POINTS OF VIEW
8200 – THE BIG IDEA
There are range of ideas, or ideologies, which drive modern societies though, for much of previous history, religion in one form or another alone was the driving force. Indeed, some countries are still ruled by religious beliefs, such as Islam, and even the current US government is heavily influenced by Christian fundamentalists.
On the other hand, in not a few of these situations the religious message is manipulated for other reasons; to support the anti-imperialist groups in Islamic countries and equally to support the neo-cons in the US – whose real agenda is very different. On practice the neo-cons publicly espouse supposedly ideological elements such as democracy and freedom as their own special values; though as, in reality, few would dispute the need for such values in any civilized society it is not clear what is different about the neo-con versions. Of course, their position was much clearer a couple of decades or so ago, when they stridently defined themselves as ‘anti-communists’, a position which is no longer available; and hence their search for new enemies!
Communism itself, or more specifically Marxism, was the one secular movement whose ideas approached the power of religious beliefs, in those societies – such as China - which genuinely committed themselves to it rather than used it – as did Stalin – as a means of control.
The grim reality has been, in most societies, that the prevailing ideology – almost whatever its form – has been captured by the governing elite to be used for their own ends. This was just as true of Stalinism in the USSR as it now is of the Republican governments in the US. The most famous, most often quoted, exception was Athens in the 4th century BC; though even then – though the whole electorate did participate personally in the debates – the majority of the population, most notably the women and slaves, were excluded from this electorate! Our leaders are now less blatantly obvious about such exclusions, hence the neo-cons trumpeting of their commitment to democracy, but their elite represents an even smaller group.
Paradoxically, in view of the spectacular demise in 1989 of Stalinism around the world, the most influential political philosopher - in the West as much as in the East – was Karl Marx! Clearly he was important in terms of the communist regions which purported to follow his dictats; and to a less extent those that subsequently espoused socialism. But he was just as influential, in terms of setting the ground rules for the debate, amongst the capitalist in the US.
The one ‘ideology’ which, however, claimed to be the outright winner of the 20th century – to ‘End History’ – was indeed capitalism. Its pre-eminence has now even been accepted by the former communist regimes, as well as the one remaining major communist power China. The socialists, now the social-democrats, in Europe have also embraced it; and Tony Blair has even made it central to his reform of New Labour. Above all, there is now no serious challenge to the supremacy of western capitalism as the best route to effective political governance.
The problem is that, unlike most other theories of governance, capitalism as now practiced has not been definitively captured by a few well chosen words. The need for this was evaded for most of the 2nd half of the 20th century by defining it in terms of ‘anti-communism’. Unfortunately that option is no longer available; and it is not clear that the neo-cons increasingly desperate search for a new enemy – currently focused on Islam – which will replace communism. Equally, the attempt to appropriate democracy and freedom as uniquely capitalist virtues seems doomed to failure.
Thus, despite the attempts of its promoters to claim all the virtues for it, capitalism – in its assertion that it is the one and only practical ideology capable of handling the complexities of modern life - ultimately has to stand or fall on its economic philosophies and principles. Where the principles of Marxist economics, and in particular its emphasis on the equitable distribution of wealth, have often been put under the microscope the credentials of western capitalism have rarely been examined. In general few - if any - western managers even question the ‘fact’ that it offers the only framework within which they can operate. Indeed, even social democratic politicians – and some communist ones – have now come to believe that private enterprise, driven by the profit motive, provides the most effective context for management; even in much of the public sector!
Few of them, actually almost none of them, ever think of what the ‘market economy’ – the current inoffensive term for capitalism – really means. Having spent most of my life promoting the virtues of marketing, even I have found considerable difficulty putting my finger on precisely what lies at the heart of this ‘market economy’; which seemingly is something very different to marketing itself.
In truth, to my shame, I have only once seriously considered the subject, and even then I was forced into this uncomfortable process by an unusual group of students. As I have described elsewhere, my Ethiopian students – led by Seeye Abraha who was the most radical thinker I ever worked with – demanded that I spell out what was the philosophy behind western capitalism; behind the ‘market economy’. I was eventually forced into admitting that I simply couldn’t answer their question of the cuff.
Accordingly, the group – comprising some of the brightest thinkers in Africa – spent the best part of an evening trying to formulate a meaningful answer. As communists the students had previously spent years exploring how Marxist economics answered the question. So at least they had the advantage of being able to recognize a suitable answer if they should come across it.
Eventually we did boil the answer down to a single word. To our horror the word was ‘greed’! In essence ‘profit’, which is the bottom line for most business operations in the west, is about successfully taking money from others; a very different concept to the Marxist ideal – at least in theory – of sharing it. I was shocked, because I had never thought my life had been dedicated to such a base motive. My students were also shocked because, on behalf of the 60 million members of their population, they had just sacrificed their Marxists principles for this western philosophy.
The students eventually came to terms with the price they were paying, best summed up by Seeye Abraha as “Well I would do a deal with the devil himself if it helped feed our starving population!” I am not sure that I, personally, have ever accepted the idea since that time. Indeed, my unease has since been heightened by the machinations of the US neo-cons.
So let me try to put into context what my thoughts have been since. First the blind alleys:
Despite Marx, the practical essence of the USSR revolved around a planned economy; for virtually everything that mattered, regardless of its nature. Maybe if all the decisions thus planned had been based on perfect information, and were perfectly taken by the planners, it might have worked. But, of course, such a counsel of perfection can never exist – and the great virtue of the market economy is that, at least to a degree, it self-corrects for failed decision-making where a planned economy must rely on the judgment of the planner. On the other hand, ethically based systems – such as those derived from religious beliefs, especially Islam – may have specific benefits, including some allowance for social engineering, in general they enjoy too narrow a perspective to cover all needs. But at least these other systems tend to recognize that there may be other alternatives, indeed faced by the dominant US model they cannot do otherwise.
Unfortunately neo-con devotees of the market economy recognize no alternatives! Even those social-democrats who have previously talked about a mixed economy – whilst still not wanting to accept the whole set of dogmas promoted by the neo-cons, have slowly accepted the dominance of the capitalist ethos the neo-cons espouse. Like my Ethiopian students, whilst condemning the excesses of the neo-cons, they accept the practice in order to enrich their electorates. They do not understand how its magic works, but they still want to buy into it.
What has been lost in all the lurches to the right, which occurred during the 1980s and 1990s, is any sense of pluralism. It is true that ‘pluralism’, a favourite of social scientists during the 1970s and 1980s and defined by them in a special way, was as much a criticism of society as a recommended framework. Not least it stressed the impact of a variety of pressure groups on the supposedly democratic processes in the west; though, Marxism apart, the rest of the world was largely ignored. This gentler, pluralist view of the failings of society has seemingly now been tossed aside in favour of the more radical – or perhaps we should be honest and sat ultra-conservative – view so effectively promoted by the neo-cons.
I would, in any case, prefer a much wider definition of pluralism; one that recognizes the need for different answers to widely differing situations.
But the neo-cons, and their many followers, talk endlessly of ‘freedom’, where this turns out to be the freedom to accept their view of the world or, too often quite literally, die! Not least, if you opposed their business friends – most notably the US oil industry which has used its vast wealth to so successfully fund their campaigns – you must be ‘Anti-American’; and in every sense one of the new enemies they needed to define the US state.
In fact, real freedom needs to recognize the multiplicity of potential answers needed to cover the wide spectrum of real-life situations on the ground around the world; including the 80+ per cent still outside of the First World. Not least, in terms of economics, the balance in a mixed economy between the private enterprise so beloved of the neo-cons and the public services so despised by them, which still holds true even in the US, should be established where the end results best serve the public at large and not just those making profits from them. It may be true that some parts of the public sector are not well managed, but there is no real evidence that private ownership rather than just better management would offer any better solution. If truth be told much of private industry is also badly managed, and nobody in the west any longer suggests that nationalization is the answer to this.
It is inconceivable that the recent switch of billions of dollars to Africa could have come about except by government action, and internationally agreed ones at that. Despite the almost inevitably political nature of the decision-making, it is even arguable that control of public goods – such as those provided by the utilities – might be better handled, and in particular more rationally subsidized, under government control. But it is highly unlikely that any Fast Moving Consumer Goods Companies (FMCG) will ever again be the beneficiaries of direct government intervention.
Looking at matters from a different direction, the great advantage of an economy revolving around money, as is the essence of the market economy, is that it is easy to see what is happening. The performance figures leap out of the page, ask your friendly accountant. Of course, even these figures can be outrageous simplifications – or even falsifications - as Enron, Worldcom and Parmelat so graphically showed. Accountants, and neo-cons, full deserve their monikers as ‘bean-counters’; for that would be just as valid a use for their talents! They like to think that their beloved figures are exact measures of their world, and hence their pre-occupation with balancing the books; except when this is to their disadvantage. Of course, the inherent vagaries of estimating capital movements, and the gross distortions as off-balance-sheet accounting, mean that even these figures must be suspect. Modern business – in the Internet age – largely ignores the traditional costs elements: of materials (in an Internet organisation there may be none of these), labour (there may be few of these, though modern suppliers ignore such human interfaces at their peril), land (which used to be a major element of economists’ thinking but which now barely enters into the equations for any company). This leaves the sole consideration of capital, and the profits which can be derived from this – since interest too is often not a significant factor.
The problem is that measurement of the current state of this capital is at best a guesstimate. Where now so much of it is encapsulated in the brand franchise, it can be almost mythical. Google, which was a brave investment for college students but an insignificant one for a modern corporation, conjured literally billions of dollars out of thin air. On the other hand, AOL - achieving something similar – saw a hundred billion dollars evaporate into the financial ether! It is, quite literally, all in the mind of the investor; or, as Lord Keynes said, in their ‘animal spirits’.
None of this takes into account all the other factors which make up modern life. What impact do corporate actions have on employees or customers? What impact do they have on the environment, or on society as a whole? Where the original investments may be relatively small, such unaccounted for considerations could conceivably swamp these.
By the beginning of the 1990s these ‘externals’ were being recognized. In particular it was recognized that employees had become the most important resource in the new service economy - as well as being its most important stakeholders – and indeed Tony Blair made much of stakeholders in his early speeches. Around the turn of the Millennium, however, history was turned on its head; as the neo-cons finally came to power in the US, and set a new agenda for the rest of the world as well as that country. The focus suddenly reverted the ‘owners’, and customers just as much as employees had found themselves being traded backwards and forwards with the sole aim of maximizing profits. Paradoxically, the one thing that has been lost – remembering that we are now in a service economy – is service itself!
My father’s firm, to which he gave the whole of his working life, was moved – by the stroke of a pen – from Unilever, which had owned it for the best part of a century, to ICI; and I found myself advising its board of future strategies which took no account of its previous links to Unilever which had so long been its raison d’etre. All of this was done with no consideration of the needs and wants of its long-serving employees. As it so happens, though, these paper transactions left my mother, one of its pensioners, still in the Unilever fold!
In this monumental new global business game only one thing counts: capital value. Yet, as we saw earlier, this – along with the profits which are supposed to drive such value – are too often illusory.
The lie to my criticisms is seemingly given by the success of the US. Not only is it the greatest economic and military power, but it is the model which almost all others now try to emulate. Forget the theory, real-life success is what counts! Or is it?
Elsewhere in this compendium, not least in the IBM story, we have seen how confidence can carry an organization way beyond the point where it should have collapsed. In the case of IBM it took a decade before its mistakes finally destroyed its financial performance. In the case of countries the size of the US the process may take much longer. The decline of the United Kingdom, for example, started at the beginning of the 20th century, yet it took another half century before it was finally forced to face up to its problems. The equivalent decline of the US probably started in earnest in the 1990s, when the model on which it had built itself - albeit as a mirror image – the USSR itself finally collapsed.
The rest of the world, observing President Bush’s vain dreams of glory, has already recognized that the process of US decline has started; and celebrates the fall of the last global bully. US citizens, on the other hand, are still in denial. Just talk to someone from the mid-west and they will tell you all the problems are purely peripheral to their nation’s greatness: for example “Our trade gap is negligible compared with the size of our economy”. In a sense they are right. I remember talking, during the early 1990s when the problems were starting to emerge, to a leading economist from one of the East Coast think-tanks. He commented “We may be living on our savings, but it will be another century or so before we have used them all up!” Unfortunately, the more recent policies of the neo-cons have reduced that timescale to a few decades, and certainly to less than the three or four decades which may remain for the imperial lifespan of the US.
The collapse may come even sooner, when the nations paying literally trillions to support the dollar – typically in order to keep the exchange rate favourable so that they can sell their exports – recognize that the price they are paying is too high. It is the petrodollar which is likely to be the crucial breakpoint. At the moment energy in general, perhaps as much as two thirds of it, is priced in chancy dollars; with the more stable euro accounting for less than a third. The crunch will therefore come when oil exporters start to really worry about the long-term stability of the dollar, and hedge their bets by progressively switching to the euro. As in all such things, this movement may turn into a stampede; as the dollar halves in value in a few months.
The denizens of the mid-west may be proved right in assuming that this will initially have little impact on their lives. Arguably it may even help the position of the US as a debtor, since it will at a stroke halve its overseas debts.
But, especially in a world where so much of business life is ephemeral, it will destroy the credibility of the US. The emperor will at last be seen to have no clothes, and foreign investors are likely to shun US investments. This will, not least, mean that the US government will be forced to ask its own citizens to fund its vast overspending.
In any case, the lack of trust – and of optimism about the future of the US – will impact its own businesses as much as foreign investors. The resulting ‘depression’ may turn into a slump something like that of the 1930s; which will affect the rest of the world as much as the US. In any case, the neo-cons – despising anything which smacked of liberal values – have destroyed all those sell-correcting safety devices Lord Keynes built into modern economies; and there will be no more levers to pull which will stimulate demand!
Needless to say, the rest of the world will also suffer, though the euro-zone – with its much more conservative approaches to national finances – may be less affected. Britain, not yet fully protected in this way, will scramble to get into its safety.
What then might be my recipe for success after this calamity happens?
The answer is, I think, to mix and match. There is no single economic model which will safely handle everything in human life; much as neo-cons and western economist might wish for it. There isn’t even one which addresses the majority of our problems. Instead there are a range, a large range, of approaches which can be used to best address specific situations. The simple answer is, as I have said elsewhere, to ‘THINK’. Then the managers involved, for almost everything now needs to be positively managed rather than casually administered – the neo-cons for once are right about that, will be best able to choose the solution to suit the circumstances.
So, there it is. All we, and especially our leaders, need do is ‘THINK’!
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