Being the fantastical story of the islands of Amer and Eur…
Near my Oxford office is a pub called the Eagle and Child. In it, J. R. Tolkein, C. S. Lewis and others used to meet. Some of their writing took the form of fantastic allegories. A virtue of the imaginary worlds that Tolkein in particular created is that you can explore issues free of argument over whether the exposition is exactly descriptive of any particular history or society. I recently stumbled across a beer-stained manuscript written by a little known business economist who was a member of their group.
His fantasy told of two islands, called respectively Amer and Eur In Amer, the prevalent culture was strongly individualistic. People co-operated with each other, but they tended to do so on the basis of carefully drafted contracts and well designed systems of miles. Amerans viewed their constitution with almost reverential authority, and turned quickly to their lawyers in the event of accident or dispute.
Eur was a much more consensual society. Few of the conventions which governed business behaviour were written down: co-operation tended to be instinctive. Risks and information were things to be shared, rather than managed strategically. Individual misfortunes were immediately matters of social concern.
Both Amer and Eur were very successful economically, but in different ways. Amer was a wonderfully innovative society, reflecting its emphasis on individual initiative and readiness to experiment. Eur was better at producing the land of high quality manufactured goods which demanded commitment from the work force and trust between firms. Amer firms were managed rather aggressively for the benefit of their owners (or the people who managed them). Eur firms were more conservative, with an emphasis on the long-term organic growth of the business. Amer companies were quick to seize new market opportunities: Eur firms were more inclined to invest in the evolution of their business and attached special importance to developing the stalls of their workforce. Amer firms treated their workers rather instrumentally: Eur firms saw the employment relationship as a long term commitment obligations
These different competitive strengths worked to the benefit of both. Eur benefited from Amer innovation, while Euran products were widely admired in Amer.
There was some sort of dispute between Amer and Eur. (The details of this seemed to have been written and rewritten many times and I could not make them out). But following that dispute, a group of Amer political philosophers and economists, with attendant lawyers and merchant bankers, arrived on Eur shores to re-educate the population in the Amer values of liberal individualism.
At first, this didn’t make a great deal of difference to the way the Eur economy worked. What had previously been described as social insurance was now reformulated in terms of welfare rights. What had been generally understood conventions about business behaviour were now defined and prescribed as state regulations. People carried on behaving in the same ways, they just talked about them differently.
But over time, the new rhetoric started to have its influence. Welfare rights conveyed little in the way of corresponding even speculatively. That made them increasingly expensive, while at the same time the majority of the Eur population, which had no need of them, became resentful of this cost. The social solidarity which had provided the initial basis of the welfare system started to erode.
And an advantage of business regulation based on consent was that it constantly and often imperceptibly adapted to changing economic conditions. Formal, legalistic regulation did not. Moreover, it necessarily applied to all firms whether they could afford the costs of these obligations or not.
Whenever change was proposed, interest groups gathered together to resist. Practices which had formerly been helpful in maturing the Eur economy work increasingly became impediments to its progress.
All this eroded the self confidence of Eur business and Eur politicians. They worried about the road ahead. The visiting and philosophers – who had by now trained many Eurons in their systems of thought – were in no doubt about the answer. The problem with Eur was that it was still not Amer enough. If only Eur would roll back its welfare systems and dismantle its regulations, Eur could be as prosperous as Amer.
But not all Eurs were convinced. Many of them, of course, were simply defending what they had been encouraged to think of as their entitlements: underworked employees of state industries, companies failing to meet the challenge of world markets.
Yet others were more thoughtful. They pointed out that incomes were as high in Eur as in Amer, which did not suggest that only the Amer model worked. They noted that many more Amers enjoyed life in Eur than the other way round. They argued that Eur was unlikely to be more successful at being Amer than Amer was itself.
They asked whether is was not possible that many of the old Eur ways were the best – For Eur if not necessarily for Amer. They shared with the Amer ideologies a desire to restructure the welfare system. But they wanted to replace it with a structure that gave back responsibility for sound insurance to firms, communities and new public-private partnerships. They also wanted to reduce state regulation in product and labour markets. But to do so on the basis that most of its objectives – in consumer and worker protection – would be adopted by companies themselves.
Some of those who sympathised with this perspective also believed that the traditional Eur values could not be sustained in a world in which Amers, and those who had acquired single capital market Amer values, dominated the single capital market which had come to embrace both islands. Perhaps they were right, perhaps wrong. The manuscript ends at this point.