Mittwoch, 5. Oktober 2011

Welfare State - VI: Competition of Thought and Performance

„Look at the Japanese“, the Argentine Central Banker said to the group of visiting foreign bankers around 1985, „although they live in an essentially poor country they have made so much of it! And we Argentines live in one of the richest countries of the world and we have made a mess of it. Can you imagine what Argentina would be like today if the Japanese had lived here and not us Argentines?“ „Yes, I can“, reacted the banker from Tokyo, „the Japanese would today be the same way as the Argentines are because they wouldn’t have had to try so hard“. The group laughed, but they had just heard a monumental truth.

It is disequilibrium (and not equilibrium!) that is the cradle of improvement and quality. If the thought of the earth’s being the center of the universe had never encountered competitive thoughts, we would still believe in that. If we never felt that we had something at stake, we would never try to preserve it. Managers who are convinced that they are always right will sooner or later pay a hefty price for having been wrong. Prudent managers will form their opinion by generating a constructive conflict of opinions among others and by making their best choice among them.

When the term „competition“ is misinterpreted - and the Welfare-State-Mentality tends to willingly misinterpret that term -, it can easily become a specter that arouses fears because it tends to create images of the risk of losing, of the risk of rejection. The more competitive a society is, the greater the discomfort of those who cannot stand up to competitive pressures, the greater their perceived need to reign-in competition. After all, where would it lead to if everyone could compete with everyone else? Would it not lead to a brutal battle for survival among the fittest (at the expense of all others)?

This paper emphasizes the reasonable competition, whereby it is understood that one cannot define where reasonable competition ends and where unreasonable competition begins. A society’s basic rules, its real or perceived value structure will determine the borderline between „reasonable“ and „unreasonable“, and this is a never-ending process of searching for the commonly acceptable standard. What is accepted as reasonable competition in today’s environment may become perceived as unreasonable (or excessive) competition in tomorrow’s environment. When, in the 1980’ies, the accelerated competition for capital and yields thereon set off the storm of corporate restructurings, one could also see many positive aspects in that development: cozy corporate managements were awakened and layers of middle-managements discovered that receiving attractive salaries for little value added could no longer be justified. Overall, many industries became more efficient in the process: „shareholder interest“ and „shareholder value“ became the predominant themes. Today, when the most effective way to push up a company’s share price often is the announcement of a major staff reduction program, responsible leaders are beginning to question whether „shareholder interest“ is indeed the only valid yardstick for corporate performance. And it may well be that a society that applauded the priority of shareholder value yesterday will tomorrow promote the theme of corporate responsibility to society.

The sportive interpretation of competition is: „May the Best One Win!“; it is not: „May the Losers Perish!“ The principal themes of Welfare Government are that competition must go hand-in-hand with solidarity, and that the whole of society can never be better than the sum of individual efforts and contributions. The principal worry of the Welfare State is that there would be a brutal battle for survival among the fittest - at the expense of all others - unless social welfare is organized and regulated. The Welfare State generally fails to promote the positive aspects of reasonable competition in the process of achieving results. Instead, it tends to create the illusion that results are already there and only waiting to be distributed. Witness, however: young Boy Scouts make the solemn promise that „they will always give their best“ and youthful enthusiasm is generated in the process. Rotarians throughout the world are being called upon to probe their actions against the questions whether what they do is true, is fair to all concerned, whether it promotes friendship and goodwill, and whether it serves the well-being of all. Other service clubs composed of business professionals set similar standards. And the standards of the Welfare State? The standard of the Welfare State is that welfare will come about automatically provided that it is organized by the state.

The call for protection and regulation is reactive (and not proactive) in nature. It tends to be the reaction to the results of excessive or unreasonable competitive behavior. Politicians do not get elected because they only propose to protect and regulate per se. Instead, they get elected because they propose to protect society „against“ something, they propose to regulate in order to achieve a greater good. Instead of focusing on improving the framework for reasonable competition so that better results are achieved, politicians tend to focus on reducing and/or eliminating competition altogether in those areas where social welfare could be deemed to be affected by competitive forces.

Once the competition of thought and performance is reduced, the engine for the sustained betterment of society is being slowed down. The only effective way to counter a „silly“ argument is to come up with a better one (and to allow that better arguments can come up). The only effective way to improve the performance of a service business or institution is to expose it to the competition of a better performer and to give customers the right to choose. It is not sufficient to simply declare silly arguments as „silly“: they will continue to carry weight and influence unless they are outweighed by better arguments. It is not sufficient to give a poorly performing business or institution instructions to improve performance: there will be no substantial change unless it is exposed to competition, until there is something at stake. There has to be something at stake - either something real or something perceived -, there has to be a special motivation for man to make a special effort.

In reality, there is always something at stake. An interpersonal relationship that is not actively affirmed will sooner or later break down. A customer relationship that is not actively maintained will sooner or later lose quality. A social system that constrains the forces of supply and demand as well as the competition of thought and performance will sooner or later become inefficient. It is the test of supply and demand, the reasonable competition of thought and performance that are the constructive forces of a society. Any society that reduces the influence of these forces will reduce the power of the engine for sustained betterment. When competition becomes unreasonable, the answer is not to eliminate it but rather to improve the framework within which the test of supply and demand, the reasonable competition of thought and performance can take place.

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