I recently wrote critically about the fallacy of composition, meaning the idea that individual ‘economic’ acts do not add up to social economy because what is true for a part may not be true for the whole.
To make the question live, lets consider the current practices and arrangements in relation to financial literacy. Surely it is axiomatic that an economy consisting of financially literate people will be a healthy economy … indeed one way of defining what financial literacy essentially consists in would be to say that it is the understanding which leads to socially functional financial behaviour. Put the other way round, the global financial crisis must be a reflection of our societal financial illiteracy.
Unfortunately this logic is not applied among those for whom such considerations ought to be paramount. Instead the operating thesis is simply as follows: financially literate individuals are those who cleverly use their understanding of current arrangements to ensure the best outcome for themselves. But best here means best on an individual level, in isolation from wider events, and based on the idea of saving the most (which is tantamount to capital valued in the abstract). On the societal level a completely other set of considerations are thought to come into play. Responsibility for keeping the whole show on the road is given to policy makers who, notwithstanding the narrow perspective of this view of financial literacy, have to put matters rights when the actions of individuals don’t add up, normally this involves legislating, regulating, penalising and reallocating resources. The same person might in his private life be pursuing ‘policies’ who natural consequences on a societal level will be financial turmoil, while in an official capacity endeavouring to apply the correctives that allow society to avoid breakdown. Can this really be called financial literacy? Isn’t this just financial schizophrenia? Its like throwing rubbish onto the street and then being outraged by the mess there, while at the same time declaring that the responsibility for keeping streets clear of litter cannot be undertaken by anyone but an officially designated street warden.
So what kind of financial literacy would really add up to a whole? More to the point is whether an expanded conception of what it means to be financially literate is beyond humanity-at-large. You would be surprised about how many people, when responding to this question, reveal that such matters are beyond ordinary people. My response is that not so long ago writing was considered beyond ordinary folk, but as soon as people were given the opportunity to learn (and literacy became part of the curriculum) the consensus changed, so is it really so far-fetched to imagine that in the not so distant future we will all be able to practise double-entry bookkeeping based on the balance sheets of our own situations?
Wednesday, April 25, 2012
Tuesday, April 24, 2012
Global Economy or The Fallacy of Composition? A threshold question.
Global Economy - the single closed economic domain that humanity inhabits
The Fallacy of Composition - the fallacy of inferring that a property of parts or members of a whole is also a property of the whole
When a university supervisor argued that my thinking was flawed because I had failed to take account of the fallacy of composition, she meant that an individual cannot act in a social way because what is ‘social’ for the individual is not ‘social’ for society. Individuals ‘economic’ acts do not add up to a functional economy because what is true for the part is not true for the whole. It is easy to see how she arrived at this reasoning. The individual takes account of his own circumstances but in order to reckon with wider circumstances, one needs to move a level ‘up’ and in so doing the logic by which events operate may change. Seen from the logic of an individual perspective, one course of action seems appropriate; seen from the logic of a societal perspective a different course is needed.The argument is an old one in economics, going back to Mandeville’s Fable of the Bees and particularly emphasised by Keynes’ Paradox of Thrift.
The the fallacy of composition focuses on an interesting phenomenon. What is it that shifts when one changes ones perspective from a purely individual to a societal perspective and how in fact does one do this (if indeed one can), given that there is a threshold of some kind that the fallacy of composition identifies. The fallacy relies on the idea that the two perspectives are incommensurable.
It is probably obvious that I do not accept the assumptions of those who use the so-called fallacy to argue that individuals must necessarily behave in a way that is societally anti-social, though I understand that this is often used a stick with which to beat the marketeers.
But why mention it at all?
The rounds of ‘austerity’ which European states are seeking to impose and the arguments about their effectiveness are gradually bringing the point home that the consequence of everybody being ‘austere’ at the same time will not be a ‘saving’ for everybody. My saving will be your lost income and vice versa. Economically speaking it does not make sense to act according to oneself only, one needs to look at how one’s actions affect the larger picture and then think how those greater circumstances will, in turn, play back into one’s own.
The circumstances alluded to are primarily financial, that is to say they relate to our expectations of future events and there is a reflexive relationship at work here. George Soros, though he does not claim to be the originator of the idea, is the great proponent of reflexivity; you can hear him describing it here, for example. The essential point is that we are thinking participants in economic life and it is our thinking that will shape the economic landscape we are attempting to take hold of. The objectivity that one finds inherent in natural phenomena is found to be subjectively co-determined in the economic realm.
So who is on the other side of this reflexive relationship? With whom does one need to do metaphorical business. The simple answer is: everybody else! On the other side of each individuals economic activity is the global economy - not local or even national economy. The problem for proponents of the fallacy of composition in economic life is that between the two worlds is a knowledge threshold. The individual is held not to be able to do more than represent his own essentially ‘private’ perspective. The conventional solution is to bring in either the market or the state as the compensating element. In the first case, the selfishness of the individual is held in check by everybody else’s selfish activity and the whole result is, if not social, the best moderation of selfishness achievable. For those who deprecate the market and therefore champion the state, the selfish individual must be regulated by the oversight of those who can take a societal perspective because they represent, not their own interests, but a democratic mandate to socialise the individual. We are then left with two choices - global markets representing the aggregated myopia of individual selfishness or a global state (for such is concerted economic governance by treaties between states) representing the views of those who call themselves leaders and would regulate others.
But is the idea so far-fetched that an individual might choose to adopt a societal perspective, not instead of a purely individual one but as a complement to it? Do we not just need to step out of our own circumstances and see our actions from the perspective of the effects they will have on others too? Furthermore, can this be done alone or does it need to happen in association with others?
That may sound like a moral injunction but one could also ask whether in fact that is not the conclusion that one is forced to come to when one begins to look at the world in terms of balance sheets. Balance sheets are meaningless until they are related to the wider circumstances in which they find their correspondences. But as soon as they are placed in such an interconnected context they afford the closest representation we can conceive of what constitutes economic reality, a reality that can be seen both from within one’s own point of view and looked at from outside, as it appears to others.
It may not be ‘rocket science’ but there is a little ‘magic’ in the way we touch on this ever shifting boundary that we experience between ourselves and economic life at large. It is not fairy dust or magic wands we need to reveal to ourselves how this threshold is to be negotiated, but the simple expedient of accounting, used as an instrument of economic perception and providing us with the possibility to perceive both individually and through a ‘social brain’.
Yes we have the choice to act in isolation, but increasingly those who think in such terms will be challenged to maintain the reality of the world they think they live in.
The Fallacy of Composition - the fallacy of inferring that a property of parts or members of a whole is also a property of the whole
When a university supervisor argued that my thinking was flawed because I had failed to take account of the fallacy of composition, she meant that an individual cannot act in a social way because what is ‘social’ for the individual is not ‘social’ for society. Individuals ‘economic’ acts do not add up to a functional economy because what is true for the part is not true for the whole. It is easy to see how she arrived at this reasoning. The individual takes account of his own circumstances but in order to reckon with wider circumstances, one needs to move a level ‘up’ and in so doing the logic by which events operate may change. Seen from the logic of an individual perspective, one course of action seems appropriate; seen from the logic of a societal perspective a different course is needed.The argument is an old one in economics, going back to Mandeville’s Fable of the Bees and particularly emphasised by Keynes’ Paradox of Thrift.
The the fallacy of composition focuses on an interesting phenomenon. What is it that shifts when one changes ones perspective from a purely individual to a societal perspective and how in fact does one do this (if indeed one can), given that there is a threshold of some kind that the fallacy of composition identifies. The fallacy relies on the idea that the two perspectives are incommensurable.
It is probably obvious that I do not accept the assumptions of those who use the so-called fallacy to argue that individuals must necessarily behave in a way that is societally anti-social, though I understand that this is often used a stick with which to beat the marketeers.
But why mention it at all?
The rounds of ‘austerity’ which European states are seeking to impose and the arguments about their effectiveness are gradually bringing the point home that the consequence of everybody being ‘austere’ at the same time will not be a ‘saving’ for everybody. My saving will be your lost income and vice versa. Economically speaking it does not make sense to act according to oneself only, one needs to look at how one’s actions affect the larger picture and then think how those greater circumstances will, in turn, play back into one’s own.
The circumstances alluded to are primarily financial, that is to say they relate to our expectations of future events and there is a reflexive relationship at work here. George Soros, though he does not claim to be the originator of the idea, is the great proponent of reflexivity; you can hear him describing it here, for example. The essential point is that we are thinking participants in economic life and it is our thinking that will shape the economic landscape we are attempting to take hold of. The objectivity that one finds inherent in natural phenomena is found to be subjectively co-determined in the economic realm.
So who is on the other side of this reflexive relationship? With whom does one need to do metaphorical business. The simple answer is: everybody else! On the other side of each individuals economic activity is the global economy - not local or even national economy. The problem for proponents of the fallacy of composition in economic life is that between the two worlds is a knowledge threshold. The individual is held not to be able to do more than represent his own essentially ‘private’ perspective. The conventional solution is to bring in either the market or the state as the compensating element. In the first case, the selfishness of the individual is held in check by everybody else’s selfish activity and the whole result is, if not social, the best moderation of selfishness achievable. For those who deprecate the market and therefore champion the state, the selfish individual must be regulated by the oversight of those who can take a societal perspective because they represent, not their own interests, but a democratic mandate to socialise the individual. We are then left with two choices - global markets representing the aggregated myopia of individual selfishness or a global state (for such is concerted economic governance by treaties between states) representing the views of those who call themselves leaders and would regulate others.
But is the idea so far-fetched that an individual might choose to adopt a societal perspective, not instead of a purely individual one but as a complement to it? Do we not just need to step out of our own circumstances and see our actions from the perspective of the effects they will have on others too? Furthermore, can this be done alone or does it need to happen in association with others?
That may sound like a moral injunction but one could also ask whether in fact that is not the conclusion that one is forced to come to when one begins to look at the world in terms of balance sheets. Balance sheets are meaningless until they are related to the wider circumstances in which they find their correspondences. But as soon as they are placed in such an interconnected context they afford the closest representation we can conceive of what constitutes economic reality, a reality that can be seen both from within one’s own point of view and looked at from outside, as it appears to others.
It may not be ‘rocket science’ but there is a little ‘magic’ in the way we touch on this ever shifting boundary that we experience between ourselves and economic life at large. It is not fairy dust or magic wands we need to reveal to ourselves how this threshold is to be negotiated, but the simple expedient of accounting, used as an instrument of economic perception and providing us with the possibility to perceive both individually and through a ‘social brain’.
Yes we have the choice to act in isolation, but increasingly those who think in such terms will be challenged to maintain the reality of the world they think they live in.
The Money Saving Muddle - Part 2
While I accept that anyone on a limited budget will want to make every penny count, the ‘money-saving’ culture is about something else also. It represents an almost obsessive religious fervour with paying the least one can, for the sake of it. And it is this principle, as a principle, (not the constraints faced by somebody who is hard-up), that, although it masquerades as prudence, actually masks a brutal kind of egotism.
For what does the money-saving idea exemplify other than that one prefers to keep rather than share one’s resources, that the ‘money’ does not go to the other person but stays with oneself. To put it more radically it is the principle of impoverishing one’s neighbours, whether they are the producers, whose hard work goes into making goods available, or one’s fellow shoppers who must by logic pay more every time you pay less for a group-buy, a voucher or some deal.
I was therefore pleased to note when recently one of the money-saving sites had the following to say:
What is the effect of low-pricing? One just needs to look around one at the high-streets today which are occupied by ‘money-saving’ chains, or compare the quality of goods bought now to good produced 50 years ago. What happened to all that ‘money’ that was saved? It has made day to day life much more expensive because the land has been mortgaged … think the process through, or track it out in the accounts, and you will see to what extent the prices we pay today are a reflection of a need to make repayments on loans that were taken out at a level pressured by the need to lend ‘saved’ money at interest!
True Prices
When we feel confident that our needs will be met from the future then we can let go in the present what has come from the past. Then the rain will come. We need circulation not stagnant dams and parched deserts. We will be glad to pay the true price for what we buy, the price that the other person can really live from, knowing that when we ask for what we need, he will be thinking the same way.
For what does the money-saving idea exemplify other than that one prefers to keep rather than share one’s resources, that the ‘money’ does not go to the other person but stays with oneself. To put it more radically it is the principle of impoverishing one’s neighbours, whether they are the producers, whose hard work goes into making goods available, or one’s fellow shoppers who must by logic pay more every time you pay less for a group-buy, a voucher or some deal.
I was therefore pleased to note when recently one of the money-saving sites had the following to say:
the higher costs for funding the vouchers are merely displaced, pushed on to those without internet access or the time to take advantage. …Vouchers have also killed spontaneity - drop in to Pizza Express on a whim, without vouchers, and you effectively pay a surcharge, a rule that now applies to vast swathes of consumer life in the UK. … just when I thought there was nothing more to dislike about money-saving vouchers, one of our journalist discovered this: Online money savers wreck charity bake plans by exploiting 'free bread for a year' offer I have a hope that this whole coupon rush is just a fad, some nightmarish, misguided consumer experiment that will run it's course.
What is the effect of low-pricing? One just needs to look around one at the high-streets today which are occupied by ‘money-saving’ chains, or compare the quality of goods bought now to good produced 50 years ago. What happened to all that ‘money’ that was saved? It has made day to day life much more expensive because the land has been mortgaged … think the process through, or track it out in the accounts, and you will see to what extent the prices we pay today are a reflection of a need to make repayments on loans that were taken out at a level pressured by the need to lend ‘saved’ money at interest!
True Prices
When we feel confident that our needs will be met from the future then we can let go in the present what has come from the past. Then the rain will come. We need circulation not stagnant dams and parched deserts. We will be glad to pay the true price for what we buy, the price that the other person can really live from, knowing that when we ask for what we need, he will be thinking the same way.
Monday, April 23, 2012
I-Work - a response
Simon Luke Breslaw responded as follows to my recent post - it’s quite long so I am posting his response and then adding my comments in the comment box. Overall Simon seems to add weight to my argument by showing how entrepreneurs and employees are differently related to the work they undertake, if employees were to become entrepreneurs there is no reason why they wouldn’t work in partnership to create productive associations, even still using the framework of the company
Very nicely argued, Arthur! I'm [not] totally convinced though. Are the activities of entrepreneurs not distinct from those of employees, regardless of whether the individual employee has undergone a change in perspective or not? To my mind, entrepreneurs work with capital in a realm of freedom, free from hierarchy and with the aim of realising new business ideas. Their progress towards realising these ideas is measured by the balance sheet.
In contrast, employees operate within in a realm of solidarity, where their work contributions are made possible (at least in a world where income security is not an issue) through their willingness to be associated with the aims of an existing business. Although employees are free to choose whether or not to be associated with the activities of an existing business, the terms of that association (or employment) must be such that the employee agrees to abide by certain organisational rules and organisational hierarchy in regard to decision-making and their work contributions. The organisational rules, although negotiable, are determined by the needs of the company and what the company feels that a particular employee is able to offer. I can't see an aeroplane factory operating in any other way.
Employees do not have the freedom to tell the company what they want to contribute because if their demands do not tally with the aims of the company, they simply won't be hired or they will be fired. In other words, it's the explicit objectives of the company that are capitalised, not necessarily the personal aims of the employee. This helps to take the egotism out of both the entrepreneur's and the employee's aims by socialising them.
Through their employment, employees endorse the aims of the company. Employees agree to help realise the company's aims by partially subjugating their own aims. In an ideal world this would happen out of a spirit of solidarity, as opposed to the need to secure an income. There may be many cases where an employee's personal aims fully match that of the company, I admit. However, the progress an employee makes towards realising his or her personal aims is not measured by a balance sheet but by a large set of other variables, including non-financial variables. An income is merely the prerequisite that enables individuals to realise their personal aims. My personal aim might be to go climbing in the mountains as much as possible. Unless I agree to the rules and objectives of the Alpine Club that has hired me as a mountain guide, I won't be able to realise my non-financial aim of climbing mountains as often as possible because I won't be employed and therefore won't secure an income.
Employment can be a positive thing in helping to curb the egotistical objectives of individuals by forcing them to subjugate their own aims to the social aims of an organisation. Depending on the perspective and situation of the employee, this subjugation may be forced or agreed to voluntarily out of an enlightened social understanding.
The Money Saving Muddle
I recently received a letter from the local council informing me that rather than regularly sending letters by post they would like to notify me of certain information by email. They then invited me to help them ‘save money’ in this way. But what were they really saving? If they had said they would like to save resources, or save paper, or save the postman’s time, this would have been understandable but in their muddle of monetary thinking they are no doubt convinced that it is ‘money’ they are saving, whatever that might be!
From an individual’s perspective such an aspiration might appear to make sense but from a societal perspective it does not add up. A visitor from another planet, upon being told that humanity was embarking on a money saving exercise would hardly know what this meant. A local council is surely representative of society as a whole (rather than one entity I competition with others). Economists often talk about this with the tag-line ‘the fallacy of composition’ but another way to describe it would be to point out that if humanity were to consolidate its balance sheets the monetary components would all cancel each other out. Society, aka, humanity cannot save money. Anyone (be it an individual or an organisation) representing a societal point of view, should not therefore be talking of saving money because all they can mean is that it should be in one persons ‘pocket / account’ rather than another’s. It may have changed location but nothing else has changed … or been saved. Why this talk of, this addiction to, the notion of saving money?
Can we not strike out the abstraction and be concrete again - save resources, save effort, save time even … but don’t say that because the ‘money’ is in your pocket rather than someone elses, that it has been saved!
From an individual’s perspective such an aspiration might appear to make sense but from a societal perspective it does not add up. A visitor from another planet, upon being told that humanity was embarking on a money saving exercise would hardly know what this meant. A local council is surely representative of society as a whole (rather than one entity I competition with others). Economists often talk about this with the tag-line ‘the fallacy of composition’ but another way to describe it would be to point out that if humanity were to consolidate its balance sheets the monetary components would all cancel each other out. Society, aka, humanity cannot save money. Anyone (be it an individual or an organisation) representing a societal point of view, should not therefore be talking of saving money because all they can mean is that it should be in one persons ‘pocket / account’ rather than another’s. It may have changed location but nothing else has changed … or been saved. Why this talk of, this addiction to, the notion of saving money?
Can we not strike out the abstraction and be concrete again - save resources, save effort, save time even … but don’t say that because the ‘money’ is in your pocket rather than someone elses, that it has been saved!
Thursday, April 19, 2012
The Demonisation of Debt
Don’t look at pornography and don’t get into debt is good advice from any parent, surely? But how much scrutiny can such moral homilies stand? Indeed if there is anything that has unified politicians, economic commentators, and the general public at large it has been the ‘problem’ of debt; and there the matter is left to rest, as if we are at least all agreed on one thing.
But stop! While debt may be inappropriate in certain circumstances, and from an individual perspective can be crippling, we need to look from an economy-wide perspective. Debt is of course just one side of a relationship, but we hear much less about the problem of credit, which is of course its corollary. Indeed the moral homily continues: spend less and save more. But what is saving but being a creditor and therefore being co-responsible for the debt that some other person is carrying. To be more forthright, we should place before our eyes the creditary nature of ‘saved’ money which is an accounting identity made explicit when one looks at bank balance sheets. The very banknote you carry in your pocket is the debt that someone else owes you. How virtuous is that?
Let’s put it another way. When I give classes on financial literacy I ask young people to draw up their balance sheets, as an exercise in trying to understand how a balance sheet shows the way in which we are related to the world around us. I ask them if they are carrying any debt and they normally say they are not. Then we talk about how future liabilities and the things we expect to have to pay for.
It becomes clear that although these may not have been made visible they do amount to quite a lot. For the most part these are things that we cannot avoid paying: tax, rent, insurance, food, medical costs etc. Or to take another example, as citizens of the country we are liable for the national debt, the bank bailout, the maintenance of the military-industrial-medical-educational complex. If a young person were to calculate their liabilities or monetised costs that they cannot reasonably avoid over the course of their lifetime would it still be true to say that they are not carrying debts. To put it another way, the young are already massively indebted, in large measure by virtue of the arrangements that preceding generations have put in place. So how fair is it, how much sense does it make then to turn around and tell them not to go into debt, while not at the same time understanding the dynamics of what one is describing oneself!
But stop! While debt may be inappropriate in certain circumstances, and from an individual perspective can be crippling, we need to look from an economy-wide perspective. Debt is of course just one side of a relationship, but we hear much less about the problem of credit, which is of course its corollary. Indeed the moral homily continues: spend less and save more. But what is saving but being a creditor and therefore being co-responsible for the debt that some other person is carrying. To be more forthright, we should place before our eyes the creditary nature of ‘saved’ money which is an accounting identity made explicit when one looks at bank balance sheets. The very banknote you carry in your pocket is the debt that someone else owes you. How virtuous is that?
Let’s put it another way. When I give classes on financial literacy I ask young people to draw up their balance sheets, as an exercise in trying to understand how a balance sheet shows the way in which we are related to the world around us. I ask them if they are carrying any debt and they normally say they are not. Then we talk about how future liabilities and the things we expect to have to pay for.
It becomes clear that although these may not have been made visible they do amount to quite a lot. For the most part these are things that we cannot avoid paying: tax, rent, insurance, food, medical costs etc. Or to take another example, as citizens of the country we are liable for the national debt, the bank bailout, the maintenance of the military-industrial-medical-educational complex. If a young person were to calculate their liabilities or monetised costs that they cannot reasonably avoid over the course of their lifetime would it still be true to say that they are not carrying debts. To put it another way, the young are already massively indebted, in large measure by virtue of the arrangements that preceding generations have put in place. So how fair is it, how much sense does it make then to turn around and tell them not to go into debt, while not at the same time understanding the dynamics of what one is describing oneself!
Wednesday, April 18, 2012
I-Work: The Path of the Sovereign Individual
“The employee is dead, long live the entrepreneur”
I look forward to the day when a public figure can stand up and announce: ‘we are all self-employed now’ because in a world of self-employed people, the playing field would be level. Not in an absolute sense but in the sense that we would be peers and partners, understanding what it means to have taken responsibility for something. That does not mean that employees cannot feel responsibility for their work and it is not my intention to sow animosity. However, the person who ‘carries’ the balance sheet and who has both to make his own final decisions and bare their consequences, is technically and experientially in a different place from the person who gets told what to do and then takes home wage at the end of each day. The camp-follower can never know what it means to be a guide. Can every human being guide himself, at least as an expectation and an ideal? Or does society ‘work’ because some people need to be told what to do while others are in a position to tell them.
A self-employed person is someone who has chosen their own path and taken responsibility for what they produce or offer to society at large. Is there any reason why this could not be all of us? The advantages would be immediately apparent. A person who manages his own balance sheet has a very direct interest in how to offer the best service. You won’t find a self-employed person shutting up shop just because it is 5pm as the last customer hurries to get to the door, nor do the self-employed take sickies, waste their resources or carry out futile tasks because it is their ‘job’ to do so.
There are two aspects to self-employment. The first is an inner one. It requires initiative to take something on, to feel responsible for it and to maintain it. The other aspect is external - one’s legal status (which is also a tax issue). It is a moot point whether one can be made self-employed ‘from outside’, whether this can cause an inner re-orientation. Let’s imagine it can! Is there any reason why people currently employed by a company cannot change their contracts of employment such that they become contracts not of ‘employment’ but simple agreements between parties. The company would still exist as a contracting entity but the individuals working within it would all be sovereign ‘service-providers’.
The obstacles to self-employment (in law and in tax arrangements) are not insuperable. In the first place they exist largely as a reflection of our culture’s attitude to working independently. Secondly, even as they exist today, laws are the subject of much misconception - the thinking behind the law is that a person is self-employed when he IS self-employed in fact and his working context just reflects this. Unfortunately (and this is a problem across the board with the way the law is casually understood), a common interpretation of self-employment is to see whether the working practice falls within revenue guidelines, a tick-box approach that pays no heed to the spirit of the law.
So let us assume that we can all be self-employed. Outwardly not much will change - we can continue working in our existing roles, but inwardly a complete reorientation will occur. No longer will anyone work for a ‘boss’, everyone will work according to a contract that they themselves devise with their counterparty. The only question will be whether the contract is being fulfilled or not. The energy wasted on complaining about one’s workplace and colleagues will need to find another outlet - as the author of one’s own arrangements it will be harder to point the finger.
The more strongly this image lives, of people organising their own working life, however modest or humdrum, and having the satisfaction of being their own masters, the more one wonders why the prospect faces such resistance. Of course one can argue that society’s resources are already nicely carved up by the vested interests of corporatism, the state-sector, unionised labour and other allied bodies in such a way that the single individual will never be able to make progress without joining up with the big players. Perhaps that is so and perhaps in the long run ideas and imaginations remain what they are while life, without paying them heed, runs its own course.
A self-employed person must stand or fall on his own merits, there is no safety net or place to hide. Because that is so, one quickly comes to realise that the ‘fate’ of the self-employed is not an individual matter but a social one. He depends on recognition from the rest of society to capitalise his activity, commission his work, and pay the true price that will enable him to live by what he does.
The question is whether as a society we value people doing their own thing and working together in free association, or whether we think that a more regimented approach, governed by industrial leaders, is more conducive to productivity, creativity and the social good.
I look forward to the day when a public figure can stand up and announce: ‘we are all self-employed now’ because in a world of self-employed people, the playing field would be level. Not in an absolute sense but in the sense that we would be peers and partners, understanding what it means to have taken responsibility for something. That does not mean that employees cannot feel responsibility for their work and it is not my intention to sow animosity. However, the person who ‘carries’ the balance sheet and who has both to make his own final decisions and bare their consequences, is technically and experientially in a different place from the person who gets told what to do and then takes home wage at the end of each day. The camp-follower can never know what it means to be a guide. Can every human being guide himself, at least as an expectation and an ideal? Or does society ‘work’ because some people need to be told what to do while others are in a position to tell them.
A self-employed person is someone who has chosen their own path and taken responsibility for what they produce or offer to society at large. Is there any reason why this could not be all of us? The advantages would be immediately apparent. A person who manages his own balance sheet has a very direct interest in how to offer the best service. You won’t find a self-employed person shutting up shop just because it is 5pm as the last customer hurries to get to the door, nor do the self-employed take sickies, waste their resources or carry out futile tasks because it is their ‘job’ to do so.
There are two aspects to self-employment. The first is an inner one. It requires initiative to take something on, to feel responsible for it and to maintain it. The other aspect is external - one’s legal status (which is also a tax issue). It is a moot point whether one can be made self-employed ‘from outside’, whether this can cause an inner re-orientation. Let’s imagine it can! Is there any reason why people currently employed by a company cannot change their contracts of employment such that they become contracts not of ‘employment’ but simple agreements between parties. The company would still exist as a contracting entity but the individuals working within it would all be sovereign ‘service-providers’.
The obstacles to self-employment (in law and in tax arrangements) are not insuperable. In the first place they exist largely as a reflection of our culture’s attitude to working independently. Secondly, even as they exist today, laws are the subject of much misconception - the thinking behind the law is that a person is self-employed when he IS self-employed in fact and his working context just reflects this. Unfortunately (and this is a problem across the board with the way the law is casually understood), a common interpretation of self-employment is to see whether the working practice falls within revenue guidelines, a tick-box approach that pays no heed to the spirit of the law.
So let us assume that we can all be self-employed. Outwardly not much will change - we can continue working in our existing roles, but inwardly a complete reorientation will occur. No longer will anyone work for a ‘boss’, everyone will work according to a contract that they themselves devise with their counterparty. The only question will be whether the contract is being fulfilled or not. The energy wasted on complaining about one’s workplace and colleagues will need to find another outlet - as the author of one’s own arrangements it will be harder to point the finger.
The more strongly this image lives, of people organising their own working life, however modest or humdrum, and having the satisfaction of being their own masters, the more one wonders why the prospect faces such resistance. Of course one can argue that society’s resources are already nicely carved up by the vested interests of corporatism, the state-sector, unionised labour and other allied bodies in such a way that the single individual will never be able to make progress without joining up with the big players. Perhaps that is so and perhaps in the long run ideas and imaginations remain what they are while life, without paying them heed, runs its own course.
A self-employed person must stand or fall on his own merits, there is no safety net or place to hide. Because that is so, one quickly comes to realise that the ‘fate’ of the self-employed is not an individual matter but a social one. He depends on recognition from the rest of society to capitalise his activity, commission his work, and pay the true price that will enable him to live by what he does.
The question is whether as a society we value people doing their own thing and working together in free association, or whether we think that a more regimented approach, governed by industrial leaders, is more conducive to productivity, creativity and the social good.
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