Tuesday, May 8, 2012

Labour and a new World economic order.

Can a redefined “labourism” create a new viable global economic model?

Two words, one concept, is all it takes to produce a revolutionary and exciting potential blueprint for a new economic model that breaks free from hackneyed ideological rhetoric, yet is rooted firmly in logic and accommodates best known practices. And they have come from an unlikely but authoritative and widely experienced source: that of Bobby Godsell, Chairman of Business Leadership.

Singing the praises of labour in a recent article in Times Live, he used the term “wealth creators” in referring to the 50 million people in this country. “Work” he says, “has always been a central and valuable part of the lives of men and women. From hunter-gatherer societies, to settled agricultural communities, through the industrial age, and now in the knowledge society, the capacity to create value in a way that improves the individual's life circumstance has been central to the human story. Homo Faber - man the maker - is as central to this story as Homo Sapiens - man the knower.”

He then puts labour at the very heart of wealth creation: “Work is about creating value. The best definition of entrepreneurship is the process of combining resources in new ways to make more. This more, in order to be sustainable, must create goods or services for a customer in a way that brings acceptable benefits to the provider. This, indeed, is what real wealth creation is about”.

My interactions with Godsell go back to the days when he was Human Resources Chief at Anglo American and when he and N.U.M. founder Cyril Ramaphosa were regular guests on TV news and actuality shows. It does not surprise me that despite his subsequent “capitalist” public image he has always held a somewhat different view about labour from his executive colleagues and contemporary capitalist moguls. But what has surprised me is his denunciation of the current economic model and its “side-lining” of labour.

He writes: “In the past few decades, a mind-set has developed, particularly in Anglo-Saxon capitalism that has viewed employment in precisely the opposite terms to those described above. As we moved to fund-manager capitalism and a focus on short-term returns, companies that cut costs dramatically were seen as winners. Often the easiest way to cut costs was to reduce employment.”

I first used the concept of labour as “wealth creators” in my earliest basic economic courses for company employees. But it was not even my idea. It came from a barely literate participant in one of my pilot programmes who made the connection after I explained the process of wealth creation or adding value in the most basic of terms. It showed me once and for all not only how simple the concept of wealth creation is but how easily the mantle is adopted by employees -- and with pride. It is not only “an entrepreneur” that creates wealth, but entrepreneurial behaviour, a willingness to make a contribution, which can be displayed and unleashed at all levels within the labour ranks or as individuals, self-employed or unemployed.

In this context, the term “labour” means all “doers”, from sweeper to chief executive.

Ultimately, only doing something (including rational thinking), and not simply owning or investing, creates wealth. For it means transforming one situation, circumstance or set of resources, into another. It is the oldest economic concept known to mankind – predating even trade and dating back to purely self-sufficient individuals or families. When barter and trade became part of social co-existence, then a “value” or price could be placed on the process itself.

Since the beginning labour has been the centre of creating value. Yet, only in rare pockets, or time frames in some countries, have we seen labour adopt this central and dominant role. Under the known systems, labour has been enslaved either to capital or governments.

Today still, the concept of “labourism” is not broadly defined as potentially another economic model, but rather as an activist movement within the understood ideologies, as a class war, as a struggle for worker’s rights. Despite his criticism of capitalist behaviour in modern times and some useful suggestions on social and individual behaviour adjustments for a better employment environment, Godsell understandably does not offer an answer to the need for breaking down current ideological paradigms and putting labour onto the pedestal it deserves.

The hurdles are quite daunting. We have to at least start with recognising the huge deficiencies in the labour market which in its present commoditised form simply cannot capture the three dimensional essence of labour. One dimension is skills and qualifications; the second is willingness and passion, and the third, the most important by far, is simply that the value of labour, as in all things is not determined by its own needs, ability to mobilise, haggle and extort, but by the usefulness to someone else of what it collectively does – for the customer, the market.

The conventional labour market places most emphasis on the first commodity dimension, and rather crudely. Some recognition is given to the second dimension, again mostly inaccurately by focussing on shareholder rather than tangible customer value, through bonus and merit schemes. But the third and most important, that the value of those efforts is ultimately determined by what the end customer, or market, is prepared to pay, is largely ignored. I have in a number of previous articles suggested some practical ways this can be done, even if only moderately and at an individual company level, through concepts such as common purpose, common fate and fortune sharing.

Labourism implies the unthinkable to most labour champions at present: embracing as a collective a market orientated approach. It has to be willing to allow its collective value to be determined by its usefulness to others, the contribution and difference it makes, the value it adds to other people’s lives. This, we know, is volatile and seldom set in stone. Real labour flexibility implies an ability of collective adjustment. This can be done while still accommodating a differentiating template for the supply of and demand for skills and qualifications.

Capitalism has (falsely in my view) claimed to be the exclusive champion of free markets. The real essence of capitalism is not market led but profit led and capital dominated, to the extent that it has created devious instruments for delinking wealth creation from tangible value based on contribution to the broader market.

We have made a huge leap when business leaders such as Godsell, entrepreneurs, investors and others, can acknowledge the basic tenet that labour is at the heart of all wealth creation.

All it needs to give expression to a new world economic order is for labour itself to accept the risks, responsibilities and accountabilities that go with claiming this position.

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