Disillusioned commentary on Australian financial sector, politics, business, media... with attention occasionally distracted to the world outside... and intermittent reminder that rage is a more life-conserving irrationality than despair.

Wednesday, January 26, 2005

Shouldn't you be working harder?

Today is a public holiday in this country. Australia day celebrates the arrival of several boat-loads of soldiers and convicts from the UK on 26 January 1788, subsequent defeat of the indigenous Australian people in armed conflict, their decimation from smallpox and then subjection over more than two centuries to economic hardship and humiliation. It was only as the consequence of a successful referendum to change the constitution in 1967 that they were actually granted the status of being human, on an equal footing with the rest of the population.

However that is by the bye. The subject of this post is happiness.

Ross Gittins, economic editor of The Sydney Morning Herald, asks in his column today, "Feeling a twinge of guilt over taking today off so soon after Christmas and New Year? What are all these public holidays going to do for Australia's international competitiveness?"

Is laziness like this destroying civilisation as we know it?

Although Gittins does not mention it, US Treasury Secretary John Snow has recently blamed a lot of what's wrong with the US's international trade position with Europe and Japan:

The combination of rising deficits and the shrinking U.S. dollar is setting off another round of international finger pointing, according to the Times of England. John Snow, U.S. Treasury secretary, blames Europe and Japan for not growing fast enough to absorb more American products, particularly capital goods.

So what does Gittins have to say?

... if you take maximising our production of goods and services to be the object of the exercise (as some silly businesspeople and politicians seem to), working harder - that is, longer - isn't a sensible way to go about it.

You don't understand the first thing about how the rich countries got to be rich, and will go on getting richer, if you think we did it by working harder. Rather, we did it by working smarter - a little smarter every year.

How do you get workers to work smarter? In the way we've been doing since before the Industrial Revolution: by giving them more and better machines to work with. By giving them an extra pair of hands, so to speak.

This means developing and applying new technology and investing in more capital equipment.
In these days of the IT revolution, however, we've become more conscious of the need to work smarter by increasing our investment in "human capital" - the knowledge and skills our workers carry around in their heads.


The more the developing countries take over the world's production of manufactured goods, with China at their head, the clearer it becomes that our future lies in using increased investment in education, training and lifelong learning to raise the skill of our workforce - something we're not doing well enough at present.

To put all this another way, if the nation's interest is in amassing worldly wealth, you don't focus on production (output), you focus on productivity (output relative to inputs).

Any fool can increase output by increasing inputs (including hours worked). The genius of the capitalist economy is its long-proven ability to increase the output of goods and services much faster than the increase in inputs.

This economic magic is achieved by technological advance, backed up by the accumulation of physical and human capital.

Seen in this light, the question of how many days a year we take off pales into insignificant penny-pinching.

He then asks if maximising the output of goods and services actually is the object of the exercise(emphasis added):

... there's an even more fundamental objection to the attempt to make us feel guilty about holidays: it confuses means and ends.

Conventionally, the production of goods and services is a means to an end, not an end in itself. The end is what economists call "utility" or satisfaction, and the rest of us call happiness.
And the point is that utility derives from a combination of consumption and leisure. Part of the key to happiness is contrast and striking the right balance between work and leisure. You'd expect neither the person who never stopped working nor the person who never worked to be particularly happy.


The defenders of capitalism are always telling us we should produce more because the richer we are, the more we can afford to do what we want - to spend money on fixing the environment, for instance.

But here the same people are telling us we can't afford to take a few days off because we have to keep working and getting richer.

This is muddle-headed. It takes the end of leisure and reduces it to a means to the end of increased production.

It tries to make us into misers, who think the fun comes from making and counting money, not from spending it. It's like being too busy preparing a meal to sit down and enjoy it.
Though this is the most elementary and conventional economics, the funny thing is that economists regularly foster the misconceptions of businesspeople and politicians by using a nation's total production of goods and services (gross domestic product) divided by its population as the standard measure of its prosperity and economic success.


The trouble with this is that it focuses on production rather than productivity. It thus implicitly assumes that the person who slaves night and day to amass goods and services is more successful, and more happy, than the person who sets a high value on leisure - even where that person has high productivity, meaning they can well afford to take time off.
For years this measure of GDP per person has been used to show the Americans are far richer than the Europeans and conclude there's something wrong with the European economy that needs "reform".


But recent research has demonstrated that Europe's level of productivity is similar to America's, meaning that the Yanks' higher GDP per person is largely a product of their decision to take shorter holidays and generally work longer hours. The Europeans, on the other hand, prefer more leisure and less work.

It's a free choice. Despite all the propaganda we hear from the workaholics, there's nothing in orthodox economics that says the Americans have done the right thing and the Europeans the wrong thing.

Nothing in common sense, either.

So the sensible answer to the question that this post asked, whether John Snow likes it or not, is, "no!"

1 Comments:

Blogger Frederick J. Helfrich said...

As an American, I can vouch for the workaholic atmosphere "over there". But although I can't quote it, I remember seeing recent research that although Americans are working more hours per year than ever before, they are only marginally more productive than the French, who work less than 35 hours per week and have a month's vacation every year. Hardly seems more productive to me, when it means working 12 to 14 hours a day.

Note: I'm not in the US right now, I'm working in Africa. Sure, I make less that I would in the US, but I really enjoy the time I spend after work with my 5 month old daughter. Also, a month vacation every year isn't a bad thing.

February 1, 2005 at 7:29 PM

 

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