (bit sad, but allowed) but its mega hypcritical to claim to be a born again Christian and carry a sign saying "You are not entitled to what I earn"
Of course readers know that Bozo is kind of a socialist and most definitely a Christian. But I do not at this point claim that Jesus or Christianity have the monopoly on social welfare or social justice. Any study of ancient culture and almost all of the world's religions believe in charity. Because, interestingly, Jesus didn't actually think it was the government's role to support the poor either. He thought it was all our jobs.
The British social welfare system evolved over a period of time in which the poor got pretty well screwed. And guess what? Like any system led by government it's deeply flawed. And as a deeply flawed system it costs more than it should, it is plagued with inefficiency and waste.
The Victoria era had some fairly famous philanthropists. People like Joseph Rowntree who became an exceedingly rich man and who devoted vast amounts of his wealth to looking after the poor. The problem the social welfare system has is that nowadays the rich think (actually not true - we ALL think) that its not their job to help the poor - it is the government's job. This is a bit of a chicken and egg.
I guess the issue is can we say "It's the government's job" and at the same time say "The government waste too much money doing this". Because we know the government pretty much waste too much money doing ANYTHING, but unless we remove the job from them we have to let them got on with it. Sorry but the only other alternative is not having a system at all.
I can hear a few people saying: "Aha!" Those people who really do believe the poor are not entitled to what they earn. Well I have nightmare's about a society that doesn't give a toss about the poor. But I have another issue too. It's called evolution. I reckon we have about 4,000 years of history we know some stuff about and we have about 4,000 years of poor people. We have about 4,000 years where some people have less brains than others, some people work less efficiently than others, some people have skills that are more marketable than others. Some people are unlucky. Of course some people are also lazy, bone idle wasters who like a nice system so they can scam it.
I don't know how many million years before Darwin's theory will kick in and evolution will mean we only produce offspring who are skilled,(and only skilled in marketable high earning areas and not in art or crafts or archery - once highly valued but currently not a good way to earn a living) motivated of course and never, ever disabled or with learning difficulties or dyslexia.
Maybe one day - because the 4,000 years we have had has always been full of the disadvantaged. At the height (and end) of the Roman Republic the Romans had the Roman Mob. Justbefore the powers that be bumped him off Julius Caesar was handing out loads of cash to the poor in Rome. Not of course for any altruistic reason but because he was using his popularity with the mob as a political weapon. This has been repeated throughout history. Sometimes the urban mob has been used by savvy politicians and it is actually always hard to know when a mob is driven by a desire to right social injustice and when it has been manipulated by people with a political agenda. This uncertainty applies (IMHO) to analysis of Paris 1789, St Petersburg 1917, Cuba 1961.
I cannot tell you which mobs were inspired by righteous anger against injustice and which were cajoled into action by unscrupulous people. I can tell you that if you don't want the poor to be manipulated by unscrupulous people a clever strategy is not to have the poor, or at least not to have them SO poor, and so disadvantaged that they are prepared to take the risks involved in initating social unrest. The thing is despite evolution we haven't quite managed to produce only productive people. Every society for 4,000 years seems to have had a healthy does of the poor and disadvantaged.
So, guess what, the problem isn;t going to go away. And the two core options society has is ignore it and pay for it. Of course the government will be inefficient and wasteful in solving it. They pay £3,000 for staplers! But if you don't want the government to do it then YOU have to do something, don't you?
Of course there is always living in gated communities surrounded by barbed wire and protected by armed security guards. Let's not stop the poor and disadvantaged being poor and disadvantaged, let's just segregate them and protect posh people from them.
I am not a big fan of that, aside from obvious Christian or humane reasons, I think there are two clear problems that will bite you.
First, at some stage it will cost more to protect you from the poor than it would cost to elevate the life of the poor to something decent and sustainable.
Second, where do you recruit your security guards from? The Romans decided it was better to hire the barbarians as soldiers than to fight them and trust me - it ended very badly.
So where does business come into all this?
Well the experiment for the past 20 years has been to elevate the working class into the ranks of the middle class. Stable, employed home owners with an investment in the country and a vested interest in law and order.And it worked for a while.
But then business helped screw it all up.
Consumerism was what made the economy grow. And the new middle class were leading the way. But business needed to grow sales. They had saturated the middle class, so the new plan was selling to the poor.
This meant lower prices.
That meant lower profits.
If shareholders had accepted lower profits we'd have been fine. (Maybe)
So in the 1990s we unleasged the cost control cost reduction wave onto business. This partially increased efficiency through eliminating waste, and partially through better design. Howver the rabbit was out of the hat and in the neverending search for shareholder value it dawned on a few people that outsourcing lower end work to the third world was also more efficient, allowing the difference between paying Brits and paying Indians to fly into shareholder value. This seemed to work, because our smarter people levered themselves up into better jobs in the so-called new economy. And no one really gave a toss about the ones who had less skills and joined the ranks of the unemployed.
But we still wanted to sell them stuff!
Fortunately Enron came to the rescue.
What? Enron?
Well yes, because when Enron (with a bit of help from 9/11) derailed completely faith in the stock market and the corporate debt market the US government had a snazzy response. They made money dirt cheap. One of the upshots of this was the massive explosion of credit.
Well that was good for everyone wasn't it? It stopped businesses going broke (even General Motors failed to go broke for seven years sespite being in terminal decline all that time - so long as someone would lend them money they would be OK). Even better, we didn't have to give handputs to the poor - because we could instead lend them money! They could stay consumers because we could lend them the money to buy the stuff that our businesses were having made aborad by Indians and Chinese workers! Even better, all the new wealth in China was finding its way back into government securities.
Bankers thought they had found nirvana. Everything went up forever, making them very rich, and so long as we could lend the poor money to buy stuff the poor didnt feel poor at all! Not only were they relatively happy, they were buying our chinese made stuff!
Shareholder value has a lot to answer for, but so does cheap credit.
Business cannot avoid ther fact that profit and not social conscience or any thought for wider society has caused the problem to magnify through the transfer of jobs out of the country.
Business says: "That's the government's problem! Not ours!"
Then business says: "The government spends too much money and fails to solves the problem!"
Well I am sorry business, you cannot have it both ways... as we will see you were happy enough for the givernment to step inefficiently in when it suited you..
Of course the chicken came home to roost. And it pooped all over the furniture. When the credit bubble burts and became the credit crunch it wasn't just that banks stopped lending money to poor people to buy things they couldn't afford, it was worse. They stopped lending to each other! (in case the others had even more toxic debt lent to people incapable of repaying and were about to follow Lehman's down the tubes).
So at some stage the government stepped in. many governments stepped in. The same governments that currently employed bankers decry for being wasteful in social welfare. They paid out a few TRILLIONS to calm the markets and prevent a total meltdown. Even rich people sometimes think the government handing out cash is a good thing. Because guess what?
It wasn't the poor that benefited. You may think that the total implosion of the banking system would have been bad for everyone. But it wouldn't.
The folks sleeping under Charing Cross railway bridge on cold winter's nights wouldn't have noticed at all! Over time they would have noticed increased demand for the spaces - but hey, they had experience on their side and were already in possession of the best spots! The middle class had not had their street survival skills honed like these guys.
Of course no one minds that the governments did what they did to save the middle classes and prevent post apocalytpic anarchy.
Of course they all do mind that a side effect seems to have been that many of those responsible for the mess were paid millions by the government instead of being locked up. I have said many times that the only two explanations of how bad the mess was are deceit and stupidty. And that the stupid defence shouldn't make you eligible for a bonus.
But now the bill has to be paid.
And guess what?
The rich don't want to pay it! (Like we are shocked)
A man earning a million ppounds thinks the £400k tax they pay is enough.
I myself find it hard to care if that man(or woman) takes home £500k or £600k. It alwasy occurs to me that they have plenty left.
The only reason i can think of for not making them pay £750k tax is that the practical reality is so many would do a bunk (the rich, unlike the poor are prtty mobile) and that we'd lose all the tax they paid and that would be a bummer.
but you know its a pretty naff reason to pander to them.
Because while we pander to them society is not improving.
So, it is no doubt fair to say that we won't change society with a polemic, even one as long as this.
But I don't think we change society by throwing a bench through Santander's window either.
But the sans culottes and the Bolsheviks may disagree with me. And histroy says if you make the gap between rich and poor wide enough that eventually the bench trhough the window becomes the tip of the iceberg.
Many years ago the banking community's version of sub-prime lending was latin american sovereign debt. Needless to say, like most things in the theoretical free market (because we all know its neither free nor even transparent) the desire for profits led to more and more unwise lending...no need to go into the details think subprime and replace poor home buyers with Mexicans and Paraguayan goverments) until it all went tits up.
Many high level negotiations were held. The president of Mexico left one set of obviously acrimonious discussions with the banks and made a classic statement.
"Bank of America cannot make Mexico disappear, but Mexico can make Bank of America disappear!"
I loved it then and I love it now.
The rich cannot make the poor disappear. The only thing they can do is decide how to make them less poor. You tried lending them the money and that didn't work.
Society can work, and competitiveness and ambition has a role to play, but if you think darwin will solve the problem you need to find a way to live for a few more thousand years so you can reap the benefits.
So long as our response is to make the less well off pay the price we need to be less shocked if they toss a few benches through a few shop windows.
Polemic over...
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