Built by history

It���s appropriate that Martin Wolf���s criticism of proposals to introduce more market forces into higher education should appear the day after Man Utd���s abject defeat to Midtjylland. This is because football clubs and universities ��� and in fact big businesses ��� have something in common.

That something is the power of history. As Martin says, universities rely upon reputation, and reputation is built over time. Oxford is one of the world���s best universities not because it is remarkably well-managed, but because of its history.

Exactly the same is true for football clubs. Man Utd still get capacity crowds not because they are playing brilliant football ��� as their fans noted last night, they are not ��� but because they benefit from a loyalty built up over decades. People watch Man Utd not to savour the sublime talent of Marouane Fellaini or workrate of Memphis Depay but because they got hooked on Best-Law-Charlton-Scholes. Similarly, Oxford���s reputation owes far more to Evelyn Waugh than it does to its here today-gone tomorrow-forgotten the day after Vice Chancellor*.

What���s true of football clubs and universities is also true for big companies. If I ask you to picture, say, Ford or Coca-Cola, the image that comes to mind might well be one from decades ago.

What Edmund Burke said of society applies to organizations ��� at least those with big brands. They are ���partnerships . . . not only between those who are living, but between those who are living, those who are dead, and those who are to be born.���

And brands generate rents: if you spend ��30,000 on a BMW you���re buying ��20,000 worth of car and ��10,000 worth of badge. I get paid for working at the IC but not for blogging because the IC has, over the years, built a monetizable brand. The Glasers take cash out of Man Utd thanks to a brand built by past players and managers. One of the strongest facts about CEO pay is that it is correlated with firm size (pdf), but that size is often a product not of the CEO���s own efforts but of historic growth. As Barack Obama said (in a different but applicable sense), ���you didn���t build that.���

In all these cases, what���s going on is a form of exploitation. Bosses and workers today are making money not (just) from their own efforts, but from the work of their predecessors. They are not (just) value-adders but value-estractors.

Of course, this point generalizes. I owe my income not just to the IC���s history but to British history generally. I���m rich not because of my talents but because as Gary Lineker says I was fortunate enough to be born in this country rather than in one that hasn���t enjoyed three centuries of economic growth.

All this provides a justification for (globally) redistributive income taxes. But perhaps it justifies more than that. Seen from this Burkean perspective, bosses of great organizations ��� universities, businesses, whatever - are merely custodians of them. This makes it all the more necessary to restrain their power by more collective forms of leadership ��� a point which is all the more true because there are also other cases for restricting bosses��� control and empowering workers.

* I was going to say that its reputation is founded upon the calibre of its graduates, such as um, err -wait they���ll come to me.