Friday, 27 April 2012

Wealth of a Nation

" ... though a great number of people do not labour at all, many of whom consume the produce of ten times, frequently of a hundred times, more labour than the greater part of those who work ; yet the produce of the whole labour of the society is so great, that all are often abundantly supplied ; and a workman, even of the lowest and poorest order, if he is frugal and industrious, may enjoy a greater share of the necessaries and conveniencies of life..." Adam Smith in his introduction to 'The Wealth of Nations'.

In the years since Adam Smith wrote his detailed analysis of economic power and strategy for the 18th century many other have laid claim to his legacy as supporting their own politico-economic theory or view from Karl Marx to this decade's neoliberals. That so many diverse and opposing theories claim justification in the words of Adam Smith leaves me wondering if rather than understanding what Smith was saying to the politicians and businesses of his day, there is not just a bit of leaning on the great and good going on but frank and total manipulation of what Smith was saying to fit theirm own cause. This essay is not any attempt to make an objectively evidenced scientific economic or socio-economic point but to seek to ask the appropriate questions to begin to understand what we mean in the 21st century by the term: 'Wealth of a Nation'.

Over the last five decades I have been employed as an officer in the Royal Navy, built three business from scratch (of which only the first 'failed'), worked for a multi-national as a quality assurance consultant and ISO auditor in their healthcare scope and been involved in co-project managing a $4.5 million hospital in a developing country. In all these situations I have observed how people work both for and against themselves and have become increasingly cynical about modern economic theories as they focus more and more on capital and move ever further away from the one thing that still holds true in Adam Smith's writings, the importance of 'labour' or better known to you or I as the people of the nation.

I picked the above quote simply because it demonstrates that people (and not capital) are at the heart of Smith's thinking, as without people capital does not exist because it has nothing to exist for. Yet in today's neoliberal political and economic hamster wheel the talk is all about the bottom line (capital) and not how the wealth is actually created by people carrying out skilled work and endeavours. Further Smith reflects that the non-productive part of any socio-economic system is reliant on those who actually produce goods and services for their own well being and wealth - an idea currently turned on its head given that the UK Government is currently actively wrecking the UK's product and service base, the bit that actually creates the capital side of the wealth of a nation; always hold in your mind that capital can not exist with out people.

Looking simply at the capital wealth spread in the UK in simple terms 20% of people hold 80% of the capital wealth. My first question is this: How can any nation be considered 'wealthy', as Westminster Government claims the UK is, when 80% of the nation holds only 20% of the capital wealth. Analytical logic surely defines 20% of the people of the UK as wealthy while the other 80% clearly are not. If the majority of the nation is not wealthy, how can a nation be considered wealthy in purely capital terms? Yet it is in these 'bottom line' terms the UK Government bases it case -  it ignores the majority of people in the UK it is supposed to represent, almost as if the majority do not count - people are no longer important to the UK Government.

Given this appears to be the case is it any wonder that there is a growing sense of London and the SE's detachment from the rest of the UK which in turn is increasing the resentment between the English regions and Westminster while in Scotland there is ever increasing support for our own nation to withdraw from the Treaty of Union and go our own way. For people, people remain more important than 'capital', we measure our 'wealth' in other equally tangible ways. For most people the wealth of a nation is its people and for politicians who can grasp this fundamental need and create a vision and policies to deliver their vision, success awaits.

So how do my experiences in the Royal Navy and the rest of my career to date inform this argument?

As an officer (leader) in the Royal Navy my core task was to deliver results based on the concept of ordinary people, doing extraordinary things, in an ordinary way. My main assetts were the people I was responsible for and to. I had to be aware of the capital available for the task, be that in materials or cash, but fundamentally I succeeded or failed by the labour of the people. The fascinating result of this method of 'creating wealth' or as we would say 'achieving our aim' was they way people worked together to succeed with out the need for much else than encouragement and simple reflection on how well we were doing or not. Miles away from the rigid hierarchy of work of Adam Smith's theory (misinterpreted by both Marx and the neoliberals) but in terms of bottom line demonstrably efficient and effective. It was notable that when top-down directives were promulgated in the RN by the MoD they invariably reduced the effectiveness and efficiency of the system. People need a bit of flexibility - capital does not, it just lies in the bank doing nothing in particular.

My business experiences were shaped by the working practices I learnt in the Royal Navy making people my chief asset while capital was just something that resided in the bank where it was safe, warm and preferred to be. After my intial false start, mainly due to the bank deciding not to release capital, I then was involved in a dental partnership which in five years went from a turn over of £30,000 to £250,000. We involved our staff asset to develop our business, they gained through job security, good working environment, shared goals, treats and our ability to pay them higher than standard dental nurse and staff wages. My partner in the business and I benefited by being left to do what we had trained to do - dentistry - and focus on our patient's needs, deliver on those needs which in turn created return business and gave the capital in the bank more playmates to cuddle up to. For those of you who wish to state it would not work in the world of multinationals here are a couple of words - John Lewis, Delta Airlines: smart businesses are coming round to the idea their main wealth is their people. Yet the UK Government continues to hoard capital, while throwing away people.

I am an instinctive social democrat all my own experiences over the last 50 years lead me to one simple conclusion, the wealth of any nation is its people and that governance must focus on the needs of its people for health, welfare and public utilities while the people have to be released from out dated and outmoded ways of being thought about by Governments of any stripe, as a mob to be ruled rather than a people to be listened to. In return the people will create the capital to ensure it can happen because it is mutually beneficial for all to make it so.

There will be abuses by both sides, as that is the nature of the small numbers of humans who want it all for themselves and think there is never enough to go round. This is in fact ironic as Adam Smith pointed out back in the 18th Century:  "... yet the produce of the whole labour of the society is so great, that all are often abundantly supplied; ....."

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