Tony Judt opened ‘Ill Fares the Land’, his valedictory ‘treatise on our present discontents’, suggesting that something was ‘profoundly wrong with the way we live today.’ Since the 1980s we have relied on the free market to maximise monetary wealth and to distribute it with fairness and justice. But it clearly hasn’t worked.
We have been here before. The 1929 Wall Street Crash and the following austerity driven Great Depression, which Roosevelt ended with New Deal investment, has many parallels with today’s situation. The same forces that fostered the prolonged Great Depression are now heading the world to destruction. But today’s global population, which has more than tripled since the 1930s, is not just afflicted by rising and unsustainable inequalities of wealth and income, but also earth’s oceans and atmosphere polluted, its finite resources wasted, its biological species headed for a mass extinction, and these impacts capped by the seeming inevitability of global warming.
Business, if appropriately managed and governed, may have the potential to resolve all these issues by the invention and application of new technologies. No alternative solution appears to have a like chance of success. Business historian Chandler described business as the most important institution in the economy and its managers the most influential. Business controls the real industrial economy. It controls finance. It controls the media. It is hugely influential in academia through its funding of research and academic institutions as well as individual appointments. It also, increasingly, appears to control political decision making through its $multi-billion funded lobbying industry, its politically oriented think-tanks and its operation of the revolving doors through which individuals progress between these various sectors and government. Just about the only thing business does not control is business itself.
It appears instead to be controlled by a simplistic, even childish, belief in the widely falsified economic theory based on the idea that the free market knows best how to allocate economic resources. This simple idea is elaborated into a comprehensive economic ideology of free trade with open access to unregulated markets, minimised public sector, minimised taxation, and so on and so forth – the whole baggage of neo-liberal economics.
This ideology is beginning to be more widely questioned for supremely practical reasons, such as the recently threatened closure and disposal by Tata of its British steel operations. They were said to be losing around £1m a day, at least in part as a result of Chinese dumping cheap steel on UK markets. The outrageous suggestion had been made that the domestic industry should be protected by charging an import duty on Chinese steel so as to at least level the playing field. Thus the classic dichotomy was drawn up between the two simple minded economic ideologies: free trade on the one hand; protectionism on the other.
These are the tips of the two ice-bergs of neo-liberalism and totalitarian communism. If one is challenged, the only alternative is the other simplistic ideology. The neo-liberals (von Mises, Hayek, Friedman and others) argued that any step in the direction of exercising social responsibility, or any regulatory amendment to increase fairness, instead of seeking simply to maximise economic growth by free markets with open access, would lead inexorably to full on totalitarian communism.
The communist ideologues no doubt believed a similar process would ensue in the opposite direction. So when members of the Soviet Union showed any signs of liberalising, the tanks were sent in to eliminate such aspirations. However, such brutal ending of the Hungarian uprising of 1956, and the Prague Spring of 1968 did not prevent the fall of the Berlin Wall in 1989.
Since those days, no alternative to neo-liberal economics has been accepted by the self-perpetuating establishment. All moderate centrist governments appear to have swallowed the package in its entirety, few more so than the British governments over the past few decades. Naïve enactments driven solely according to the diktats of ideology, have served short term political purposes, while damaging the economy’s long term potential to the disadvantage of the UK population.
An illustrative example was the £1.4 billion Thameslink contract which the UK government awarded to the German company, Siemens, rather than to the UK’s last rail producer, which was by then Canadian owned, Bombardier. The then Transport Secretary, one Philip Hammond, interviewed on BBC Radio 4’s Today Programme on 5th July, 2011, justified the decision which threatened to result in the loss of 1400 UK jobs, on the grounds of commitment to the belief in ‘free trade and open markets’. Hammond had noticed that ‘the Germans award contracts for trains to German builders’, and ‘the French routinely award contracts for trains to French train builders’. He described the French and German approach, as looking ‘more strategically at the support of the domestic supply chain’ and appeared glad to proclaim that for the UK government, the free trade ideology took priority over such ‘strategic’ considerations.
The same ideology saw Boots the Chemist acquired by a private equity operator, saddled with the debt raised for its acquisition, and registered in the tax avoiding Swiss canton of Zug with its corporate culture radically altered to focus on maximised shareholder value, all this instigated and presided over by Sir Nigel Rudd, one of David Cameron’s elite team of industrial advisors.
There is an endless list of similar examples flagging up the practical outcomes from naïve acceptance of the neo-liberal economic belief system. The British owned car industry was sold off for £10 to the Phoenix consortium of asset strippers who extracted £42m for themselves before closing it down. British industry after industry, without state support, were sold off to foreign owners or closed down.
But there are also endless examples of the business potential for the UK’s technological inventiveness which could be given state support to contribute to a sustainable global future. Cambridge researcher Julian Allwood indicated how UK’s strengths in materials innovation could be deployed in relation to the steel industry’s current position (http://www.cam.ac.uk/research/news/uk-steel-can-survive-if-it-transforms-itself-say-researchers).
Similarly, molecular engineering is making its impact with new synthetic materials such as graphene which would be expected to revolutionise manufacture across a wide front (The Story of Graphene – see http://www.graphene.manchester.ac.uk/explore/the-story-of-graphene/
In the end, a more nuanced understanding of reality seems bound to emerge, based on knowledge and experience, rather than on blind ideological belief. Totalitarian communism has clearly failed. Neo-liberal economics is also clearly failing. But the more enlightened pragmatic approach to these real world problems is not yet accepted. And time is running out. Real world knowledge and experience is available and could be applied to political decision making by such as Philip Hammond and his leader.
At this critical time, they are the people who will decide the future of sustainable business.