Monday, 29 August 2016

The moral tyranny of the free market

As the Labour Party battles out who will lead them into the next election defeat, it becomes clear that the dominant theme in the party is now one of 'nationalisation' of industries and services. Both candidates advocate taking the railways into national ownership, a call more easily made than done, as the recent Observer editorial argued.

Those were the times - Nationalisation in 1947

In a space best characterised as an echo-chamber, the rank and file of the Labour Party are competing for the most extremist positions, underpinned by what Hannah Arendt once called the 'emancipation from reality'.

However, the more interesting question is why leftists have such a visceral hatred for the market in the first place. Marx himself was by no means disinclined to let market forces do their work in the inevitable demise of the capitalist order. And Lenin himself used the free market in the brief New Economic Policy period to improve people's material lives following the deprivations of the Russian Civil War. So, why do socialists a la Corbyn have such as dislike for free markets?

Much of this appears to do less with where Corbyn and others want to take the country than with where they have been. Corbyn seems to cherish the old nationalised railways exactly because the image of British Railway branded carriages criss-crossing the country offers the certainties of old times. His and his supporters' desire to nationalise industries are motivated more by the past than any exciting vision of the country's future.

A second reason may however be a fundamental misunderstanding of the moral nature of the free market. When asked about the role of private providers in the NHS Corbyn reliably talks about profit in healthcare (conveniently denying the fact the GPs are running business as well which need to make a profit too). Corbyn does not seem to understand that profit is not the only, and often not the main motivator for people to set up businesses. The main reason why people become self-employed is because it gives them the opportunity to shape their own destiny and be in control of their lives.

Running a business is thus a fundamental manifestation of personal freedom. As people establish businesses they exercise a right which is tied up with personal responsibilities, such as making and keeping mutual promises and entering contracts. Running a business thus has a moral side as people operate in a contractual sphere which imposes civic obligations on them which in turn allows them to disclose their moral commitment to civil society. The recent focus on those who have tried to escape their contractual commitments (Philip Green e tutti quanti) only reinforces this point as they are the exception to the norm.

It is this moral aspect of economic activity that Corbyn and his left wing comrades refuse to acknowledge when they argue in favour of nationalising industries. Where such a policy would lead is clear for everyone with only a cursory knowledge of the sophisticated discussions amongst Marxists and Revisionists since the 1880s. Or, alternatively, if once prefers the Soviet Russian debate, one may look it up in Trotzky's critique of Stalinism. Nationalising an industry only achieves one thing. It puts the 'means of production' into the hands of a bureaucratic elite whilst removing the notion of personal responsibility for success and failure of economic activity from everyone. Where everyone owns everything, no one feels responsible, and the result is usually a steady but inevitable decline. Anyone remember British Leyland?

Sydney Opera House - Expressionism at its best

Sydney Opera House from the Ferry
Foto: Axel Kaehne

Modernist architecture can be as much a revelation as it is sometimes a disappointment. Most modernist building tend to be something of the latter because they fail to relate meaningfully to their surroundings. Norman Foster's IB tower in Malaysia is little more than exactly that, a very tall building without much thought about its environmental context. Zaha Hadid built impressive buildings but they never managed to link in, or indeed cared much about their neighbourhoods. And then there is the external versus the internal. Hans Scharoun's Philharmic Hall, Concert Hall and Library in Berlin are all of a kind externally, but the real wonders start once you enter the buildings.

Hans Scharoun's Philharmonic Hall - Foto: Manfred Brueckels

Perhaps this lack of connectivity to the physical context is the nature of the beast, something that modernist architecture is preternaturally disposed to. This may particularly be the case with expressionism. Expressionism has mainly remained a dream confined to the drawing boards of architectural firms, presumably because the issue of fitting expressionist buildings into their environment is tricky. Where expressionism has made it into reality, the buildings tend to be in areas that have no residential or urban context in the first place, such as Berlin's Congress Hall.

Berlin Kongresshalle - Foto: Bertholt Werner

Sydney's opera house is an exception. It was built adjacent to the central business district, an area that glorifies in mainly non-descript and forgettable glass and steel buildings. However, the Sydney Opera House is at the same time slightly removed from the district by virtue of being located on the tip of a promontary. This affords it a distance to the city that was put to some extraordinary use by the architect. The individual 'shells' of the House open up towards the city which gives those standing inside the house or those sitting on its front steps a breathtaking view of the Sydney skyline.

The view from Sydney Opera House towards the Central Business District
Foto: Axel Kaehne
In the night, people leaving a performance at the opera or concert hall get the impression that the venue somehow floats on the water, like something moored in Sydney Harbour. The sense is of something holistic that works well with its surroundings to impress. Hence a rare example of expressionist architecture done well.

Monday, 22 August 2016

The gender pay gap - new evidence

This morning a new report by the Institute for Fiscal Studies on the gender pay gap is being released. It comes along some new evidence about the structural reasons for the pay gap.

The new evidence and reports make fascinating reading, not least because they attempt to identify the point at which the pay of female workers diverges from that of male workers in companies. This point appears to occur at the time of child birth when women traditionally take up child care and either drop out of employment temporarily, or work part time. Once the children reach the age of 20, women who go back to full time employment the wages of women never reach the wage levels of their male counterparts.

If this points to the need for structural changes such as providing better child care for families and/or more flexible parental leave, this is certainly not the whole story. Interestingly, even before women take up maternity leave, the wage gap to their male colleagues is already 10 percent.

Once women are working part time, their chances of progression are also significantly reduced which points to a dilemma. We know that part time workers are actually more productive compared to their full time workers, but that does not seem to translate into better pay or equal opportunities to be considered for promotion.

If this all sounds gloomy and hard to tackle, however, it is worthwhile remembering that there is some good news too. The gender pay gap itself has reduced from about 28 percent in 1993 to 18 percent to date. Much of that is due to the increasing number of women in high paying jobs. So, whilst women's pay now increases faster than men's pay in general, the gap still exists. In addition, women in low pay jobs with no promotion opportunities do not experience any pay differential to their male colleagues in similar positions, which again illustrates the critical role of promotion and progression in generating the pay gap in the first place for higher paid workers.

It seems to me that to make progress on this issue, several things need to happen. First, the government should continue to provide additional flexibility for parental leave. The cultural shift in providing child care jointly by both parents still has not materialised, but incentivising both parents to contribute to this appears essential.

Second, the legislation to compel companies to provide transparency about salary structures amongst their work force is welcome as well. It will produce additional evidence and allow boards to take a hard look at how they perform on the issue of pay.

Last but not least, progression and promotion needs to be de-coupled from the amount of time you work, and linked to productivity, which would ensure that part time workers gain opportunities to progress as well.

Legislation is unlikely to make inroads into this problem, what is required is more a cultural shift at the work place.