Trust of civilians in companies and in eachother is not the consequence of ‘a disciplining free market’, as Mathijs Bouman states in last week’s column in Het Financieele Dagblad.
To the contrary: trust is founded upon a strong belief in the intrinsical goodness of people and is itself an indispensable catalyst for successful cooperation and ‘entrepreneurship’.
"I told him you got the right ta-ta,
But the wrong ho-ho..."
Mathijs Bouman, whom I mentioned earlier in some of my articles, is a macro-economist, as well as a columnist for Het Financieele Dagblad (FD) and a co-host of televized business programs.
Especially his written columns for the FD are often very good and interesting reads, although I quite often disagree with his conclusions and mental leaps.
Last week Mathijs again had written a very interesting article, about the need for confidence and mutual trust in a country, in order to bring it on a higher economic level. One of the most interesting quotes of this article was the following one:
I was hungry, so I decided to buy a ‘raisin roll’ (i.e. in Dutch ‘krentenbol', a sweet bread roll filled with raisins - EL). I did not know the bakery, where I bought it. No idea where he acquired his flour and raisins, or how clean his bakery shop was. Still, I took my raisin roll and sunk my teeth in it, without looking. Three bites and my roll was gone.
Again the miracle happened: there was no thumbtack in my roll. Every time when I buy a raisin roll at a bakery store which I didn’t know before, there is no thumbtack in it. You might think: “Come on... Of course, there is no thumbtack in it. Which bakery would do that?! He would not sell a single item anymore, as no customer would trust him again”.
That is exactly my point. I trust the baker to not drop something sharp in his dough, as I know that it will cost him his bakery store. I trust him, because he is disciplined by the free market. Efficient capitalism is therefore a matter of trust; when I had to investigate whether the baker and his suppliers could be trusted, it would cost me half a day.
Trust is an important factor for production. Without trust we can only negotiate and deal with the few people that we know well and not with the anonymous mass. Without trust markets don’t work efficiently and we lose much time and money with assessments and regulation. That is pure spillage and a waste of effort and time.
I wholeheartedly agree with the tenor of this article, as mutual trust between people and general consumer confidence are the building blocks of society and strong catalysts for a healthy and growing economy.
However, Mathijs is dead-wrong when he states that this trust is built up and maintained due to the fact that small entrepreneurs ‘are disciplined by the Free Market’. To use one of my favourite JFK movie-quotes: Mathijs Bouman has the right ta-ta, but definitely the wrong ho-ho!
That sheer fact is not hard to explain by itself: Mathijs has traditionally been a representative of the liberal-conservative school, which advocates the ‘discipline of the market place’ as the perfect medicine for almost any human flaw. Exactly this discipline seems to be founded on Theory X about humans, in my humble opinion.
This theory is described in Wikipedia like this:
Theory X considers that on the whole, workers dislike their work, and have little inherent motivation to perform well. Therefore, if organizational goals are to be met, 'Theory X' managers must rely heavily on detailed rules and instructions, on close monitoring, and on the threat of punishment to gain employee compliance.
Theory X is a very calvinist and even cynical view upon the world and on human behaviour, stating that people can’t be trusted without having a carrot in one hand and a big stick in the other. Theory X takes the imperfection and presumed laziness and disinterest of humans as starting point, instead of looking at it as outliers.
In this particular example of the bakery store, the stick is carried by the 'disciplining and almighty Free Market'. In other words, when this imaginary bakery is so stupid to spill a box of thumbtacks above their dough mixing machine (’as if...’), the so-called ‘free market’ will punish it by expelling this bakery from the market place.
Even though I warmly endorse the remaining content of this article and agree with Bouman’s call for trust, this ridiculous example shows that there is little intrinsical trust in Mathijs’ statement itself.
Personally, I will also eat such a raisin roll without the slightest hesitation. First, because the odds of finding a thumbtack in one’s raisin roll is extremely small, even perhaps when a clumsy baker spilt a whole box in his raisin dough.
And in the second place, based upon the knowledge that independent bakers generally love their profession and like to ‘spoil’ their customers with healthy and tasty quality-food, every day made with love and passion. Just like most SME (small and medium enterprise) owners genuinely love their job and want to produce the best quality for themselves and their customers, while working long, hard hours to achieve this.
While there are of course exceptions, most workers – irrespective of them being blue colllar or white collar – love their jobs and what they do too and give their very best on a daily basis. That this very best differs from person to person is a fact of life, but nevertheless most workers do.
However, a lot of workers and SME entrepreneurs get fed up by the distrust of their managers and bosses at one hand or their local and central government at the other hand.
Managers and government representatives are not seldomly people, who have a general distrust for their personnel or their citizens and domestic companies. Therefore they try to get hold of all tangible and intangible results, facts and circumstances through their dreaded ‘key performance indicators’, ‘control frameworks’, permit procedures, enquiries and ‘general assessments’.
Of course I’m not naive and therefore I am aware of the fact that there are indeed some ‘rotten apples’ in the basket: both among corporate and government workers and among independent entrepreneurs.
Yet, most people deserve being looked at with Theory Y in one’s head: these are people of enthusiasm and good will, who are willing to work hard and smart and who want to fight for a ‘good cause’ and for the reputation of their company.
Offering the best quality and fair prices within their business or profession is always at their retinas. There is no way in which the Free Market is a catalyst for such people to achieve more, just like the traditional ‘carrot and stick’ approach won’t bring them to better quality or higher output eventually. They already give their very best, even though not every day or achievement can be rewarded with an A+.
There is only one thing that most people like to have in their work or their company: trust and faith of their bosses and their respective governments and the freedom to do their job in the way that they learned to do it, founded upon education and/or experience.
This is the reason that many managers are not a catalyst for growth and improvement within their companies, but rather form ‘a grain of sand in the machine’ for most workers, with their KPI’s, their perpetual desire for change and improvement and their dashboards and controls.
Of course governments need to maintain inspections and assessments, in order to stop people and companies from cutting corners and endangering their customers out of sheer greed or fear for the competition. Yet, governments need to do so with Theory Y in their heads: founded upon trust, instead of having distrust as a starting point.
But there is more: Bouman’s article was illustrated with an interesting chart containing WorldBank data upon trust and faith within countries.
This chart even somewhat undermined his own vision about the effects of ‘discipline, administered by the Free Market’ upon trust and faith within a country.
|People with trust in the majority of their countrymen|
Based upon a WorldBank survey.
Chart courtesy of: www.fd.nl
Click to enlarge
When people are asked about the countries with the highest amount of free market-adepts within their government and with the most liberated markets in the world, there is a considerable chance that the United States, Australia and Canada are mentioned among those.
Yet, these countries are far removed from the winners, when mutual trust and general confidence of their citizens are regarded. Not even to speak about ‘liberized’ and fast-growing capitalist markets in countries like Brazil, Russia, India or Mexico.
No, the winners with respect to mutual trust and general confidence are ‘social-democrat-ish’ countries with relatively big and caring governments, like Norway, Sweden and... The Netherlands.
So neither the ‘Freedom of Trade’ nor the ‘Discipline administered by the Free Market’ seems to provide the indispensable mutual trust among the population in a country.
It is the fact that the people care for each other – financially and non-financially – under the umbrella of a caring, but definitely not intrusive government, that seems to be the catalyst for mutual trust and general faith in a country. That must be a surprise for Mathijs Bouman, who seems to be in favour of a smaller government, just like so many other liberal-conservative people in The Netherlands and abroad.
Having said this, there is one – perhaps somewhat surprising – outlier on this aforementioned chart: China. In spite of the ubiquitousness and almightiness of the Chinese government, as well as its infamous corruption, the Chinese seemingly trust eachother.
Perhaps this is just the consequence of having lived with an enormous population in a formerly rural country for thousands of years: a country in which there were always many, many mouths to feed, even during times of bad weather and bad crops.
Trust and cooperation are the only means for surviving in such a situation and so the Chinese trusted and still trust eachother. Even 75 years of communism alledgely could not change that at all!