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Where's the rational thought?

HOW do people in influential positions – and, for good measure, us little people as well – take important economic decisions? One would hope that all the facts of a given situation would be gathered, weighed, analysed, alternatives considered, and that then – and only then – a decision be taken.

This approach is, no doubt, often followed. But it would seem, all too often it is not.

Let us look at two typical examples.

The first was reported in Tuesday’s newspapers. It appears that thousands of job opportunities, especially in the agricultural sector, were lost in the second quarter of 2014. Altogether 39 000 fewer people (a loss of 5.5%) were employed in this sector than in the first quarter, and 73 000 (9.8%) fewer than in the corresponding quarter of last year.

Even more revealing are the graphs detailing the developments in other sectors. Without going into detail, it is clear that employment increased in the service industries, but dropped in the manufacturing sectors.

Of course, one may cite a dozen different reasons for this. But there is at least one important reason which needs mentioning: strikes.

The British economist Joan Robinson famously said: “The misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all.”

When I first heard this, I thought it was pretty cynical. And so it is. But it is also factually correct as having a badly paid job, is – shall we say – less bad than having no job at all.

Of course, this does not excuse exploitation in the first place. But it certainly puts matters in a certain perspective.

The recent strikes in the platinum, metal and agricultural sectors are cases where the strike leaders clearly did not properly consider the net result for their members. In all these cases strikes have contributed to the sectors shedding many jobs. We heard recently that Anglo American Platinum [JSE:AMS] is to all practical intents and purposes pulling out of the country.

Cynical political game

The strike leaders are either moved by their emotions, or they are playing a cynical political game in order to consolidate their position as a power on the labour market.

But one may also take a look at the bosses. Rational businessmen, one would like to think, would know that a happy and contented work force is loyal, and that such workers’ productivity would be higher, improving a company’s profits.

In the 1920s, Henry Ford was reproached by other car manufacturers for paying his workers too well. His answer was interesting. He treated them so well, he told his colleagues, because he wanted every one of them to buy a Ford motor car!

A Dutch weekly magazine, De Groene Amsterdammer, this week featured an article about the unrest among bank employees in the City of London. Almost as an aside, an anonymous senior bank official says (translated):

“Many banks create a culture turning around expectations. In such a culture employees do not do something because they believe in it, but because of the possible returns. When that expected return vanishes or becomes doubtful, these organisations disintegrate. That is precisely what happened in the past crisis years. Teams fall apart. It is everybody for himself. The minute you as an employer start having problems, all your people run away, instead of helping you. I call that a mercenary mentality. Terrible, yes, but the companies have created this themselves.”

Culture of greed

What this man is saying, is simply that banks (but, of course, it applies to most large corporations, also in South Africa) thought that they could buy the loyalty of their senior personnel with large salaries, bonuses, share options, stocks, whatever.

The little people, by the way - those whose daily grind make everything possible - were forgotten.

And, more importantly, the family atmosphere many companies used to have made way for a rock-hard corporate culture in which only one thing mattered: money. Profit for the company, yes, but more importantly, money for themselves. It appears that loyalty, the feeling that you owe it to the company to work hard, belongs firmly to the past.

If you want loyalty, get a dog, I remember a certain senior official saying a few years ago.

In this case also, the decision to go for a harsh maximum profit-seeking culture, it seems, is a short-sighted one. Certainly not a decision taken on the basis of proper research and mature reflection. The main engine is, simply put, all too often greed.

Well, money makes the world go around, they say. And so it does. No company can exist or grow without making money.

But all players in the economy – employers and unions alike – should sit back first, take a few deep breaths, and consider the net results of what they want to do. Before they do it.

Alas, rational thought is often not part of the decision-making process.

 - Fin24

* Leopold Scholtz is an independent political analyst who lives in Europe. Views expressed are his own.
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