Patching the Hole
There is a serious deficiency in the way a market mechanism is deployed. This deficiency is a cause of many conflicts in market-based societies, and sometimes, it causes flipping of free market-based societies into despotic societies based on strictly enforced ideologies-religions.
Sides in negotiation for “the use of skills and time” of specialists in the market are unequal. This distorts prices and makes functioning of the market inefficient and the market itself unstable.
It is obvious in times of economic downturn.
There is a large group of market participants who cannot afford to be without work for any prolonged period of time. This forces them to accept payment for “the use of skills and time”, which is lower, than it is healthy for the market.
Trade unions emerged in market-based societies to compensate for this deficiency. Their emergence improved pricing for “the use of skills and time” and caused growth of overall wealth of the society. Unfortunately, they also brought monopoly, which tilted this pricing to the opposite extreme, caused inflexibility in “the use of skills and time”, and slowed down the rate of improvement of skills. This became a drag on the growth of the wealth of the society and caused major instability in the market and in the society.
In the time, when huge new work force of developing countries is coming to global market, inflexibility of trade unions prevent sufficiently fast adjustment of the market to new circumstances and this causes dangerous economic and social imbalances.
Hence, a new way to patch this market deficiency is needed.
One might think that simple measures could suffice.
People could have some fall-back “business”, where
they could return at hard times. This does not work – any “business” requires
full-time attention and in hard times such fall-back “business” is
uncompetitive. Current situation in
The government could provide indefinite support for
people, who cannot find work. This does not work also. Such system creates a
new sector of society, where people rely on government support without even
trying to move to normal market activities. Eventually, this sector acquires
social and political structures built around it and perpetuates itself. In the
There are serious “side effects” of this deficiency of the market mechanisms.
One is obvious; the society pays a psychological price for it.
People on the disadvantaged side of the divide acquire fears, disbelief in possibility of social advances, detachment from political life, etc. This causes social instability in a democratic society.
People on the other side of the divide develop parasitic tendencies, where they try to improve their life at expense of others and to justify such approach to life they develop delusions that they are somehow better than those exploited others.
Thus, this deficiency of market mechanisms creates internal rift in the society, which makes it difficult to fix it.
The society, which expects one part of it to be forced to work, develops mechanisms to force people to seek the work.
For example, in the
In such environment, it is meaningful to set goals to “create jobs” during a market downturn, to “protect jobs” from moving capital oversees, where workforce is less expensive, etc. This became such a commonplace that people even do not see how bizarre it is in a market-based society. In a market-based society, one should think about increasing income, increasing savings, protecting against life eventualities, one should not think in terms of “getting the job” or “keeping the job”. In a free market-based society one should think in terms of own growth, expansion, in terms of new desires and new opportunities not in terms of surviving.
This rift decreases market efficiency. For example, for many years and in many places, management tries to reduce the role of software developers to the usual role of workers mindlessly executing orders of managers. This does not work, because any meaningful software development requires very high rate of innovation. Management does not learn this lesson, because of the dominant impression in the society of inferior mental status of those, who belong to disadvantaged side in the negotiation for “the use of skills and time”.
Management in many large companies failed to reduce software developers to the status of mindless workers and decided to “outsource” software development to developing countries with relatively low cost of workforce. This works even less. Company specific knowledge does not accrue. Disconnect between those who use software and those who develop it leads to delays, increased cost and delivery of software, which is not useful.
Hence, the price for this internal rift in the market-based society caused by the deficiency of the market mechanism is huge. It causes inefficiency and instability of the market, and dissatisfaction, social conflict and instability of the society.
This is a hole, which has to be patched, and currently used patch is not working well.
In the same time, the seeds of the solution are already growing.
Firms, to which large companies outsource software development, often provide workforce to work on the site of their clients. They cannot find qualified workers in their countries and hire workers in the countries, where their clients are located. This sounds bizarre, but this works, more or less.
The client – a large company in the
Also, there are a few companies in the
This works with skillful specialists, this hardly can work with workers, who do not have high level of skills, because there are too many of them, especially in the times of market downturn.
However, it seems that fewer jobs will be available for people without skills, especially in developed countries, because they cannot compete with workers in developing countries, who are ready to work for much lower compensation. This kind of jobs is disappearing due to automation or transfer of production of service to the developing countries. This is a trend of global economy.
Hence, in developed countries, people will need to acquire skills to be employed, and they will need to improve their skills perpetually. This seems to be a trend in global economy.
In such situation, trade unions are too rigid to improve specialists’ chances in negotiation for “the use of skills and time”. However, specialists will have better chances, because they will have difficult to find skills.
In such situation, experience of software developers becomes quite relevant.
This experience shows that not trade unions, but special companies providing specialists to other companies are needed. When these special companies have no monopoly on a particular set of skills, the competition between them should lead to discovery of market prices for “the use of skills and time”. Perpetual improvement of skills accordingly to needs of the market should keep these prices sufficiently high to support decent quality of life of specialists and allow accumulation of savings sufficient to survive without employment during market downturn.
This should patch this hole in market-based societies.