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Fishing with dynamite: the big competition myth

Is it time to relinquish fantasies of winning in exchange for the greater prize of shared progress?

Illustration by Sonia Roy/Colagene.com

The cure for banks? Ed Miliband advocates more competition. Need to improve education? Nick Clegg urges more competition between students, between teachers, between schools. The solution to fuel poverty? David Cameron places his faith in competition between the energy companies. From TV talent contests and school rankings to the Olympics and rich lists, our religious faith in competition has promised fabulous efficiencies, miraculous economies and dazzling innovation. Instead we find ourselves gasping for air in a sea of corruption, dysfunction, environmental degradation, waste and inequality. Might there be a connection?

When I interviewed bankers for my 2011 book Wilful Blindness, the brutal pragmatism of a competitive industry was spelled out. “Sub-prime was about ripping off poor people,” one told me. “But we have to employ a sales force. And there was no way we could hire, let alone retain a single good salesperson without letting them sell these high-commission products.

“What were we supposed to do? Sit on our principles and watch as every salesperson walked out the door?”

The financial crisis proved so catastrophic because so many were selling the same toxic products. Classic economic theory may argue that competition is productive because it generates a diverse range of goods and services that benefit consumers and, by extension, society – but in this instance (and many others) it signally failed to do so. Belief in the theory underpins Cameron’s and Miliband’s touching faith that competition, and being more easily able to switch between banks or energy providers, will somehow liberate consumers from price-gouging. In fact, it seems more likely that it will just encourage companies to copy each other’s dodgy innovations at a faster rate. Competition frequently fails to deliver its theoretical promises. Intense competition inside and between institutions generates dysfunction, corruption, waste and the unwinding of the social fabric.

In organisations, competition for permanent jobs, bonuses and promotions can erode trust. Many companies formalise this through forced ranking, a system in which employees are assessed and rewarded for their position within a standard distribution. The top 10 per cent are winners, the bottom 10 are losers and are encouraged to move out, and those in the middle are (at least temporarily) safe. At Enron, this was known as “rank and yank”, at Intel “Focal” and at Microsoft “stack ranking”. The system is a crude form of social Darwinism, inspired by the hope that a need to survive will promote great work. In fact, it has just the opposite effect: people sabotage each other, appearing to be courteous while keeping back just enough information so that colleague-competitors can’t excel. Pleasers and politicians thrive, gaming a system that no one takes responsibility for; if you’re a winner, the system works for you – and if you’re a loser, it’s not your problem. Microsoft recently announced that it was abandoning the system but most large corporations still use it, and then wonder at their inability to innovate.

Competition can’t deliver the creativity these managers need because it specifically disables collaboration. If I’m being judged in comparison with my peers, why would I help them? That these executives are the products of competitive education systems only exacerbates the problem: they bring with them a lifetime of being trained to compete for class rankings, prizes and places. In the United States, where class rankings are still common, parents advise their children not to help one another, on the grounds that doing so may jeopardise their winning the top spot. Here in the UK, primary school teachers observe “competitive friending”: parents’ attempts to ensure that their kids make the right friends to enable acceptance in the right social networks.

In both the UK and the US, the emphasis on competition and ranking encapsulates the same message: everyone is a rival. This does little to teach the subtle habits of collaboration but much to focus any child’s mind on results. If grades are all that matters at school does it matter how you get them? The past decade has brought an explosion in cheating, plagiarism and the use of drugs to enhance exam performance. At the Institute for Global Ethics, the late Rushworth Kidder estimated that, by the time they reached college, 75 per cent of students had cheated – which is why many universities now run students’ essays through Turnitin software to check that they haven’t been copied or stolen.

In the world of science, a well-honed competitive mindset has produced what many leading researchers are calling a crisis: a culture in which the open exchange of ideas, data and theories has all but stopped. Crick and Watson may have considered themselves to be in a race – but their success hinged on the shared insights, data and debates of colleagues. They would find today’s labs very different: in 1966, 50 per cent of scientists said they felt safe talking about their research, but by 1998 that number had fallen to just 14. Science is a necessarily accretive process but from Harvard and Washington to London and Berlin, ambitious scientists wanting to be superstars share with no one. Rivalry and the fear of being scooped stop them from pitching in.

Progress for a scientist is measured in publications, citations and research awards – and as the competition for both has increased, so have fraud, plagiarism and what scientists call “normal misbehaviour”: secrecy, sabotage, data slicing and culling. At the University of Washington, Ferric Fang has grown particularly concerned about the increasing numbers of scientific papers that have to be retracted because they are rushed into print too fast, with inaccurate, incomplete or fabricated data. The number of articles published in the past decade has increased just 44 per cent but retractions of scientific papers have increased tenfold – and most scientists believe this represents the tip of the iceberg.

The cost of this is inestimable; flawed papers lead researchers down dead ends and deflect others from promising avenues. The fraud of the prize-winning physicist Jan Hendrik Schön (who falsely claimed spectacular advances in the field of nanotechnology between 2000 and 2002) cost numerous scientists years of fruitless work and wasted resources.

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The tournament that is modern science has produced what scientists call “the Matthew effect”, according to which the well-funded scientists (winners) get more funding and those with little (losers) get less. This might be a great way to run a game show but it is an especially poor way of promoting discoveries because picking winners is so difficult. The history of science is replete with cases of stunning breakthroughs made by the least likely of people, from the Augustinian monk Gregor Mendel to the “surfer pothead” Kary Mullis, whose invention of the polymerase chain reaction (PCR) transformed the science of genetics.

The costs of competition in business are sometimes obvious – fraud, corruption, sabotage – but many are more oblique. The measure of a company’s success (or the status of its CEO) is size, and the pursuit of growth is routinely pursued with high-risk strategies whose true cost may be apparent only years later. This is what the legal scholar Lynn Stout calls “fishing with dynamite”.

The quickest way to grow a company is through mergers and acquisitions, an old headline-grabbing favourite of high-profile CEOs even though research shows a failure rate of anywhere between 40 and 80 per cent. Under John Browne, BP grew fast by buying Amoco in 1998, Atlantic Richfield in 1999 and Burmah Castrol in 2000. Theoretically this should have generated economies of scale but it created debt, which ushered in an era of cost-cutting.

Similarly, the quest to make RBS the world’s biggest bank left it with the biggest loss in British corporate history and, in 2012, with a balance sheet the size of the UK’s economic output. Many working at RBS sensed that the acquisition of the Dutch bank ABN Amro in 2007 was driven by Fred Goodwin’s desire to pull off the biggest deal in banking. The quest for scale delivers not just huge risk, but also vast complexity. Supersizing companies always comes at a cost because competitive instincts don’t stop until they fail. To this day, RBS is in a tangle that people working there don’t believe they can fix.

Competition for market share is typically pursued by lowering prices. This race to the bottom might look great to consumers – dresses for £5, cashmere jumpers for £40 – but the costs have to go somewhere and usually they are pushed down to the most vulnerable. We may imagine this is a relatively new phenomenon but it isn’t. The Triangle Shirtwaist Factory fire in New York in 1911 (146 deaths) was echoed a century later by the collapse in 2013 of the Rana Plaza factory in Bangladesh (which made clothing for brands such as Matalan, Primark and Walmart), in which 1,129 died.

Globalisation didn’t invent the race to the bottom but firms such as Li & Fung accelerate it. Acting as a broker between low-wage factories and the companies that use them, Li & Fung’s “Little John Waynes” scour the world from Vietnam to Bangladesh to sub-Saharan Africa in search of ever cheaper labour. This is no small business – in 2012 Li & Fung earned $20bn – and, in theory, the brokers monitor working conditions. But its suppliers have had several disasters, including a factory fire that killed over a hundred workers.

Whether you’re making clothes, fast food or cheap books, competing purely on price drives down labour costs, producing a casualised workforce whose greater needs are either ignored or met by the state: a form of corporate subsidy that companies rarely acknowledge but happily accept.

The true costs exacted by a harshly competitive culture can be seen in the flood plains of North Carolina, the epicentre of the global meat industry. It isn’t just the ten million hogs (concentrating in just one state waste equivalent to that produced by the entire human population of Canada) which make this region remarkable. Rapid consolidation of family farms threw people off the land with nowhere to go. Industrialisation didn’t bring in money or create jobs but left the predominantly African-American families living off food stamps, stranded in a wasteland dotted with lagoons of animal excrement, afraid to protest the high levels of ammonia, hydrogen sulfide, acetic and butyric acids emanating from the facilities.

As large meat conglomerates moved into eastern Europe, a tradition of silence made consolidation easy: within ten years, 600,000 hog farms in Poland and 90 per cent of Romania’s independent farms had vanished. Horse meat is a sideshow, compared to the damage done to the social fabric of such places.

Economists may call these “perverse outcomes” but they are the predictable outcomes of competition. If we place our faith in it, we shouldn’t be surprised by such antisocial effects. After all, if my win is secured at the cost of your failure, what connects us? In a society that believes in winner-takes-all, how can competition fail to generate increasing levels of inequality?

Competition enlivens routine with drama, but when the stakes are high, so are the costs. The ubiquitous metaphor of our age – sport – demonstrates how destructive competition is, when it comes to playing for the big prizes and huge rewards that professional athletes now pursue. Travis Tygart, the head of the US Anti-Doping Agency, and the man famed for bringing down Lance Armstrong, has long agonised over the increasing rates of doping and corruption that characterise elite sport. His research showed him that although people still valued sport for the lessons of fair play, collaboration, integrity and discipline it could teach, in reality they believed that all that really mattered was winning. “In a climate in which corporate executives fabricate financial records, citizens evade taxes, professional athletes commit felonies . . . cheating and unethical behaviour appear to pay off,” Tygart’s research concluded. “Is our nation well served by a citizenry that learns to prize winning and extrinsic rewards at any cost as the values held most dear?”

It’s a recurring question. How can we create schools, companies and communities characterised less by competition and driven instead by an intrinsic passion for innovation, problem-solving and collaboration? Crowdsourcing companies – Kickstarter, Airbnb, SnapGoods, RelayRides, TechShop and many more – start from the premise that it is pooling, not hoarding resources, that creates opportunity. These businesses are typically celebrated for their technology, but their true daring resides in their reliance on the human desire to work together.

More conventional businesses such as W L Gore and Arup have proved successful and resilient because they focus intently on building social capital – trust, reciprocity and shared values – both within the company and with all the other businesses they work with. This isn’t marginal; it is central to everything they do. W L Gore is known for producing Gore-tex but should be more famous for the way it runs its business; you succeed at Gore because people want to work with you, not because you’ve bested them in a contest.

The structural engineers at Arup have been able to build some of the most challenging structures in the world – the Bird’s Nest stadium in Beijing and the ArcelorMittal Orbit – because the firm nurtures a work environment in which people eagerly share expertise and where hierarchy and status contests are of negligible importance. That these companies are also owned by their employees isn’t the single driver of collaboration but consistent with a mindset that sees shared respect and commitment as the necessary conditions for progress.

The Business Secretary, Vince Cable, and others have been keen to champion employee ownership structures as making a difference to the way companies behave. They are right to do so but wrong to think ownership alone will immunise companies against the ills that competitiveness spreads. We have seen the Co-op mired in scandal and fiasco because its ownership structure proved insufficient to ward off the conventional allure of mergers and acquisitions, the quest for scale for its own sake.

There is a lesson here for nations also. While presidents and prime ministers posture on the world stage, comparing their standing in GDP league tables, it is the smaller countries, such as Finland and Singapore, that prove most agile. They have to be great partners because they don’t have the size or market heft to protect them. They export more, plan further ahead and learn quickly. Knowing they can’t win through dominance, smaller countries have had to develop the capacity internally to be excellent collaborators externally. Not surprisingly, their high-achieving school systems seek success for every child, because they don’t believe they can afford to waste anyone.

Larger nations find it increasingly difficult to adjust to a world in which partnerships, alliances and trust represent the best social and political capital. Britain’s agonised relationship with the European Union demonstrates just how poorly we have developed the ability to contribute the best of our talents to the best of our partners.

If we are to find new ways to live and work together, we need to develop and prize high levels of trust and give-and-take: elements that competition so subtly corrodes. We need to celebrate the individuals and institutions that produce the greatest opportunities for the largest number of contributors. Many companies around the world continue to prove the human capacity for this way of working and measuring collective success.

Yet many politicians, wedded to gladiatorial combat and the rankings mania of opinion polls, have signally lost the capacity to think beyond the narrow confines of a very short race. Our politics are stalled because our problems are complex and our means of addressing them are often crude and rigid.

In the looming face-off between business, governments and society, a competitive mindset can frame the contest, but accepting this could destroy the mental maps that might show the way towards a solution. The problem is a failure not of the imagination, but of courage: the willingness to relinquish fantasies of winning in exchange for the bigger prize of joint achievement and shared progress. l

Margaret Heffernan is the author of “A Bigger Prize: Why Competition Isn’t Everything and How We Do Better” (Simon & Schuster, £14.99)

This article first appeared in the 18 June 2014 issue of the New Statesman, Islam tears itself apart

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Why Jeremy Corbyn is a new leader for the New Times

In an inspired election campaign, he confounded his detractors and showed that he was – more than any other leader – in tune with the times.

There have been two great political turning points in postwar Britain. The first was in 1945 with the election of the Attlee government. Driven by a popular wave of determination that peacetime Britain would look very different from the mass unemployment of the 1930s, and built on the foundations of the solidaristic spirit of the war, the Labour government ushered in full employment, the welfare state (including the NHS) and nationalisation of the basic industries, notably coal and the railways. It was a reforming government the like of which Britain had not previously experienced in the first half of the 20th century. The popular support enjoyed by the reforms was such that the ensuing social-democratic consensus was to last until the end of the 1970s, with Tory as well as Labour governments broadly operating within its framework.

During the 1970s, however, opposition to the social-democratic consensus grew steadily, led by the rise of the radical right, which culminated in 1979 in the election of Margaret Thatcher’s first government. In the process, the Thatcherites redefined the political debate, broadening it beyond the rather institutionalised and truncated forms that it had previously taken: they conducted a highly populist campaign that was for individualism and against collectivism; for the market and against the state; for liberty and against trade unionism; for law and order and against crime.

These ideas were dismissed by the left as just an extreme version of the same old Toryism, entirely failing to recognise their novelty and therefore the kind of threat they posed. The 1979 election, followed by Ronald Reagan’s US victory in 1980, began the neoliberal era, which remained hegemonic in Britain, and more widely in the West, for three decades. Tory and Labour governments alike operated within the terms and by the logic of neoliberalism. The only thing new about New Labour was its acquiescence in neoliberalism; even in this sense, it was not new but derivative of Thatcherism.

The financial crisis of 2007-2008 marked the beginning of the end of neoliberalism. Unlike the social-democratic consensus, which was undermined by the ideological challenge posed by Thatcherism, neoliberalism was brought to its knees not by any ideological alternative – such was the hegemonic sway of neoliberalism – but by the biggest financial crisis since 1931. This was the consequence of the fragility of a financial sector left to its own devices as a result of sweeping deregulation, and the corrupt and extreme practices that this encouraged.

The origin of the crisis lay not in the Labour government – complicit though it was in the neoliberal indulgence of the financial sector – but in the deregulation of the banking sector on both sides of the Atlantic in the 1980s. Neoliberalism limped on in the period after 2007-2008 but as real wages stagnated, recovery proved a mirage, and, with the behaviour of the bankers exposed, a deep disillusionment spread across society. During 2015-16, a populist wave of opposition to the establishment engulfed much of Europe and the United States.

Except at the extremes – Greece perhaps being the most notable example – the left was not a beneficiary: on the contrary it, too, was punished by the people in the same manner as the parties of the mainstream right were. The reason was straightforward enough. The left was tarnished with the same brush as the right: almost everywhere social-democratic parties, albeit to varying degrees, had pursued neoliberal policies. Bill Clinton and Tony Blair became – and presented themselves as – leaders of neoliberalism and as enthusiastic advocates of a strategy of hyper-globalisation, which resulted in growing inequality. In this fundamental respect these parties were more or less ­indistinguishable from the right.

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The first signs of open revolt against New Labour – the representatives and evangelists of neoliberal ideas in the Labour Party – came in the aftermath of the 2015 ­election and the entirely unpredicted and overwhelming victory of Jeremy Corbyn in the leadership election. Something was happening. Yet much of the left, along with the media, summarily dismissed it as a revival of far-left entryism; that these were for the most part no more than a bunch of Trots. There is a powerful, often overwhelming, tendency to see new phenomena in terms of the past. The new and unfamiliar is much more difficult to understand than the old and familiar: it requires serious intellectual effort and an open and inquiring mind. The left is not alone in this syndrome. The right condemned the 2017 Labour Party manifesto as a replica of Labour’s 1983 manifesto. They couldn’t have been more wrong.

That Corbyn had been a veteran of the far left for so long lent credence to the idea that he was merely a retread of a failed past: there was nothing new about him. In a brilliant election campaign, Corbyn not only gave the lie to this but also demonstrated that he, far more than any of the other party leaders, was in tune with the times, the candidate of modernity.

Crises, great turning points, new conjunctures, new forms of consciousness are by definition incubators of the new. That is one of the great sources of their fascination. We can now see the line of linkage between the thousands of young people who gave Corbyn his overwhelming victory in the leadership election in 2015 and the millions of young people who were enthused by his general election campaign in 2017. It is no accident that it was the young rather than the middle-aged or the seniors who were in the vanguard: the young are the bearers and products of the new, they are the lightning conductors of change. Their elders, by contrast, are steeped in old ways of thinking and doing, having lived through and internalised the values and norms of neoliberalism for more than 30 years.

Yet there is another, rather more important aspect to how we identify the new, namely the way we see politics and how politics is conceived. Electoral politics is a highly institutionalised and tribal activity. There have been, as I argued earlier, two great turning points in postwar politics: the social-democratic era ushered in by the 1945 Labour government and the neoliberal era launched by the Tory government in 1979.

The average Tory MP or activist, no doubt, would interpret history primarily in terms of Tory and Labour governments; Labour MPs and activists would do similarly. But this is a superficial reading of politics based on party labels which ignores the deeper forces that shape different eras, generate crises and result in new paradigms.

Alas, most political journalists and columnists are afflicted with the same inability to distinguish the wood (an understanding of the deeper historical forces at work) from the trees (the day-to-day manoeuvring of parties and politicians). In normal times, this may not be so important, because life continues for the most part as before, but at moments of great paradigmatic change it is absolutely critical.

If the political journalists, and indeed the PLP, had understood the deeper forces and profound changes now at work, they would never have failed en masse to rise above the banal and predictable in their assessment of Corbyn. Something deep, indeed, is happening. A historical era – namely, that of neoliberalism – is in its death throes. All the old assumptions can no longer be assumed. We are in new territory: we haven’t been here before. The smart suits long preferred by New Labour wannabes are no longer a symbol of success and ambition but of alienation from, and rejection of, those who have been left behind; who, from being ignored and dismissed, are in the process of moving to the centre of the political stage.

Corbyn, you may recall, was instantly rejected and ridiculed for his sartorial style, and yet we can now see that, with a little smartening, it conveys an authenticity and affinity with the times that made his style of dress more or less immune from criticism during the general election campaign. Yet fashion is only a way to illustrate a much deeper point.

The end of neoliberalism, once so hegemonic, so commanding, is turning Britain on its head. That is why – extraordinary when you think about it – all the attempts by the right to dismiss Corbyn as a far-left extremist failed miserably, even proved counterproductive, because that was not how people saw him, not how they heard him. He was speaking a language and voicing concerns that a broad cross-section of the public could understand and identify with.

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The reason a large majority of the PLP was opposed to Corbyn, desperate to be rid of him, was because they were still living in the neoliberal era, still slaves to its ideology, still in thrall to its logic. They knew no other way of thinking or political being. They accused Corbyn of being out of time when in fact it was most of the PLP – not to mention the likes of Mandelson and Blair – who were still imprisoned in an earlier historical era. The end of neoliberalism marks the death of New Labour. In contrast, Corbyn is aligned with the world as it is rather than as it was. What a wonderful irony.

Corbyn’s success in the general election requires us to revisit some of the assumptions that have underpinned much political commentary over the past several years. The turmoil in Labour ranks and the ridiculing of Corbyn persuaded many, including on the left, that Labour stood on the edge of the abyss and that the Tories would continue to dominate for long into the future. With Corbyn having seized the political initiative, the Tories are now cast in a new light. With Labour in the process of burying its New Labour legacy and addressing a very new conjuncture, then the end of neoliberalism poses a much more serious challenge to the Tories than it does the Labour Party.

The Cameron/Osborne leadership was still very much of a neoliberal frame of mind, not least in their emphasis on austerity. It would appear that, in the light of the new popular mood, the government will now be forced to abandon austerity. Theresa May, on taking office, talked about a return to One Nation Toryism and the need to help the worst-off, but that has never moved beyond rhetoric: now she is dead in the water.

Meanwhile, the Tories are in fast retreat over Brexit. They held a referendum over the EU for narrowly party reasons which, from a national point of view, was entirely unnecessary. As a result of the Brexit vote, the Cameron leadership was forced to resign and the Brexiteers took de facto command. But now, after the election, the Tories are in headlong retreat from anything like a “hard Brexit”. In short, they have utterly lost control of the political agenda and are being driven by events. Above all, they are frightened of another election from which Corbyn is likely to emerge as leader with a political agenda that will owe nothing to neoliberalism.

Apart from Corbyn’s extraordinary emergence as a leader who understands – and is entirely comfortable with – the imperatives of the new conjuncture and the need for a new political paradigm, the key to Labour’s transformed position in the eyes of the public was its 2017 manifesto, arguably its best and most important since 1945. You may recall that for three decades the dominant themes were marketisation, privatisation, trickle-down economics, the wastefulness and inefficiencies of the state, the incontrovertible case for hyper-globalisation, and bankers and financiers as the New Gods.

Labour’s manifesto offered a very different vision: a fairer society, bearing down on inequality, a more redistributive tax system, the centrality of the social, proper funding of public services, nationalisation of the railways and water industry, and people as the priority rather than business and the City. The title captured the spirit – For the Many Not the Few. Or, to put in another way, After Neoliberalism. The vision is not yet the answer to the latter question, but it represents the beginnings of an answer.

Ever since the late 1970s, Labour has been on the defensive, struggling to deal with a world where the right has been hegemonic. We can now begin to glimpse a different possibility, one in which the left can begin to take ownership – at least in some degree – of a new, post-neoliberal political settlement. But we should not underestimate the enormous problems that lie in wait. The relative economic prospects for the country are far worse than they have been at any time since 1945. As we saw in the Brexit vote, the forces of conservatism, nativism, racism and imperial nostalgia remain hugely powerful. Not only has the country rejected continued membership of the European Union, but, along with the rest of the West, it is far from reconciled with the new world that is in the process of being created before our very eyes, in which the developing world will be paramount and in which China will be the global leader.

Nonetheless, to be able to entertain a sense of optimism about our own country is a novel experience after 30 years of being out in the cold. No wonder so many are feeling energised again.

This article first appeared in the 15 June 2017 issue of the New Statesman, Corbyn: revenge of the rebel

Martin Jacques is the former editor of Marxism Today. 

This article first appeared in the 15 June 2017 issue of the New Statesman, Corbyn: revenge of the rebel

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