The complete absurdity of Ha Joon Chang

The multiple suicides of workers in Foxconn factories in China have revealed Victorian labour conditions down the supply chains for the most futuristic Apple products. But the top managers of Apple escaped blame because these deaths happened in factories in another country (China) owned by a company from yet another country (Hon Hai, the Taiwanese multinational).

Well, no. The top executives escaped blame because the suicide rate in those factories is a fraction of the suicide rate across China as a whole. Having a lower than average suicide rate is not something to be blamed for.

The largest companies today are so complex that top managers are not even expected to know fully what is really going on in them. These companies have also increasingly outsourced activities to multiple layers of subcontractors in supply chains crisscrossing the globe.

Increasing complexity not only lowers the quality of decisions, as it creates an information overload, but makes it more difficult to pin down responsibilities. A number of recent scandals have brought home this reality.

And this is where the tosser becomes completely fucking absurd.

Firstly, an economist criticising the division and specialisation of labour is on a pretty sticky wicket as far as either theory or empirics go. But do recall, please, that this is the man who thinks that we\’ll have a better economy if the politicians and bureaucrats tell all those businessmen what to do. The world is so complex to manage that we should direct it from two further removes? Have things ordered by people with even less clue of what the fuck is happening?

Anyone know why Chang hasn\’t been made a full professor at Cambridge after all of these years?

24 thoughts on “The complete absurdity of Ha Joon Chang”

  1. if increasing complexity reduced the quality of desicions wouldn’t large systems of people be hard to find.

  2. What he doesn’t grasp is that outsourcing reduces the complexity of companies. People who know about retail want to deal with retail. They don’t want to be a software development company. So, they outsource it to a company with a contract and the job’s done.

  3. “Anyone know why Chang hasn’t been made a full professor at Cambridge after all of these years?

    Because even Cambridge draws the line at drooling mouth-breathers like Chang.

    …although I hear Loughborough are interested…

    🙂

  4. Surreptitious Evil

    I was rather puzzled by his statement:

    Andy Haldane, executive director of financial stability at the Bank of England, once pointed out that in order to fully understand a CDO – one of the more complicated financial derivatives (but not the most complicated) – a prospective investor needs to absorb more than a billion pages of information.

    Because a billion pages is an awful lot of information. So much so that the statement is clearly bollocks.

    So I downloaded and read the hyperlinked transcript (I have changed the link in the quote above to the non-frames version of the transcript, for the sake of everybody’s sanity). Of course, at least in that speech, Mr Haldane said no such thing. As far as I can see, he doesn’t mention CDOs at all.

    He did say that Lehman Bros had “almost one million open derivates contracts” when it imploded and Chang says that some derivatives contracts are “a few hundred pages long“. However, that is very much not the same thing.

  5. @ Tim Almond

    Perhaps he’s only familiar with public sector outsourcing, where the functionality is outsourced.. but replaced with a new complex structure (possibly the same size/cost as the outsourced functionality itself) to monitor delivery of the outsource contract.

    To be fair, that’s probably an issue for large private sector outsourcing too. Outsourcing only reduces complexity when the outsourcee is trusted to get on with it.

  6. Guardian diversity – they may look different but they think in lockstep. This is the essence of the Left’s ‘diversity’ – diversity is mandatory except in the one area where it is actually useful – diversity of ideas.

  7. Wait.

    In developing countries, the majority of suicides are among people who are no longer able to support themselves: the elderly, the disabled, and farmers whose crops have failed.

    You’d expect the suicide rate among young urbanites with jobs to be an order of magnitude or so lower…

  8. A clear left/right divide.

    Right-wingers will cast this as “Foxconn workers slightly less miserable than fucked peasant subsistence farmers with failed crops. Yay Foxconn!”

    Left-wingers will see it as “Foxconn workers only slightly less miserable than fucked peasant subsistence farmers with failed crops. Boo Foxconn!”

  9. * The complete absurdity of Ha Joon Chang *

    Is this not the name of one of the segments from Kill Bill?

  10. Even at the peak (14 suicides in 10 months) Foxconn’s suicide rate was not only lower than the Chinese average but also lower than the average for the US and Europe.

    So what is Foxconn doing right that we can learn from?

    Not much, I’m afraid. If you correct for suicide risk factors you will find that foxconn is about average, I expect. Suicides are commoner among:
    males
    adolescents
    drug abusers
    post partum mothers
    the unemployed
    farmers
    owners of small businesses
    etc
    and these categories are obviously under.represented in the work force of Foxconn.

    So you could torture the stats (and 14 out of 830,000 is a very small number) to show that the suicide rate was higher than expected, for a brief period.

    Then you might compare the rate with a similarly state-directed enterprise such as France Telecom. 60 suicides in three years out of an employee count of 180,000. That makes working for a big firm in France five times more suicidal than working in for a big firm in China.

    So maybe Foxconn has something to teach France Telecom, but not the lesson this idiot wants them to learn.

  11. Unfortunately most France Telecom suicides were brought on by boredom, overindulgence in wine at lunch and a final surfeit of garlic.

    🙂

    The lessons this idiot wants to teach are that Capitalism + Globalisation = Eviiiiiiiiiiiiiiiiillllllllllll!

    That the reality doesn’t fit due to what Richard Feynman might describe as those awkward facts is easy for the typical Gramskyist lefty, they are just ignored.

    In other news “Choco rations going up to 20 grammes next week. Doubleplus good, eh?”

  12. @BraveFart

    I believe The Complete Absurdity of Ha Joon Chang is also a novel by Louis de Berniérs….

  13. Surreptitious Evil

    Ken,

    Thanks for that link. Fortunately for the forests of the world (and unfortunately for Chang), Haldane’s intern didn’t check his maths.

    Assuming the extremely unlikely event that merely reading the contracts will allow you to “fully understand the CDO^2” (this is a typical failing of financial and legal due diligence – the assumption that reading the paperwork will actually give you the faintest idea what is really going on), the reference you so kindly provided has the number of pages as:

    [1] + [3]*[5]*[2]*[4] = 1,125,000,300 (arithmetically correct)

    [1] is the pages in a CDO^2 prospectus.
    [2] is the pages in an ABS CDO prospectus
    [3] is the pages in an RMBS prospectus
    [4] is the number of ABS CDO tranches in a CDO^2 and, wheezes,
    [5] is the number of RMBS in an ABS CDO.

    So the correct equation is actually:

    [1] + [4]*([2]+[3]*[5]), which works out as (a still wholly unmanageable) 3,787,800. We’ll call it 4 million.

    Now, if a security engineer and peripatetic blogger (who hasn’t anything much to do with serious maths since 1989) can sort this out, how come one of the high-heidjins of the BoE and a Cambridge not-prof get it wrong by several orders of magnitude?

  14. LETELU: Looks Exotic Thinks Exactly Like Us.

    For some real racism, just look at how the ever-tolerant American left has recently treated Clarence Thomas, Mia Love, Alan West, and so on.

  15. @ SE
    BUT most of the pages in each ABS CDO prospectus are exact copies of the corresponding pages in every other CDO prospectus just as most of the pages in a commercial lease document are identical.
    Haldane is just indulging in hyperbole to emphasise his point: is anyone seriously suggesting that the Hedgies who shorted the Goldman Sachs CDOs didn’t understand what they were doing despite the impossibility of carefully reading 4 million pages in a single lifetime? (NB even their total payroll could not have read 4 million pages in the time it took GS to set up and market the deal so sharing out the reading is *not* a refutation).

  16. Surreptitious Evil

    Haldane is just indulging in hyperbole to emphasise his point

    If he hadn’t included the calculation in the transcript of his speech, I would agree with you. But he did. Therefore I think he seriously, however incorrectly, calculated his billion pages.

    I concur with your core point however – but I don’t think it invalidates mine. Even if you had read the documents, it wouldn’t necessarily help you understand what is actually going on with the bet.

  17. None of which means working conditions at Foxconn aren’t Victorian. Though I suspect they are a little better than that.

    @Rob – quote of the month. Diversity in everything except thought. I love it.

    @RosBiF, all mothers are post-partum. Sorry about that, but I gather pendantry is positively encouraged in these parts.

  18. I’m tempted to say it’s because unlike Dawkins he hasn’t got a friend with 5 million squid to spend, but that may be trolling,

  19. James V
    You should be hanged as high as one of Polly’s chandeliers for that post.coital remark. Pendantry, moi?

  20. Another thought on the complexity / 1bn vs 4m thing…

    Apparently there can be up to 93,750,000 mortgages in a single CDO^2.

    Ok, so that is just a number. But really? Even though it was calculated on Excel, doesn’t excuse the author from a sense check! Are there even that many residential homes? Certainly not in the UK. What about the US? (answer: No, there are ~76m residential homes).

    In the UK there are 9.2m mortgages (http://www.guardian.co.uk/news/datablog/2013/may/13/mortgages-property-debt-uk-trends#data)

    In the USA there are 50m mortgages (http://www.census.gov/compendia/statab/2012/tables/12s0998.pdf)

    So even if all the mortgages outstanding in the US & the UK were packed into a single CDO^2, we would be nowhere near the 93m quoted.

  21. Portemat,

    If you look closely, there are more than 50 million since 35 million with one mortgage, 10.8 million with 2 mortgages and 0.8 million with three or more mortgages. It’s 50 million houses subject to mortgage as I read the table. Still, nowhere near the 93 million putative.

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