Oikonomics: a social life of money

Education and risk

It appears that teachers have beensquirreling away cash in the good times and now the government wants it back. My initial reaction to this story was my usual revulsion at the weird behaviours created by the bureaucratic attitude to budgeting; i.e. if you didn't spend it this year then you will get less that amount next year - plus we will claw back what you didn't spend. All sorts of requests for work come through about the time of 'year end' as a result which are merely designed to maintain budgets and rarely add any value as projects in themselves.

However, on reflection while this may well be the cause of the 'claw back' we should probably look more closely at the intentions headmaster had for that money before being too judgmental either way (the £500m or so is the amount being axed from University budgets next year reputedly - maintaining the political myth that young minds deserve more help than older ones, utter rubbish in my view - young minds think they know everything, older minds are more fertile because they realise they don't - and if you think you quickly pass you prime in terms of 'ideas' just look at Zygmunt Bauman as a man for whom age is no barrier to original thought).

If this money is being held back for a rainy day then yes it does represent poor value for the tax payer. Smoothing out the up's and down's of budgets for consumables is probably much less efficiently done at an individual level (as people will tend to purchase less efficiently and will generally over-hoard rather than save just what they need taking money out of the system which should be used to convert young minds into productive thinking machines). However, if these headteachers are displaying a latent entrepreneurial spirit of 'investment' then we should we be applauding their initiative? - perhaps. I am not entirely convinced that headteachers have the experience, intuition and research to make good risk decisions on behalf of their students and as is found in other areas entrepreneurial intervention in the schools system, it is very hard to measure or predict the results of risk capital with such soft materials to work with - i.e. minds and in reality most of the money is sunk into infrastructure which is often questionable in its effectiveness at delivering improved educational results, although it does benefit local house prices.

And there we have the problem of using the word 'investment' to justify spending on infrastructure. Investment implies some sort of risk and return equation based on a bet that something successful will arise. The trouble with infrastructure, particularly 'public goods' like educational establishments or energy capacity is that the state cannot 'risk' that infrastructure not happening. The investment which best fits with infrastructure is a bond or debenture which provides a steady and ideally unexciting return over the long term of the infrastructure usage rather than providing risk capital style returns. My perception of PFI is that it often works more like a risk capital style return (i.e. at a significant premium to pay for the private risk) when in reality it is just a gilt edge security based on a very necessary and important public asset like a hospital. By mixing up metaphors and terminologies we get, again, all sorts of weird financial consequences.

So back to our entrepreneurial educationalists. What are they investing in? What are they risking? What is their return? If it is infrastructure then again hoarding cash and building stuff is highly inefficient. If it is 'investment' then surely they should be investing in the soft stuff - the kids in the schools themselves - to create radical new outcomes (and probably some failures) which benefit society as a whole. Who would argue against fasttracking the education of Newton or Einstein? What would the impact be if children were able to bid, zopa style, for individual investment to better themselves educationally?

Sadly, I think this is just a case of rainy day money that would be better spent elsewhere and not hoarded for peace of mind. However, if anyone is up for seeing what individual students could do with £1000 grant to expand their minds and make the world a better more enlightened place, drop me a line.

Reinventing the firm

As Bauman often elucidates, re-invention is the "problem" of the modern condition. If change is the norm then change becomes necessary to maintain our position and meaning in a fluid modern society. Now Will Davies(Potlatch) in conjunction with Demos has taken aim at the models of corporation which were supposed to bring us prosperity in our newly chastened "modern" age – specifically the Plc and its mantra of shareholder value – but patently failed in their governance of risk when it comes to banking at least. 

One response from the FT is to question not the models but the fallibility of the individuals which as I mentioned yesterday seems to be where much of the blame is landing currently. I think there is a wider question about the ways (and the whys) in which corporations and individuals take risks for personal and collective advancement and use knowledge to inform those risks. I was having a conversation last night about the experience of a credit card company which took the UK by storm in the 90’s and early Noughties by offering lower rates of interest to encourage people to maintain their credit balances month to month. Their mantra was total re-invention of the business every 5 years. They did this by deliberately replacing their graduate intake completely on a 5 yearly cycle. The rationale was that experience and ‘knowledge’ of how to do things evolved from risk taking to risk avoiding over that period and therefore such individuals were no longer useful to pushing the business forward.

Time and again you meet corporations where the ‘culture’ of the business and its purpose are held in the heads of a relative few (usually the entrepreneur founders – as was the case in Egg )or in the advertising agency (in the case of many large fmcg businesses) where the creative director (usually) lasts longer than the brand manager. Short termism and selfish risk taking becomes a function not of the way in which people are rewarded (i.e. bonuses) but in the way their career progresses. Fluidity of career becomes the norm creating specialization of the workforce not seen since Henry Ford’s time, as people seek their niche and hold on to their very specific experiences as the only way of both protecting their current value and creating their own future value. Generalists are few and far between in such organizations (witness the comments about the current state of the civil service as an example) who can join up knowledge sufficiently to make strategic decisions and understand a more complete picture of what is going on in a particular organization. Employee ownership in itself does not encourage such development, it requires enlightened managers as well as management structures. Although at least such models do encourage a degree of solidity rather than change for change’s sake.

The challenge for both PLC’s and Employee owned business is to see the pursuit of knowledge as a path to creating value for the business not individual power. Weber might state that such a goal is an impossible ideal our capitalist society but without it the lifespan of businesses (and their ability to create long term social value for their employees and society as a whole) will always be limited by their ability to use knowledge to adapt to a changing environment rather than affirm their internal cultural beliefs, prejudices and positions of power.

Grant McCraken is talking a lot about the need for a ‘chief culture officer’ to enable the corporation to maintain some of that perspective on both the meaning it infers and the meaning (and therefore value) it creates. All companies, PLC’s or otherwise, have a culture which tend to turn inward and conservative unless it can produce a critique of its own cultural production and bring about a re-invention of its point of view rather than merely renewing and re-inventing the arrangement of the deck chairs.

What would Barthes make of our newly (macro)prudent money?

"Demystification" and "giving consumers more information to make ‘informed choices" are part of the government’s proposals for creating ‘micro-prudence’, complementing to our new ‘macro-prudential’ world. Aside from the growth in extreme sports around the vicinity of Canary Wharf as over-stimulated, over-sexed and over excited bankers try to let off steam in the world of "Prudence" (whether the FSA or BofE become the ‘minister of raised eyebrows’) we still seem to be living in a remarkably unreflective world when it comes to thinking about what money is and what it could be.

Barthes would recognize the reality of myth making and political discourse which underpins this narrative of ‘prudence’ – one that seeks to control the individual to protect the stability and security of the state which is being written into the myth of both the market and money. It is the narrative of money as housekeeping conjuring images of pickle jars full of pennies.

But where is the challenging critique? Why are money and markets treated as natural and not seen for its essential historical /cultural nature? Surely markets should not be treated like some natural phenomenon to be tamed or insured against like a hurricane; they are social and cultural things. In seeking to ‘demystify’, we mythologize; in seeking to make ‘transparent’, we merely jargonize (just read the KFI of your mortgage for example). Barthes’ acute critical pen unlocked the way everything from detergent (and "deep" cleaning) to wrestling were just mythologies – historical accounts masquerading as natural science – and boy could we do with his analysis now.

The dominant mythology of money is ‘money as utility’. We need money like we need water, energy and of course, now, like we need broadband (!!!). Water, energy and broadband are seen as too important and necessary for our ‘well-being’/’votes’ to completely hand over to the market to provide. Although we have lived with the (largely failed) attempts to put them in the domain of a ‘free market’, I don’t think that anyone would feel that it had been a success or that they even operate as ‘markets’. I am still flabbergasted by the tiny minority of people who realize a) that there is an energy market and b) can describe how it works. The best yet was a person who thought that her Scottish Power came south to her home by truck….

The problem with this narrative is that it places the control of ‘production’ not with individuals ‘making money’ from their entrepreneurial spirit or sheer physical labour, but in the hands of banks who have the status of nuclear power plants – prone to overheating and toxic spills, but it would make a real mess of everything if you let them fail!

These huge credit factories are seen as making our everyday lives possible channeling money around the grid as efficiently as possible. Of course the reality is very different with bottlenecks, overloads and meltdowns happening right and left. The result is that we no longer attach an individual moral or even social responsibility to our USAGE of money. Just as the idea of using energy sustainably leaves us feeling cynical and blaming others so our use of credit money has much the same issues.

Demystifying money would not involve giving me more information about its role as a utility (and how to wire myself into the grid without electrocuting myself), but instead would challenge the dominant politically derived mythology which sees money purely as an economic good transmitted around the economy creating health, wealth and happiness. It would establish ways to demonstrate how money can be created and used in less intensive forms – ‘organic capital’ if you like. Now I am not advocating the type of localist politics of the currency innovators (i.e. treating the only ‘real’ community as a geographically local one – another myth) but rather encouraging the growth of virtual communities (such as zopa.com) who allow individuals to use and control money outside of the national grid/macro economy. Just as with energy, these initiatives would make us less dependent on global insecurities affecting individual well being but perhaps more importantly would enable the next generation of entrepreneurs to emerge who would see money as an essential social good created not in the ‘dark satanic mills of Canary Wharf’ but out of the relations and exchanges of everyday life. As for what this could look like in reality? Watch this space!