Tuesday, 4 September 2007

Competition Overdrive and the Aussie Way of Life

The concept of quality of life is increasingly being edged out by that of productivity, and the image of Australia, along with other welfare nations, swings from the favoured to the dismissed. The laidback attitude, and quality life behind it, has felt less enthusiasm. It is time to put prevailing arguments for productivity in perspective. The concept is crucial in economics, as
there is apparently no other factors of production more important in generating modern day economic development. There has always been a desire in human societies to produce more at lower costs, especially in the era of industrial production with a heightened possibility of technological breakthroughs and managerial competence. For developed and developing countries alike, productivity forms the core of their prospects of economic growth, and its continued rising is commonly seen as contributing to developed countries’ excelling and dominating positions in the world economy. Developing countries followed suit.

A thrilling pursuit of ever higher productivity levels has become a reality in business and in life. Business corporations must have this goal in mind for their planning and operations. Competition has narrowed down to tiny differences in productivity among major players in the field. Countries are also put to the annual test of productivity levels, in the main category of competitiveness. These rankings often embarrass those lagged behind, being regarded as slack or not lean enough. In consequence, companies put their priority on every means to raise productivity, and this concept is enshrined as an equal to God and tax, unquestioned and faithfully adhered to.

There are in general two ways to raise productivity, to increase output per unit of input and to cut down costs per unit. For individual businesses, it is sufficiently clear and unambiguous that a reduction in costs is a gain in productivity and returns. Increased productivity may also in a broad sense improve the state of a society, lifting living standards and creating more incomes, but such a gain may adversely constitute a loss due to damages to people’s well being. Take Wal-Mart for an example. It is both one of the largest and the leanest corporations in the US and around the world. Its high productivity levels are perhaps unmatched. The company is able to achieve this on the basis of low pays and low prices. Employees generally receive low wages and minimum benefits to do long hour work, and suppliers are squeezed to accept low procurement prices, possible only because of temptation of large orders from the company. Interventions from labour unions on employee benefits are rejected outright, until recent state legislation took mild effect. All in all, the company achieves high efficiency in operations and high returns for the company and shareholders. The other side is protests and law suits from unions and unhappy employees. The contradiction in productivity is best illustrated in the practices of Wal-Mart, being hyper efficient but less genuine caring. There is nothing wrong in searching for ways to improve productivity, whether technological or managerial. The trouble is the blind pursuit of monetary gains that makes seeking higher productivity be manipulated into diminishing real benefits in life.

There is also a preference to focus on numbers in this productivity debate. GDP growth is taken seriously as a measure of strength of an economy. These days, gains from services industries constitute a major part of GDP, but many of the categories of growth are doubtful of generating real gains to the society. Law suits, for example, incur related costs to clients and the unfortunately affected, but bring incomes to legal professionals. These increases are all counted as growing components of GDP. The O.J. Simpson trial is said to have generated tens of millions of US dollars for the economy, in terms of consumption and incomes, but its sensational exposure produced little real value to the society, and a high productivity, as measured by the huge amounts of revenues and incomes created in that short period of time, has made few happy and benefited.

Productivity can be said a perpetual goal of human beings to pursue leisure while contemplating the ways of supporting the consumption of this leisure. There were Chinese gentry in imperial China and European noblemen living off rents collected from land they owned, and Roman upper class and modern plantation owners living off slave labour they bought or controlled. That kind of leisure displays class gaps and represents cheap and cruel ways of utilising resources for leisure. Technological advances since early industrial periods have changed people’s life dramatically, substituting forced labour with employees for work pays, a more humane way of exchange in the market. The trouble is that modern industrial manufacturing demands tight organisation and cost effective operations. Efficiency is totally against slack and leisure. Concerns over output and profit far outweigh concerns over treatment of employees and their want of leisure time. Since the whole workforce is tradable on the market, living standards and well being of employees are crucial issues to a majority of the people in a country, blue, white or golden collars. Only with continued government intervention and pressure from external groups, acceptable levels of work conditions and after work time are protected and guaranteed, at least by laws.

The contradiction between efficiency and employees’ well being has existed all along, with some sectors in the society pushing for an emphasis on either of them when opportunity arises. In more recent times, the voice for efficiency, in other words, productivity, has grown louder, citing worldwide competition and cutthroat business survival. It is also a way to repudiate certain previous forms of overprotection of the labour force, slack in work and long leisure time, such as paid holidays. The ominous bottom line is whether staying in operation with extra workload or closing down the business. Remarkable technological advances have not lessened this dire pressure on productivity drive. To be competent and leading, one must insert more effort and input. For this reason, stress is getting common in industries, especially for those in high risk, high turnover sectors, such as finance and IT. Modern day gentry live off intellectual property rights and the right to collect charges or tariffs on consumers. They traded overworked schedules at present for later year comfortable life styles. The point is that all these effort, drive and urge generated a trend totally opposed to the meaning of life or the essence of progress. They seldom make the working people enjoy their benefits adequately, having more leisure through shorter endurance of toil. Pace of work has been quickened dramatically, instead of slowing, in many ways laying heavy burdens on the urban work force.

A side show of drive in productivity is unambiguously in mainstream writing and reading of the late. Thanks to pressure and stress in contemporary societies, two types of writing have become extremely popular and bestselling. One is on how to make money, get rich, or reach the top in business. Following experts’ advice, they easily fill lines of stacks and shelves. The other is how to recoup after failure, release one from pressure, discover worth in oneself, cope with a lack of self-esteem, etc. The second type is sometimes called “sweet soup for thought”, supposedly psychological solutions to soothing mind and healing wounds. It apparently aims at countering the cruel reality of competition and inherent stress created by punishing paths to giant success promoted relentlessly by the first type of writing.

Under globalisation, services of many types are shifted to economies with lower costs, thanks to advanced technology in telecommunications. While this kind of outsourcing brings in huge savings, the ultimate goal of doing business is to guarantee the quality of services and consumers’ satisfaction. Judging by these criteria, shifting call centres and support centres to English speaking economies, say India, is often a bad idea, since the contact with end users is often riddled with miscommunication and resentment. In the case of Australia, difficulties arise from staff’s strong accent or from uncomfortable feelings on the part of Australian service users that they are talking to a foreigner regarding local matters and that they have lost that kind of fair dinkum Aussie connection. There is this depressing thought of being supported by far away strangers rather than your familiar local people. Any anxiety and ill-feeling in the mind of consumers is bad for business. A friend of mine was extremely upset by callers from India (a sub-branch of a certain Australia company) to advertise on coming property sales and auctions just a few blocks from where she lives. What a ridiculous setting for a marketing strategy! She steadfastly refused the offers and hugely disheartened that hapless Indian salesperson. For shopping, services or other local affairs, she would rather hear it from local people. This is a common feeling easily understood by people who live in a real world, but perhaps not so by some marketing geniuses or company bean counters.

My wife had an extremely difficult time in a phone conversation with a strong accent salesperson. The call was just to activate a purchased phone card, which took about half an hour and many rounds of “sorry, say it again”. The salesperson was not only strong accented, but also rushed things by reading straight from his task list, disregarding the fact that the customer may not be able to understand and follow his quick firing advice, especially those technical jargons. Amazingly, the in-shop sales girl offered little help, unable to key in the details for activating. One wonders whether the computer terminal in her shop was deliberately down, so that salespersons in an Indian service centre can do their job on line. In contrast, I made the same activating request a couple of years before, in a very noisy commercial arcade. I was quite unsure and panicking in following the instructions from the service centre. Fortunately, the person in charge spoke clear Aussie English and offered helpful instructions at each step, so that we finished that business quickly without a hitch. Alas, those were the pre-outsourcing days. If a second language speaker like me feel certain comfort in receiving advice and help in standard English, imagine how local Aussies long for that comfort when they are bombarded by strangers overseas in strong accents. This is not to discuss the preference of English speaking styles, but to point out that there is a real chance of failure in marketing, based on relentless pursuit of cost cutting in services industries. When local sales persons stand idle with a down computer and one has to ring a support centre thousands of miles away filled with staff of low pays, you cannot help thinking this is a purposeful action to force customers into designated routines of the service provider’s liking.

It goes down to a simpler contrast in views of productivity, to strive for profits and market domination, or for real rewards to workers of all kinds and social welfare for all. At the micro level, business success comes with stress and redundancy. At the macro level, the economy has to deal with consequences of cost-cutting, setting the priorities straight and providing needed conditions for citizens to enjoy benefits and welfare. Absolute efficiency causes problems in damaging wellbeing of workers and the environment. Competition overdrive resembles an overkill in business. Productivity is better seen as one of the concerns of enterprises, not their single purpose of existence. A conviction of productivity should not deter people from their pursuit of desired way of life.

In restructuring and re-engineering, executives unavoidably talk about cutting down waste and making an organisation leaner. Waste is supposed to be everywhere, and any capable manager can spot endless waste in business operations. Even if one makes a company run as a perfect machine, no one can claim a complete wipe out of waste. A company naturally should strive to be sufficiently lean, but its heads and culture should not be mean. There ought to be some room for tolerable unwinding and individual pace of work. After all, the Wal-Mart cut to the bone type of efficiency is not everybody’s cup of tea. The contradiction between waste reduction and employee benefits needs to be seen more from employees’ point of view, because they are bringing these benefits into their lives and to the good of the society.

On the other hand, production and supply to the full capacity is a weird form of waste, not only to the producing company, but to the society as a whole. Competitiveness often causes over-supply and glut, flooding the market to make competitors suffer or quit. Mass produced consumer goods often wag the producers by the tail, making more to earn less, encouraging more careless consumption so that they could sell more. Thus there comes bulk buy of disposable goods, a trend since the 1980s, which fits people’s busy life and becomes new ways of boosting spending, towards using affluence to get convenience in a developed society. The concept of convenience to people overwhelms the concept of environmental protection and generates massive waste of products and resources. Personal computers, for example, Used computers have become a hazard in waste, because the materials to build them are not degenerateable. Convincing arguments for productivity and efficiency have made many business and social matters worse by increasing, rather than reducing, waste in production and consumption.

A modified use of the Production Possibilities Frontier (PPF) is worth being considered in this mad world of productivity frenzy. It is crucial to highlight the essential aim of all work humans do: from the earliest time to current time, it remains the same, to enjoy leisure as much as possible beyond the survival stage. The difference is in ways and means to sustain this pursuit at different historical times. If amassing wealth is the priority of some individuals, then their emphasis is on profit which can be had by some, rather than on leisure, which all in the society deserve.

An alternative option can be illustrated by a revised PPF curve following economics principles, which shows a position an economy stands after making its choice and considering the costs of reaching the desired level within the given total production capacity. In between the two extreme possibilities of maximum output and maximum leisure, there are many combinations of choices, and a tradeoff is behind their separate choices, to give up one element to lean to the other. Under PPF, there is a point of efficiency along the curve at which the balance is well kept, and no possibility exists of an increase along one axis without causing a decrease of the other.

Apparently, Western Europe and the US differ in approaches, based on their own social customs and philosophies. By and large, that ideal point of choice is more likely to be a description of Western European purposes of doing business. US companies emphasise absolute efficiency and productivity, with their singular goals of becoming the number one in whatever business sectors or markets. Away from this ruthless mentality, Western European countries take business gains as one way to improve their living standards, and social and personal welfare stay high on their agenda. They pay greater attention to their entitled social benefits and guaranteed state assistance. From this prevailing preference, they keep shorter working weeks, minimum wages, company-paid holidays, and overtime pays, and governments and unions manage to prevent welfare erosion and unfair dismissals of employees. During a leisured tour of Europe years earlier, the coach driver casually mentioned to us Asian tourists that even government employees went off for holidays in country sites or nearby beach to enjoy that lovely July sun and fun. As a result, Western European economies have had relatively lower productivity levels and are said to be less efficient in business operations than their US counterparts, as concluded by economists studying recent decades of economic growth, but their satisfaction level and quality of life are certainly not affected by those seemingly unimpressive statistics.

Leisured life style and consciousness of welfare in Western European countries usually ignore competition and pressure from outside. Productivity is seen as a means to improve life quality, rather then the end goal of life. A slower growth in certain periods of time is thus tolerable. This is similar to the life styles in China before the Opium Wars and in many other pre-modern societies, which came to subject to Western colonialism. Life by the standards of pre-colonial times seemed reasonably acceptable, and there was less want for marked improvement, unlike pent-up craving from those eager colonising Westerners. History seems to have repeated itself in mysterious ways. Once an industrialised country could afford certain luxuries or spend beyond necessities, it is time to establish a welfare state, so that people in the society can enjoy fuller benefits coming from working under new social structures. There is then an entrenched inclination to maintain living standards and quality of life, even at the cost of some lost business opportunities. As competition from outside pushes and urges, this life style may come under certain threat due to its lax and slack. Time goes by, but the ultimate goal of human societies, the pursuit of life quality, has never been diminished. That goal is meaningful to all kinds of people, undiscriminating. No one is the supreme judge in this context on what other societies may or may not live in a certain way, or should one society change due to emerging admiration there of another model or to pressure from a blanket competition in raising productivity. The PPF choice of Western European societies is thus more commendable.

Australia blends nicely in this picture. Its well maintained balance between productivity drive and quality of life has come from abundant opportunities and resources, but ultimately a way of thinking that put the priority right, the people in the centre of things. Its egalitarianism cuts down the shine of the top layers, while adequate and fair welfare make it affordable for ordinary citizens to enjoy much leisure as they can. It is again the rationale of working for the joy of living that works here.

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