etnobofin

14th September 2009 – remember this date. It’s the day that the Stiglitz Commission presented its report on improved GDP measurement to the French government. If the report has the impact that Nicolas Sarkozy hopes, it could eventually change the way politics and economics are done throughout the world.

Joseph Stiglitz arrives at the Sorbonne to deliver his report

The report, which runs to 291 pages in English, 324 pages in French, argues that current methodogy for measuring GDP, and therefore the performance of an economy, is inadequate because it doesn’t measure quality-of-life and ecological impacts.

Essentially, what these economists are saying is that we need to evaluate economies in terms of how they serves their society and environment, rather than measuring the economy purely in terms of the quantity of stuff produced. Changing GDP measurements would shift the goalposts for policy-making: the implications for countries everywhere could be wide-ranging.

The Commission started work in January 2008, before the financial crisis really hit, but the ensuing year of chaos has made its work even more relevant. The Commission argues that a more balanced GDP measurement could have assisted in blunting or preventing global banking collapse of September 2008:

“[Some of the members of the commission believe that] one of the reasons why the crisis took many by surprise is that our measurement system failed us and/or market participants and government officials were not focusing on the right set of statistical indicators. In their view, neither the private nor the public accounting systems were able to deliver an early warning, and did not alert us that the seemingly bright growth performance of the world economy between 2004 and 2007 may have been achieved at the expense of future growth. It is also clear that some of the performance was a “mirage”, profits that were based on prices that had been inflated by a bubble.”
Report of the Commission, Executive Summary pages 8-9

Will anyone pay attention? Will the recommendations be implemented? Perhaps the weight of old habits and vested interest will prevent change. But the timing of the report is masterly – the first anniversary of the Lehman Brothers collapse and just days before the G20 meet in Pittsburgh to discuss reform of the world financial system.

So this report will certainly be read and debated. Some will argue that the Commission’s membership was too “French” for the report to be more widely applicable. But as a statement of intent, endorsed by the government of one of world’s largest industrialised economies, the document is powerful in itself.

The Commission was convened at the insistance of Nicolas Sarkozy. Like all French Presidents, he’s a controversial figure – loved by some here in France for his energy and his will to change things, loathed by others for his autocratic style, his hardline stance on immigrants and his “bling bling” lifestyle.

If the findings of his Commission are indeed adopted widely, it could be ironic that Sarkozy, a right-wing president, and professed fan of free markets and liberal economics, could go down in history as the leader who initiated one of the most important advances in social and environmental progress in a century.

In this time of crisis it’s possibly useful to rethink our concepts of economy and the role that business plays in our society. I recently moved to a new apartment in a different part of Montpellier, but something was bugging me about my old place. I’ve been trying to work out how all the shops in my old neighbourhood survived.

Within 150 metres of my front door there were:

• 5 boulangeries
• 3 épiceries Marocaines (selling fruit, vegetables and groceries)
• 1 Lidl that never has the same products on sale two days in a row
• 1 SPAR that sells things at ridiculously high prices (just like SPAR in the UK)
• 1 Casino that sells exactly the same stuff as SPAR and Lidl, but 100 metres further away
• 1 Schlecker that mainly sells dish detergent and cat food
• 1 halal butcher
• 1 Tabac-Presse which is also a bar and PMU (betting shop)
• 3 hairdressers

If you drew a Venn Diagram of all the overlapping products, and graphed the potential demand from local consumers, one might conclude that none of these businesses could be profitable. Yet somehow they all open daily and serve customers, and apparently all make a living profit.

A little further thought provided the clues to how this ecosystem works. First of all, the dwellings in the neighbourhood were large apartment complexes. By my conservative calculation, 25,000 people (the population of Taupo) live within a 300m radius of the shopping centre. So in fact, local demand for groceries and basic services is significant and sustained.

Secondly – and more importantly – none of the businesses is any bigger than any other, and none of them is trying to expand, so competitive pressure is fairly low. So long as each business can achieve a turnover sufficient to feed a household, and nobody rocks the boat, everyone is happy.

On an MBA course, (a degree designed to train managers for a globalising industrial economy), the teaching tends to emphasise the “logic” of achieving growth and shareholder value in an environment where intense competition for customers is an unquestioned reality.

By contrast, my old Montpellier neighbourhood illustrates a concept of a fairly equitable ecosystem, where everyone’s activities are bound by social convention to achieve mutual benefit: rather different to the sort of capitalism we’ve come to expect in Western economies.

A few weeks ago our MBA class was lucky to have a flying visit from Dr Leo-Paul Dana (who coincidentally teaches in NZ at the University of Canterbury). His doctoral research among the Inuit of northern Canada revealed startlingly original attitudes towards entreprenership.

The rate of entrepreneurship in Inuit communities is very high, but not because Inuit want to grow profitable businesses or to become wealthy. For many Inuit, (according to Dr Dana), being an independent businessperson simply means that you can organise your own time around communal activities such as whaling and house construction. To work for a salary ties you to shifts and you cannot participate fully as a member of your community.

This is not an argument against capitalism or market forces. But it seems pertinent to re-examine how individuals use capitalist practices to serve themselves, society and the planet. The current crisis is partly the result of a loss of focus: we have been encouraged to see unfettered capital growth and consumption as an end in itself, rather than a tool to help us live together.

Now I’m off to buy a baguette at the boulangerie on the corner.

(All photos were taken in Burgundy in 2007, not in Montpellier in 2009)

In France it’s long been acceptable to take advantage of “le weekend” to undertake “un relooking” (either house renovation or a  fashion makeover, depending on context).

I’m in no position to complain about any French person who chooses to borrow English words whenever it suits them. After a few weeks back in France, I’m still just getting to grips again with the passé composé of reflexive verbs and abusing the subjonctif at every opportunity.

But it seems to be in business that the vocabulary of le management anglo-saxon has gained particular prominence. I’ve started keeping a list of business Franglais. Here are a few I heard this week:

• le pipe-line = sales pipeline (Jean-Marc, t’as combien de prospects dans ton pipe-line ce mois-ci?)
• le boss = the person who asked Jean-Marc the probing question above
• un brainstorming = brainstorming (an opportunity for a frank and passionate exchange of opinions on why Jean-Marc doesn’t have enough sales dans son pipe-line)
• le team marketing = the people who ultimately get blamed for the lack of sales in Jean-Marc’s pipe-line
• un slide = a Powerpoint slide. Possibly produced for le boss by somebody in le team marketing
• un Powerpoint = une collection de slides. Presentation of “un powerpoint” also provides an opportunity for a frank and passionate exchange of opinions.
• le goodwill = goodwill (ie. the value of a business entity not directly attributable to its assets and liabilities)
• le staff = employees (some of whom were on strike last week)
• le Performance Management = techniques for finding ways to help le staff work more effectively
• le Balanced Score-Card = a tool used in “le perfomance management” focusing not only on financial outcomes but also on operational, marketing and developmental/environmental measurements
• les stakeholders = that’s stakeholders, as distinct the members of le staff who order filet mignon (à point) at the company restaurant
• un lunch = the partaking of food with business colleagues in the middle of the day. Another opportunity for a frank and passionate exchange of opinions (generally about non-work topics).
• le business model = apparently any model of business in France that permits flagrant use of English words in day-to-day operations

So I’m still picking up pieces of my former French fluency.  I’m ashamed of the verbal disaster area I’m creating as a long-dormant part of my brain creaks back into action, rashly gluing together semi-forgotten words with half-remembered grammatical structures.

But it is a relief to know that when I do forget a word, I can insert an English one instead, and sometimes find out that it’s just as acceptable as any French alternative.

Bon courage à tous !

Yup, the weather’s got worse. Here’s a picture taken in Mount Eden yesterday morning. Hail like we’ve never seen before in Auckland. The only upside is that we’ll be able to go skiing this Christmas.

Hail in Mount Eden, 19 December 2004

This article in the Herald also caught my eye – suggesting that the generous remuneration awarded to Chief Executives may not be achieving the desired results in business growth. The philosophy of “incentivising” good performance may not be as well-founded as we think. A notable quote from the article:

“the paper suggests that today’s corporate managers are somewhat like landed aristocracy in the 19th century or political elites of the Third World: the benefits they receive, and any value they create, are the result of the prevailing form of development rather than any real contribution. “

Arrr, blow me down and call me a socialist.