With all the talk about a bubble in investment in so-called ‘AI’*, I have taken a moment to reread the classic on the 1929 Wall Street bubble bursting, US economist John Kenneth Galbraith’s The Great Crash 1929, first published in the 1950s.
Speculative market bubbles do come and go. As Galbraith notes, the reason that 1929 is most remembered is not so much that the speculative bubble had grown so large before bursting (though it was unusually large) but that there were such broad real economy impacts from the bursting of the bubble – the lost years known as the Great Depression. A pair of Galbraith datapoints start to capture the scale of the Great Depression in the US and its searing impact on ordinary people: unemployment in 1933 was 13 million, one in four of the labour force; and even in 1938 still one in five were out of work.
So trying to understand why the Great Crash sparked the Great Depression is of real interest and seems like a timely thing to consider. Galbraith has no patience for the Wall Street apologists who argue there was no connection between Crash and Depression, but he does see that there were vulnerabilities in the economy that made it particularly susceptible to the crisis.
The first of these is of most interest to this blog, and Galbraith headlines it ‘The bad distribution of income’, noting that in 1929 the top 5% received around 35% of all personal income, and that interest, dividends and rental income (the almost exclusive preserve of the wealthy) represented fully 22% of total family income.
“This highly unequal income distribution meant that the economy was dependent on a high level of investment or a high level of luxury consumer spending or both. The rich cannot buy great quantities of bread. If they are to dispose of what they receive it must be on luxuries or by way of investment in new plants and new projects. Both investment and luxury spending are subject, inevitably, to more erratic influences and to wider fluctuations than the bread and rent outlays of the $25-week workman. This high-bracket spending and investment was especially susceptible, one may assume, to the crushing news from the stock market in October 1929.”
Readers will recognise some of our current distortions in these reports of the imbalances of pre-crash 1929 (also see Is enough enough? Addressing the problem of the super-rich, and The centre cannot hold). Significant inequalities – especially unfair ones – make economies less robust, more risky and more prone to crisis.
That is the first of Galbraith’s linkages between Great Crash and Great Depression. The others are as follows (deploying my brief characterisations of his comments):
Bad corporate structure. A business sector including many swindlers and fraudsters.
Bad lending. Profligate lending to unsound businesses and investments.
Imbalanced trade positions. Long-term trading imbalances, sometimes exacerbated through the application of tariffs, with the resulting deficits sometimes filled by corrupt, or at least grey, payments.
Poor economic insight. Shonky economic data riddled with holes.
So clearly, we’ve nothing to worry about now.
I will leave Galbraith with the last words of this blogpost, without comment from me. In the last pages of the book, he writes: “during the next boom some newly rediscovered virtuosity of the free enterprise system will be cited. It will be pointed out that people are justified in paying the present prices – indeed, almost any price – to have an equity position in the system. Among the first to accept these rationalizations will be some of those responsible for invoking the controls. The newspapers, some of them, will agree and speak harshly of those who think action might be in order. They will be called men of little faith.”
* Seasoned readers may remember that I am an ‘AI’ sceptic – see A just AI Transition, for example
I am happy to confirm as ever that the Sense of Fairness blog is a purely personal endeavour – and also that I do not give, and am not authorised to give, personal financial advice. This blogpost should not be construed as such advice.
John Kenneth Galbraith, The Great Crash 1929. Hamish Hamilton 1955
From this week’s Economist: how our sense of fairness means that we favour the underdog, and so makes forms of protest that seem powerless, powerful.
[if anyone is missing my blog, don’t worry! My fairness writing energies are largely being taken up by a book commitment; I’ll return re-energised to the blog next year, and you’ll also be able to read a book version of some of my Sense of Fairness thoughts]
It shouldn’t really be a surprise, but dignity at work – a combination of things such as the sense of autonomy and relationships with colleagues and bosses, and being treated fairly – matters to people. It’s as true at the bottom of the income scale, where observers might assume concerns about pay outweigh all other considerations, as it is higher up. Dignity matters to people, as I’ve been exploring in recent blogs.
For the book I am writing (on fairness in business and investment) I am currently investigating the literature on monopsony and oligopsony in labour markets. Monopsony is the distorted market situation arising from there being a single buyer of a good or service (a monopoly is where there’s a single seller); oligopsony is where there is a narrow enough group of buyers that they distort the marketplace. Economists are increasingly observing evidence that the labour market suffers inefficiencies that are consistent with oligopsony – employers having excess power in setting pay. Most workers would probably agree that their experiences too are consistent with this.
The study included four sentences exploring the degree to which workers had a sense of dignity in their jobs (these sentences were developed based on prior interviews with Wal-Mart workers that sought to understand their experience in the workplace, as well as earlier academic work). The overarching question was Indicate to what extent the sentence describes the workplace of your job at Walmart, and each time respondents were offered four responses (Almost Always; Often; Sometimes; Never). The four sentences were:
You [have/had] the opportunity to express yourself while at work.
You [can/could] rely on your co-workers to help you with work.
Your supervisor [treats/treated] you with respect.
Your supervisor [treats/treated] everyone fairly.
And of these four measures of dignity, it appears to be fairness that matters most. Indeed, a lack of fair treatment by one’s boss is in essence the greatest determinant of likelihood of quitting a job in the study, with the obvious exception of pay (and of the availability of hours of work a week, which is a clear part of the pay equation for those paid on an hourly basis):
Consistently, the study confirms that fairness and dignity are powerful drivers of work satisfaction, and thus in willingness to stay with an employer.
As the study states:
“A natural question is whether firms can adjust the level of dignity at work. While immediate supervisors likely have the most discretion over workplace dignity, supervisors can be incentivized by higher-level managers to treat subordinates fairly and with respect, and workplace rules can be designed to allow opportunities for self-expression and co-worker support. While it may take time to alter workplace experiences, and agency costs might be considerable, the significant cross-store variation we document below suggests that managers have some control over the level of workplace dignity.”
Our bosses, and how they treat us, matter.
As well as enhancing people management, the authors raise the interesting challenge of whether improving the competitive context of the labour market is necessary to increase dignity in the workplace, the experience of fairness for workers:
“any effort to increase workplace amenities (including subjective experiences at low-wage jobs) may require policies that reduce monopsony power in the low-wage labor market. The high levels of labor market competition in the immediate post-COVID labor market may have given workers the opportunity to quit jobs that didn’t provide dignity. Whether this results in firms upgrading the subjective experience of work remains to be seen.”
I’m not sure that we’ve yet seen significant enhancements to workplace dignity and fairness, but perhaps we should continue to live in hope.
Reading an old book can sometimes feel like an archaeological dig – you find fragmented artefacts of how people used to think and have to try to piece together an understanding of their world, and their world view. Very often it serves to illuminate our own.
That’s definitely my sense while reading a book called Equality by an old socialist and economic historian, RH (Richard Henry) Tawney. My edition dates from 1964 but the original book was published in 1931, based on lectures given in 1929. This version enjoys a 1964 introduction by founding father of social policy Richard Titmuss, and no fewer than two prefaces by Tawney himself, one from the 1951 revised edition and one from the ‘substantially revised’ 1938 edition. Reading through these in this order is like uncovering historic layers of English inequality, and repeated aspirations for greater equality. What’s more, the first chapter of the book, The Religion of Inequality, starts by referring to a lecture by Matthew Arnold from I think 1878, to which it attributes the coining of that phrase.
I find it impossible to read these archaeological artefacts and not reflect on our own age. This blogpost aims simply to capture a few sentiments from each of these layers of history. Readers will no doubt be conscious of the great ruptures and attempts towards greater equality that provided the context for the writing of each of these layers of commentary, from the heights of the Cold War, the challenges of the Second World War and the creation of the welfare state that followed it, the Great Depression and the rise of fascism – and even, back around the 1870s, the first steps to broad enfranchisement (and while the right to vote did not then extend to women, that decade did see them permitted for the first time to retain their own property rather than simply surrender it on marriage).
Titmuss in his 1964 introduction:
“We…delude ourselves if we think we can equalize the social distribution of life chances by expanding educational opportunities while millions of children live in slums without baths, decent lavatories, leisure facilities, room to explore and the space to dream. Nor do we achieve with any permanency a fairer distribution of rewards and a society less sharply divided by class and status by simply narrowing the differences in cash earnings among men during certain limited periods of their lives.”
“Long years of economic depression, a civilians’ war, rationing and ‘fair shares for all’, so-called ‘penal rates’ of taxation and estate duty, and ‘The Welfare State’ have made little impression on the holdings of great fortunes…Wealth still bestows power, more power than income, though it is probably exercised differently and with more respect for public opinion than in the nineteenth century.”
“These consequences of technology in an age of abundance are more likely to increase than to decrease differentials in income and wealth if no major corrective policies are set to work…Without a major shift in values, an impoverishment in social living for some groups can only result from this new wave of industrialism.”
Tawney in his 1951 preface:
“Like earlier wars of religion, the credal conflicts of our day will find varying issues in different regions; but, if Europe survives, societies convinced that liberty and justice are equally indispensable to civilization will survive as part of her. The experience of a people which regards these great abstractions, not as antagonists, but as allies, and which has endeavoured, during six not too easy years, to serve the cause of both, is not barren of lessons which may profitably be pondered.”
And he quotes The Times from 1 July 1940:
“If we speak of democracy, we do not mean the democracy which maintains the right to vote, but forgets the right to live and work. If we speak of freedom, we do not mean a rugged individualism which excludes social organization and economic planning. If we speak of equality, we do not mean a political equality nullified by social and economic privilege. If we speak of economic reconstruction, we think less of maximum production…than of equitable distribution.”
Tawney in his 1938 preface:
“It is still sometimes suggested that what Professor Pigou, in his latest work, calls ‘the glaring inequalities of fortune and opportunity which deface our present civilization’ are beneficial, irremediable, or both together. Innocent laymen are disposed to believe that these monstrosities, though morally repulsive, are economically advantageous, and that, even were they not, the practical difficulties of abolishing them are too great to be overcome. Both opinions, it may be said with some confidence, are mere superstitions.”
“Institutions which enable a tiny class, amounting to less than two per cent of the population of Great Britain, to take year by year nearly one quarter of the nation’s annual output of wealth…are an economic liability of alarming dimensions. They involve…a perpetual misdirection of limited resources to the production or upkeep of costly futilities, when what the nation requires for its welfare is more and better food, more and better houses, more and better schools.”
“Today, when three-quarters or more of the nation leave less than £100 at death, and nearly two-thirds of the aggregate wealth is owned by about one per cent of it, inheritance is on the way to become little more than a device by which a small minority of rich men bequeath to their heirs a right to free quarters at the expense of their fellow-countrymen. The limitations imposed on that right during the past half-century were greeted, when first introduced, with the usual cries of alarm; and the alarm, as is not less usual, has been proved by experience to be mere hysteria. It is perfectly practicable, by extending those limitations and accelerating their application, to reduce the influence of inheritance – at present a strong poison – to negligible dimensions.”
“To make [democracy] a type of society requires an advance along two lines. It involves, in the first place, the resolute elimination of all forms of special privilege, which favour some groups and depress others, whether their source be differences of environment, of education, or of pecuniary income. It involves, in the second place, the conversion of economic power, now often an irresponsible tyrant, into the servant of society, working within clearly defined limits, and accountable for its action to a public authority.”
Tawney reports that Matthew Arnold said, in c1878:
“Arnold observed that in England inequality is almost a religion. He remarked on the incompatibility of that attitude with the spirit of humanity, and sense of the dignity of man as man, which are the marks of a truly civilized society. ‘On the one side, in fact, inequality harms by pampering; on the other by vulgarizing and depressing. A system founded on it is against nature, and, in the long run, breaks down.’”
As LP Hartley says in another old book, one that deliberately plays with memory and history, “The past is a foreign country; they do things differently there.” But often ‘they’ worried about the same challenges we do, and sought similar solutions.
I am happy to confirm as ever that the Sense of Fairness blog is a purely personal endeavour.
It’s no criticism of the other presenters at a recent seminar on political populism hosted by King’s College London’s Policy Institute and the Fairness Foundation – it was a consistently energising discussion – that (for me at least) the most striking comment was this from Liam Byrne MP:
“There’s a real inequality of dignity [in the UK] today. People who were prepared to fight for the dignity of working people would go a long way [politically].”
Byrne chairs the House of Commons Business & Trade Select Committee and went on to describe the committee’s recent work. In particular, he has been struck by the strong public reaction to the Committee challenging companies that are seen to have been acting unfairly. He sees this as evidence of a real thirst for a body that seeks to inject more fairness into the relationship of business with society.
This blog is of course all for such an injection of fairness, but this post in particular is about the question Byrne raises about the inequality in dignity. What might we mean by the term, and how might we address that particular area of inequality, of unfairness?
Fortunately, there’s an academic who has dedicated her career to considering dignity, who is permitted to benefit from it, and how it can be reinforced. She is Michèle Lamont, Professor of Sociology and of African and African American Studies and the Robert I Goldman Professor of European Studies at Harvard University. A proud French Canadian, she feels a profound affinity with those at the periphery of societies. Her work largely focuses on the US, but she collaborates internationally and the lessons to be learned are global.
Lamont says at one point in her latest book, Seeing Others, that it is an “exploration of how we decide who matters”; that description really applies to most of her work. The phrase for me is both encouraging and profoundly unsettling at the same time. If we are to deliver the equality of dignity that Byrne is in effect seeking then we need all people to matter, not just those we decide are worthy of dignity. That is Lamont’s aspiration too, but she recognises the reality that we are far away from that point currently: it’s not by chance that the subtitle of Seeing Others is How to Redefine Worth in a Divided World.
Seeing Others is mostly focused on further-educated members of Gen Z and their efforts to recognise the worth of others. Byrne discusses their deliberately inclusive disclosure of pronouns, which has become such a target for some – opponents of the approach ironically seeing it as exclusionary, in contrast to its inclusive intentions. But earlier work was more directly concerned with the perspectives of the working class – in particular The Dignity of Working Men.
Lamont’s core finding in that book is that people create their own framework of dignity for their lives, and the camaraderie of working life together reinforces it. Morality lies at the heart of this sense of self, in the form of straight-talking honesty and a strong self-discipline – importantly, these are characteristics that they believe are lacking in many of their bosses and those of higher social status (they are only partly believers in American meritocracy). Lamont finds that “morality plays an extremely prominent role in workers’ descriptions of who they are and, more important, who they are not. It helps workers to maintain a sense of self-worth, to affirm their dignity independently of their relatively low social status, and to locate themselves above others.” Providing for and protecting their family lies at the core of this moral life, not least because it is “a realm of life that gives them intrinsic satisfaction and validation – which is crucial when work is not rewarding and offers limited opportunities”.
Byrne himself in his excellent recent book The Inequality of Wealth doesn’t much deal with these issues of dignity. Subtitled Why it matters and how to fix it, the book is much more trying to develop a prescription for addressing broader unfairness in our society. But there is one discussion that is very relevant. Tellingly in a chapter called The Cost of Affluence, Byrne discusses the work of psychologist Dacher Keltner, whose experiments explore the sense of fellow feeling and the willingness of strangers to support one another. He quotes Keltner as saying: “we’ve done several studies that look at how your wealth, education and prestige of your career or family predict generosity. And the results are consistent: poorer people assist other people more than wealthy people.” Here too is a source of dignity – and also an indication that working people are right to be cynical about the morality of those better off than themselves.
The Dignity of Working Men was published in 2000, but its interviews date back to 1992 and 1993. And some of the comments feel all of their 30-plus years of age. In particular, this comment from postal worker Steve Dupont, who argues with his immediate boss on a regular basis, feels like it comes from a very distant time: “This has gotten me in trouble but as I always say to [my foreman], ‘I can always find another job, I can’t always recoup my pride and my own dignity.’” There may have been an element of bravado then, but now not even the most bragging of working men would feel able to assert their ability always to find another job.
And that seems to be the core of the dignity deficit: when the ability to stand up for what is right, when self-discipline isn’t enough to avoid being restructured out of employment, then there is little basis for this traditional source of dignity and pride. Where it is no longer possible, even with hard work and discipline, to protect and provide for one’s family, dignity becomes less possible too.
One consequence of this dignity deficit is a nationalistic fervour. In The Dignity of Working Men, Lamont finds that “Being an American is one of the high-status signals that workers have access to”. She amplifies this finding in Seeing Others: populist political messages “extend to downwardly mobile people one of the few high-status identities available to them: their “winning” status as Americans”.
There’s a danger if this loss of dignity goes too far. A sense of humiliation is probably the opposite of the sense of dignity. And humiliation is a dangerous feeling. A recent excellent paper published by the wonderful people at Psyche discusses the impacts of humiliation at a national level – or at least the impacts of narratives of national humiliation. These are the fuel for conflict, finds author Raamy Majeed (a lecturer in philosophy at the University of Manchester). His title, Does national humiliation explain why wars break out?, expresses where the loss of dignity may end. “When citizens of a nation feel humiliated, they become more likely to support aggressive foreign policy initiatives.” Fairness (naturally!) can lean against this sense; Majeed reports on the work of philosopher Avishai Margalit, especially in The Decent Society, which “argues that a just society does not necessarily prevent its citizens from feeling humiliated but instead avoids creating humiliating conditions”.
Even short of conflict, there are direct physical consequences of the inequality in dignity. In Seeing Others, Lamont makes a clear link to the work of Anne Case and Angus Deaton on deaths of despair: “dignity affects quality of life just as much as material resources do”.
So we need to address the dignity deficit. A just society will help limit humiliation, but are there other prescriptions from Lamont’s work? She attempts exactly that in her conclusion to Seeing Others, a chapter entitled Strengthening our Capacity to Live Better Together, and she is exploring it in her current work, which she calls a study of the three Manchesters (Oldham, near Manchester in the UK; Greater Manchester, New Hampshire; and Tampere in Finland, nicknamed the Manchester of the North; all former centres of industry). At a talk this month at the London School of Economics, Lamont discussed both Seeing Others and this three Manchesters work, which is considering how working class 18-30 year olds seek and gain recognition – another term for dignity perhaps – and the role of place, history, politics, exclusion and inclusion in that.
It’s too early to have conclusions from the Manchesters work, but the conclusion to Seeing Others does provide some insight. Much of this is relatively vague, emphasising the need for shared visions, hopes and narratives – and at its most simple, shared existences, rather than living very segregated lives. There is a hint at emphasising the proud inclusivism in national stories, rather than the exclusive aspects of them. Lamont also calls for the middle-classes not to ‘opportunity hoard’ as much as they (I should say we) do. She gets more specific when she says (without acknowledging the element of division she is encouraging):
“The Democratic Party could make significant gains by regaining working-class voters with not only redistributive policies, but also with messages of solidarity and dignity, as an alternative to the Republican Party’s populist messages of division and blame. Redirecting working-class anger toward the one percent is more likely to sustain fruitful alliances than driving wedges between diverse categories of workers who have so much in common.”
In the absence of such efforts, and the absence of efforts to build a shared sense of community, it may be no surprise that a lack of fairness in dignity, echoing wider unfairness in society, is fuelling political and social tensions. Many people have the sense that the status status quo isn’t working for them, and are willing to see dramatic change as a result. Byrne is right, we need to be working to close the dignity deficit, to instil a greater fairness, an equality, in dignity.
I am happy to confirm as ever that the Sense of Fairness blog is a purely personal endeavour
‘Beyond the regulatory boundary, “fairness” can be seen as an opportunity to generate value to both the enterprise and its wider community. Fairness frameworks can be aligned with corporate and brand values as part of the broader enterprise strategic and risk management framework.’
While the starting point for a recent report on fairness in health insurance is the regulatory consumer duty recently put in place by the UK’s Financial Conduct Authority (FCA), it’s clear that the paper is more interested in business risk and opportunity than in mere regulation. As this blog has long found, there are remarkable numbers among the challenges that modern business faces that can best be viewed through the lens of fairness – and many opportunities that can be uncovered by deploying that lens.
From those smart people at Milliman, the report, Fairness in UK health insurance: Developing a framework and best practices in health insurance, covers the full range of relevant issues. These include: fairness in the delivery of consumer relations, especially the treatment of vulnerable customers; fairness in the application of new technologies, including AI and algorithms; and considerations of structural biases in healthcare.
While the report is narrowly focused on health insurance, it naturally considers many of the wider fairness issues that apply in the field of health. Foremost amongst this is the sterling work of the wonderful Sir Michael Marmot (perhaps most accessibly in The Health Gap). Marmot’s consideration of the social determinants of health is reflected in this brief segment of the report:
‘With greater focus on protected characteristics, there has been a move to greater use of “lifestyle” factors as personal “choices.” ‘Certainly, smoking is widely accepted as a choice. Possibly exercise; but are postcode, income, occupation, education, children? Whilst at some point they may have been “choices”, at later points in life they may be fixed rather than changeable (or controllable).’
Marmot shows that many of these issues are not choices at all, but are the outcomes of inequalities in wider society. In brief, poor housing, work, education, income, are all among the clearest determinants of poor future health outcomes. Few of these are chosen, particularly in economies where meritocracy is failing. While people in poverty are unlikely to be accessing health insurance, Marmot’s analysis raises questions about how fair it might be to consider some of these lifestyle issues in the pricing of such insurance.
The use of technology in relation to healthcare is also a significant feature of the Milliman work. In particular, the paper argues that: “Greater personalised medicine and healthcare are likely to mean that trust, privacy and fairness are increasingly necessary parts of ensuring good customer outcomes.” Further, it is not enough that fairness be done, it must be demonstrable that it has been delivered in practice: “Risk-based pricing and underwriting approaches should be auditable with clear accountability and robust governance of decision-making processes.” It is certainly not enough to assume that AI or algorithms will generate fairness – as this blog has found previously, these technologies can encode and replicate pre-existing unfairnesses.
But it is in dealing with the FCA’s consumer duty requirements that the paper breaks most fresh ground. Given that these requirements are still new, we have not yet seen best practices developed. The paper is therefore one of the earliest detailed expositions that I have seen of how it might bite in practice, and what it may require of business. The Milliman summary of the application of the duty to health insurance seems clear and wholly appropriate to me:
“For UK health insurers this combines providing fair customer treatment and clear information with products that genuinely meet their needs. Particular attention is required to product design and suitability, customer communication, customer support and providing “fair value” as well as systems to track performance and make adjustments. There is also a need to give special attention to vulnerable customers.”
The paper later considers some of the detailed best practices that seem likely to be required under the duty, including “Being transparent with customers, in particular with terms and conditions around the inclusion or exclusion of pre-existing medical conditions, any moratorium and exclusion of any specific types of treatments (often highly complex, severe conditions)” and “Being clear and signposting these policies using laymen terms in the policy documentation so there is no ambiguity.”
And there is a particular need for fairness in the area of health insurance, a particular need for care regarding consumer duty. As the paper point out: “Almost all customers making health claims are vulnerable to some extent, with particular efforts required to meet the needs of the most vulnerable.”
Reinsurance firm Pacific Life Re was also recently inspired by the advent of the FCA consumer duty regime to consider the uneven distribution of insurance products across different communities. But its response is a rather more bluntly commercial one: “Understanding where communities are underserved, both within your own business, and that of the industry, offers an opportunity.” This has echoes of the fortune at the bottom of the pyramid thinking that seems slightly to have slipped from much business thought. But as the work of Citizens Advice continues to show, accessibility and pricing of various insurance products are not evenly distributed across consumer groups.
The Milliman paper also draws a fascinating analogy to the independent governance committees that are in place in the pensions provided by insurance companies. These IGCs have responsibility for overseeing the customer experience and defending consumer interests, with particular attention to value for money. The paper suggests that there is something in this model that would be worthwhile perhaps extending to health insurance: “We consider that these efforts can be a best practice governance framework for the health insurance sector and help tap into consumer groups’ understanding of “fairness” and how their expectations evolve over time.” IGCs are consumer champions in pensions – do we need something similar for other products?
For some, the very availability of commercial health insurance in the UK is itself a symbol of unfairness. Where there is (at least in theory) universal provision through our National Health Service, health insurance can often be seen as jumping the queues which seem the main form of rationing of that provision (and which can make its universality seem theoretical). But we have to recognise the reality of the use of health insurance – not least as a standard employee benefit from companies keen that their staff stay healthy. It is certainly better that it is deployed fairly than not. The Milliman paper provides a pathfinder for that, as well as useful insights into the consumer duty more broadly.
Readers (at least those that read the small print at the foot of every blogpost) will know that the Sense of Fairness blog is a purely personal endeavour. But naturally I am sometimes inspired to write things by events in my working life.
So it is this week, following a gathering on Tuesday hosted by fund manager Impax on the role of corporate culture in business performance. Naturally, the firm has a product to sell and wants to demonstrate its prowess in identifying share price performance drivers in what is still a surprisingly under-researched area.
Impax showed us striking charts showing stronger performance by companies with better culture, on the metrics that they have been able to garner from company reporting and more independent sources on employee satisfaction such as Glassdoor. Note that of course I am not making any investment recommendation.
Perhaps more striking than the performance statistics were the anecdotes from active fund manager Charles French, who relayed stories from the front line of asking CEOs about culture. As I too used to find when I asked my favourite “How are your people?” question, the range of responses to questions about culture tells you a great deal about the attitude and mindset of bosses. Some literally have nothing to say and do not know how to begin an answer; others become energised and demonstrate very clearly how much of a focus for them is inspiring their staff. You are left in no doubt which bosses – and so businesses – you would prefer to work for.
The event also featured a presentation and panel discussion on corporate culture. The panel featured a couple of my favourite people who have done great work on corporate culture, Tina Mavraki and Annabel Gillard. Most striking for this blog were a pair of word clouds within the initial, energising presentation from Jenny Segal, whose headline offer is ‘Building better workplace cultures through creativity and understanding motivation’.
She had asked a representative group of people what motivated them at work. Fairness appears with reasonable prominence, as do a series of other words that have concepts of fairness attaching to them:
As noted in a previous post, there are very different motivations for workers at companies which have a clear purpose and seek to inspire their staff. It’s unsurprising that unfairness at work is demotivating.
Jenny also asked people what makes a good boss. Again, fairness clearly matters:
Another striking comment from the panel came from Christine Cappabianca, one of Impax’s quant team, who leads their work uncovering data on culture. Clearly the reporting dynamic around diversity, equity and inclusion factors – one of the areas she has been mining for insight – varies around the world and is shifting notably at the moment. One of the shifts that she expects to happen as diversity is downplayed is that the language of fairness will see more use, as it’s a much less divisive way of capturing the intent of these programmes. That fits with the the most forward-thinking research in this space.
Fairness matters, viscerally, to people. It’s not surprising that its presence fires us up at work and that its absence demotivates. The best managers know this viscerally too.
Even given my cynicism regarding the current hype about artificial intelligence (AI)*, I have to admit that it’s very clear this new technology will transform the world of work. The societal excitement about Chat GPT and other large language models (LLMs) has been matched by corporate excitement. Companies across the world are experimenting broadly, many of them keen to deploy this as a cost-saving tool.
Of course, as with every technology shift, cost-saving comes in the form of replacing people with machinery. Efficiency means being able to do things more quickly with less human intervention. If the current experiments with AI deliver, perhaps companies will redeploy those humans to other work. More likely they will remove those people, and their costs, from their business.
That’s how business, and economies as a whole, operate: moving to more efficient ways of delivering what customers and society want, to enable higher profits or simply to enable companies to compete with rivals which are also trying to reduce their costs. On the whole, this is good for economies too as more efficiency allows national resources to the deployed to where they deliver most value.
But that redeployment takes time, and technology transitions are painful processes, for individuals and for society. Discussions of efficiency, cost savings or redeploying resources divorce us from the very real human and emotional impacts of these changes, which are of individuals losing their jobs and livelihoods, and subsequently struggling for money and self-esteem. Even where a technological shift does create new opportunities (which has been the case with every such transition previously and so seems likely once again), that takes time – time in which individuals feel unanchored, unvalued, and perhaps reach an age where further employment is unavailable to them. That can serve to destabilise society further. We shouldn’t let the economics blind us to the personal and emotional.
There is much talk in sustainable investment circles of the need for a just transition (sometimes a fair and just transition) to a decarbonised world, ensuring that care is taken to protect and support those individuals whose jobs are impacted by the dramatic shift to economic activity that must come as the world finally faces up to the realities of climate change. There is also likely to need to be a fair and just transition to an AI-enabled world.
Recent work from the International Monetary Fund (IMF) begins to open a window on this challenge, building on the sentiment of managing director Kristalina Georgieva in a blog from a year ago called AI Will Transform the Global Economy. Let’s Make Sure It Benefits Humanity. The organisation is developing approaches to consider which jobs – and which economies overall – will be impacted by the advent of AI.
Most recently, IMF staff considered impacts in Asia. A blog this month, How Artificial Intelligence Will Affect Asia’s Economies, tries to map this out in more detail, based on analysis of the breakdown of jobs in each economy. The blog reflects a deeper discussion within the analytical note attached to the Fund’s most recent Asia and Pacific Regional Economic Outlook. This analysis suggests a greater exposure to AI impacts in the region in what IMF jargon terms advanced economies, while emerging economies are likely to face lower impacts. However, they also seek to assess whether those impacts will be positive or negative for jobs: around half the impacts in advanced economies are where AI is complementary to the job, potentially driving economic benefits; meanwhile in emerging economies the majority of impacts are where there is much more likelihood of workers finding their jobs replaced. The economists hedge this analysis with language such as ‘low complementarity’ and ‘displacement’ of work, but the thinking is clear.
The language was more blunt in some earlier less detailed work, suggesting AI “could endanger 33 percent of jobs in advanced economies, 24 percent in emerging economies, and 18 percent in low-income countries”. Those conclusions look more worrying than the most recent analysis, but even the lower levels of estimated disruption are very significant.
According to the most recent analysis, there is also a gendered split in the potential impacts, again potentially exacerbating existing inequalities:
The blog reads:
“The concentration of such [complementary] jobs in Asia’s advanced economies could worsen inequality between countries over time. While about 40 percent of jobs in Singapore are rated as highly complementary to AI, the share is just 3 percent in Laos. “AI could also increase inequality within countries. Most workers at risk of displacement in the Asia-Pacific region work in service, sales, and clerical support roles. Meanwhile, workers who are more likely to benefit from AI typically work in managerial, professional, and technician roles that already tend to be among the better paid professions.”
Georgieva was clear about the risks: “In most scenarios, AI will likely worsen overall inequality, a troubling trend that policymakers must proactively address to prevent the technology from further stoking social tensions.”
The IMF economists are increasingly clear about what needs to be done about these inequality risks. According to them, a just transition will require:
Effective social security nets
Reskilling programmes for affected workers
Education and training to enable effective application of the AI opportunity, particularly for those economies where AI is currently seen to have low impacts – so that the positive benefits can be enjoyed
Regulation to promote ethical AI use and data protection
The IMF, in its AI Preparedness Index, suggests that there is a broad spread in the readiness of global economies for this coming wave of technological disruption:
Again, as things stand it seems that the greatest likelihood is for AI to exacerbate existing inequalities. Preparing for this major economic shift will demand fresh policies and investment. These are significant challenges for world economies, for companies as they embed AI into their workflows, and for global investors, to rise to.
*I have my doubts about each of the A and the I in artificial intelligence: calling an activity ‘artificial’ when it depends on the horrific grinding work of many people to scrub its results seems inaccurate; and calling it ‘intelligent’ when it is simply a logic puzzle about the likelihood of putting one word after another – the stochastic parrots as described in that prescient article (I particularly like the analogy of Emily Bender, one of the authors of that article and a professor at the University of Washington, that AI is reproducing text in the way people might if they had unrestricted access to the National Library of Thailand but without pictures or dictionaries to enable them actually to understand or translate the language). A more recent article touching on these matters is the excellent Ask me Anything! How ChatGPT got Hyped into Being, which among other things states this fundamental truth: “LLMs are not designed to represent the world. There is no understanding by the artificial agent (chatbot) of the meaning of the output it creates. It is us humans who create that meaning.” More directly, the word soups that I have been presented with by colleagues show very clearly the limits of the technology in doing anything without clear instruction and precise pre-existing materials to work with.
Nonetheless it is fascinating to read John Burn-Murdoch’s piece for the Financial Times this weekend, Inequality hasn’t risen. Here’s why it feels like it has, which is grounded wholly in the Gini coefficient. Burn-Murdoch is the FT’s Mr Statistics, and he is always readable and interesting, so I’ll forgive the obsession with the use of single datapoints that will always be flawed if viewed in isolation (and I’ll acknowledge also that he recognises the limits of Gini: “Aggregate inequality statistics certainly have their place, but they can mask important nuances,” he writes).
The core of Burn-Murdoch’s article is the data shown in these charts:
He notes the increased attention to inequality over the past decade, even though the Gini numbers suggest it is in fact falling in both the UK and US, and he attributes this to a squeezing of the middle class between improved treatment of the poorest paid (which appears to be the driver of more than the total drop in the Gini measurement) and an increased stretching of the advantages of those best off in our society (which has increased inequality, but less than the reduction driven by the improvements for those least well off). While it’s known that the minimum wage in the UK and its bolstering over time has helped those least well off here, it is more surprising to find that some similar improvements have also been experienced by the poorest in the US also, despite the notorious stagnation of the national minimum wage there. This squeezing effect is reflected in the title given to the article in the paper copy of the newspaper: Why the middle class is right to feel squeezed.
This blog would naturally suggest that one reason why there is increased noise about inequality now, despite the falls in the Gini coefficient, is that the problem as humans see it is unfairness, not inequality, and the bluntness of Gini fails to capture the richness of human experience. In particular, it’s hard to believe that the improvement in the incomes of the poorest is genuinely felt to be an improvement in their life experience – perhaps especially as they have experienced greater inflation than wider society over recent times. The moves in Gini may be masking insight as much as they are revealing.
Burn-Murdoch is clearly right when he highlights the reductions in sense of opportunity available to many in society – opportunity both for themselves and for their children. But, for this blog at least, these are questions of fairness, not of inequality (measured by Gini or in some other way).
A historical meander through the countryside for the holidays
The quintessential vision of England is of a village set in rolling countryside. Depending on the topography, this may be hills cropped by sheep, or less frequently other farm animals, or flatter lands growing cereal. But whatever the countryside, the village is consistently there (whether or not, like former prime minister John Major, we include in our image cricket and warm beer and spinsters cycling across the village green). We imagine these villages as images of fairness and justice, representing the ordinary people of England, strong, independent and free.
But those villages have not always been there. And they do not always represent fairness, independence or freedom (even if we can set aside modern concerns about incomers pricing out locals). Any settlement and community is the creation of a set of decisions. Some of those decisions were by ordinary folk choosing to come together for their own reasons. But many times what are now viewed as symbols of peace and tranquillity were created by force at the whim of the local landlord, a feudal founding created to control the population and ensure that it was productive – to the benefit of the seigneur.
The bucolic beauty that we tend to take for granted was often an emblem of power and an assertion of unfairness. The same villages have also over centuries witnessed further episodes of the ebb and flow of power, and of fairness. We tend to imagine these places unchanged forever. They are not.
It used to be thought that there was a ‘village moment’ in England, when villages suddenly appeared in the landscape. My use of the term ‘seigneur’ was deliberate, for this ‘moment’ was for decades ascribed to the Norman invasion of 1066 and the following years, when newly created feudal lords established villages as power bases to control the population and its work effort. It is not just that the Domesday Book (which dates to 1086) provides us with the first consistent written record of the existence of English villages (though often it refers to individual farmsteads or small hamlets that later developed, or were developed, into villages).
This belief in a particular moment of village creation was reinforced by the archaeological digs of abandoned (or shrunken) mediaeval settlements, which “showed very little evidence for occupation earlier than the eleventh or twelfth century” as Carenza Lewis and colleagues explain in their key work Village, Hamlet and Field. But the belief eroded as further investigations, not least of settlements that continue to exist, tended to extend the moment to a rather broader period: they “seemed to push forward the origin of the large nucleated village to the period between about 850 and 1200”. It’s tempting to suggest that the disproportionate representation of the Norman-created villages among those that were subsequently abandoned is a sign that their artificial creation meant they were less sustainable than those created organically by a population choosing to move closer together, but I suspect that’s a little pat.
While landscape historians have pushed back the creation of many villages, it is undoubtedly true that many others were created soon after the Norman invasion, by those new feudal landlords: “lordly authority was clearly a key motor in the planning of settlements,” explains Oliver Creighton in his Designs Upon the Land. He further says: “The well attested phenomenon of seigneurial village planning, which in many cases extended to embrace field systems, can be taken as further evidence for the expression of lordly authority.”
These Saxon and mediaeval creations were of course not the first villages, though they were the first of a scale that we would recognise, and the first to include a village church (typically seen as the signifier of the distinction between village and hamlet). There were Neolithic villages – examples of these can still be seen at Scara Brae in Orkney, Carn Euny in Cornwall and Ty Mawr on Anglesey (preservation is better in remote places). But life generally remained scattered until towards the end of the Anglo-Saxon period.
These were not the first villages, but these were the first that we might recognise today. And, whatever the timing of their creation, all were under tight command and control arrangement, “a tightly managed landscape” says Trevor Rowley in the classic Villages in the Landscape. “The manorial court was responsible for the regulation of internal field boundaries, the precise amount of grazing and rights of gathering on the common waste, and it also had responsibility for the trackways and streams. The manor courts collectively administered rules of husbandry, watched over local customs of tenure and inheritance and enforced local peace and order. By 1300 we would have looked on a landscape which was intensively used at a subsistence level.” This was not a fair landscape: most lived the hardest of subsistence existences while a small handful prospered.
As Rowley summarises: “the permanent nucleated village so familiar to us today was a factor not of ethnic or cultural change, but of economic and social forces. It was brought about by a complex combination of increasing population and increasing authoritarian control through the manorial system”.
And it wasn’t only the villages, but the landscape more broadly. Creighton takes a particular interest in parkland, land taken into private ownership as a venue for hunting. He points out that taking land out of agricultural production and creating parks was not an economic decision, but a social one driven by concerns of status. “The right to empark was a jealously guarded privilege and badge of lordly authority,” he writes. “The huge outlay involved in the creation of parks and the challenges of maintaining them, combined with the minimal financial returns that accrued, shows that they were not geared to maximise profit by cold, hard businesslike patrons.”
Ridge and furrow – a relic of mediaeval communal shared fields – within the private walled grounds of the National Trust’s Canons Ashby, Northamptonshire. An example of the historic privatisation of shared land
This contrasts of course with the much later enclosure movement when the wealthy took land out of common usage by the general population and asserted their direct ownership of it (often with the formal endorsement of acts of parliament – the law being used to enforce the demands of the powerful). Enclosure coincided with the agricultural revolution, making the productivity of the seized lands more than recompense the cost of the creation of the hedges, walls and fencing – and of the policing of the protests from the dispossessed population. Susanna Wade Martins in Farmers, Landlords and Landscapes reports that after enclosure, “Productivity could sometimes be doubled and rents went up by an equivalent amount.” That wasn’t the case with mediaeval seizures.
Parks in the mediaeval era were just as contested as the enclosed lands, though. As Creighton points out, “Many parks were recorded for the first time not when they were licenced or created, but when they were first broken into.” He suggests that poaching may have been just an assertion of continuing rights to seek food in emparked land.
Alongside this privatisation of land, from 1250, the elite turned more aloof, power and wealth enabling them to distance themselves from ordinary folk. Increasingly, the wealthy kept themselves apart, both in the siting of their own property and in the design of their buildings also. Creighton says: “an increasingly aloof aristocracy … was progressively increasing the social distance between the household and the world beyond the walls… This is part of a pan-European phenomenon evident at key lordship sites in France, Germany and Scandinavia and, in turn, part and parcel of a broader phenomenon of the increased privatisation of space, as manifested particularly clearly in the changing function of the hall and modes of domestic planning that enabled individuals to spend more time in individual rooms.” This period seems to coincide with a trend towards moated sites for elite dwellings – typically a symbolic separation rather than offering any degree of protection. This trend towards status symbols and separation was reflected in food also, for example it is at this period when the eating of more exotic birds becomes an activity for the elite, and the poor were excluded from certain foods.
This move is not to be taken lightly. In his The Archaeology of Power, John Steane discusses the ceremonial role of the lordship’s property, in particular the community role fulfilled by his hall, “the architectural expression of the household”. He quotes from William Langland, the 14th century supposed author of Piers Plowman, who criticises those lords whose halls have become a “sorry, deserted place” because “the rich nowadays have a habit of eating by themselves in private parlors”. The implications of the harm caused to community and society as a whole by this withdrawal are significant.
This was an age of remarkable unfairness. The majority toiled, a few did well – and increasingly turned their backs on the toilers, living very separate lives. It took a devastating event, or series of events, to reawaken fairness in our country. Those events were the repeated scourges of the Black Death (which first swept across Europe in the years either side of 1350), devastating the population and bringing enormous changes in its diseased wake.
I wrote in my last post about the impact of the Second World War in sweeping away some of our nation’s then ossified unfairness and injustice. And I noted that we must hope that it doesn’t take such an event to sweep aside the unfairness that has built up again in our society. The Black Death was a still more lethal and traumatic event that led to an even more remarkable reversal of inequalities. According to James Belich’s analysis in his remarkable and epic history of the consequences of the plague era, The World the Plague Made, around half of Europe’s population died from the initial outbreak of the plague (he spends a whole chapter justifying this conclusion, which is greater than the usually quoted one-third, a death toll that would have been remarkable enough).
As Belich explains, this halving of the population dramatically increased the value put on labour – meaning that the poorest suddenly began to be paid more. The poorest may have doubled their available spending capacity (even the smallest increment in pay for someone operating at subsistence levels will enable this), as well as giving them more leisure time; others fared better in absolute terms. The decrease in the availability of labour, and the increase in its cost, led to a productivity revolution – and with the same capital goods now shared between a halved population there was significant scope for such a productivity shift. This, together with increases in money available across the economy, led to a boom in demand for what had previously been luxuries available only to the few. Trade boomed, deploying the same shipping capacity for the benefit of the halved population. Many were freed from subsistence farming and agricultural patterns shifted to favour more specialisation.
Belich argues that it was the plague that led to Europe’s imperial dominance of the globe over subsequent centuries. One vehicle for this, he suggests, is that the fairness of the post-plague era lingered long enough in folk memories that it made ordinary people willing to risk everything to travel to far off lands in search of a better life, a life more like the less unequal era post-plague.
Those with Scottish and Irish heritage will no doubt baulk at this, pointing to the enforced movements caused by those great historic injustices the Clearances and the Great Hunger (the capital letters just a nod to their cultural significance) – and others will point to other causes in other lands. There’s truth that many travelled the world (and do so now as well as then) because their homeland no longer offered them a home, but both events came later than Belich intends. He is thinking about the start of the European imperial era, in the fifteenth and sixteenth centuries, when the journey itself was extremely hazardous, with around 30% dying even before they reached their destination – let alone the challenges of the precarious imperial outposts that were created. Those of course are the odds of those who travelled freely as free people, not of those who were enslaved, nor those of the indigenous peoples whose lands were taken from them.
European people travelled in spite of these odds, Belich believes, because they remembered the freedom and fairness that followed the horrors of the Black Death. A small hope for fairness will inspire many to action.
As we walk the countryside, we should recognise how it offers insights into past unfairness, and not the simple bucolic beauty that is all we sometimes see.
I am happy to confirm as ever that the Sense of Fairness blog is a purely personal endeavour.
Village, Hamlet and Field: Changing Mediaeval Settlements in Central England, Carenza Lewis, Patrick Mitchell-Fox, Christopher Dyer, Windgather Press, 2001
Designs Upon the Land: Elite Landscapes of the Middle Ages, Oliver Creighton, Boydell Press, 2009
Villages in the Landscape, Trevor Rowley, Dent, 1978
The Sense of Fairness blog 