Archive for category Economy

The dawn of totalitarianism

German politicians – especially female politicians – rally to increase the share of women in corporate boards. However, this does not mean that they put forward an initiative or some kind of incentives for women to get themselves more prepared and more willing to reach top-level jobs. No. German politicians do what they think they do best, they regulate, they tell others how to behave and especially how not to behave. And with every regulation, German politicians strangle individual freedom a bit more. Mind, all this is done for equality’s sake (not equity)- at least this is what they tell you.

The German minister for quite a lot of things actually, that is for women, youth, family and elderly (maybe I got the wrong order), Ms. Schroeder, plans to tell corporations how to man their boards, i.e. how to woman their boards: Mrs Schroeder wants to see more women in corporate boards – regardless of past merits. (I would like to see myself in more boards, maybe I should apply for a quote?) Accordingly, German corporations will be subjected to a law: If they fail to meet a certain share of women in their board a fee of 25.000 Euros will be due. In other words, state regulation, not shareholders will have a say on board composition. Shareholders simply get stripped of one of their rights, namely to determine board composition.

Forget about effort and performance, forget about all the tons of papers written about the best way to recruit skillful CEOs or skillful board members (and about how to overcome problems like moral hazard, once they are installed in their position). That’s history. From now on, biology will do the trick. Get women in the board and all is fine. This mantra rules the campaign for more women in corporate boards or in leading positions as the EU dubs it. Biology, or the biological imperative that a sizeable share of women in corporate boards improve profits is the new racism of our times (- and it violates individual rights, the rights of men, because they can try as hard as they like, they won’t climb the ladder because they have the wrong gender, the rights of women because once they form a part of corporate boards, nobody will attribute this “success” to effort, performance, knowledge or any other individual feature) .

The campaign to bring more women with their snout in the corporate trough is a religious crusade. There is not a single reason given as to why more women in corporate boards is an improvement. There is not a single shred of evidence that boards with a considerable share of women make higher profits nor is any other reason than “equality” given. Equality is a religious dogma and anyone who dares to question the dogma, asking for reasons and benefits, will be treated as a heretic. Accordingly, another German minister, Mrs von der Leyen, threatens to publicly denounce corporations that do not fill their boards with numbers of women deemed suitable by the very minister. So we’re back to the dark ages and it won’t take long before to criticize German politicians and question their approach will end with the critic being burned at the stake. Whether the burning at the stake is literally or metaphorically, time will tell, history, however, suggests the former.

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Part-time CEO

The European Union is lobbying hard for gender equality in boardrooms. The target is, equal shares or at least a considerable increase of women in “responsible” or “top positions”. In this vein, Viviane Reding, Vice-President of the European Commission and EU Justice Commissioner delivered a rather tell tale speech at ECBs headquarters in Frankfurt. The speech was about “The European Commission’s Gender Equality Strategy”, though, arguably you could say that the ECB should have more pressing issues to address than gender equality in boardrooms.

Nevertheless, Reding gave that speech and said, amongst other things the following: “The topic of gender balance in boardrooms is high on the agenda at the ECB and the European Commission”. This elevated position of the boardroom gender balance issue originates from the observation that women, though they make-up 60% of university graduates in the EU (which – by the way – should be a worrying sign, given that Ms Reading is responsible for “gender equality”, however, the advantage in this case seems to be the wrong way around), they lack when boardroom composition is scrutinized. “Women represent roughly 1 out of 10 board members of the largest publicly listed companies in the EU”. This, so Mrs. Reding, needs improvement. But how? Well, Vice-President Reding is not in favour of quotas, however, her not-in-favour-statement is followed by a number of examples that show how well a quote worked for Sweden, Spain and other European countries. Stubbornly standing ground against her own line of argument, Mrs. Reding is in favour of voluntary action. (Big) companies should make a “Women in Boardroom Pledge”. However, in March 2012, Mrs. Reading will see “which and how many companies have signed up to the “Women in Boardroom Pledge”. Supposedly, if the number of companies fails to satisfy Mrs. Reading, she will swap the carrot for the stick.

Before doing so, however, it would be rather advisable to take counsel with those, the female Vice-President is lobbying for: Women.

In 1995, Catherine Hakim published an article in the “British Journal of Sociology” titled: “Five Feminist Myths about Women’s Employment” . Amongst other things she showed:

  • Female employment-rates are stable since 1851;
  • Women favour more traditional role models than men. Especially women working part-time prefer part-time work or no work at all: „In effect, the adult female population divides into two fairly equal sectors. The first group of women are committed to careers in the labour market and therefore invest in training and qualifications, and generally achieve higher grade occupations and higher paid jobs, which they pursue full-time for the most part. The second group of women give priority to the marriage career, do not invest in what economists term ‘human capital’, transfer quickly and permanently to part-time work as soon as a breadwinner husband permits it, choose undemanding jobs ‘with no worries or responsibilities’ when they do work, and are hence found concentrated in lower grade and lower paid jobs which offer convenient working hours with which they are perfectly happy“ (Hakim, 1995, S.434).
  • Child care does not prevent women from participating in the labour force, rather child care is the result of a decision taken by women in order to either resort to part-time work or to abandon work altogether.

As Hakim’s results show, a sizeable group of women does not want to work full-time (or at all). Contrary to men, women can exit the labour market and retire to child care. Hence, if Vice-President Reding’s intention is not to establish part-time CEOs, she would be well advised by taking her clients interests into account .

Reference

Hakim, Catherine (1995). Five Feminist Myths about Women’s Employment. British Journal of Sociology 46(3): 429-455.

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It never rains in Southern California

Sometimes you come across scientific papers that leave you in a cloud of amazement. While reading the paper you go through a particular kind of transformation which leads you from “do they mean that serious?” to “they do mean it serious!”. Stephen Haber and Victor Menaldo wrote such a paper titled “Rainfall, Human Capital, and Democracy”.

Moderate amounts of rainfall, the authors claim, have stable democracy in their tow, however, it has to be not less than 550mm per year and not more than 1300mm. Immediately, you start to ask, what the heck should connect rainfall to democracy? Haber and Menaldo provide the answer. They have a theory and it goes like that: Moderate levels of rainfall enable cultivation of storable crops and legumes, storable crops and legumes enable economies of scale, trade in crops and legumes and accumulation of wealth. Wealth can be invested in accumulation of human capital. Intelligent people, people high in human capital that is, are able to control their government more efficiently than people low in human capital are, hence, democracy settles in. Don’t believe it? Here’s the original: “Rather, we are saying that a society made up of grain-growing family farmers is likely to have gone down a path of development that produced a high level and a broad distribution of human capital. When democratization happens in such a society, for whatever reasons, it is likely to stick because a broad swathe of citizens will have the knowledge and sophistication to enforce their rights and hold politicians accountable” (21).

Don’t object to that reasoning by pointing at Nazi Germany or ancient democracy in the dry country of the Greek, it won’t do. The theory, developed by Haber and Menaldo is one of short-range. It is designed to only apply to the world after the II. World War. Before, rainfall seems to be in no connection at all to the regime of government, hence, you can’t blame too much or too less rain for fascism or authoritarian systems. Also, skip the obvious critique that it is quite odd to place the nucleus of democratic development in farmer families given, e.g., that most if not all democratic movement started in big cities, where farmers are not that common. Anyway, let’s overlook that and concentrate on the way, Haber and Menaldo try to prove their claim, let’s look at the methodology and the measurement.

Haber and Menaldo’s model mainly draws on three variables,

  • A polity-score for all countries spanning the period from 1965 to 2009 and telling you the level of democracy for which a particular country qualifies;
  • Annual average precipitation within 100 miles of a country’s largest city;
  • Human capital measured as newspaper circulation per capita in 1965;

Well. Results are not too surprising, democracy flourishes most with moderate rainfall and high newspaper circulation.

Since I first looked at the way, Haber and Menaldo operationalized their “theory”, I wondered about a lot of things. E.g., what would happen if precipitation is measured within a range of 10 miles of a country’s largest city? What impact do decreasing newspaper circulations have on democracy? Not to think about artificial irrigation, is it the best way to spread democracy? And, if you want to spread democracy in, say, Afghanistan, will the export of a number of family farmers to Afghanistan do the job? Questions over questions…

On page 4 of their paper, Haber and Menaldo come close to realize that maybe their research does rely on too much assumptions that are far-fetched and cannot be proven when they write: “Moderate levels of rainfall tend to generate societies with social structures that are conductive to the consolidation of democracy: they do not guarantee that every country with a moderate level of rainfall will be democratic”. However, what’s correct in one direction, must be correct in the other direction as well. Hence, absence of moderate levels of rainfall does not guarantee that every country with more or less than moderate rainfall will turn out to be autocratic, non-democratic that is. However, this renders the entire paper meaningless. Science is about making firm connections, stating that if A is given B will follow. To say that if A is given B might or might not follow, isn’t a scientific statement, it is a tautology. There is no place for tautologies in science.

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