Thursday, September 18, 2014

War or Peace for the middle classes

So much has been written on the impact of war, so many tragedies told, so many tears shed, yet we begin business as usual. We are middle class.

There are parents losing children and children losing parents, yet we are planning on how we can make money on reconstruction after destruction. We are middle class.

There are wives losing husbands and women raped, yet we are patiently planning on how we should grow great. We are middle class.

There are those exalting in power in taking away a life, yet we are powerless to perform anything more than our selfish strife. We are middle class.

We can read about war on a daily basis till we are numbed by the numbers, and we can piously pretend that it will never happen here. We are middle class.

Turn the other cheek, look away, its none of your business. What is a disaster can be profitable to someone. Just turn the page of your paper. After all, you’re only middle class.

You didn’t pay to read this, you don’t need to ever come back. Just quietly go back to your search for more information indigestion. It is the lot of the middle class.

What can we do, what could possibly be done? The answer is sitting in your heart. But can you listen? Can you be proud to be middle class?

Slow down, work less.
Share your work with someone else.
Give him an identity
Let him make money
And join in the pride of the middle class.


Monday, August 18, 2014

The middle class tourist in Venice

One of the most romantic cities of the world, Venice, is a city composed of 118 islets interconnected by bridges. The population of Venice city itself is only 60,000 but another 170,000 on the mainland also consider themselves Venitians. The city has been known to be a source of refuge from the power of Rome. And, perhaps, it is true even now, for we do not see beggars in great numbers. Probably, the city is still insulated from the despair of Italy, protected by its tourists.

And these tourists flock to Venice in ever greater numbers: "Maybe there are more tourists, says a waitress, but they certainly don't seem to be spending money. There are more and more Chinese and Indians". In this she echoes tourism statistics which show that Chinese tourists to Europe have increased by 25% and Indian tourists by 15%. Even if France with its 85 million tourists leads the world, followed by the USA (70 million) and Spain (60 million), Italy cannot be far behind. Venice alone has 3 million tourists a year. "Although we can see that many of the Chinese tourists do have purchasing power, the Indians are low-cost tourists, very careful on what they spend their money", says a salesman from a souvenir shop.

Nevertheless, at an average of a little less than one week per tourist, this comes to about 18 million tourist nights, which corresponds to statistics that indicate that there is an average of 50,000 tourists per day. There is a tax of 4 Euros per night. This means that the local taxes are already about 72 million Euros. Since most establishments insist that local taxes be paid in cash, we can assume that a corresponding amount is escaping tax! In fact, a lot of restaurants and shops in Italy accept only cash, indicating that the parallel economy is strong.

Of course, Venice is the hometown not only of Murano glassware, of which there is plenty, but also of Antonio Vivaldi. Fortunate to discover that a concert of the Four Seasons was scheduled for the evening, we found tickets easily available. At 36 Euros and 26 Euros, evidently Vivaldi is too expensive for the middle class tourists. And the 26 Euros section was full while the 36 Euros section was half empty. Why, asked my son, don't they just make a smaller section for rich people? Because, it takes years of observation to accept that the people no longer have to power to pay. The rich patrons are much fewer.

Not that there aren't people who can afford drinks and dinner at restaurants where an expresso costs 10 Euros, on the Piazza San Marco, where musicians play instrumental music from Evita or My Fair Lady, among others. But lots of chocolate for a few rich to eat, while the middle classes stand around to overhear the music and provide applause for the musicians and admiration for the rich who may sit down at the restaurant. A sign is put up saying that sitting on the ground in public places is illegal. So, the middle classes must stand and wait. It is also illegal to sit and eat in public places. But don't cry for me, Argentina, because the place is so beautiful that we are willing to pay. Its just that we'll spend three nights instead of a week.

These laws are probably outdated, as is the premium strategy being adopted by the restaurants. Market Research may show that an outer-ring of cheap seats with reasonably priced café or ice-cream, may attract business from the middle class tourists. So, instead of serving by standing and waiting, they could contribute financially by sitting and paying. There is nothing new in this suggestion: the high priests of the next-door San Marco church have long realized this. Tourists form a long queue to see the beautiful church, but to see special sections inside, one has to pay 2 Euros here, 3 Euros there, 5 Euros to go up, and so on. Thus, they are able to tap the consumer surplus of the middle classes to the extent possible.

There are other outlets for paying. Money flows out constantly. The rents, the pizzas, the transport are all far more expensive that Ravenna or Verona, both within a couple of hours drive. Even the cooperative store is 20% more expensive than on the mainland because goods have to be carried physically and manually form the port to the shop. And manpower costs. The best Pizzas are certainly not in Venice, at least not in the middle class price range.

What about the middle-classes serving the tourists? They come from the mainland, taking an average of an hour to reach work, because they cannot afford the rents on the island(s). In any case, many of the homes are now owned by foreigners, further limiting supply. The local population of the historical city was 120,000 in 1980 and only 60,000 today. The others had to move out. There are about 20,000 students at the Ca’ Foscari University of Venice who also live on the island. Most of the houses are residences for the tourists, explains a Gondolier.

About 400 Gondoliers are plying their Gondolas on the canals. The license is controlled by a guild, to avoid overcrowding but also to permit a minimum of profitability. After all, each Gondola is hand-made and costs about 35,000 Euros, as much as a beautiful taxi.

What seems to be perfectly legal is the army of South Asian salesmen selling roses and toys on all the prestigious tourist sites. These toys are no different from the ones that can be bought in India Gate in New Delhi. So, if they are selling, surely there must be middle class tourists coming from countries other than India. "Yes, thank God for the Germans… they at least come and drink beer".

The workers have to carry goods across bridges and have to wade through the tourists who create bottlenecks. There are signs requesting the tourist not to stand on the bridges because people have to get to work. Tough…. Too much of a good thing?

Thursday, July 24, 2014

The Regulation Approach and the Middle Classes

I have just read an old paper of Alain Lipietz (1988) in order to understand what the Regulation Approach was all about. The paper is an English translation of a lecture by Alain Lipietz in Denmark, given in 1984!

Apart from the pleasure of reading Marxist vocabulary which I had more or less ignored since my college days (1979-80), I was amazed that the Regulation School had more or less identified the same problems and come to the same solutions that are mentioned elsewhere in this blog. The regulation approach is concerned with the way in which social relations are maintained and reproduced despite and through their conflictual character. In any social relations, there are sub-groups who are dominant and those who are not, and the latter would like to change the rules of the game. The social procedures and authority structures for the linked modification of norms are called forms of regulation. 

An example of the regulatory approach would be to ask why the librarians of the University of Burgundy keep accepting their working conditions (see previous blog) and don't revolt.

1.      Managers are suffering more: the conditions are worse on the floor where the managers sit. As a result, the people at the bottom, on other floors, relativize their own situation and have a sentiment that nothing can be done or at least, their own lot should be acceptable.
2.      There is no syndicate leader who is strong enough to make an issue of it.
3.      The managers have the sentiment that it is public money which is perhaps better rationed for other things.
4.      Any revolution or strike may stop the current benefits of a regular salary
5.      The threat of not having a future promotion
6.      Most of the workers being women may also play a role since women have a legacy of suffering.

Thus, accept for point 2, which we may also need study, the discourse and reasoning which lead to acceptance of conditions of being dominated, of having to accept conditions, which many in the rest of France do not have to bear, would form the subject of the Regulation Approach. There is a French law which allows people to stop work if the inside temperature falls to below 12°C. Therefore, there is a limit placed. But there is no French law on the maximum temperatures which have to be supported.

Coming back to Alain Lipietz, here is a summary of his overview of the problems of the developed world (I'll skip the terminology sections). Remember, he is in 1984 !!!!

The Fordist model worked well for the thirty Glorious years (1945-75) because productivity increases were matched by wage increases which in turn led to consumption demand increases and profitability, which led to capital accumulation and investments. Thus, a balance had been found in the growth of returns to capital and to labor.

The cause of the Fordist crisis was that productivity growth was reduced. This reduced profitability. This reduced investments. This reduced employment. This reduced consumption.

One way out was to internationalize and increase exports by setting up free trade zones such as the EU. But this internationalization led to pressure on the wage rate. The constraints on growth of wages meant that consumption of domestic goods fell (if imports went up). If all countries do the same, in the hope of recovering from exports, it means all over EU wages are not keeping up with productivity. This means inadequate consumption at the EU level.

A second way out was to export the Fordist model to other countries (NICs). They could then manufacture according to Fordist models and import OECD capital goods. This Peripheral Fordism meant that the problem was postponed by issuing Euro dollars: the Americans continued to consume thanks to credit. There were minor gains in productivity in the US and slowdown of capital accumulations. When credit stopped, the crisis emerged because the NIC were no longer able to pay the high interest rates. So monetarism was finally rejected and Reagan went back to Keynes: tax and defense spending to bring the economy back. Household consumption went up.

A third hope is whether technology and new innovation (in electronics) be able to raise productivity and profitability and solve this problem? The problem is that profitability alone is not enough. It has to be accompanied by mass consumption growth. This growth requires employment and wage increases. Otherwise, the increased productivity will lead to some well-paid skilled labor, others stagnant wage earners and increase in unemployment.

This means that consumption will not increase and recession will continue. One way would be to reduce the working hours massively and modify the wage relation.

Management lessons:
Can I say more? What it means is that if you have good workers who are demonstrating productivity increases, and you are not increasing their salaries, you are digging your own grave. Whether you distribute the wage increases specifically to the person who performs or generally to all your employees may involve other questions of motivation and management, but if you keep the increased profit for yourself, you are undermining your own long-term viability.

Another reminder of Marx, remember the Communist manifesto… this time its 1848 …..
"The development of Modern Industry, therefore, cuts from under its feet the very foundation on which the bourgeoisie produces and appropriates products. What the bourgeoisie therefore produces, above all, are its own grave-diggers."