May
2004 - Is all productivity for the better?
Some time ago I wrote about a
study that explained why wealth could not buy
happiness. The work, by Professor Richard Easterlin
of the University of Southern California, concluded
that the satisfaction of any particular desire
led inexorably to the creation of a new one.
Prof Easterlin noted that no
matter how we progress throughout our lives, general
levels of happiness across the population tend
to remain constant. More than this, he said, our
desire to buy things increases in proportion to
our income. So the more we earn, the more we want.
Unfortunately these desires cannot
be sated since we are never able to sustain anything
more than some short-term gratification as a result
of material gain. On the contrary, the more we
gain, the more we want to increase our gains.
I suppose this explains why entrepreneurs
find it difficult to call a halt to their quest
for further acquisitions. The word "enough"
is missing from their vocabulary.
The financial aspect of such
acquisition is probably true for most of us, since,
in a related study, Prof Easterlin found that
when people were asked to define the source of
happiness, most listed wealth after health and
their families.
Part of Prof Easterlin's research
referred to a study carried out by David McClelland,
the social psychologist, nearly 50 years earlier.
McClelland's so-called "ring toss" experiment
involved children competing with each other in
throwing hoops over wooden pegs. They were told
they could stand as close to, or as far away from
the pegs as they wished.
Before the experiment the children
had completed a test that marked them on their
urge to do well, or what McClelland called their
"need for achievement".
The children with the highest
scores in the test tended to stand at a distance
that required a challenging throw - but not so
challenging that they had no hope of succeeding.
As they improved, they extended
the throwing distance. The low scorers would either
stand far back or get so close that they could
not miss the peg.
McClelland believed that western
industrialised societies had built their economic
success by encouraging those, as with the high-scoring
children, who created challenges for themselves.
Prof Easterlin linked the "ring
toss" findings with his observations about
material gains. Just as the children with the
strongest desire to do well set their aspirations
in proportion to their abilities, "so increased
earnings are matched by an increasing desire to
buy things".
This basis for economic progression
was questioned by John Kenneth Galbraith in The
Affluent Society, his 1958 critique of the US
in the aftermath of the second world war. Prof
Galbraith was using the term in the book's title
ironically since he argued that the affluence
- derived from a concentration on private enterprise
- ignored the need for better public services.
Too much industrial effort, he
suggested, was concentrated on satisfying trivial
consumer desires when there was a more pressing
need for improved public services in the form
of better schools, social services and infrastructure.
There is a thread running through
these debates that might have relevance to existing
assumptions underpinning the UK government's determination
to encourage greater productivity.
It is difficult to disagree with
the trade and industry secretary Patricia Hewitt's
argument that higher productivity generates more
wages and profits for each hour that someone spends
at work. The links between productivity and economic
success appear irrefutable.
But should all productivity be
seen as an economic good? Take the hamburger,
for example. Sales of hamburgers in fast food
outlets generate profits and jobs. But the heavy
consumption of hamburgers and other fast foods
is leading to a rise in obesity, thereby increasing
health care costs and the misery of those who
would like to weigh less than they do. It could
be argued that we might have a healthier and happier
society had hamburgers never been invented.
You can apply the same argument
to jobs as Prof Galbraith did. Jobs and investment
producing trivial consumer goods, he argued, were
less desirable than those that helped to improve
education and social well-being.
The government appears to have
bought into part of this argument since it is
has diverted increasing tax revenues towards public
services. Moreover, its education policies reflect
the theories of human capital investment expounded
in the 1960s by Theodore Schultz, an economist
at the University of Chicago. Prof Schultz made
the link between a better educated workforce,
improved productivity and economic benefit.
Ms Hewitt has been persuaded
by Michael Porter, the Harvard Business School
professor, of the need to build the UK's innovative,
technical and business skills in the belief that
increasing international capacity for outsourcing
is going to limit the future for many existing
low-skilled service jobs.
But leaving aside the skills
debate, should we accept that all productivity
is good or is there such a thing as bad productivity
that does not contribute very much to a healthy
society?
After all, we have now reached
the stage at which Tesco, the supermarket group,
is introducing a shopping trolley designed to
improve our fitness while we shop. Tesco itself
has argued that its fitness theme might encourage
people to buy healthier products.
But where is productivity being
directed in this development? On the one hand,
we need to devote productive effort to create
goods on the supermarket shelves. On the other,
we are being encouraged to expend further productive
effort to take them off the shelves and consume
them. Why not simply cut out all the unnecessary
productivity in the middle of this process?
I am not suggesting here that
the government's underlying policy on productivity
is wrong. Far from it. The government is concerned
to encourage greater skill levels, enterprise
and output from employees. Even so, is it perhaps
too simplistic to link human endeavour wholly
to profits and incomes?
There seems to be a direct, and
adverse, link between the need for a fitter, healthier
society from which we draw our workforce and the
kind of consumption generated by that very same
workforce. It all adds up to a lot of wasted effort
and a lot of wasted resources.
Perhaps the department of government
that has been encouraging us to spend much more
time in the gym should be dealing more with the
department that is intent on increasing profits-related
productivity without any discrimination about
the nature of those profits.
Prof Easterlin's study, aligned
to the others quoted here, is questioning whether
the headlong pursuit of the kind of affluence
described by Prof Galbraith is going to produce
a happier society.
My grandmother used to have a
saying: "Enough is a feast". I'm beginning
to understand what she meant.
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