Is there a link between the behaviour of “bankers” who have been credited with bringing down the world’s financial system as they pursued ever-greater bonuses, and British parliamentarians who have been credited with ripping off the taxpayer in an orgy of greed and dishonest expense claims?
Clearly, in the minds of much of the press and perhaps most of the public, there IS a link in that both groups have been driven by greed and avarice … or so it is assumed. But is this actually true?
The neoclassical economic approach (and the one that underpins the position of much of the press on this matter) is that both groups have been exercising rational and fully informed decision-making and have concluded that the long-term financial benefits accruing from their decisions are of far greater economic value than the costs incurred. But this is to fully misunderstand that neoclassical economic theory simply does not apply in cases where a behavioural approach makes more sense Read the rest of this entry »
The collapse of General Motors has nothing to do with the current world economic crisis and it has everything to do with the failure of GM’s management to actually know what it was doing.
For many years the unions and their bloated and unrealistic pensions plans have been bleeding General Motors and will continue to bleed GM until it implodes and becomes little more that an interesting case study for university professors specialising in the collapse of Western manufacturing. Are the unions to blame for this – well, yes … and no! They did what they were supposed to do and extracted whatever they could from the employers on behalf of the workers BUT their interest was strictly short term and focused entirely on what they thought they were entitled to rather than what was sustainable for the company over the long term. In many ways, the unions thought that long term planning was concerned with what they would do at the weekend, while short-term planning was about what they would eat for lunch. Read the rest of this entry »
It seems just possible that US politicians have realised that the solution to the economic crisis in the US should not include bailing out large organisations with a half-century of poor management practices, poor labour practices and high levels of contempt for clients and the environment. Yes, the US Senate has rejected the bailout of the US car industry and, in reality, the big three car makers (Ford, General Motors and Chrysler) should now apply for Chapter 11 bankruptcy protection while they break up and start becoming modern businesses. The only regret is that the politicians didn’t feel the same way about the banks. Read the rest of this entry »