Tuesday, January 13, 2009

How Do You Define 'Wealth Creating'?

James Forsyth has kicked up a right old storm on Spectator Coffee House with a post highlightling Peter Oborne's assertion in the Mail this morning that not a single member of the Cabinet has ever occupied a wealth creating job. I often use the statistic that only five out of 350 Labour MPs has ever run a business.

James's post has prompted a furious reaction in the comments. Our old friend David Boothroyd says...
How exactly do you define "wealth-creating job"? Jacqui Smith was a teacher and economics lecturer, which gave other people skills to create wealth. Alan Johnson was a postman, delivering mail to business and thereby helping them create wealth. David Cameron worked as a political adviser and head of PR for a TV firm - is that wealth-creating? Even if it is I would have thought being a teacher in a comprehensive school provides more benefit for society.
Tiberous puts the counter view...
Wealth creators are those who take business risk with their own assets. They are people who indeed do have to meet a payroll. There would be no public sector without private sector taxes. In the generally understood terminology, then, the public sector is non-productive and does not create wealth. It is designed to serve those who do, but latterly has assumed a self-importance and self-justification which is grotesque, none more so than at the BBC. The humility of public service of yesteryear has been taken hostage.
If we go by the Adam Smith definition of wealth creation, as the combination of materials, labour, land, and technology in such a way as to capture a profit (excess above the cost of production), then Oborne and Tiberius are certainly right. I would add a further element - risk. How many politicians have risked their own money in a business investment? How many politicians have ever directly employed other people in their own companies?

Not many, I suspect.

58 comments:

Ross said...

Not to blow my own trumpet but I pointed this out the on the day that Brown announced his first cabinet.

The only private sector experience any of them have is in professions that are symbiotic to politics, law and the media. Since writing that article I discovered that Alan Johnson once worked for Tesco's but that is the only exception.

Simon said...

Archie Norman was interviewed on The Daily Politics last year and said that although he enjoyed his time in politics, he didn't necessarily agree that business skills were entirely suited to transfer into politics.
Just out of interest, how many trade unionists are in the shadow cabinet?

Ross said...

"Just out of interest, how many trade unionists are in the shadow cabinet?"

Alan Johnson, Hillary Benn and if you count the NUS Jack Straw. Peter Hain worked for a Union too but he is no more.

Simon said...

Sorry Ross I did say shadow cabinet. My point is if you bemoan the lack of business people in Labour then there's a counter-argument about the Tories

Ross said...

Oh sorry, I misread you. The answer is none although for non-traditional Tory occupations, Patrick MacLoughlin's background as a miner stands out. I'm currently composing a list of what the shadow cabinet did before politics.

Inspector Morse said...

I entirely agree with the Tiberous definition, and what really gets up my nose is that Parliament is now composed, across all parties, by a vast majority of lawyers.

All we get from a Government with a workable majority is a bunch of lawyers inventing new laws.

The perfect result for me at the last election (and the next) was (will be) a hung parliament staffed by people who meet the Tiberous definition in 51% of seats.

Fat chance!

John Peel said...

As a farmer, working for the government & EU can I ask:

How many ex army types are there in the Tory ranks?

Are they wealth creating?

Man in a Shed said...

This is a far bigger "Diversity" issue than Women MPs or whatever.

We need MPs with a broad range of experience - preferably in all parties.

A more wide ranging analysis of the back grounds of all MPs might make interesting reading. Anyone done one ?

North Briton Hunter said...

This has touched on a major problem and one which is not defined by party loyalty. MPs across the board come from a far too small number of professions. The Shadow Cabinet are, by and large, all businessmen. They are mainly all 'wealty creators'.

By and large, they have not come from the ranks of teachers, lecturers, social workers or manual labourers. All crucial jobs but not 'wealth creating'.

But the same criticism applies to Labour.

While it might be true that traditionally Labour members come from professions like the ones mentioned above, many now have no experience of working in the real world.

There are far too many professional politicians, who have had no experience in any other walks of life - the Milibands and Purnell spring to mind.

And far too many lawyers.

Both the cabinet and shadow cabinet should have 'wealth creators' from the private sector, people from careers such as teaching and manufacturing, and, I suppose, lawyers.

It's all a bit depressing. How do you manipulate the upper echelons of major political parties to come from a wide variety of backgrounds? I would think it was pretty much impossible.

iain said...

I can't say I've spent a lot of delving into it, but I thought Doughball Jacqui was a Home Economics teacher rather than an Economics lecturer.

Home Economics (for younger readers) is a posh word for 'cookery'.

Just the person then to be defending our nation against the islamist threat.

CityUnslicker said...

That paraphrase of Archie Norman is stretching the truth.

I have read many things Archie said about politics. One of the main things is that as CEO if you say jump, jumping occurs. Politics is not like this.

He does not say business skills are not essetial, he says being a CEO may not have helped.

The latter the I agree with. broadly my view would be a mix would eb good, but with a leaning to wealth creation as that does support everything else financially.

In these times the importance of this is more apparent than ever. What are the unions doing but howling at the moon?

Theo said...

Exactly how many 'politicians' have ever done a fair days work? The whole political system is infested with numpties, ne'er do wells and assholes. Until the 'establishment' are neutralised this country will continue to go down the pan.

Lola said...

Jacqui Smith is and always was an overhead. Economics is a tech yourself subject.

My simple mind has a few parameters for this.

1) Have you ever sold anything to someone who was not initially your friend?
2) Does your business exist for willing customers? In other words does your position or connections make you useful to someone for no other reason than they exist.
3) Does your pay come from the free market? In other words if you have set up something that sells to government you do not qualify. (Usually associated with (2) above.
4) Can you knock on doors. Cold calling must be in your psyche. If you cannot do it, forget it. Just imagine, even if you did not know he was such a tosser what you would do if Brown turned up on your doorstep trying to sell you double glazing.
5) Have you built a business that you can sell for real oney?
6 ) And above all have you risked your own wealth and money?

Lola said...

John Peel - Good point. Just how many New Labour politicians have any military exeprience at all? None I reckon. So not only not wealth creating but no bloody idea about the military either.

wv - weartin - I kid you not!

Jimmy said...

Ms. Smith's degree was PPE. The "Home Economics" line beloved of tory commenters I assume is because she's the wrong sex.

I think public and private sectors are different skillsets, but the net for MPs should be cast more widely, too many people come either from party or related research jobs, or they've spent a few years as leader writers or at the Bar waiting for a seat. And that goes for all the parties.

Irfan Ahmed said...

Iain another interesting post by you!

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Bet you did not see that coming!

Liam Murray said...

A few observations:

If MPs (of any stripe) started exploiting their 'wealth-creating' experience & meddling in the private sector I suspect you'd be the first to ry foul - if that's not appropriate then the level of experience can't be a huge issue.

This amounts to 'quota-fetish' which we all find really irritating on the left - % women, % ethnic, % called Kev - it very rarely matters.

And finally what a mad campaigning angle for the Tories - a tiny, tiny % of people consider themselves in 'wealth-creating jobs', even the vast majority in the private sector wouldn't recognise that tag (and those that do are probably Tory already). The implication of greater wisdom on their part doesn't help efforts to 'normalise' the party...

David Boothroyd said...

Just to confirm that the claim that Jacqui Smith taught "home economics" rather than economics is definitely untrue.

Another issue to refer to very forcefully is the Archie Norman point. It is very often claimed that what the cabinet needs is someone who is a real business entrepreneur. Unfortunately the skills needed to succeed in business are quite different to those needed to succeed in politics, and whenever this has been tried, either the person concerned has quickly tired of political life, or their political career has ended in ignominious failure.

Archie Norman is an example. Further back there is John Davies.

I also regard the frequent reference to people "who have never had a proper job" as intensely patronizing. Most of those making this comment have really no concept of the jobs they are describing as improper.

Chris Paul said...

So much nonsense on this. It is a facile distinction. Even if Oborne had bothered to define it or say why it mattered.

On this scale:

Have a hot dog stand, turnover £5,000 pa = tick vg. Run something 100 or 1000 times more serious, complex, high budget, employing, responsible in public or third sector = pooh bah.

Run something private incredibly badly = tick vg. Run a sublime public or voluntary sector operation = pooh bah. It is a rubbish test.

There are of course the lawyers and the accountants and the consultants and the journos and the PRs. The odd medic. But tucked away - mostly outside the cabinet just now admittedly - there are those who have worked in industry and commerce too.

But really, this is a shibboleth. Might as well say that only 3% of the Tories understand co-operatives, the voluntary sector, the concept of public service. Does that disqualify your lot?

Good points from Liam too. Shibboleth? Fetish? Bollocks? If the Tories want to claim the votes of the so-called wealth creators (many starting from privilege) we'll settle for the real workers.

Chris Paul said...

This crossed with David's latest. Let's not forget that there are many people who are extremely entrepreneurial who choose public service despite being perfectly suited for money grubbing ... because of values and ambitions measured other than in pounds, shillings and pence.

Roger Thornhill said...

David Boothroyd, read Lola's list.

Maybe the PM is not the ideal entrepreneurial post, but there is such a dearth of real experience of generating the wealth that pays for all their crap.

I mean, Clegg was blathering on about paternity. Clearly he has no idea.

dmc said...

Ah chris paul,youve not had a proper job either then,and judging by days off sick etc,i wouldnt class public sector jobs as proper either.

Newmark said...

Man in a Shed said... A more wide ranging analysis of the back grounds of all MPs might make interesting reading. Anyone done one?

Some interesting statistics HERE on the occupations of MPs (2005 General Election).

............................Percentages
.............................Lab.....Con
Lawyers ....................8.......20
Businessmen/women......7.......38
Public Servants.............6........2
Teachers/Lecturers.......21.......3

(Sorry about the poor alignment and all the dots. I don't know how to do tabs in HTML)

Philip I said...

The world should listen to this wise Israeli.

Helen said...

People who create wealth should go on creating wealth and not go into something parasitical like politics. Society can only cope with so many politicians and lawyers.

Being in the military and rising to the rank of, say, lieutenant-colonel does not mean you understand a great deal outside your own experience of the military, let alone the navy or the air force, let alone the marines. And you certainly are unlikely to understand anything about defence in general.

The real problem is not who our politicians are but how much power they have over our lives. As it happens, they don't have too much power to legislate - eighty per cent comes from the EU and they cannot throw it out - but they can make those laws as difficult for us as possible. That's what needs to be addressed, not the personalities.

Mark Fulford said...

How many politicians have risked their own money in a business investment?

Peter Mandelson, for a start. And surely it's to his credit that his shrewd investments were able to pay for such a lovely house.

Thatsnews said...

It is, in fact, worse than Home Economics. It was Business studies (with economics) that she taught.

At that level (secondary schools, we used to call 'em!) business studies is, by and large, a subject of very little relevance or interest to the pupils. Even those who wanted to study the subject.

Thatsnews said...

...Let's not forget that there are many people who are extremely entrepreneurial who choose public service despite being perfectly suited for money grubbing ... because of values and ambitions measured other than in pounds, shillings and pence.

Or because they realised they could milk the system to their own ends. And thus make much more money.

subrosa said...

'Being in the military and rising to the rank of, say, lieutenant-colonel does not mean you understand a great deal outside your own experience of the military, let alone the navy or the air force, let alone the marines. And you certainly are unlikely to understand anything about defence in general.'

That statement is outdated and rather offensive to today's military.

Perhaps you're one of the 'old school' of retired Lt Cols but your breed are dead and gone these days. Military personnel have a vast knowledge of the world these days (as well as in depth knowledge of all Services) and any retiring senior officer would be a great asset to any organisation.

martin day said...

I am back! Blogging!

The Labour party is qualified at just one thing and that is wasting money!

Martin Day said...

Hello! Nick Clegg = Neil Kinnock and Gordon Brown is getting on with the job!

Trouble on the farm!

Lola said...

Chris Paul is right, a knee jerk reaction that all private enterprise managers are inherently better then all public sector managers is false. I have never maintained this.

But, this government and its cohort of failures masquerading as ministers of the Crown can neither run the country nor a whelk stall. They are useless, as this economic crisis which is entirely the result of their incompetence attests, as well as their complete failure to understand how to sort it out by promotimg wealth creation. None of the rescue policies being promoted helps wealth creation, they just add more debt. If they understood wealth creation they would cut taxes (especially on private and business income and investment) and cut public spending.

Wealth creation relies on pools of private capital - not in the main bank lending - being available to an entrepreneur to hazard on his idea. This government has persistently taxed - and spent, not reinvested - such private capital hence hamstringing the ability of entrepreneurs to succeed. At the same time these taxes on capital increase its cost making many projects not viable.

Essentially this government has speculated on its own ability to allocate capital better than its owners, and it has failed, totally. None of the money so squestered hs created any wealth at all. All Government, left or roight are useless at efficient allocation of capital, but whilst righties are just useless, lefties are absolutely dire.

Essentially, for all their spouting about being business friendly this government does not understand or empathise with wealth creation (tellingly Chris Paul desribes it as 'money grubbing' - that's his fatal flaw of lefty uselessness nailed), they merely see business and enterprise as a cash cow to steal from.

Be very clear, to create wealth, you need free pools of non-bank capital. You need entrepreneurs willing to hazard everything to pursue an idea and you need low taxes and a government as umpire not player, you need as few stupid rules as possible, you need sound money (Hah! Another New Labour failure), and you need the right of private property, and the rule of law.

Wealth creation is the creation of equity.

Windsor Tripehound said...

David Boothroyd said...
Unfortunately the skills needed to succeed in business are quite different to those needed to succeed in politics...


And vice versa. Sadly, that doesn't stop politicians from buggering about with business and making a complete pig's ear of it.

Lola said...

May I just add one more thing? I run a small business. I do not want more bank debt. I do not need it. But my bank needs to reduce my overdraft, because its own balance sheet is screwed, not mine. So it has asked me to reduce our borrowings. Well, demanded actually. Now I can do this from free personal wealth I have created and saved over the years. But I want to rebuild this wealth. The biggest drag on that is excessive, penalty taxation on my earnings and capital. Without that I can re-invest and create another job or three. I have a openings now, but I cannot afford to fill them as I have to pay too much tax.

By extension then there are jobs in the public sector paid for by my taxes that are preventing me recruiting for my wealth creating business. Those public sector jobs are bought at the expense of the jobs in my business and hence less wealth is created.

Sooner or later someone in this useless government and the vague and muddled opposition will realise that cutting income, business and capital taxes is the only way out of this recession. In line with this government spending will have to be slashed and those workers will be released to pursue more productive wealth creating jobs in private business. The TPA has indentified at least £100Bn of wasted spending, so there is plenty of scope to cut. And before any of you lefties start on the cutting 'teachers, police, doctors and nurses' etc that's nonsense. There are about 1.3 million in those frontline services leaving another 5.7m state 'workers' doing what exactly?

These actions lead to wealth creation, from which we, as a country, can enjoy more good stuff.

CharlesOJ said...

Labour mps who founded firms:

Mohammed Sarwar - United Wholesale Grocers
Michael Wills - Juniper TV
Geoffrey Robinson - TransTec
Liam Byrne - eGovernment Solutions
Gordon Banks - Building supply company
Lindsay Hoyle - Screen Arts, a printing firm
John Mann - Abraxos, conference organiser

Labour mps with serious business careers:

Derek Wyatt - Director, Computer Channel, BSkyB
Don Touhig - General manager of Free Press Group
Paul Farrelly - Manager at Barclays DZW
Barry Gardiner - Partner at Mediterranean Average Adjusting
Jim Knight - Managed a small publishing firm for ten years
Stephen Timms - Telecoms analyst, Logica and Ovum
James Plaskitt - Director of Oxford Analytica, global risk consultancy
Dr Stephen Ladyman - IT technician, Pfizer
Ian Cawsay - Computer programmer, Seven Seas vitamins

And, er, that's it....

Unsworth said...

@ Helen

".....And you certainly are unlikely to understand anything about defence in general."

Any evidence for this quite stunning assessment? Any research to back this up?

Unsworth said...

@ ChrlesOJ

You should take Derek Wyatt's claims with a large pinch of salt. Director? What does that mean, actually? What does it entail?

Maybe that's one less, then.

Unsworth said...

@ Lola

Well said. And what about all those parasitical 'consultants' too?

GM said...

This issue really touches a raw nerve! I quite liked Simon Heffer's definition of some public sector jobs as "socially productive". The fact is, both public and private sector in the modern liberal state thrive off each other, and it is something of a misnomer to suggest that one group over another might be better at being in government. Rupert Murdoch and Richard Branson are outstanding wealth creators, but they would be appalling men of government. The businessmen brought in to government by Gordon Brown have not been notably successful.

Possibly the only good rule for determining who should govern is that those who really want it are those who are likely to be worst at it.

Dave said...

Robert Heinlein, author of "Stranger in a strange land" wrote more than fifty years ago that there are three types of people- makers, takers and fakers.

He was right. Politics is packed full of takers and fakers with not a maker in sight

Lola said...

Geoffrey Robinson potted biography - "Labour Party Research Assistant1965-68; Senior Executive, Industrial Reorganisation Corporation 1968-70; Financial Controller, British Leyland 1971-72; Managing Director, Leyland Innocenti (Milan) 1972-73; Chief Executive, Jaguar Cars 1973-75; Chief Executive (unpaid), Meriden Motor Cycle Workers' Co-op 1978-80 (Director 1980-82); Director West Midlands Enterprise Board 1980-85."

Lola said...

GM - I agree MP don't necessarily make good businessmen and vise versa.

The point is not can they do it, but do they understand it? Wealth creation that is.

Clearly New Labour only understand it to a degree and see it purely as a means of taking more of this wealth away as tax. The assumption being that they, New Labour, are better at allocating this capital or spending it, better than the people they tax.

They do not make the connection between taking this wealth away and the reduction in the wealth of the UK as this capital is destroyed by spending it.

Look, the current financial crisis is caused by excess debt. This excess debt both private and government has been used to sustain income levels as capital has been destroyed by lefty policies. Essentially we are unwinding excess money and reducing our income to a level sustainable by the actual value of the capital we employ. This is lower than the last 11 years as New Labour's tax and spend policies have destoyed so much of the capital, wealth, that we have created.

Wealth creation and the preservation of that wealth is a public good, even or especially if it stays within the hands of the creators as they will husband it. Governemnts will just destroy it. They have no incentive at all to maintain it.

Wealth creation and preservation go hand in hand.

Letters From A Tory said...

I think working in the frontline of public services (e.g. teacher, doctor, nurse) gives you a useful perspective on things, but wealth-creation is very different from that.

It's a shame that so few politicians understand the realities of either working in a hospital or school, or running a business and managing other people.

albertmbankment said...

Oh dear, this is a favourite Bankment hooby-horse. The majority of current politicians are career wonks who have never aspired to do anything other than get their hands on the levers and start telling the rest of us how to run our lives.

Blair - never really cut it as a barrister.
Cameron - a non-job in PR for TV; how vapid is that.
Osborne - nothing.
Hague - school, university, managment consultancy without having experinced management itself.
Brown - nothing.

The list is almost endless. Ghastly as Prescott was, for example, at least he had experience of the real world. You really can't imagine either Cameron or Brown queuing for a bus or worrying about the next gas or council tax bill. They have always led gilded, feather-bedded lives, being burnished for government and being told throughout how ever-so jolly wondeful they are and how the people hardly deserve anyone of their brilliance to tell them how to run their lives.

And now we have the next generation of Benns appearing over the horizon to assume their birthright. There was a feature over the weekend about some 19yo Benn girlie who's been selected for a seat next time round. How very dare she push herself forward as knowing any damned thing about any damned thing!

Anon said...

Lola for Prime Minister!

Newmania said...

'Jacqui Smith was a teacher and economics lecturer, which gave other people skills to create wealth'

Yes anyone who had actually had a job would know what a fatuous remark that is. I think a good way of looking at it is to imagine a less complex society where the distinction is clearer. Lets say you have a tribal group living in case and feasting on woolly mammoth .

Some of them will be charged with defending the tribe from the predations of other tribes and that obviously has a value . , not only that but its especially dangerous so they would be held in high esteem .( The Forces ) . Some would be engaged in the difficult an task of hunting mammoths daily risking life and limb in an arena when the slightest slip can be fatal .( Wealth Creators )

Mean while back at the caves , women , usually , will have other tasks ., like teaching the young cooking cleaning up the cave painting pictures of woolly mammoths , dancing about and writing songs of praise for the hunters .

This ancillary third group are useful, enough but not of course as vital as the actual providers without whom everyone starves .

WE seem to have a society where the people who draw pictures of Mammoths get all the tasty cuts while the people who kill them get left with a thin broth of mammoth toenail clipping and sabre tooth foreskin.Whats more the fire is not well tended and the lazy fat home bods have convinced themselves that mammoth comes out of thin air and appears on their plates by magic Grrr

Bryan said...

Lola 9.36 "Geoffrey Robinson potted bio" add to that Robert Maxwell gofor and porfessional sleaze bag

Miller 2.0 said...

The idea that wealth is created by risk looks weak compared to the notion that wealth is created by work.

Jimmy said...

"The society which scorns excellence in Plumbing as a humble activity and tolerates shoddiness in philosophy because it is an
exalted activity will have neither good Plumbing nor good philosophy: neither its pipes nor its theories will hold water."
John William Gardner

Theo Blackwell's blog said...

How many wealth-inheritors are in the shadow cabinet?

David said...

It's not just politicians that have little experience in this area it is commentators as well in the media (not you Iain I know).

neil craig said...

At one time government owned much of industry & that bit was then productive though often not sufficiently so. Excepting the Post Office, these days are gone - government employees are almost all bureaucrats &/or regulators. Indeed an awful lot of government is negatively productive - without most of our planning regulators we would have more & far cheaper houses, without thousands of bureuacrats, lawyers & quangoists exercising vetos we would have more & far cheaper nuclear electricity & not be facing blackouts. Economist's rule is that every £1 spent on enforcing government regulations costs the regulated £20 which means the 200,000 H&S regulators cost the country the work done by 4 million of our productive workers.

As regards the fitness of ex-public employees - the fact is that they do not get sacked for failure. Jaqui Smith may or may have been a competent teacher but the fact that she wasn't fired is no indication. That John Redwood, or Chris Huhne, made considerable amounts of money before their political careers shows substantial competence.

Elby the Beserk said...

Splendid timing, given the following on Dilly Dolly Draper's New Labour shagfest

http://www.labourlist.org/its_becoming_more_difficult_to_see_how_cameron_and_his_team_coul

Very funny.

Elby the Beserk said...

Blogger David Boothroyd said...

Just to confirm that the claim that Jacqui Smith taught "home economics" rather than economics is definitely untrue.
//

So what? She is terminally useless and clearly not up to the job. So your point is?

Elby the Beserk said...

@Chris Paul said...

This crossed with David's latest. Let's not forget that there are many people who are extremely entrepreneurial who choose public service despite being perfectly suited for money grubbing ... because of values and ambitions measured other than in pounds, shillings and pence
//////////////////////////////////

Care to back that up? You say that, but I would be interested to know how many of the, say top 10% paid public servants, are there for reasons of public service.

Statements like that need some sources and references, you know. Else it is just an opinion.

Peter said...

God, there are some really thick lefties here!!!

A lawyer is a business man, you tosssers. I am apartner in a law firm, which means that I am an owner. The firm is a business just like any other effing businees. It is a welath creation business in that the firm uses its owners' and employees' skills to make money by providing services.

Most of us lawyers make a lot more money and create a lot more welath for ourselves and our clients, than any other business.

Dave said...

"Most of us lawyers make a lot more money and create a lot more welath for ourselves and our clients, than any other business."

It's a shame you can't spell. Nevermind, I don't suppose your clients can read.

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