Traditional 'Economics' is dead - and a 'New Economics' is emerging

Stephanie Flanders recent asked for the "New name for a New Economy', when in reality the question should have been about a "New name for a New Economics" ... so I pointed out the huge insights Dr. W. Edwards Deming offered to the world nearly 20 years ago (and from which Leanomics and my book 'Lean World' are founded), and as the discussion continued some commentators questioned whether a "New Economics" is here now, or even needed, so I posted the following:

"... IMHO 'a New Economics' is not here yet, but it is starting to emerge - and following on from my previous post ...

'Economics is the social science that studies the production, distribution, and consumption of goods and services' (Wiki).

IMHO Just like other 'sciences', 'economics' (as defined above) has been functionalised, is too narrow in scope and is effectively dead. The failure all around us now is testament to this. It fails to account for the values (and/or the lack of values) people uphold, their beliefs, the political systems, leadership and management practices, the environment, the intrinsic motivation within people and social relationships that exist.

The fact that we are comparing ourselves more and more to basic animals (i.e. species with very low intellect) arguably shows how low we have now fallen, and how moral values have been progressively jettisoned from the field of play. The fact that economics today is more about how people make money from money (wealth manipulation), rather than adding any real value (wealth creation), is also testament to this, and the purpose of money as a basic bartering system has been almost completely forgotten. This is the world of Poweromics, which is still very much in operation today, with no moral/ethical values, standards or rules, and seeks to manipulate the system for ones own gain ... and it has failed the vast majority ... but has successfully transferred yet more wealth to a small minority - the already wealthy (even from those not yet born - eg spiraling Government debt due to bailouts/failure).

Ignoromics will gradually reduce as the majority of people's lives get much worse ... but Government's will no doubt create wars and blame other people, to divert people's attentions/anger away from themselves, the real villians & from what's really going on.

Some countries are already challenging Poweromics and turning themselves around, kicking out Poweromics (e.g. poor leadership, management, corruption) and using lean management practice (and Leanomics) to improve overall well-being and to create a sustainable prosperous 'economy'. Those that fail to act will fail to survive, and will die by their own ignorance, arrogance and ineptitude. Those current leaching off the others like a plague of locusts will also eventually destroy all the fields they are feeding off, and/or will find a new resistant strains that 'repel attacks' ... and those places where Leamomics starts to thrive will have no time/interest in 'parasitic organisms'.

'Leaders' looking to deflect blame, rather change the system (as well as the way they lead/manage), will be given short shrift soon ... and IMHO that time is not very far away"

One of the original commentators went on to say ... "I hear some college professor at Oxford is to give a huge chunk of his future earnings to a new charity - that's what I call a real change of behaviour but how many will or can really afford to follow his lead?"

To which I commented "This is just a small/individual example of Leanomics I would suggest - it's worth noting more young people/graduates are starting to shun the traditional corporate world ... as they also see the world very differently too ... and they are unlikely to remain on a 'sinking ship' either" ...

It's official - bad management drives staff to leave

The BBC reported today that findings from a Chartered Management Institute survey which revealed almost half of UK workers saying they have left a job because of bad management.

Forty-nine per cent say that under less drastic circumstances, they would rather take a pay cut than work for someone who made bad decisions. The findings come in a survey from the Chartered Institute of Management, as it attempts to launch a campaign to improve standards among bosses. It wants the government to make developing effective managers a national priority.

But the survey also found unhappiness among managers themselves. Sixty-eight per cent said they had fallen into the role by chance and 40% admitted they had not wanted the responsibility of managing people at all ... and Ruth Spellman, CMI's chief executive, said: "The figures reveal the depth of the crisis of confidence in UK management."

She added that such bad management was taking an enormous toll on the UK economy - and on people's well-being. The organisation promotes what it calls the 'art and science' of management and is pressing for action from the government to improve Britain's performance in this area.

It has launched a Manifesto for a Better Managed Britain, and whilst this is indeed honorable cause, the article unfortunately serves to highlight how little they know, and how far they are behind in their understanding in the 'art'/'science' of 21st century leadership & management. My own book successfully decoded the 'science behind 21st century management' practice two years ago ... and it also highlighted the 'art of 21st century leadership' too ...

... I'm afraid the institute hasn't got it's head around the basic definitions yet, and is still lost in the 'soup of generality', outdated practice (nb MBA = "Maybe Best Avoided"!) and misconception ... and as my recent blog pointed out ... most 'leaders' and 'managers' haven't seen half of what's yet to come ... e.g. the complete exposure of their failings, and tsunami of litigation heading their way ...

Building up a bigger crash

Whilst the Bank of England continues to print money to service Government debt, Banks are busy stoking up the next crash via another pyramid scheme (rewarding themselves huge bonuses in the process too) ... for instance, take a look this US article (as it also applies/relates to the UK too), as well some of the key additional points I've summarised below:

“Interest rates are close to zero; in effect the Federal Reserve is subsidizing the risk-taking and bond trading that has allowed Goldman Sachs to produce billions in profits and that infamous $16 billion bonus pool (analysts say it could grow as high as $20 billion). The Treasury has lent banks money, guaranteed Wall Street’s debt and declared every firm to be a commercial bank … They are all ‘too big to fail’ and so free to trade as they please—on the taxpayer dime.”

The Wall Street Journal reported Monday that Morgan Stanley has concluded that the amount of cash circulating in the global economy is at its highest level by far since the firm began tracking it 30 years ago. This vast wave of hot money can find no profitable outlet in production, so it is being pumped into stock markets and speculation on commodity prices and currencies. The result of a colossal global asset bubble that must sooner or later burst."

If the money taxpayers had provided to banks was steered into traditional banking only, and commercial banking separated from speculative trading (e.g. by Government's re-instating a Glass-Steagall type act), this type of behaviour would not be possible. Bankers would not be able to use government cash to underwrite short-term speculation to fuel their massive bonuses again, and they wouldn't be able to call upon taxpayers to fund their failure again either (i.e. once their current pyramid scheme collapses).

Commercial banks focus on lending to real 'wealth creators', to enterprises/institutions adding real value for others as well as to the well-being of the economy. Creating real wealth takes time, energy and resources, and is not a short term decision/investment/gamble. On the other hand, 'wealth manipulation', adds no real value, except to the bankers, traders and the already wealthy (who benefit further from this manipulation of wealth - particularly when it's taxpayers money being used to pay for all the failure). 'Wealth manipulation' takes very little effort in terms of time, energy and resources (e.g. beyond the passing on of 'pieces of paper') so banks see it a much easier (and 'profitable' way) of 'making money' from money (i.e. the velocity, and profit, from money is much greater), particularly when all the risk (i.e. failure) is taken on by someone else (the taxpayer).

... and it doesn't take a rocket scientist to work this out, so why have UK/US Government's chose not to heed such advice, and done absolutely nothing about splitting the banks up in this way? ... why have mainstream economists identified the fundamental flaws in the economic model? ... and why have the media been 'absent' in investigating this properly ... well it doesn't take a rocket scientist to work all these out either ...

and fail again it will ... but wow - decades more misery to sell news* ... and as the crisis deepens ... an attempt to create more wars to deflect people's attention away from the immoral/guilty ... so they can continue to quietly profit from the system ... and so the newspapers can sell more news ...

For this to change, Ignoromics needs to reduce quickly ... and Poweromics needs to be challenged too ... if apathy prevails for much longer, the outcome is pretty clear ... 'war'

* NB Good news/success doesn't sell (only bad news and celebrity does).

QE: So where did the £150bn go?

Of the extra £175bn the Bank of England created through its Quantatitive Easing (QE) programme, around £173bn has been used to buy UK gilts - i.e. to buy Government debt to keep it afloat - as highlighted in my previous blog, 'Printing Money, Inflation and Spin'.

Today the Bank of England also announced it will be pumping in another £25bn too (QEII) - so it looks like Gordon is looking for the bailout to continue to keep the UK ship afloat until at least the general election, so he can try to avoid any more blame falling upon himself (e.g. for the impending tax hikes, and the slashing of services & public sector jobs), and so he can pass the problem onto someone else (rather than deal with it).

Trust, Honor, Responsibility, Respect? ... You decide!

Stress - a challenge to 'management' ... and the 'economy'

Whilst some arbitrarily debate whether recovery is already on its way (e.g. based on outdated & flawed GDP measures) ... and others debate what more Quantatitive Easing actually means ... real insights about our 'economy', and some of the additional challenges/chasms ahead, slip out ... almost unnoticed !

With Government debt continuing to grow, with more businesses collapsing and with tax revenues falling rapidly, it doesn't take a rocket scientist to work out that the day of reckoning is not far away. The current Government have simply chosen to defer it - i.e. until after the general election next year - so they can avoid any blame and pass the problem onto someone else (Trust, Honor, Responsibility, Respect - I think not!)

After the general election, the delayed/stored up reality check will hit (like a tsunami), with unprecedented tax hikes and the slashing of public sector jobs (in a desperate attempt to balance the books). Unemployment will continue to rise and the systematic spiral of failure will continue to grow. Unions leaders are already predicting this and are preparing for battle - blaming politicians policies (and bankers greed) for the mess the UK economy is in.

Enough to cause a 'double-dip' recession? The unions certainly think so and so do I. What's more, what they've been referring to so far is arguably just the tip of the iceberg ... so let me explain ... and refer to more insightful news stories published today too ...

Outdated leadership and management practices (19th/20th century), demonstrated by most UK leaders/managers today (including politicians, civil servants etc), primarily focus upon extrinsic motivation, self interest & personal gain ... with managers in offices (remote from the work) making all the decisions, telling people what to do and driving them to hit arbitrary targets in order to get a bonus ... rather than going to the front line, listening to customers/staff and supporting front-line staff in their quest to continually improve how value can be provided to customers (nb this is what 21st century leadership and management practice is all about - take a look at my book for instance) ...

The former systematically generates frustration and stress, for customers and front line staff alike. It also drives people to manipulate 'the system' in order to meet their targets & goals; deflecting people away from the real purpose of the enterprise (i.e. to create value for customers) which destroys teamwork, morale, and the future of the enterprise too. Such practices have also been shown to systematically generate between 40-90% waste in terms of both time and resources as well - i.e. traditional enterprises spend most of their time (and resources) wasting time, effort and money, for their customers ... whilst stressing them out in the process too ...

... and a traditional manager's response to this ... "it's just the way work is" ... and "let's send everyone on a 'stress management' course - to help them to process stress" (and to also reduce the risk of being sued!) ...

The problem with the traditional management statements above is that they are both wrong - and flawed. 21st century management practices do not involve helping people to 'process stress' - they focus on systematically 'eliminating stress'! ... so there is no need for stress management courses at all ... (i.e. such courses are a 'cost of failure', and they do not reduce the risk of leaders/managers being sued either).

Enterprises applying 21st century leadership and management practices do not just transform the performance of the enterprise, they transform the lives of people - forever, and for the better. Most enterprises applying such practices quickly transform their capability (e.g. improvements of between 40-1000%) and change out of all recognition. Staff moral is positively transformed and stress is systematically reduced. People are naturally motivated to innovate, to add value and to help others. They are also more than capable of finding new ways to improve current products/services and to find new products/services that would allow even more value to be created too (given the opportunity). All they need is clear direction, as well as trustworthy leaders & managers who support them on the front line, who listen, learn, and help them to systematically improve how value is provided. Again not rocket science - just rarely practiced in traditional enterprises.

Stress, and the impact of stress, on people is heavily responsible for the 'eighth waste' in 21st century management practice ('untapped talent') - as it destroys people's desire/ability to contribute, to be creative or to think rationally (e.g. take a look at Ch. 8 of my book). It also impacts on people's overall well-being, as well as the well-being of those around them ... which impacts on communities/nations as a whole too (NB hence it's inclusion in the 'BUTS' test).

The National Institute for Health and Clinical Excellence (NICE) today said the cost of work related mental illness was £28bn - a quarter of the UK's total sick bill, and it also made clear that the stress created as a result of bad management/managers was the single biggest cause of problem. The 'economic loss' of stress goes way beyond the £28bn referred to here too ... this is literally just the tip of the iceberg.

Those leaders who believe stress management courses will 'protect them' from 'being sued' are I'm afraid also sadly wrong ... as 'ignorance' is 'not bliss' (or a defence - nb landmark cases are already occurring - but are mostly settled out of court to avoid publicity). The writing is on the wall now that 21st century leaders & managers have demonstrated the capability/outcomes created from applying 21st century practices ... which highlight the way forward, as well as the fundamental flaws in traditional practices ...

21st century leadership/management practice and examples will no doubt be used in evidence against those continuing to apply outdated traditional 19th/20th century practices ... and as millions of law suits start to get filed, yet more traditional private enterprises will go bankrupt ... and yet more taxpayers money will be diverted away from providing front line services (to pay for millions of out-of-court settlements) ... joining all the taxpayers money already being diverted to service Government debt, as well as the colossal (and unfunded) civil service pension liability ...

Double dip, absolutely ... a 'triple dip', and a 'quadruple dip' to follow, very likely too I'm afraid ... unless current leaders/managers change course dramatically, and quickly ...

The UK could successfully turn itself around (nb Singapore did it), but it will require very different political leaders to the ones we have now ... and things are going to have to get much worse before the level of Ignoromics reduces sufficiently for Poweromics to be effectively challenged ...

Referred to in Stephanie Flanders blog "Is Britain growing yet"? (post 64).