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November 11, 2007



Labour's managerialism may have boosted UK executive salaries, but Tony Blair's government has had very little effect on the rest of the world, where executive salaries are also extremely high. Perhaps there is an ideological faith in managers, but it is not the fault of New Labour. If anything, it is the fault of globalization and the homogenization of financial markets which create incentives to higher "superstar" managers.


High salaries for executives are highly motivating, not just for the executives getting them but for all those, like me, hoping to get to the money one day.

Motivated not to do an outstanding job, of course. Motivated to play the political games and manoeuvring needed to climb the greasy pole into senior management.

Nick Rowe

Interesting thought-experiment. But here's a counter-argument:

For cleaners, you can substitute quantity for quality of labour; this is much harder to do for top bosses. Suppose for example that some people are good cleaners, others are bad cleaners, but that 2 bad cleaners are as effective as 1 good cleaner. No matter how high the demand for cleaners, or how few the number of good cleaners, no good cleaner could ever earn more than twice the wage of a bad cleaner.

Would 2 bad bosses be as effective as 1 good boss?

Why do top soccer players earn so much? Again, because you can't substitute quantity for quality, with only 11 players allowed on a team. Imagine what would happen to soccer players' salary structure if teams were allowed an unlimited number of players. Two medium-skilled players would outplay one top player, so the top player would earn less than two medium players.

Kevin Carson

The problem is that the corporate hierarchy exists *precisely* to permit the separation of effort from reward. Top-down authority and administrative incentives are substituted for market incentives so the corporation doesn't *have* to pay production workers according to their productivity. The high CEO salaries are overseers fees for squeezing more effort out of the downsized and sped-up work force.

Residual claimancy by workers is the ideal model for a firm operating in a free market, because it cuts through all the information and agency problems of the hierarchical, absentee firm like a sword through the Gordian knot. It ends the separation of productive knowledge from authority, and the sepration of effort from reward. The problem is that the capitalist wage system is built on the presumption of concentrated wealth and absentee ownership, and hierarchy is necessary to extract effort from people who do not own the firm or internalize their productivity gains, and therefore have absolutely no rational interest in putting out more effort or working more productively.

It's often remarked that slavery is an extremely inefficient system. The only thing more inefficient, from the slave-owner's perspective, is having to pick cotton himself.


Kevin Carsen,
I find this a very interesting comment. At the moment I find myself relatively underemployed. The reason is not that there are not useful things for me to do, or that I am intrinsically lazy, but that "management" hasn't made a decision about what I should spend my available time doing. And according to managerialism, I am better doing nothing (and being able to respond quickly to crises) than doing merely something. I once worked in a firm where they decided if the cost of deciding whether to do something exceeded the cost of doing it, then just do it. That impressed me.

Brad Spangler

Regarding: "...the forces of demand and supply that cause high or low salaries can be ideological constructs."

Congratulations on taking the first tentative steps to independently re-discovering the subjective theory of value -- http://mason.gmu.edu/~tlidderd/menger/aus_1_1.html


"it has unquestioningly adopted an ideological faith in managers" - and has in many places got people who find that they have to be bootlickers to get on. That creates a very unhealthy working environment for those who will not bend with the wind.

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