Hunger Hurts. (July 2012)

JACK MONROE

Today has seen fourteen job applications go in, painstakingly typed on this Jurassic mobile phone, for care work, shop work, factory work, minimum wage work, any kind of work, because quite simply, this doesn’t work.

For reasons unbeknownst to me, this month my Housing Benefit was over £100 short. I didn’t get a letter that I know of, but I can assume that it’s still the fallout from the cockups made by the various benefit agencies when I briefly went back to work from March to May. Whatever the reason, it’s easy to work out that £670 of rent can’t be paid of £438 of Housing Benefit. So I’m a week in arrears, almost two, as by the time Thursday comes and the next £167.31 is due, there’ll still be nothing coming in. The Income Support went on keeping me afloat, briefly, as did the Child Tax Credit. Now I’m…

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What’s driving our inequality?

 

good economics actual economics

good economics : actual economics

If there was a one line answer for why inequality is growing, someone would have said it elegantly a long time ago. It seems the answer is a mix of systemic, economic and political factors, which I will wade through somewhat inelegantly below.

Trends – Global and Local

The Economist ran a feature late last year looking at the dynamics of income distribution. They point out that up until the 1970s, inequality within countries was largely falling, while inequality between countries grew. Globalisation and technological advancement since then have served to enrich the rich in developed countries (as their companies become global in scale), and the rich and middle class in developing countries (as markets open and jobs are outsourced); while hurting the poor and middle class in developed countries (whose jobs disappear overseas) and leaving the poor in the developing world largely unaffected. The result is a decrease in inequality between countries, and an increase in inequality within countries.

One of the key dynamics that comes into effect as we globalise is that of “superstar economics”: The argument that the best in any given field will earn disproportionately more than the second best in a globalised, technologically enabled set up. Nassim Nicholas Taleb describes this effect in his hugely insightful book “The Black Swan.” The argument goes that a hundred years ago, a modestly talented footballer could earn a good living as local people would be willing to pay to see them play. Nowadays, everyone can tune in to Barcelona v Real Madrid to watch the best in the world. This crowds the averagely talented player out of the market, while grossly inflating Christiano Ronaldo’s pay, as his audience grows exponentially.

The sectors that have become less equal are the same ones that are growing the quickest. Urbanisation and industrialisation (particularly in the developing world) mean that more and more people are working in a winner-takes-most “extremistan” environment. In an argument first put forward by Simon Kuznets in 1955, this sectoral change in itself has become a driver for increased inequality.

One of the most headline-friendly modes of discussion of inequality is around CEO compensation. There is ample evidence of CEO pay mushrooming in the last thirty years, with a growth rate 127 times greater than the US industrial average since 1978. This idea of superstar economics goes a good way to explaining why: Intuitively, CEOs run much larger organisations. Interestingly, looking at their pay compared to their next two most senior lieutenants, they have risen from 40% higher in the 1980s to 150% higher by 2000. This suggests the same dynamic dictates the relationship between the 99% and the 1% as the relationship between the top 1% and the top .1%.

And the politics

In 1955, Simon Kuznets was confused as to why inequality was falling. The industrialisation of society mentioned above, combined with disproportionately large returns on capital (held by a small proportion of society) should have seen inequality growing. One of the key mechanisms for inequality falling that he proposed was the flow of political power from the super-rich to the urban poor.

To quote fully:

“In democratic societies the growing political power of the urban lower income groups led to a variety of protective and supporting legislation, much of it aimed to counteract the worst effects of rapid industrialisation and urbanisatuion and to support the claims of the broad masses for more adequate shares of the growing income of the country” (Kuznets 1955: p17)

Can anyone seriously say today that political power has continued to flow from the wealthy to the urban lower income groups? At a time when Barack Obama, campaigning for the Presidency in 2012, can overtly state that “We can be outspent and still win — but we can’t be outspent 10 to 1 and still win”?

At a time when Saez and Pickety have demonstrated that 93% of the money from the economic recovery in the US between 2008-2011 went to the top 1%; with 33% going to the top 0.01%?

Whether pursued consciously or not, it is impossible to avoid the conclusion that inequality within countries is growing today; and the forces pushing it – be they globalisation, urbanisation, market-based compensation or a shift in political power toward the super-wealthy, are not dissipating any time soon.

Inequality, Happiness and how Economics got us lost

lost

It’s increasingly obvious that one of the issues that emerges from our current social set up is growing inequality. No longer the domain of marginal voices on the far left, talk of a crisis in capitalism and inequality that is economically inefficient is now firmly mainstream. This post will look at why equality is a worthy goal to pursue in its own right.

Economics’ focus

Orthodox economics tends to focus on growth (and to a lesser extent, employment) as the primary goals of economic policy. This wasn’t always the way however.

Jeremey Bentham, a pioneer of the discipline in the Eighteenth century argued the goal of economic policy should be to bring about the greatest happiness of the greatest number of people. What happened next is crucial. Typifying the best and the worst of economic thinking, there was a move to produce a simpler, intellectually more elegant model. Rather than attempting to measure all the intangible inputs to societal happiness, it was assumed that people would spend their money in a way that maximised their personal happiness. Following this logic, giving people more money to spend increases the amount of happiness each individual can buy, and thus the most efficient way in increase total societal happiness is to increase total societal income.

As with any classical reductionist model, it is contingent on a number of assumptions. The passage of time has made these assumptions less and less tenable.

1. Increasing income will increase happiness

This was difficult to measure initially, but advances in neuroscience and survey methods have given us reliable measures of happiness. While increasing income leads to increasing happiness initially, beyond a certain point the relationship breaks down – as argued by Richard Layard – and demonstrated in the graph from the World Values Survey below.

Graph of income against happiness from the World Values Survey

The upshot of this is that increasing the wealth of the wealthiest has minimal impact on their own happiness.

2. If a country maximises income, wealth will trickle down and questions of distribution will take care of themselves

This assumption has its basis in the work of Simon Kuzntes. Kuznets completed a study showing an inverted u-shaped relationship between GDP and equality. As countries grow, they become less equal initially. Kuznets suggested that a tipping point is reached however, and wealth is redistributed. Kuznets completed his study at a time when data was not available for any country over time. Instead, Kuznets used a cross-section of countries at one point. Despite being well received, the theory has failed to predict what would actually happen.

More importantly as time series data has become available,for individual countries the “Kuznets curve” has failed to manifest itself.

While Kuznets’ hypothesis is now widely discredited, the orthodoxy of focusing on growth and ignoring equality remains.

3. Happiness comes from growth in absolute income – not growth in our own income relative to peers

While this initially seems logical, there is a range of research showing the rivalrous nature of income – again excellently outlined in Richard Layard’s book, “Happiness“. Habituation and social comparison mean that beyond a basic level, absolute income is less important than income relative to peers.

4. The market will lead to a fair distribution of resources

Fairness matters to people’s happiness; and acting in a fair and cooperative way has been shown to activate neurotransmitters in the brain associated with happiness. For reasons discussed in the next post, inequality is growing, and increasingly there is a sense that the way the market distributes income is not fair. The last two points taken together mean that current policies that increase the wealth of the wealthiest can actually have a detrimental effect on societal happiness.

Taken together, we are pursuing happiness by maximising GDP, allowing the market to determine a relatively fair initial outcome and trusting the Kuznets curve to correct this initial distribution as necessary.

But maximising GDP is increasing the wealth of the wealthiest – whose happiness is largely unaffected by this increase; the initial market outcome is no longer perceived to be fair, decreasing everyone else’s sense of happiness; and the mechanism by which we thought society would correct this distribution turns out not to exist. These are clear signs of a failing and a need to intervene to ensure a more equitable outcome.

While classic economic theory might have produced seemingly fair outcomes up until now, that is less and less the case. The reality is the middle is being squeezed, the rich are becoming ostentatiously wealthy and the poor are being left behind and isolated as never before. Whether that is down to social dynamics, crony politics or something entirely random, its not good for us as a society. We have to recognise that a laissez-faire approach is no longer producing a fair, equitable or happy result.

Antifragility

 

antifragile

 

I have just finished the first book of Nasseem Nicolas Taleb’s latest offering: “Antifragile”. His previous book, “The Black Swan” not only predicted the market crash of 2008 with eerie accuracy, but introduced the idea that our world is disproportionately created by and governed by extremely rare and unpredictable “black swan” events. Taleb argues that our entire concept of risk and probability is based on the idea of understanding what happens 99% of the time, and ignores these extreme events. He argues passionately for a change in how we think about probability, risk and the impact extreme events have on our world. It is an incredibly powerful piece of emancipatory thinking, and an idea that I believe will still be spoken about and taught hundreds of years from now.

Antifragility picks up where the Black Swan left off, with Taleb identifying it as a practitioners guide to living in a world of Black Swans. Taleb is characteristically cavalier, identifying this book as his “central work,” with the Black Swan as a “backup or junior appendix”.

The central concept of the book is anti-fragility. If fragility is a property of a system whereby it is weakened when exposed to volatility or stress, and robustness means an object or system is largely immune to the same, then antifragility is the property of a system or object being strengthened by volatility and stress. Inanimate objects Taleb suggests are largely fragile, or perhaps robust. Living beings and complex systems on the other hand are anti-fragile; they need chaos and disorder to survive and indeed, it is the lack of chaos that causes damage.

There are many aspects of the first “book” of antifragility that appeal to me. The central concept makes a huge amount of sense, and as with most great ideas, leaves you wondering why nobody has thought of it before. Taleb links anti-fragility as a property of complex systems to non-linearity and overcompensation. Fundamentally, it makes sense for a system to evolve or adapt to stress by preparing for a more extreme shock in future. His description of how fragility at one level of a system leads to the emergence of antifragility at a higher level is also intuitive and well backed up.

I am not fully convinced by is Taleb’s assertion that stress is required for growth or innovation in a complex system. Taleb takes the position that when we are comfortable we have less of an incentive and are less likely to innovate. As such, innovation requires the application of stress. I don’t believe stress is the only, nor even the best way to consciously pursue change in a complex human system.

Perhaps its linguistic misinterpretation on my part, but my issue with the word stress is that it seems to pre-suppose an inability for a human system to realise change from within. Stress implies an external force over which we have no choice, because people don’t choose stress. The necessity for stress opens up the door for top-down “burning platform” managerial approaches to change covered in my previous post.

I prefer the word challenge. While being stressed can elicit an unexpectedly positive reaction, it can also have an equivalent negative effect; and can lead to excessive risk aversion in future. People can and often do choose to be challenged. Being challenged usually involves being stressed; however choice has a fundamental role in how we choose to interpret a stressful situation. We choose to be challenged and if that brings stress, it is our own doing. If external stress is wrought upon us, the reaction is liable to be less positive.

On the whole there is a lot to like and I look forward to finishing the book.

Don’t amputate your fist – what the UCI need to learn about culture change

This is the second post I have dedicated to the UCI in light of the Lance Armostrong affair. In terms of an organization and a total culture needing change, I’m not sure there is a better example right now – and certainly not one getting the press scrutiny of the UCI. It’s a fascinating case to look at.

Pat McQuaid

On Monday, the UCI accepted the USADA’s case against Lance Armstrong and stripped him of his seven Tour de France titles. This might be seen as a big positive in the fight against doping in cycling, and a sign that Pat McQuaid, the organisation’s embattled President is moving in the right direction. And yet, that is far from the case. It has been easy to “throw Lance Armstrong under a bus” in the current climate. What is far harder to do, and where McQuaid has been totally unconvincing is in taking accountability for the UCI’s own role in the fiasco.

In January of this year, Pat McQuaid and Hein Verbruggen (former President of the UCI) announced their intention to sue Paul Kimmage – a well known cycling journalist and anti-doping campaigner. Kimmage famously opened Pandora’s box on the Lance Armstrong affair when he completed a seven hour interview with Floyd Landis, a former team mate of Armstrong who made a number of direct allegations about doping. McQuaid and Verbruggen are suing Kimmage claiming their “reputations have been seriously damaged” by the article and citing their “annoyance”. Interestingly, they chose to sue Kimmage (currently unemployed) personally, rather than the publications that ran the interview, (L’Equipe and The Sunday Times). Kimmage has explained his thinking for why they have done this:

“Clearly they don’t want this addressed properly in court, because if they did, they would have addressed their letter to L’Equipe… L’Equipe would have sent along their finest barristers and presented a defence of this. They would also have brought all of the witnesses that you would need to defend it.

“Clearly they [McQuaid and Verbruggen] don’t want that to happen, which is why they have targeted me rather than the newspapers. That would be my reading of it.”

Why is this relevant? Because this type of reaction has typified McQuaid’s handling of the entire Lance Armstrong affair: Bullish and defensive when challenged personally. And because the UCI has enabled the culture of doping and secrecy that has brought professional cycling to this juncture. The point is presciently made by Landis in his interview with Kimmage:

Kimmage:              How many of the decisions you made after that (Landis’ assertion that the UCI covered up Armstrong’s positive doping result) were coloured by this experience you’ve had with the UCI and their relationship with Lance? How big a factor was that in the decision you made to dope?

Landis:                   That’s all of it. If I had any reason to believe that the people running the sport really want to fix it, I may have actually said ‘If I wait long enough I’ll have the chance to win without doing this (doping) but there was no scenario in my mind where in my lifetime I was going to get a chance to race the Tour and win clean. So, all of it had that as a backdrop.

 

Talking about organizational change, Martin Bauer of LSE argues that resistance is very much like pain in the body; uncomfortable to deal with, but a valuable signaling mechanism. We may not enjoy it, but pain is essential for our survival, and its value to us should not be underrated. Kimmage’s criticism is a vital part of the cycling community. Rather than trying to understand what actions the UCI have taken that have caused this criticism and doing something about it, McQuaid is trying to ostracise and silence him; a bit like amputating your fist because you hurt it punching a wall.

Kimmage continues to act as a thorn in the side of the cycling hierarchy, giving this stinging radio interview on Monday. More to the point, he has recently asked difficult questions of this year’s Tour winner, Bradley Wiggins and Team Sky. While some would argue he is sucking the joy out of British cycling at its finest hour, if the last few weeks have shown us anything, it is that organized cycling needs the cynical eye and honest questioning of Kimmage and others like never before.

And this is the key point. Cycling needs a massive culture change and core to this is cultivating a new set of behaviours – discipline, measured cynicism and brutal transparency. In vilifying the type of behavior that cycling desperately needs to catalyse, McQuaid is choking this change to death before it has a chance to take root. Kimmage himself sums up the cultural implications best:

“We talk about omerta all the time in the sport. This is how they enforce it. Is this what they would say is part of the fight against doping? I don’t think so. This is all about the omerta, and enforcing the omerta.”

It is a leader’s job to manage meaning, to put words to a new positive vision of the future and to demonstrate integrity by following these words with meaningful action. Only one of these two men is acting as a leader for cycling at the moment, and it’s not Pat McQuaid.

A book-burning-library? Stoking controversy and changing conversations

Loving this story about successfully changing a conversation. It highlights the hidden power of language in how we think about the world. On the face of it, this conversation is about both saving a library and increasing taxes. It should be possible for people to hold both of those concepts in their head at the same time when discussing the topic. The reality though, is that by focusing on only one aspect of it (taxes) the other aspect (saving a library) can be occluded, even made invisible.

One of the key principles of Appreciative Inquiry is that the first question asked in any change is fateful; the question you ask, the issues you focus on and the stories you generate fundamentally shape the direction of conversation and the change that will follow.

Language and thought are more tightly coupled than we often think, and choosing a focus for conversation, and specific words to bring that conversation to life are far more important in change than we often give them credit for.

Employee Engagement – Still talking about the same thing, right?

 

An obscure “Blade of Glory” quote popularised recently by Jay-Z and Kanye But while Chazz Michael Michaels was talking about “lady humps” the same conversation might just make sense in the context of employee engagement.

As a concept, engagement has its roots in the work of Iban Mayo and the human relations movement. Contrary to the prevailing scientific management wisdom at the time, Mayo stumbled upon the somewhat obvious fact that merely treating employees like humans (with a gesture as small as adjusting the lighting in the workplace) can have a significant impact on productivity.

The concept has evolved over time, with notable input from survey based interventions and organisations like Gallup. But while the numerical focus has undoubtedly helped the idea to mature and guided organisations toward specific interventions, it is hard to avoid the conclusion that the real meaning of engagement has got lost in its practical application. Just about every employee will recognise the phrase, but try asking for a definition and see what you get. Provocative? Gets the people going?

Most research into the topic comes to the firm conclusion that the biggest driver of “engagement” is employees finding meaning in their work. This can be traced through:

  • Organisations having a greater purpose and vision,
  • Employees connecting with this purpose,
  • Understanding how their personal job contributes to this larger purpose
  • And having the tools, resource and mandate to complete their job effectively.

This is all very sensible. The difficulty when it comes to practice, however, is that organisations tend to focus on “quick wins” and easily measurable improvement plans – because we all know “what gets measured, gets managed”.

Many organisations focus on the bottom two points, with the result that to many, employee engagement has become a confusing mish-mash of making sure everyone has a pen, letting people wear jeans on a Friday and holding strictly scheduled briefings, where a corporate powerpoint presentation is recited to uninterested employees.

So what would focusing on a purpose and an individual employee’s relationship with that purpose look like? Here are three thoughts:

Define the organisations larger purpose (beyond enriching shareholders)

There are plenty of good examples, including Unilever, Melotte and Puma. Wal-Mart, suffering some particularly bad press in 2005, made an extra effort in its response to Hurricane Katrina. In the process, CEO Lee Scott noticed a massive increase in employee engagement. Attributing the increased engagement to a sense of purpose, and deciding he wanted a work force as enthusiastic as that all the time, he decided to do some thinking around Wal-Mart’s larger purpose. Scott set a target in 2005 to produce zero waste, have an energy supply that is 100% renewable and only produce products that sustain our environment and resources. This has been Wal-Mart’s sustainability mantra ever since.

Give employees the opportunity to create their own meaning around that purpose – and encourage two way dialogue

To make their sustainability mantra meaningful for their 1.3 million employees, Wal-Mart created a tool called My Sustainability Plan. This allowed employees to take the concept of sustainability and create meaning for the idea that was relevant for them. Regarding two way dialogue, Brighter Planet have produced research suggesting organisations where employees are able to make suggestions are six times as likely to have a very effective engagement programme.

Enable all employees to contribute to the larger purpose – and not just in a token way

Beyond personal sustainability plans, Wal-mart have used their Sustainability goals to re-invigorate their lean six sigma thinking. Engaging entire teams in sessions to re-design packaging and reduce waste has led to dozens of implemented ideas and millions of dollars saved.

Organisations looking for that magic bullet of discretionary effort, productivity and on-fire-employees would do well to look at their role in society and how their employees are able to engage with that. I don’t know about you, but more than having pens, or dress down Friday, I find that provocative. It gets me going.

Joining HR Dots… Corporate Social Responsibility and Employee Engagement

 

Image from sustainabilityadvantage.com

The above is the result of valuable piece of research conducted in Canada by Hewitt and Canadian Business for Social Responsibility. It looks at the link between employee engagement and employees’ perception that their employer is socially responsible.

It’s one of those relationships that makes perfect sense but is too often overlooked: The most powerful driver of employee engagement is people finding meaning in the work that they do. If an employee’s work is their cause, then of course they are going to go the extra mile to do it well!

So compelling were the above results that Hewitt have since included perceptions of CSR as an item in their engagement survey.

Hopefully this is symptomatic of a move to incorporate ideas about the social impact of an organisation in the employee engagement debate.