by Mario Fabbri
There could, in theory, be a proprietor who is so insensitive to pressure, so lacking in complaisance, that he escapes the logic of excipient costs. But he would make himself very unpopular, which is an excellent recipe, particularly in highly solidaristic environments, for coming to a bad end.
This enables us to take into account only normal businessmen who survive longer and are therefore those that one would come across normally.
All these considerations suggest that there is a sort of socially acceptable upper limit to the profits of big companies, which may vary from one time to another and from society to society, but whose economic effects are considerable.
These mechanisms are fundamental for the economy but completely escape the attention of economists, although it must be recognised that Paul Samuelson at least saw the question even though he could not find the answer. Italics added:
[The comprehensible existence] of a minimum threshold for interest rates and profits could explain the historical stability of profits… particularly if someone were able to provide reasons for an upper limit to profits.1
This upper limit to profits is created by the moral pressure of society, a factor that is more evident in most solidaristic societies, but remains invisible to economists who mechanically take their inspiration from Anglo-Saxon societies2 in which individualism is greater and complaisance weaker than elsewhere.
In this spirit they also introduced the concept of homo oeconomicus: an ideal man-model who decides his actions only on the basis of his own personal scale of ‘utility’ – something that produces a vision of the economy that indeed seems to be a caricature of a sociology of the Anglo-Saxon countries.
1 SAMUELSON, Economics (IX ed.), p. 754, note.
2 See Rovina delle nazioni, p. 243 ff.
19. Some brief looks at the imaginary economy
Work expands
so as to fill the time available for its completion.
Northcote Parkinson1
Evident absurdities appear in the imaginary economy: the effects of the inevitable contradictions of an environment that declares itself to be productive, but which must be necessarily unproductive.
They have been noted with perplexity or amusement by numerous authors, but here I owe a special intellectual debt to Northcote Parkinson, the author of the extraordinary essay Parkinson’s Law.
In it, among other things, he draws attention to the growth of the British Colonial Office staff where, as the workload decreases, the time employed to process it increases.
After having noted that in the period in question the size of the British Empire had shrunk considerably, Parkinson observes:
… a glance at the figures shows that the staff totals represent automatic stages in an inevitable increase. And this increase, while related to that observed in other [civil service] departments, has nothing to do with the size – or even the existence – of the Empire.2
Parkinson finds an excellent explanation for this increase of staff when the work to be done decreases: it is enough for employees, instead of working ‘for the rest of the world’, to work for each other.
To illustrate this, he develops the hypothetical case of a civil servant A who is, or thinks he is, unable to attend to the pile of work on his desk.
He manages to get himself assigned two subordinates, C and D, which makes his position more important and then, when they also start to complain of being overworked, he obtains two more subordinates for each of them, E and F, and G and H:
Seven officials are now doing what one did before. This is where Factor II [of working for each other] comes into operation. For these seven make so much work for each other that all are fully occupied, and A is actually working harder than ever. An incoming document may well come before each of them in turn. Official E decides that it falls within the province of F, who places a draft reply before [common boss] C, who amends it drastically before consulting [his colleague] D, who asks [his subordinate] G to deal with it. But G goes on leave at this point, handing the file over to [his colleague] H, who drafts a minute that is signed by D and returned to C, who revises his draft accordingly and lays the new version before [big boss].3
In fact a crucial ingredient in the development of the imaginary economy is that enlarging the staff of a bureaucratic organisation may increase the time it needs to complete tasks, rather than reducing it. For example::
Imagine a public office with a staff of 50 dealing with pension applications. For each application an official performs formal controls, calculations and checks, and eventually establishes the size of the monthly cheque that will be paid out.
One official can deal with two or three applications per day and usually, in that imaginary country, a pension demand is settled the same day it is examined.
Then the number of applications increases and the office is no longer able to deal day by day with the number of cases arriving. A permanent backlog starts to accumulate.
The staff is increased, and then again, and again… until there are 2000 officials. But now the time necessary for processing an application has grown considerably.
The fact is that in order to rationalise it, the work organisation has changed significantly: the tasks to be completed have been subdivided by type – initial scrutiny, formal checks, calculations, etc. – and assigned to units that specialise in each.
Now there are five large units, and each application has to go through each of them in turn. The minimum time an application is held in each division is still one day, as all divisions transmit the material processed to the next division in the evening.
And this alone is enough to cause the required time to increase from one day to five.
It was thought that this increase would be offset by specialisation benefits, which would make the work more accurate and reliable. But it was not realised that in the new more complex structure new problems would arise.
For example, staff have been assigned permanently to each of the five units, so when the workload increases it can happen that one unit is unable to complete all the work expected of it because of shortage of personnel.
And this delays the whole process even if the other units are overstaffed, because it is the slowest stage that sets the overall pace.
What is more, the managers of each unit are zealous and, because they want to stand out from their peers, make small changes in the areas they are in charge of.
These are nearly always commendable additional checks and controls devised to avoid mistakes and ensure that the State does not have to pay out more than it should.
And we do not speak of the other problems, misunderstandings, resentments and conflicts that can emerge in any community where, due to its size, there is room for career ambitions.
Ultimately the increase of employees from 50 to 2000 has brought a much smaller increase in the application-processing capability.
Someone with better experience of bureaucratic environments may be able to improve and add other elements to this sketch, but a prime factor in the growth of the imaginary economy is that as structures created to carry out a task become bigger and more complex, they generate additional needs and goals, which often conflict with their primary task.
Correspondingly, the space for unproductive work expands within them.
The inefficiencies we have just seen may seem to refer to public sector environments, but they are rife in private companies too – particularly the big ones – as is shown by the extraordinary amount of time and energy they need to perform tasks, which, if we think about it, should be quite simple.
But unless the employee weighed down by these inefficiencies is really overloaded in his other tasks, he applies little pressure to eliminate them because he wants to have things to do, in order to justify his position in the workplace to others and to himself.
This, incidentally, explain
s why many employees oppose the elimination or simplification of tasks discovered, in the course of organisational rationalisations, to be unnecessary or ill-conceived.
In the economic system, in short, inefficiency is endemic, and in many cases visible even in factories, where measuring efficiency is fairly easy because usually it is enough to count the quantities produced.
The foreman of a manufacturing department:
We start at 6:30… [The workers] take an hour and a half to set the machine, but I know it takes twenty minutes, and then they go to the doctor. At 8:30 the ones who remain have a snack. And occasionally they stop working an hour or even an hour and a half before the end of their shift, to do the cleaning.4
But in offices things are much worse: we come across situations where it is even difficult to discuss ‘efficiency’ because it would first be necessary to solve the tricky problem of identifying what it is sensible to measure in order to evaluate it.
With a little imagination numerical indicators can be created to imitate the control techniques used in the factory. But this task is only a scholastic exercise, as the jobs of many employees have but a dubious relationship with the company’s profits.
The clash between the macroeconomic constraint on the imaginary economy to be unproductive, and the strenuous efforts of imaginary workers to convince themselves they are productive generates genuine absurdities.
These have inspired many essays which even when they present themselves as satire, like Parkinson’s Law, are more penetrating than the official interpretations. Some examples:
The very essence of their work numbers managers among the great actors of our time.
… in this organisation people talk incomprehensibly and everyone keeps quiet and pretends to understand.
[In certain companies we note] an extreme distance… between how top managers speak … and the reality of workers… While one group speaks willingly of “industrial excellence”, others only see what looks to them like senseless behaviour.
In other words, the various players do not live in the same world…
There are two ways to look at it. Either (a) the business world is a sane place dominated by a number of crazy people who ruin everything … or (b) the organisations we serve are basically crazy, and you need to be crazy to manage them. After years studying the subject, I’m weighing in on (b).5
Many make heroic efforts to persuade themselves that their activities are somehow productive and rational: this illusion is fundamental for the most conformist, but most critical observers cannot sign up to it.
For example, in his precious book The Audit Society, the British auditor Michael Power begins his critical analysis of his own professional sector with a warning to the reader on its largely imaginary nature:
I have never really been able to understand the purpose of auditing, apart from that of training people like me.6
The most extreme cases are perhaps jobs in politics, the unions or associations, which would like to be considered at least ‘very indirectly productive’ functions. But their futility often reveals itself to the people involved in a clear and demotivating way.
The Italian sociologist Bruno Manghi reflects on his experiences in the field:
[Contradicting the idea that ‘time worked’ must produce something] there is a paradoxical experience: a very high number of people conduct their activities, which are always intense and frenetic, with no significant link between the days, months or years worked and the results of their work. [This is evident, for example, in] the systems that govern culture policy, in some university activities, and a great deal of what goes by the name of ‘commissions’, ‘brains trusts’ or ‘scientific committees’.7
But even where concrete objectives are not attained, often just the idea of doing a job, however elusive its purpose, that offers experience similar to productive work – commitment, problems to solve, deadlines to meet – is enough for many to give meaning to their activity.
These ‘meaning creations’ require the presence of a group of cooperating members, able to confirm to others and to themselves the importance of what they are doing.
But we will talk later about the ability of the collective consensus to create a solid, meaningful ‘reality’. Now, to explain how the futility of so many working activities can escape the general attention, let us present two more immediate factors: complexity and the micro-macro fallacy.
1 PARKINSON, Parkinson’s Law, p. 14.
2 Ibid., p. 23.
3 Ibid., pp. 17-18.
4 DUPUY, Lost in management, p. 46.
5 JACKALL, Moral Mazes, p. 61; DUPUY, Lost in management, pp. 73, 49-50;
BING, Crazy Bosses, p. 17.
6 POWER, The Audit Society, p. XI.
7 MANGHI, Il tempo perso nelle attività politiche, sindacali, associative, p. 13.
20. The dynamic of complexity
People say the complexity of modern life is a bad thing.
But for useless people such as me, it creates endless opportunities.
Scott Adams1
Between imaginary economy and complexity there is a close relationship.
We already pointed out that complexity is a fundamental ingredient in the development of the imaginary economy when we said that the work of employees and managers is “difficult to describe in simple words”.
And, since most workers in the imaginary economy obtain their jobs from complexity, they also irresistibly stimulate its growth.
A notation of the sociologist of business organisations François Dupuy:
‘Intermediate bureaucracies’… thrive in the very complexity they work to create day after day, and in which they are the only entities capable of putting across the idea that they know what they are doing.2
To better frame this crucial dynamic, let’s now do a little exercise by asking ourselves how far State authorities are able to complicate tax norms…
In a very poor country where most of the work is necessarily employed in procuring the essentials of life, there is not much room for other activities. And procedures to determine and collect taxes must be simple and unsophisticated.
But if the situation improves new spaces are created, because on the one hand the tax authorities can deploy better educated and intellectually ambitious officials, who introduce more sophisticated rules.
And, on the other hand, taxpayers too are better educated or at least they can recruit tax consultants who earn their keep helping taxpayers meet the tax authorities’ new and increasingly complex demands.
So unproductive employment increases gradually on both sides but without ever creating unmanageable situations, which remain the only real limit in force.
The parents of the tax bureaucrats and fiscal advisors were farmers whose lives were perforce taken up producing food.
Then agricultural technology improved, freeing part of the population from the obligation to work in the fields.
And now the increase in the complexity of tax law provides the farmers’ children with new, unproductive jobs that procure them an income, keeping them in line with the customs and mind set of the day.
If history had taken another course without an imaginary economy, they could have become, say, idle smallholders.
At a certain point, computers come into use and special tax programs simplify and reduce the work involved.
But their arrival also paves the way for further complexities that previously the taxman could only have dreamt about but never put into practice. So, tax returns get a lot more complicated, to the point where they become as unpalatable as before the computer arrived, if not more so.
It is like when you cannot find things for all the confusion so you “clean out the desk”, creating a space in which it is easier to work.
But because this space is more convenient to use
it is used more, and confusion soon takes over again.
All things considered, added legislative complexity in the services sector, driven by complaisance, can always create enough jobs to offset any technology-led productivity improvement in the agricultural and manufacturing sectors.
So, the advance of automation in factories increases the number of forms and signatures needed to open an account in banks.
And as current economic theories are not able to account for this simple and crucial macroeconomic logic, they must be shelved without regret as inadequate to understand the facts.
We would point out finally that complexity is encouraged to grow by a run-of-the-mill but powerful psychological factor that we can call ‘the allure of ingenuity’ which drives us to regard simple conceptions as banal and commonplace, and to strive therefore to differentiate, complicate, split hairs…
Psychologists have in fact found that ingenious reasoning is instinctively felt by many to be superior to the simple variety, even when it is simple reasoning which delivers better results!
On this subject, the American psychologist Alex Bavelas conducted an enlightening experiment: he provided separately two inexperienced subjects, whom we will call A and B, with a series of images of pairs of cells – one cancerous, the other healthy – and asked them to hypothesise, by pressing a button, which cell was the sick one. A light signal then informed them whether their choice was right or wrong.
Some achieved recognition accuracy in the order of 80%. But only A was able to reach such a result, because only he was given the correct ‘healthy or sick’ feedback.
B, on the other hand, was given random signals, which inevitably led him to build up an ineffective and very complicated theory of how to distinguish healthy cells from sick ones.
A and B were then brought together, and each in turn illustrated the recognition strategy he had conceived: