And another thing....

I'm not a fan of capitalism, at least not in its current form. I have a long list of gripes, but the one that's bugging me right at the moment is the idea of "buying power".

The idea that the more money you have, and the more money you spend, the cheaper things get for you sucks in every possible way.

In the business arena, it's highly anti-competitive. Small companies trying to start up and compete with bigger companies have to pay more for exactly the same products and services. They also usually receive much poorer customer service. (If you've ever dealt with both the corporate and small business arms of a telco, you'll know exactly what I mean.)

This then flows directly on to consumers. It's ok if you live in an area where the really big companies want to be, but if you don't, you get to pay more for everything too. And surprise, surprise, the places where the big companies aren't are very highly correlated with the places people earn less.

I understand that there's a reduced cost of sale to a big company, but this doesn't even come close to accounting for the differences in pricing. For starters, it's not at all uncommon for companies to "buy business". They'll go into a large organisation and offer their product at less than cost in order to get the business, and since they still have to make enough money to stay afloat, the costs of this practice are passed on to their smaller customers.

Also, when companies get big enough not just to control the demand for their product, but also to control the upstream providers, you see these huge companies dictating their own costs at the expense of providers. I know I'm heading into dangerous territory here, but Bob Katter is right about the impact that the massive dominance of Coles and Woolworths has had on farmers. And you may have noticed that the price of fresh food hasn't dropped to us small value customers. The wholesale price of milk dropped substantially, but the retail price rose.

There are all sorts of other ways that big companies are advantaged over small ones, and the net effect is always to increase costs to consumers. I do believe in competition, but all competitions need rules and regulations, or you just get bullies. Where competition works as it should, we see prices fall and service improve (fibre telco services in cities in would be an example of this). Where competition is strangled by oligopolies or insufficiently regulated monopolies (think supermarkets for the former, and copper telco services for the latter) we see prices rise, and service levels drop.

The heavily skewed pricing structures we see in many industries are a major barrier to the type of competition that results in good outcomes for the population at large.

Unfortunately, the thing that annoys me the most about capitalism is that I don't know enough about economics to be able to present solutions or alternatives. I know that putting prices on things that are currently not valued by our system (such as environmental costs, human life costs and so on) are a start, but I simply don't know enough to envisage what the next economic step is. I know it clearly isn't anything that's gone before. What I want to see is people discussing where we go next, instead of accepting capitalism as an inevitability, and countering any criticism with "What, do you want us all to be communists?".

Process

Process. Damn I hate process. Process is evil. Oh, I know that it's alluring - it even seems like a Good Idea. When you see some problem that's been caused by human error, you think "there should be a process in place to catch that", because after all, that's what we've been told for so long. But it's a Trojan horse. For all the human error it catches, it also creates obstacles, artificial impossibilities and just plain stupidity.

These process-induced disasters come about because process is the ultimate slippery slope. It starts out as an innocent routine. Something needs to be checked on a regular basis, so you make it a thing you do each morning, or at month end. Then you start to see similar mistakes being made more often than you'd like, so you make up a rule that says every time you do A, you need to check B. Perfectly sensible. Then you start to notice that miscommunication is a problem, so you create a form to minimise the possible ways people can express things to help overcome language barriers and local phrasing. It just makes things easier. Then you notice that the people who used to do all this stuff don't really need to think much, because all they have to do is follow the schedule, follow the rules, fill out the forms, enter the form data, so it would be much cheaper to employ less skilled people.

At about this time the CEO is looking at the bottom line and he's* pretty pleased with it all. The company is declared "efficient", possibly even "quality assured". There are bonuses (not for the unskilled staff, of course), there are options, Capitalism is pleased.

Then one day a customer calls, and they want something that requires the schedule to be modified slightly, or the rules to be broken, or gods help us, an answer that isn't available on the form. Those low paid, unskilled staff are not too interested in working out how to accommodate this customer, so they just say "no". Customer goes away and grumbles.

As this happens more often, CEO decides they need more sales staff to improve revenues. CEO spends some real money on sales staff, Capitalism approves of paying sales staff Good Money. A sales person goes out and talks to the customer and finds out what they need. It seems pretty sensible, there's no reason why the company can't do that. They sell the product to the customer. The customer then gets sent back to the same low paid staff who were uninterested in the Problems of Process the customer presented the first time, and is told "no" again. This time, the customer doesn't go away and grumble, this time the customer gets very upset. They've paid for this product, they've been told they can have it. They are told by low paid staff that what they want is Impossible. The customer knows perfectly well it isn't really impossible, but equally, the low paid staff know that from their perspective, it may as well be.

And now we know that process is really in place. And you can pretty much guarantee that no mistakes will be made by human error, because human error requires human input.

So next time you hear someone say "It wasn't human error, we need to look at the processes we have in place" as though this is a Good Thing, throw rotten tomatoes at them, or at least say loudly and clearly that you are perfectly willing to accept human error, but that if processes are making mistakes, the Powers That Be have failed utterly in their management roles.

*God yes, he's a "he". There may be CEOs for whom the pronoun "she" is appropriate who make these kinds of decisions, but they've never crossed my path.

Drunken capitalist philosophy

After that glass of bubbly, I feel ready to tackle the financial crisis. As you do.

I am spectacularly torn by this whole disaster. I should make my bias clear, I work for the financial sector, if they go down the toilet, so do we, financially at least. My hubby works with me, so we have no diversity. On the other hand, I have no allegiance to this sector, I regularly describe my job as working for the devil. A sector whose only net output is inflation.

So, I really wanted the US government to bail these arseholes out. After some thought, it did dawn on me that by finding a perspective somewhere between my personal one and my idealism, I had to conclude that it was necessary. If the US government had not done it, life for the average American would seriously suck. Credit would disappear for the average American punter, making business and home ownership almost impossible. I have been hanging out for capitalism to crumble, and I had kinda hoped this might do it. But ultimately, no responsible government could have let the fallout of this mess hit their people. Yes, I have just described George W's administration as responsible. Perhaps there are some depths that no-one will stoop to.

As with all disasters, this was a multifactorial issue. A brief summary, as I understand it, for anyone who might be interested (please feel free to tell me where I am wrong, I am trying to really understand this). There were a bunch of people selling home loans to people who couldn't actually afford them. They were doing this by selling them loans with very low repayments for a year or two, which then went up dramatically. This is a model which is easy to justify for your 20 something professionals, they can expect their income to go up dramatically soon, and this sort of model helps them get into the property market sooner. But that's not who they were selling to. So for a few years, it was all good. Every time people's loans got too big to repay, they would re-finance on the basis of their increased property value. So they started out with $100k home loan, repaid less than the interest in the first two years, and when the repayments hit a level they couldn't manage, they refinanced for $120k on the back of the increased value of their property. Each time a home loan is sold, the sales guy gets a full commission, regardless of the long term outcome of the loan. Eventually, the real estate bubble bursts (as it must) and the house values have not gone up enough to refinance, and the whole disaster collapses.

What turned this into a stock market disaster was that pretty much all American banks were involved somehow. And to make matters worse, America in general has been operating on credit for a long time. So the banks were borrowing their money to lend to these people who couldn't afford it, from other countries. And all the time the banks were recording massive profits that come from charging interest on loans that are not making full interest repayments. This is where the "market failure" comes in. The market should (according to capitalist theory - no I don't believe in it, but our whole system is predicated on it) recognise the risk, and devalue the banks as a result. It didn't. It worked on the reported profits and never thought about the inherent contradiction in a competitive system with everyone recording record profits. Something stunk, but the markets didn't see it. The entire management structure of these banks chose not to see it. And so eventually the chickens came home to roost, and here we are.

And I still reckon that the mid week voting down of the rescue package by the Republicans was done so that the Republicans could go shopping in the incredibly low market before they voted it up. Yes, I am incredibly cynical.

From the point of view of all of us not living in the US, should this have been done? No, there are so many more important things that $800 billion should have been spent on - renewable energy, a cure for malaria, whatever. As a nation's government, did they have a choice? No. They had to do this. For gods' sake, America, please vote in Obama. At least he understands that the rest of the world is affected by his decisions. You've taken this indulgence, please consider the rest of the world with your next decision. Because lord knows Goldman Sachs do not deserve to be rescued.