The idea of alternative economic systems to capitalism no longer commands much attention. Even in China the idea of capitalism thrives, albeit in a context of strong state control. Capitalism is justified as the economic system best suited to liberate entrepreneurship and maximise growth through the untrammelled workings of free markets.
There is a debate about the sustainability of the system particularly in terms of its ecological consequences, but because this is such a complex problem the default response from policy makers is to tinker at the edges without fundamentally challenging current business practices in the hope that the entrepreneurial drive of capitalism will come up with a technological fix in the not too distant future.
The financial crisis has led to some soul-searching, more among government than the banks who caused the crisis, it has to be said, but as the crisis lingers and possibly deepens, at least in Europe, there are few signs of root and branch change. As the French say, plus ça change, plus c'est la meme chose, and Francois Hollande illustrates precisely this point. Rhetoric rules. The problem is, though, that people outside of the higher echelons of business and government are becoming increasingly disenchanted with empty words and the prospect of declining living standards.
What is particularly striking in our current predicament is that there is so little debate about the growing role of plutocracy and how to curb its excesses. The Oxford English Dictionary defines plutocracy as government by the wealthy, a ruling class of wealthy people. I would add to this the suggestion that what also defines a plutocracy is that it is a state that whatever therhetoric is governed for the good of the wealthy. The rise of the plutocrats is one of the most striking phenomenon we have witnessed during the wave of neoliberalism that has enveloped us for the last 30 years..
One does not need to be Karl Marx to realise that an emphasis on a business model that is defined, according to eminent UK economist John Kay, by the rule of self-interest, market fundamentalism, the minimal state and low taxation, has led to the increasing wealth and influence of a small minority of plutocrats and companies that run rings around national tax systems and the danger of a growing impoverishment of the many, at least in the West.
This challenges the idea of a benign alignment of capitalism and democracy, the purpose of which is to enrich the many. The danger is that as the interests of the plutocrats, government and ordinary citizen increasingly diverge, the once strong bond between democracy and capitalism is undermined. Citizens could then lose faith in government as the mediator between business and society with who knows what consequences.
How should we respond to this? We have a fundamental problem compounded by the extent to which our business values are premised on self-interest, the under-regulation of markets and endemic tax avoidance. If business careers are premised on the notion that greed is good and a Darwinian vision of business competition as a war in which only the fittest and the nastiest survive, then we are unlikely to create organisations that will survive longer-term and help resolve both our economic, social and ecological challenges.
If the entrepreneurial ideal is of establishing a company is to sell off as soon as possible and to get rich as quickly as possible then we are not going to have the building blocks of sustainable prosperity and the gap between the plutocrats and the rest will continue to grow until it becomes intolerable.
How are we to react? We can, as I have done elsewhere, focus on the need to change management education to make it more liberal in a humanist sense. This might make a difference in the long run, but I am not optimistic given the motivation and the current mores unpinning too much management education and business behaviour. More fundamentally, we need to rethink the relationship between business and society and between government and business. I welcome the new book by Lord David Sainsbury on this topic, Progressive Capitalism, and its critique of economic policies which, while well-meaning, fail to challenge neo-liberal orthodoxies.
Plutocracy is essentially about the privatisation of equity in the control of small elite groups. Lord Sainsbury reflects on his business experience in one of the UK's most successful companies, built up over the long-term as a family business, and in particular its fight against a hostile takeover bid by a private equity firm. The motivation for the takeover bid was simple: to "liberate value" by selling off assets. This was to be followed by a return to the financial market as soon as possible to make a quick profit. Value was to be liberated not for the many, but for the already-wealthy few. I share Lord Sainsbury's repugnance for this form of opportunism. How governments deal with the plutocrats will play a significant role in determining our economic and social futures.