The end of the self-defeating miners’ strike in 1985 led to the somewhat fundamentalist right wing government imposing severe restrictions on the unions’ rights to engage in industrial action. Despite the 13 years of Labour rule, those restrictions were never undone. So it remains extremely difficult, within the law, for the union movement to mount any general industrial action. However, the wholesale nature of the current government’s expenditure cuts, presents a once in a life time opportunity for the unions to mount a hundred or more individual legitimate trade disputes, which could, to all intents and purposes, look very much like a general strike. The unions hope this will be the appearance of their London demonstration at the end of March, which they expect to attract a million supporters.
The pattern of technological progress has been found to be surprisingly consistent. New technology has to clear various hurdles before attracting funds for its commercial development. A successful project that gets fully exploited grows fast, all the time getting detailed improvements and added features. Eventually, progress begins to slow, returns from further R&D diminish and the technology begins to stagnate, before being replaced by something totally new and different which starts the whole process off again. The graph of this progression is the S curve, starting at the tail of the S, going through a rapid growth and tailing off, before being replaced by a new S.
About 30 years ago, when Friedman’s fixation on maximising shareholder wealth was beginning to be widely adopted, S curves were a trendy form of strategic analysis. They had been applied to many industrial sectors, studying the introduction, development and replacement of technologies, all following discernible S curve progressions. However, the idea was not then applied to theoretical development.
An article in the current issue of Harvard Business Review, by eminent Harvard Business School economist, Michael Porter, and his business partner, consultant Mark Kramer, claims to be showing ‘how to reinvent capitalism – and unleash a wave of innovation and growth’. The secret is “Creating Shared Value”.
It criticises the ‘outdated approach to value creation that has emerged over the past few decades’. That ‘outdated approach’ might be summarised as short term shareholder value maximisation – the target of much criticism in other posts on this site. Porter and Kramer propose a “new conception of capitalism”. But, despite the rather breathless, teenage language, it all boils down to an increased orientation to the usual candidates: concern for the wellbeing of customers, employees, suppliers, local communities, and also for the firm’s role in depletion of key resources, especially water and energy, and its role in polluting the atmosphere and thus, probably, contributing to climate change. So what’s new?
Neo-classical microeconomic theory, especially in its more recent fundamentalist manifestations, has done immense damage to the real economy while nurturing the parasitic financial sector, as recounted from time to time elsewhere on this site.
Various alternative approaches have identified and addressed problems created by that theory. Welfare economics, the economics of social balance, and what is referred to as behavioural economics, have all sought to modify how the neo-classical maximising model operates. However they have not provided a clear and simple alternative to neo-classical mathematics. So the neo-classical model prevails and will survive all such challenges. Utility maximising economic man and the profit (or shareholder wealth) maximising firm, operating within an assumed to be efficient market, will continue to be accepted as the solution to maximising economic growth and social welfare. The obvious inequity of distribution between rich and poor, both within and between nations, will continue to be regretted as necessary to the utilitarian result. Moreover, it is argued, care for the environment could be more readily financed by a successful economy, rather than by one which is struggling to survive.
The economic mainstream has flowed on its capital oriented way with relatively little deviation despite its manifest limitations, errors, omissions and downright falsehoods. And despite the occasional disasters to which it gives rise.
In the middle of last century, J M Keynes corrected some of the more apparent errors of the classical model, but his aim was improvement rather than revolution. He did argue powerfully that ‘the madmen in authority’ should accept the maintenance of full employment as their moral responsibility, but renegade he was not.