Word for Wednesday: managerialism (definition)

John Quiggin17 Comments

As with most terms ending in ‘ism’, and therefore imputing an ideological framework, ‘managerialism’ is more often used pejoratively than favorably. Where it is dominant,, ideology appears as common sense and requires no name. The standard assumption, backed up by the existence of university departments of management and business schools generating thousands of MBAs every year, is that management is a science on a par with physics, or at least with economics. As Thomas Frank observes in his One Market Under God‘the management literature as a whole serves primarily as a PR exercise to legitimate management.

Where managerialism needs a name, the choice is usually one that conceals or obfuscates the role and interests of managers as a class. The most important examples are ‘the New Public Administration’ in the public sector and ‘shareholder value’ in the private sector. ‘Shareholder value’ is of particular interest in the way it represents managers as the mere agents of the shareholder principals.

The central doctrine of managerialism is that the differences between such organisations as, for example, a university and a motor-vehicle company, are less important than the similarities, and that the performance of all organisations can be optimised by the application of generic management skills and theory. It follows that the crucial element of institutional reform is the removal of obstacles to ‘the right to manage’.

The rise of managerialism has gone hand in hand with that of the radical program of market-oriented reforms variously referred to as Thatcherism, economic rationalism and neoliberalism. (Despite very different histories, all these terms are now generally used in a pejorative sense). Managerialism may appear inconsistent with traditional free-market thinking in which the ideal form of organisation is that of competitive markets supplied by small firms, in which the manager is also the owner. However, managerialism is entirely consistent with the dominant strand in the neoliberal approach to public policy, which takes the corporation, rather than the small owner-managed firm, as the model for all forms of economic and social organisation.

In particular, managerialism and neoliberalism are at one in their rejection of notions of professionalism. Both managerialists and neoliberals reject as special pleading the idea that there is any fundamental difference between, say, the operations of a hospital and the manufacturing and marketing of soft drinks. In both cases, it is claimed the optimal policy is to design organisations that respond directly to consumer demand, and to operate such institutions using the generic management techniques applicable to corporations of all kind.
The main features of managerialist policy are incessant organisational restructuring,,sharpening of incentives, and expansion in the number, power and remuneration of senior managers, with a corresponding downgrading of the role of skilled workers, and particularly of professionals.

In defence of negative gearing

John Quiggin8 Comments

Ross Gittins is excellent, as usual, in his latest piece on the housing bubble. He points out that most unit investors have put their own homes up as collateral and stand to lose them if prices decline sharply (say by 40 per cent). But I have a quibble about his conclusion, saying that, if this happens

the Howard Government’s reputation as incomparable economic managers might be looking pretty tarnished.

If so, it would have only itself to blame. Why? Because it left open the negative-gearing loophole on which this whole rocky edifice has been built. And then it compounded its failure by halving the tax on capital gains. I call that asking for a property boom. As Gittins explains, negative gearing involves taking tax-deductible losses on rental property in the hope of getting a capital gain taxed at half the normal rate.

The fundamental problem here is not the tax deductibility of losses but the concessional treatment of capital gains. In principle, at least, losses should be tax deductible. The practical problems are those of bogus losses and avoidance/evasion of tax on the associated income. But where possible, it is better to tackle these problems directly than to make particular categories of loss nondeductible.

The government certainly deserves blame for the decision, taken at the height of the dotcom mania, to halve the rate of capital gains tax. But Labor must share the blame for going along with this. As I wrote at the beginning of 2000.

Unfortunately, the Labor Party has decided that it can win the next election on the basis of the government’s difficulties with the GST, while proposing little more than cosmetic changes if elected.

Whether this is a viable political strategy is not for me to say. But it has already had disastrous effects on tax policy. In order to clear the way for a opportunistic campaign on the GST issue, Labor aided and abetted the government in destroying one of the Hawke-Keating government’s most important reforms, the taxation of capital gains on the same basis as other incomes.

The implementation problems associated with the GST will pale into insignificance compared to those that will arise from this cynical deal. The tax avoidance industry and the courts will be kept busy for years dealing with attempts to convert taxable income into capital gains. Moreover, the policy will favour heavily leveraged speculative investments at the expense of real investments generating taxable income. The danger of a speculative bubble, leading to an asset price boom and slump, will be enhanced. …. (emphasis added)
(The mysterious, and not entirely accurate, term ‘negative gearing’ can be parsed as follows. ‘Gearing’ refers to the ratio of debt to equity, which is approximately proportional to the ratio of interest payments to net returns. If interest payments exceed gross returns, net returns become negative, and the ratio becomes meaningless).

I’ve appended a bit more of the article below for anyone interested

Read More »

Welcome to the Dark Side

John Quiggin12 Comments

After discussing the absurdity of the capital-rich United States being by far the world’s biggest borrower and biggest debtor, Brad de Long observes

it is a Dark Night of the Soul for us neoclassical economists who believe in the long run and in the even partial rationality of international capital flows.

I went through the necessary loss of faith a few years ago. As I observed last October

If you accept that the $US has to depreciate at some time, then holding bonds denominated in $US, and receiving interest rates lower than those obtainable in other currencies, is a dumb idea. Unless you think either that European governments are likely to default on their debt or that euroland is poised for inflation, eurobonds are a better bet, and similarly for Australian government bonds denominated in $A. But I’ve given up even the residual belief in the efficient markets hypothesis that would lead me to try and work out a coherent explanation of perverse asset prices. (Emphasis added)

Despite the stunning contrary evidence of the past five years, residual belief in the idea of efficient capital markets continues to shape the thinking of most economists (including me, when I let myself be guided by instinct rather than careful reasoning). Only when we have freed ourselves of this incubus will we able to make progress in understanding the global economy. Because this is akin to a loss of religious faith it will be a difficult and painful process.

A snippet on higher education

John Quiggin6 Comments

As I mentioned a while ago, I’m using the blog as a database of snippets that seem likely to be useful, but need to be cut from articles for space or other reasons. Comments are appreciated as always

The recent higher education policy paper Backing Australia’s Future has estimated that students are currently contributing about 25 per cent of the cost of their education. However, this is a gross under-estimate. It involves an overstatement of the subsidy associated with HECS, ignores the tax deductions that would apply for alternative investments, and fails to take account of the cross-subsidies inherent in the university system, from undergraduate education to research and supervision of graduate students (far from recognising these cross-subsidies, Backing Australia’s Future tries to claim that research funding Îsupports individual [undergraduate] studentsâ.)
For undergraduate students in areas like commerce and business, the contribution is closer to 100 per cent of the resources allocated to them than 25 per cent. For law students the contribution may already exceed 100 per cent, and will certainly do so under new proposed arrangements.

Meanwhile, back in the Middle East

John Quiggin5 Comments

I haven’t had time to comment on events in the Middle East since a relatively optimistic post on Israel/Palestine a couple of weeks ago. Since then we’ve had a full cycle of pessimism and optimism, with things currently looking as good as they have in a long time – a ceasefire from the main militant/terrorist groups and the withdrawal of Israel troops/Zionist occupation forces from much of Gaza (readers take their pick regarding preferred terminology. But as the pessimists, notably including regular commentator PM Lawrence will no doubt point out, we’ve been here before and gone nowhere but backwards.

In Iraq, things are turning out much as I thought they would before the war, though the extent of looting has surprised me. Some pro-war commentators gloated when it was reported that many of the treasures of the National Museum had been removed for safe keeping before the fall of Baghdad, and that the total loss was ‘only’ 6000 items rather than the 60 000 initially estimated. This seems bizarre to me, in view of the fact that it was also reported about the same time that Iraq’s main nuclear facility had also been looted. The absence of any attempt to secure this facility is a pretty clear indication that the Administration knew there weren’t any weapons there, but the resulting spread of radioactive material is still a disaster.

The central question now is whether, having largely conceded that the pretext for the war was incorrect, if not bogus, the Coalition will deliver on the promise implicit in claims about a war of liberation, that is, a genuinely democratic and prosperous Iraq. I opposed the war because I did not think Bush would deliver, but I still hope to be proved wrong.

Putting his money where his mouth is

John Quiggin1 Comment

The SMH has the news that Malcom Turnbull has managed to interest Wizard Home Loans in the idea of home equity loans. I was a member of the academic panel of the PMs Task Force, organised by Turnbull looking into this idea. Most of the actual work was done by Christopher Joye, a livewire young economist who’s currently with the Menzies Institute.

The home equity proposal has been widely criticised as likely to further inflate the housing bubble. This is only true if financial institutions are willing to buy equity at inflated prices, as opposed to lending to individuals.I commented on all this in my most recent opinion piece in the Fin, which I have now posted on the Website. An excerpt

The home equity proposal put forward by the Taskforce may also be seen as a kind of insurance [against falling house prices]. Instead of paying a cash premium, homebuyers would forgo part of any possible gains in return for sharing the risk of declining prices with an equity partner. Once again the willingness, or otherwise, of banks to enter such deals may be seen as a financial market judgement about the sustainability of current prices.

It now appears that Turnbull is going to put his money where his mouth is on this one.

Also on the website is a piece on road safety from 5 June much of which I roadtested here on the blog before taking it out for a spin in print. Thanks again to everyone who commented.

Update The SMH story has caused a bit of a fuss about whether it is (or would be) appropriate to use the results of publicly-sponsored research in this way. I don’t see a problem myself. In any case, I got the following email from Malcolm Turnbull indicating that the issue may be moot

The SMH story is quite a beat up I am afraid. The position is that Wizard is keen to investigate whether a commercial product can be developed which implements some of the ideas in the MRC paper. I have not offered to finance Wizard products nor, as the story stated, am I negotiating to do so.

Monday Message Board

John Quiggin14 Comments

It’s time for the regular Monday Message Board when you have your chance to have your say on any topic whatsoever (as always, civilised discussion and no coarse language, please).

I’d be interested if any readers wanted to say something about where and why they read this blog.

Philosophical fictions

John Quiggin

Brian Weatherson links to a paper he’s written with the title ‘ imaginative resistance”. It’s about the fact that, whereas it’s easy to imagine fictional events, people and so on, or to imagine real people and things having properties different from those they actually have, it’s very hard to imagine things as morally right if we believe them to be morally wrong.

It seems to me that there’s an ambiguity here and that it’s precisely this ambiguity that is being used in the majority of the fictional examples that are presented as arguments against consequentialism (and, in particular, utilitarianism). The way these examples work is that we are asked to imagine a situation in which a given action has good consequences (when we know that, in reality it has bad consequences). Since this kind of factual shift seems like what we normally do in fiction, it’s assumed [falsely, I claim] that we can do this without damaging our capacity to reason intuitively. But now, it’s pointed out, acceptance of consequentialism would imply that the action is good, when our intuition tells us it’s bad. Hence, consequentialism must be wrong.

All of this is telling us more about the limits of intuitive moral reasoning than about the reasonableness or otherwise of consequentialism.

Plagiarism or hommage?

John Quiggin1 Comment

This Salon review of horror flick 28 Days Later asserts that whereas

. the classic British dystopian sci-fi novels of J.G. Ballard and John Wyndham as influences, and they’re in there, all right …. [but] George A. Romero’s “Living Dead” trilogy, specifically the underrated third entry “Day of the Dead,” is so closely emulated here that parts of “28 Days Later” feel like a shameless rip-off.

In fact, the plot, as described in the review, is a carbon copy of Wyndham’s Day of the Triffids (except with zombies instead of carnivorous walking plants). The film version of this was pretty lame as I recall, but the book was excellent.

My question is, can a film be a shameless ripoff of two completely different sources at the same time? I guess it can be if it takes the plot from one and the cinematography from another. I don’t think I’ll bother going to find out, though.