The Power of caring in business.

How the profit motive inhibits wealth creation.

 

Earlier this month, I challenged a long held assumption that has been deeply entrenched for decades in the Anglo-Saxon capitalist model: that human beings are by nature selfish. Indeed, the economic model we have constructed is not only based on that assumption, but encourages and thrives on that behaviour.

Without repeating my earlier arguments, I have always found it interesting how the undeniable logic that benevolent intent is a far more appropriate and sustainable driver for national, company and individual prosperity and well-being, is so readily accepted in discussion with groups of informed people.

In my workshops as a consultant, I found this to be readily so, even amongst hard line capitalist sympathisers.

Watch this excerpt from one of those workshops, and you’ll see what I mean.

http://www.youtube.com/watch?v=SWFihHm5ZVc&feature=youtu.be

Unemployment: Back to basics.

Are we becoming increasingly detached from the plight of the unemployed?

Every quarter the statistics confront us. Every quarter they are met either with some comfort or concern. For a brief while, they linger in the headlines, capture some sound bites of ivory tower pontificating and then get reconciled with the “grand plans”, the NDP, government action, and company and labour cooperation and involvement.

Until the next set of statistics are revealed. Like the latest QLS figures which reflect a 100 000 loss of jobs in the first three months of this year, bringing the official unemployment rate back to above 25%. If you add those that have given up looking for work, then it is estimated that 4 out of every ten economically active South Africans are without jobs. They have to face a life of hopelessness under the double edged sword of no means and no meaning, of which the latter is the real sharp edge of the blade.

Tragically, most of them are youth who have little else left than political expression and street protests, a far more serious threat to our preciously held economic theories than socialist-capitalist debates in hallowed venues such as boardrooms, conference halls and media columns.

We have to isolate unemployment as our biggest problem, and not divert our attention to other problems related to it, such as poverty, inequality, crime, labour unrest, wage demands, race and class polarisation, service delivery, the Guptas and even education. Most of our problems will be substantially ameliorated by fuller employment. Of course, effective education and skills training will make more people employable, but for many destitute families even free and dysfunctional education is not free.

Some months ago, I wrote about the need for declaring a state of emergency around unemployment. It is worth repeating. The populist call for “economic freedom” may have died down with the demise of Julius Malema, and it has been thoroughly discredited in the minds of many because it has been presented and largely understood as an expansion of hand-outs and dependency in a growing and bloated parasitic state. Yet, convert the intention or understanding of economic freedom from means to meaning, from money to opportunity, and it becomes a very valid ideal.

Only hard line communists and radical socialists would argue that equality can mean anything else but equal opportunity. As such, it is the valued and inseparable companion of liberty and justice, the other main pillars of free and functional societies.

South Africa’s unemployment problem deserves the same urgency as political transformation did in the early 1990’s. It needs the same spirit of compromise and sacrifice that led to political freedom for all. Yet we seem to dither, locked in incessant debate in which the loud wailing of vested interests, collectives, institutions, politicians, power mongers, labour leaders, company executives and others, drown out the murmurings of despairing millions.

Our inertia regarding the unemployment problem must be at least partly due to a lack of real and tangible concern by society as a whole. It is simply seen to be “someone else’s problem” – that “someone else” being government, Trade Unions, or big business. But it is a discussion that should feature in households, at every company board meeting and on the agenda of any collective from any walk of life. Until each one of us can say that we have more than a casual interest in the problem, we cannot be exonerated from the eventual outcomes.

I came to this thought after a discussion with my landlord and farm manager, Adrian Sutton, who has become passionate about trying to uplift the local community. Within the first few minutes we became despondent and overwhelmed by obstacles, yet not totally convinced that nothing could be done. In short, a seed has been securely planted for the establishment of a communal farming venture based on many experiences elsewhere – including rooftop growers in Johannesburg.

Agriculture must certainly offer the greatest opportunity for employment and sustenance. If we can move our attention away from grand plans of land transformation and ownership to communal and co-operative farming, we could make valuable contributions to both food security and employment. Much is already being done. We simply have to build on it.

When one hits an immovable obstacle in any challenge, one simply has to go back to the basics and strip the problem of all of its esoteric niceties and ideological posturing. Unemployment is such a problem.

In creating tangible value and productive employment, sound economies have to ensure freedom of choice, free moving prices, and maximum number of competitive suppliers.

Out of the box, perhaps even outrageous considerations for the three economic estates are:

· Government must be less obsessed with creating jobs and more focussed on creating the conditions for others to create jobs. In most cases, this will mean simply getting out of the way of private initiative, especially small and medium enterprises where, as Ryk van Niekerk wrote recently, it will need to revisit its draconian legislation that is discouraging mom-and-pop ventures.

· Organised labour has to come to terms with the need for less rigid labour legislation, the fact that developing and employing a large unskilled labour pool may require sacrificing developed country employment standards, and forfeit adversarial wage negotiations for flexible pay linked to wealth creation and greater job retention.

· Companies have to let go of their obsession with maximising shareholder value, which is more of a feature in the Anglo Saxon business model than elsewhere including Asia. The advantage to them is sustainability and a lower risk price for capital. Customer and market growth, as well as job creation and retention should be important criteria in executive remuneration.

Of course, there will still be dark clouds on the horizon, such as world economic conditions, slack demand and an unstable monetary system. We are simply too vulnerable to them – a vulnerability caused by structural and behavioural inflexibility.

The above suggestions will no doubt solicit a litany of comments from various ideological standpoints, and I concede that they all need fuller argument. But in the end, humanity’s greatest attribute for survival is caring for each other. This is not a soft, bleeding heart quality. The purpose of care is the enablement and empowerment of the receiver, not the creation of a lifelong dependency on the state or others.

Of course the final litmus test is willingness on the part of those being uplifted. That in turn will rely on three factors that are the crux of any employment relationship – involvement, engagement and incentive.

Of the three the first two are the most important.

Port Elizabeth Flood 1968

On Sunday morning, September the 1st, 1968, I was called by the SABC reporter on duty, Dave Gray, who said he could not make it to the office because the roads were flooded.

I was within walking distance and decided to stand in for him.

I will never forget that day. The few hundred meters to the news office on a hill in Cotswold was like walking through water. I had to cover my nose and mouth to breath. On arrival, the engineer on duty informed me that all the telephone lines were down.

What to do as a journalist -- without telephones (long before cell phones) and no transport? I discovered that a teletext machine was working and sent a message to the news room in Johannesburg that we were dealing with a major event, but I could not give more detail.

Sopping wet, I stripped down to my underpants...fruitlessly trying to get some life out of the four telephone lines there. On one, all I got was crossed lines and I realised that any party on the other side was somewhere in the city and could relate some of the surrounding details to me. One begged me to get off the line because he was sitting on his roof, and was desperately trying to get hold of an emergency service.

And so, from many mouths of panic struck P.E. Citizens, I was able to get a good picture of the havoc being wreaked out by 420 mm of rain that had fallen within 12 hours. At about noon, a police Saraccen pulled up in front of the office and four bedraggled police officers with no ranks less than colonel, and a number of traffic cops, including the Chief traffic officer, pounded on the door.

Still only in my jocks, I was informed that P.E. was facing a real crisis and the only way to reach the ctizens to inform them to stay indoors, was via the Radio. A number of public announcements followed on air and the first comprehensive report took up nearly the entire bulletin of Springbok Radio's World at One.

It was only two days later, on the Tuesday, that some of my colleagues made it to the newsroom.

Oblivious to the fatigue that had set in, I grabbed my Super 8 Cine camera and shot several reels of film.

They had been laying dormant for years, until I recently had them converted into a digital format and was able to compile this short documentary of the aftermath.

http://www.youtube.com/watch?v=u1leO6N2YJs&feature=youtu.be

The struggle of the self.

How a questionable assumption of human nature has polarised humanity.

It’s quite amazing how the great debate about economic systems, interactions and policies, comes down to one simple yet significant assumption about what truly motivates the human spirit and individual endeavour.

It is on that assumption that we have constructed the world around us. To question the assumption means questioning that whole construct. And to conclude that that assumption may be wrong would mean that the whole construct could be wrong and inappropriate.

In short, are we by nature, instinctively and intuitively selfish or generous?

We have to answer that rigidly because in the end it distils all of our behaviour, systems, and the world as we know it into one simple question: “why?” And before we respond too quickly and simply, consider that the question has occupied the minds of great philosophers, prophets, mystics, scientists, humanists, psychologists and sociologists for centuries.

So it is puzzling to say the least that economists, politicians, analysts, policy makers, company boards and yes, journalists so readily interpret the world on one narrow view as if it’s the absolute truth – that all our actions are driven by self-interest – if not as an innate condition of being human, then as a condition of an economic being…creating a schizophrenic creature of a Mr Hyde in our working or transactional environment and a Dr Jekyll elsewhere.

Supporters of the self-interest assumption often point to Adam Smith’s Wealth of Nations, the founding work of modern day capitalism as indisputable testimony that inherent selfishness is the “invisible hand” that creates prosperity. This ignores his more profound observation in his Theory of Moral Sentiments that: “How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.”

To compound matters, we have different interpretations of the concepts themselves: on the one hand there is self-interest, selfishness, self-gain, greed, egotism, inward looking, etc. On the other we have enlightened self-interest, generosity, charity, empathy, altruism, outward looking, etc.

Our understanding of the three economic estates of capital, labour and state, is based on the raw immediate material self-interest assumption – capital is profit driven; labour is wage driven; and government is tax and revenue driven. (The latter becomes more burdensome and ominous when it becomes increasingly re-distributive.) Because they all have to feed off the same carcass, they automatically become predatory and adversarial, their behaviour held in check mostly through rules and regulations which in turn are often biased towards one or other vested interest within the three estates.

There’s a very simple self-evident equation or logic in economics that says if people by and large are taking more than they are giving, they will create deficits. If they create deficits, they create poverty. Conversely, if people by and large are giving more than they are taking they will create surpluses. If they create surpluses they create prosperity. “Giving” in this equation is not about money, but about giving of the self: time, effort, innovation and creativity. Clearly, the “what’s-in-it-for-me” or self-interest filter will constrain willingness to look beyond getting and more likely create the first condition which leads to poverty, or, as we have seen, increasing imbalance between the three constituents.

Our facile and unquestioning accommodation of the material self-interest motive has institutionalised this behaviour, creating huge and burdensome collectives and collusions to wage war on each other, with government acting either as a benevolent or malevolent referee, depending on which side it blows the whistle, or often simply in its own interest. We have gone as far as to write the “profit” or “wage” motives into the fundamental tenets of ideology. In turn their measurements are used as indisputable proof of self-worth.

It’s no longer simply about behaviour but about a “system” as scenario planner Clem Sunter implied in a recent article on the death of the private sector. Yet, some years earlier in his book “Beyond reasonable greed” he urged companies to adopt “a more caring, holistic philosophy”. “Adopting” self-regulation and all it implies such as Triple Bottom lines, sustainability, governance, Mervyn King et al, have been around for decades and have done very little to contain greed on steroids. Indeed they have simply led to more regulation and government involvement.

The term “reasonable greed” is an intolerable oxymoron. At what point does reasonable become unreasonable and who defines that point? Greed is an addiction and one sniff of it sets the addict on a path of never having enough. Like drug abuse, not even laws will contain it. Attention will always follow intention. Vested interests simply become more adept at surpassing or breaking the rules, often even writing them.

It comes down to the one simple question I posed earlier: are we by nature malevolent or benevolent creatures? Adopting either one of these assumptions will have a profound impact on the world around us: the degree to which we reject or encourage certain behaviours; what we measure as important; what we tolerate as lawmakers, jurists, voters, consumers, customers, employees, employers or shareholders; what we teach in our schools and homes; our priorities and engagement at work and many more.

The real difficulty in answering the question is that ultimately there can be none other than “the self”. Everything we do affects the self so no action can be independent of self-interest. What lies at our deepest desire or intent will find expression in motives, purpose, goals, actions and interactions. One assumption that appears logical is that the deepest need for most of us is inner peace and contentment. It is the search for that state, so beautifully articulated in Viktor Frankl’s Man’s search for Meaning, that creates a world of great diversity in behaviour and structures which in themselves can be volatile and inconsistent.

In turn, that expression can be broadly condensed into two approaches in a specific moment – malevolent or benevolent, means or meaning. Our lives are made up of countless individual snapshots of choice leaning either towards malevolence or benevolence, feeding the evil or the good wolf, in an on-going subconscious experimentation to achieve an inner state of serenity and of meaning.

How on earth can we extrapolate an “average” of all of those trillions of moment to moment choices by 7 billion people to arrive at an absolute truth for all human behaviour? But I’m going to risk it and contend that on balance we are a benevolent lot – without which humanity would surely have disintegrated. Some believe it is already well on its way.

I have argued this case regularly in “The Human Touch” since I started writing this column and have cited volumes of research and experiences to support it. Of course, I still can’t propose the premise as if it were the absolute truth. Neither can those who argue the opposite, yet they have seemingly won the day in defining humanity in such gross terms and have constructed a world that encourages that behaviour.

Indeed, here’s a challenge: name me one great achiever, apart from an adventurous gold digger or oil discoverer, who has made a meaningful difference to mankind and where this was the result of a clear unambiguous stated intention to maximise profit. I’m not saying you won’t find one, or that gold diggers and oil discoverers have not made a difference – only that you may struggle in your search. One can, of course, name an infinite number whose focus on self-gain led to extreme suffering for many around them. I, on the other hand, have cited quite a few business and other heroes who were driven by something else than money. And recent Harvard research bears this out.

If our true value lies in our capacity to make a contribution to others, then we should be highly offended when people make assumptions about our malevolent intent. And if we define generosity as being not about hand outs, but about giving the best of oneself in a given moment, then generosity is the ultimate act of self-interest.

That is the invisible hand.

Profits of doom?

Are we feeding a constipated capital cow at the expense of other interests in society?

Let this article begin with a quote: “It's time to focus on creating value, not profit”.

Now before you run for the hills screaming “not that again!” in the belief that I’m simply repeating an often covered subject in my writing, let me source that quote as being from Henry Blodget, CEO and Editor-In Chief of Business Insider, a rapidly growing business and tech news site and also a former top-ranked Wall Street analyst.

It must have taken a lot of courage for Blodget to challenge the profit motive in the land of libertarians and tea parties. I know all too well how one touches a raw, neurotic and often hysterical nerve when one questions a concept that has somehow become a bastion of ideology and an economic system. After my article of a few weeks ago on the magic of markets, I had hoped to have put to bed the assumption that I am a reborn Marxist, but a subsequent article on the feasibility of employee owned companies brought out a lunatic fringe again that labelled the idea as “communist”.

The question posed in the headline to this article is certainly valid. Blodget is one of many that reflect growing disquiet about the imbalance in national economies – a disquiet that started way back in the early 80’s with Freer Spreckley’s Triple Bottom line. Blodget puts it more convincingly than I may have done: “Since the late 1970s, when American companies were fat and complacent, the focus of American capitalism has been on the bottom line. Spurred on by activist shareholders, private-equity firms, and bonuses based on stock prices, corporate managers have become obsessed with maximizing quarterly profits.” He illustrates it with this graph of post war American company profits to GDP:

On the other hand, post war wages as a percentage of the American economy have hit an all-time low.

South Africa has traditionally tended to follow the American model and has experienced a similar trend.

In defence of executive pay and as evidence of companies being well run, Labour economist Loane Sharpe celebrates the fact that the real risk-adjusted return on capital of South African listed businesses is currently 10% – the highest in the world. This may be too narrow a view, especially if one considers the next, ILO sourced graphic which shows that the labour share of national income has been declining over a similar period.

Indexed at 100 in 1970, this shows a 15% decline in labour’s share of GDP to amount to just over half in recent times.

There is perhaps no greater threat to free markets and freedom of choice than this imbalance which is clearly one of the root causes of global concern around income disparities. As Blodget puts it: “By focusing their entire effort on the bottom line, many American companies have reduced their value to the other constituencies that great companies serve, namely: customers, employees, and society.”

At the same time one must concede that there are many other trends that have contributed to the wage/profit swing, among them:

· The shrinking of “blue-collar” work with increased technology.

· The growth of financial service industries.

· Global restrictions on the movement of goods, services and labour, while volatile capital is free to move around like “a wrecking ball”.

· Greater centralisation and power of global capital and the squeezing out of small businesses.

· Blunted domestic competitiveness and customer focus.

· Intense paper speculation, exploding debt, a contaminated banking and money system, and volatile stock markets that often force executive management to focus on matching short term investor earnings expectations.

So it may be one-dimensional and narrow to argue that the skewed growth of profit is “squeezing out” other interests. But the conundrum that this leaves for profit maximisation champions is that corporate savings continue to mount (some R600bn in S.A. alone) and executives get paid exorbitant amounts simply to feed a constipated corporate cow with more profit carbohydrates.

What must really irk is the negligible “trickle down” effect and that the long held argument that profit maximisation is the invisible hand that feeds all, is patently untrue and a gross warping of Adam Smith’s original postulate.

This has never made sense to me. There’s a lack of logic in trying to lift prosperity and wealth with such a narrow profit lever that sees the other constituents of wealth creation as a burden to it. The more appropriate understanding of wealth creation sees the main economic estates of business, labour and state as partners in this effort.

To use another physics example, it is always easier to move an object by pulling it rather than pushing it. Profits, wages and government income should be pulled by serving the market, not by pushing them through one narrow interest. This is the difference between the popular M.B.A concept of “exploiting” the market as opposed to serving it.

The failure to achieve a greater and more fitting spread of wealth in many Western capitalist countries today is not the fault of free markets, but rather inappropriate behaviour during the last four decades or so. Identifying and recognising the failure is the easy part. Analysing and finding consensus around the myriad of causes is far more difficult and I have hopelessly inadequately touched on only a few.

But the most difficult of all will be avoiding default recourse to government intervention – often in collusion with corporate capital; or unilateral and coercive wage adjustments. That would be the absolute worst response. The former will simply see capital swallowed by a bloated, often corrupt, inefficient monster. The latter, already featuring strongly in current belligerent wage demands, will have obvious “unintended” consequences in increasing production costs and inflation, blunting competitiveness, reducing jobs and indeed exacerbating the imbalance. They will simply fuel the adversarial posturing, and in that conflict capital always wins.

With monetary and fiscal discipline, and a much tightened legal framework to protect competition and counter collusive, centralised and anti-competitive behaviour, we should be able to rely on free markets themselves to restore balance. But this exposes the biggest flaw in the profit driven argument: it has been defined as a “system” in itself. The profit motive speaks to intent and behaviour, not a system. To be profit driven (or even wage driven for that matter) is not the same as being market driven: the former is purely self-centred, the latter inherently noble. The laws of legitimate transaction (supply, demand and price) are there to nurture the latter, not to warp it.

The way we think individually and collectively creates the world we experience. We simply have to ask ourselves what is the true nature of ourselves and what is best for the human condition. Are we instinctively and intuitively benevolent or malevolent?

Therein lies the key and a subject for a future article.

Trevor Manuel: A struggler’s Lament.

The challenge of ending life support for an ugly legacy.

A picture comes to mind of a group of bereaving family members surrounding a hospital bed and struggling to come to terms with the diagnosis that the patient is brain dead.

We’ve seen the scene many times before, mainly in those infernal TV hospital shows. Usually only one of the family elders is prepared to whisper “perhaps we should pull the plug!” The rest of the scene is mostly left for the next cheesy episode.

There are many, and not only of my generation, pigmentation and gender, who have felt for some time that the plug should have been pulled on the Apartheid legacy patient at least a decade ago.

By now you have probably seen or heard the dubious report posted on the social media blaming the previous regime for a local water shortage because they built the dams too big. It’s most likely a bit of April fool’s day satire that I am using only as a reflection of an issue that has become surreal on both sides. The questionable extent to which “the legacy” is blamed for most of our socio-economic malfunctions, and the hypocrisy that it covers, is nothing short of April fool’s folly.

There’s little point in old hacks like me shouting “pull the plug!” at the TV screen. But when one of the family elders hints at it, then it is time to listen. When a very senior ANC veteran, of the ilk of Trevor Manuel comes close to considering that prognosis then it should cause more than a stir amongst more than a few.

Perhaps I have read far too much into Manuel’s speech. Perhaps he did not mean to say much more than that civil service family members must stop obsessing about the patient and leave the hospital bed to get on with their work. But even that arguably comes close to being “insensitive” to emotions that have so overwhelmed his family. It is simply not the done thing, even for stalwart detractors amongst outsiders. And it is a big ask, especially when the family is stuck in and driven by two of the five stages of grief – anger and bargaining. In turn those stages hide far less noble causes – such as greed, power mongering, ineptitude, lack of accountability, false promises, political expediency, fuelling unrealistic expectations and hypocrisy.

The key question is whether Manuel’s lament will influence the writers of the next episode in our metaphorical hospital series. Will they come close to pulling the plug on a patient whose mere existence has given them so much material for episode after episode? Or maybe just reviewing the treatment? Or will Manuel himself become a sacrifice to keep the life support going, especially since the head of the family, Jacob Zuma, amongst others has come close to chastising him publicly?

The story seems to be getting “more legs” with the Centre for Justice and Reconciliation adding its voice for termination. It certainly deserves more “robust debate”, despite its hysterical sensitivity.

The question is whether the family will listen to objective physicians about how or indeed whether the patient should be treated from now on. The “legacy” argument has become a great inhibitor to rational thinking, and even respected academics and experts often skew information to argue against withdrawing life support for that patient, deflecting discourse from the real issues.

To take the medical metaphor a bit further: it’s been said that a very large part of medical treatment today is treating the side effects of other treatment. Sometimes the treatment can be worse than the disease. The debilitating side effects of treating the Apartheid legacy are becoming distressingly apparent. Only one of them is Manuel’s complaint of a large degree of dysfunction in government service at all levels. Other traces can be found in the “failure of Black Economic empowerment”, (to use the words of Moeletsi Mbeki); corruption, crime, cronyism, inequality, and worst of all growing racial distrust.

Whether valid or not, blaming others is always the simplest way of defending our own shortcomings. It is also the most counterproductive, obvious and disingenuous. As long as we blame the past for our own defects we will be trapped in inertia and self-destruction. The status of victim is seldom a noble one – especially when it is self-defined. Self-accountability and taking charge of our own lives is being eroded at an alarming rate. We can perish in blame, or prosper in self-accountability

Justice is best defined as love without emotion and attachment. It’s been said that it is at the highest order of human values because justice has to be informed by the others such as integrity, honesty, fairness, compassion, generosity and love. Justice is seldom fully achieved through a haggle such as Codesa, where the parties approach it for gain rather than contribution. Such a process may reach consensus, but seldom justice. The subsequent TRC also could not achieve justice, only a measure of fragile reconciliation. If justice is not achieved in the moment it can create an incubator for growing resentment and polarisation and ultimately a worse state than before. Then the only option is to move to the final stage of grief which is acceptance.

Of course we cannot go back and we have to recognise the need for creating a more equitable society taking into account the lingering effects of history pre and post 1948. But maintaining in perpetuity a balance sheet of assets and liabilities between races is clearly divisive and counterproductive. That balance sheet too needs re-auditing to recognise that people of all colours paid a high price to maintain the previous lamentable state The only way forward is to agree on a common vision which all approach in a spirit of giving rather than getting – and also not in the spirit of “you first”.

Letting go of the past is one of the most basic of life skills, applicable as much to a nation as to an individual.

For us it means taking a very malevolent brain dead patient off life support.

Marikana and the boxer.

How a former prize fighter and trade unionist could potentially have averted a tragedy.

I’ve written about Joe Scanlon before, and have been reminded of him again as the Marikana events unfold in the Commission of Inquiry at Rustenburg. When I think of Scanlon, a caricature comes to mind of a stocky, powerfully built man with Popeye type forearms.

He also reminds me of Tom Murray. There are probably only a few of us left that will remember that irascible, firebrand boilermaker and six times president of the then Trade Union Council of South Africa. One of the ironies that I remember well after listening to his impassioned plea in the early 70’s for the inclusion of blacks into the union movement, was the debate that followed in the Cape Town City hall that job reservation should be maintained to protect union member jobs.

There is something very familiar with the hypocrisy of that debate and the behaviour of the Union movement in South Africa today: the protection of incumbent benefits to the exclusion of those outside the employment ranks. But there was also a major difference: Unions then were run by salt-of-the-earth workers, with little material self-benefit apart from a passion to serve their members.

But back to Scanlon. The caricature may not be all that ill-fitting. He was an ex-prize fighting steel-worker, and a Trade Unionist who rescued the American steel plant where he worked from going under. It was a simple formula of cooperation with management in cost cutting implying worker sacrifices. But it was a plan that would outlive Scanlon by decades and is still the basis of various bonus schemes today.

Scanlon was a product of the depressed 30’s, and a subsequent war period which gelled management and labour into a common purpose of the war effort. It also saw the birth of the Rucker plan by academic and author Allen W. Rucker which differed from Scanlon in focussing not on profit as much as on value-added or wealth created. But both were from an age where cutting costs and saving companies from bankruptcy were the primary concern, often leading to a reduction in employment to the benefit of those still employed. It’s a highly unpalatable yet commonly used formula in South Africa today, where the number of unemployed should be of far greater concern than the rights and benefits of those employed.

By all accounts, South African companies need little help in cost containment mostly at the expense of employment. According to the latest Labour Market Navigator the real risk-adjusted return on capital of South African listed businesses is currently 10% – the highest in the world. There seems to be sufficient encouragement for both labour and capital to continue working on an out-dated 20^th century model based on the supremacy of capital and the commodity expression of labour.

A strong union movement finds its succour in the assumption of an intrinsic adversarial relationship between labour and capital. And owners can cope with troublesome and costly labour as long as the final solution, cutting heads, is in their hands. It’s only when dramatic events such as Marikana take place that the vested interests of both owners and trade Union structures are shaken to the core.

It is doubtful then that a Scanlon plan would have prevented Marikana. A Rucker plan may have been more appropriate, but then individual pay, and not the payroll exclusively should have been linked to value-added – a model that I have championed over many years.

But Scanlon, and Rucker for that matter should not only be seen as a system. It is the philosophy itself, more than the “plan” that still today gives these efforts their true value. Both were convinced of the power of cooperation between management and workers and Scanlon in particular believed that much distrust existed between labour and management because there was a lack of information sharing. He believed given information about the company and a chance to participate in helping solve problems the average worker would contribute to the success of the company.

That could have prevented Marikana.

I am convinced that given the opportunity, means and ability especially at individual company level and without coercion or malevolent seduction from outside, there is still a substantial reservoir of goodwill and enthusiasm on the part of labour to be involved. Labour can and should play much more than a subservient role.

We have seen this in many other instances apart from flexible pay systems that permeate the East. The world’s biggest labour co-operative, the Spanish Mondragon Corporation was founded on the efforts of a Catholic priest and some students. From making paraffin heaters, the co-op has developed into one of the largest multi-national business organisations in Spain with nearly 85 000 employees worldwide and an annual revenue exceeding €15bn. Labour receives 75% of wealth created. Mondragon has 10 basic cooperative principles that would have die hard profit maximisation capitalists shaking in their libertarian boots: Open Admission, Democratic Organisation, the Sovereignty of Labour, Instrumental and Subordinate Nature of Capital, Participatory Management, Payment Solidarity, Inter-cooperation, Social Transformation, Universality and Education.

In Ohio, in the U.S., what began with the efforts in 1977 of a young steelworker Gerald Dickey, has developed into what Maryland academic Gar Alperovitz describes as “many, many worker-owned businesses in the state, and the support system for building them is one of the best in the nation. There is also a very energetic organization, the Ohio Employee Ownership Center at Kent State University that provides assistance to workers and others who want to establish such firms.” Mondragon itself got involved in Ohio in 2009.

Consider the efforts by a handful of employees at Aurora who bravely but vainly fought against a scavenging group of shareholders, then the power inherent in a committed group of workers becomes nothing short of inspiring. Or Albert Koopman who in the early 80’s handed over much of the destiny of his newly founded Cashbuild to a rebellious workforce.

We’ve had some highly questionable attempts in South Africa at involving employees in ownership through this curious delusion of the “worker-capitalist” and ESOP’s. Best known, is the much vaunted KUMBA scheme, where workers went on strike within weeks of becoming semi-millionaires through the scheme. Why the DA still insists on making this a key feature of their economic policy is baffling.

The difference between my earlier examples and the misguided efforts we are witnessing at home is patently obvious: the initiative in the former came from workers themselves. They were not “seduced to think like owners” by a mistrusted shareholder body and their mostly overpaid executives – a group that, driven by shareholder value and short term profit maximisation, has earned the misgivings of a large body of the informed public globally. Even more puzzling is that shareholders themselves are prepared to pay a high cost for this folly.

Another bit of hypocrisy in South Africa is the reluctance of Cosatu to invest their own or Union controlled pension funds in taking over control of companies. Labour correspondent, Terry Bell says “the rule was obviously applied to avoid the potential for embarrassment, should union members end up striking or otherwise protesting about the actions of a business owned by their own investment company.” In the same article Bell sees NUMSA potentially breaking this rule by its proposed takeover of Scaw after its sale by Anglo to the IDC.

But that objection hides a much deeper truth: more than any other country in the world we are locked in an early 20^th century expression of the relationship between labour and capital, despite all the motivational bells and whistles that have spawned a huge empire of “human capital consultants”. These, and the main actors involved have a powerful vested interest in keeping it that way.

The real truth is that employees in worker owned companies see themselves as workers first, and owners second. There is sufficient proof that they can do so without sending companies to the wall and inhibiting their ability to raise capital.

We can only hope that along with 44 others, the voices of Scanlon. Rucker, Dickey and a Spanish priest will echo among the commissioners of the Marikana enquiry and those involved in the current wage bargaining sessions.