The ‘New Politics of Inequality and the EU Referendum’ via a Facebook squabble

Politics through Facebook

This week I was prompted to remember the birthday of one of my oldest school friends by a helpful message from Facebook.  I didn’t really need a reminder, but nevertheless I responded to Facebook’s exhortation and dutifully posted the obligatory – if low key – ‘Happy Birthday’ message on his Facebook page.

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But I don’t expect a response, and perhaps I don’t deserve one.

On Friday June 24th- – the morning of the EU referendum result – I foolishly entered into a Facebook quarrel with this old friend.  He was posting in muted but triumphal terms about the decision to leave the EU, and I objected to some of the explanations used.  He obviously received several posts and messages that were negative, and, despite some enthusiastic support from others in his network, he posted on Saturday morning that he didn’t want to offend anyone and would delete the posts in question.  I suspecthe thought some people – and I fell into that camp – were sore losers and should ‘just get on with it’, but like his initial post his tone was polite, consensual and intended to pour oil on troubled waters.

So why had his posts motivated me in the first place?

Frankly, the reason was that I recognised his concerns.  He explained his antipathy toward the EU as a result of concerns about de-industrialisation, the loss of well paid and secure employment.  He was worried about the social implications of this; in terms of increased insecurity and a sense of disruption of the local communities that had relied on these industries. I know from our friendship that he and his family are long-standing members of those communities which they hold dear. His values are of commitment to place and others.

In the wake of the referendum many remainers have poured scorn on leavers, accusing them of being uninformed, motivated by racism, xenophobia and simplistic nationalism.  All of these are easy to dismiss as the product of a lack of education or rational thought.  But my friend’s posts did not fall into any of these categories. He was thoughtful, well informed and motivated by a commendable and deeply held commitment to community and place, and concerns over the insecurity of both.

What is also notable about this friend is that he has been successful in adjusting to the changes he bemoans. He is well trained and qualified, and I assume reasonably well paid in a high skilled job.  His concerns are about material changes in the communities he values, but they are not sour grapes from a loser in the globalisation story.  He was expressing concerns about the wider and common effects of global economic changes, of which European integration was just one part.

I clearly should have been more cautious with my response to my old friend, and hopefully in time our spat will be forgotten.  The irony is of course that his concerns very much feature in my own research.

indexThat same weekend similar – albeit more consensual – discussions between myself and a range of academic colleagues, also facilitated by Facebook, suggested a more hopeful trajectory.  The Facebook ‘echo chamber generated’ new friends too – all motivated by the EU result and concerned about the need to do more to engage with the political concerns that motivated my friend.

We all recognised that we have been too insular, too concerned with metrics of student satisfaction, research impact and academic reputation to spend sufficient time on the politics of the real world.  As the algorithms of social media generated a discussion of increasing numbers of like minded colleagues, more than 250 of us joined a discussion. The result was that we rather quickly formed a new think tank – InformED. I hope that in the months and years to come you will hear more about our work, for that will suggest that we have carried through our commitment to reach out beyond the confines of the University lecture hall and academic conference room.

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So aside from introducing InformED, it is the links between the EU referendum result and my research on ‘the New Politics of Inequality’ that I want to tease out in this (admittedly over-long) post. I have two core arguments.

The first is that the pressure for the referendum and the result were partly generated by a ‘New Politics of Inequality’.

The second is that if we are to leave the EU, then it is vitally important that this process is undertaken in a way that involves us all taking greater political responsibility.  For their part, politicians need to take responsibility for the social divisions they have created. Critical academics like me and my colleagues in InformED, have a responsibility to reach out beyond the academy to influence this, and the wider public have a responsibility to engage with political debate in a more substantive way.

The New Politics of Inequality From Below

In a paper, currently under review and co-authored with Daniela Tepe-Belfrage, we argue that levels of inequality in the UK are fracturing the political consensus that had been reflected in the post-war middle class.  In a paper published in 2014 I argued that during the 1980s, Thatrcherism had sought to separate out different sections of the working class, seeking to differentiate between a deserving skilled working class able to cope with increased competitiveness and those less able to cope. This has been a long-running trend; the current government has repeatedly sought to emphasise its support for ‘hard working families’ against the ‘undeserving poor’.

The argument made by Daniela and I is that the specific forms taken by socio-economic inequality in the UK are now undermining both one and two nation attempts to build political compromises. The much vaunted ‘new middle class’ of the 1960s and 70s sociology text-books is fracturing.

For one thing, the long-term prospects of this group now look less secure.  As I argued in my inaugural lecture, the generation now in their twenties and teens look like they will be the first to be considerably worse off than their parents.  The exception to this is where families have acquired housing assets to pass between generations sufficient to protect those now in their teens and twenties from increased insecurity.  In buy-to-let mortgages at one end of the spectrum and increased private renting at the other, the housing and credit markets are acting as a significant mechanism of upward redistribution.


For another thing, those families affected by these changes increasingly recognise their own declining security.  As the recent data from the British Social Attitudes survey shows, concern with inequality is increasing, as it has done for some time.

It is this recognition that has fueled the emerging realignment of British electoral politics.  Just before the last general election the British Social Attitudes Survey showed that UKIP voters were just as likely to be concerned about inequality as were labour voters.  While some groups mix these concerns with more cosmopolitan cultural politics, others express them through more conservative cultural views.  The former group might be more likely to be young, urban and highly educated (or just living in Scotland!); the latter more likely to be out of the major urban centres, older and less well qualified.  Without over simplifying things, the former group may be more likely to be among the ‘Momentum’ group supporting a new extra-party popular mobilisation behind Jeremy Corbyn. The latter group are more likely among the ranks of labour and conservative supporters who have switched to UKIP in recent years.

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Ashcroft Poll data shows common concerns about insecurity among remainers and leavers.  Click on the image to goto the Ashcroft Poll site.

As the Ashcroft polls show, these shared concerns and divergent interpretations of them were neatly aligned with the propensity to vote remain or leave in the EU referendum.  Leave voters were more likely to be socially and culturally conservative while remainers were more likely to be socially and culturally cosmopolitan and outward looking (see graphics below). But both groups (see graphic above) were influenced in their decisions by concerns about economic insecurities and the effects of these on social and community stability.

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Ashcroft polling data showing the social and cultural values of remainers versus leavers.  Click on the images to goto the Ashcroft site for more data.

These patterns are not just present in the UK, they are echoed across Europe and North America. In the US presidential elections similar patterns of support can be seen for Bernie Sanders versus Donald Trump.  The Five Star movement in Italy, the formation of Syriza in Greece exemplify the leftward reaction. On the other hand the rise of the far right parties in France, Austria, Denmark and the Netherlands and the Pegida movement in Germany demonstrate the counter trend to view polarisation and insecurity through the prism of cultural stasis and fear of the other.  Perhaps more significantly the New Politics of Inequality is also manifest outside of electoral politics in the expressions of protest such as Occupy or the Indignados in Spain, or the rise of far right protest movements all across Europe.  Evidence can be found also in declining popular confidence in political institutions.

The New Politics of Inequality then are fracturing the post-war consensus in the highly developed nations of the North America and Europe, from both left and right.  Inequality and cultural change are popularly viewed negatively on both ends of the political spectrum.

The fracturing of the new middle class is perhaps realising Marx’s prophecy that the class structure would evolve into two great and opposing classes. The sloganeering of the 1% versus the 99% seem to suggest that.  However, it seems that the 99% are definitely not drawn together in a cohesive class consciousness by their common economic realities, but are fractured both within and across countries on their cultural response to those economic realities.

The EU referendum result represents the most significant real world expression of this so far in terms of UK, European and even global politics, though the US election result may clearly trump(!) it.

The New Politics of Inequality from Above

Several of the other papers I have written recently have addressed what might be called here the ‘New Politics of Inequality from Above’.  Here I refer to the elite concern about levels of inequality being politically, economically and socially destabilising. This concern has been emergent over the last decade, but is particularly pronounced since the great financial crisis of 2008.

Evidence of this concern can be drawn from the policy documents of significant international organisations such as the International Monetary Fund, the Organisation for Economic Cooperation and Development, World Bank and the World Economic Forum.  These organisations have different roles and functions, but collectively one of the things they do is act as the think tanks and ideas forums of elite policy knowledge.  Social, economic and political changes are interpreted by these organisations as particular problems for the status quo.  The OECD began to worry about inequality first, but all of them have published high level papers rendering inequality as a policy problem over the last five years, as I discuss in a paper published in Spectrum late last year.

Of interest here is that the European Commission definitely qualifies as one of those transnational organisations that has had influence in shaping the elite interpretation of ‘problems’ that national governments choose to focus on and frame particular responses to these in terms of recommended – and in the case of the Commission sometimes mandated – policies.  It is also the case that inequality has featured on the list of concerns the Commission has raised over the last five years.

The key terms of this new politics of inequality from above are that inequality is not rendered by these elite think tanks as an ethical problem.  This new politics does not represent a ‘road to Damascus’ moment for these organisations. Rather they are concerned precisely because inequality might now be seen as a ‘risk’ to the stability of globalisation.  As such they are busy trying to persuade national governments to take these risks seriously.

This new politics of inequality from above was clearly apparent in the EU referendum process.  For years policy elites have sought to exploit social differences to manage the process of disciplining their populations to accept lower wages, and in some cases lower standards of living also.  This has been possible politically, precisely because elites have mobilised fear and sometimes nationalism to generate this division.  Politicians have regularly sought to use the image of the immigrant, the welfare or health tourist or the domestic welfare benefit recipient as a negative foil for generating support among the rest of the population.

However, that fear and xenophobia is now rather like the ‘Sorcerers Apprentice’; its animated spirit has got out of hand is undermining the position of established elites.  Specifically in the UK, both Labour and Conservative Parties have played the ‘immigration’ and ‘race’ cards, exploiting fears over insecurities to court popular appeal.

Indeed, the now defining moment of Gordon Brown’s tenure as Prime Minister might be thought of as the moment that he unguardedly let slip his discomfort with that narrative when commenting that he thought remarks made to him by a Labour party supporter about migration were bigotry.

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Of course when he realised (see the image above from the Telegraph website capturing the moment) he had been recorded making these comments he immediately back-tracked and offered profuse apologies for ever even thinking about challenging fear expressed as xenophobia. The episode is still referred to as evidence that Brown was out of touch with popular opinion, and – no doubt encouraged by the party machine – he certainly did not try to challenge this populism. It was an episode that demonstrates the cultural divergence in responses to inequality, its manipulation by politicians and the way that this is now hard to control.

But in the run up to the referendum vote, elite concern seemed ever more shrill in the face of the evidence that the Sorcerer’s broom might now be beginning to act on its own motivation, and out of their control. As the campaign progressed and opinion polls showed a close contest, the array of large businesses and elite policy think tanks became increasingly willing to enter the fray.  The supposedly neutral civil service machine also strained at the leash to get involved to put public opinion back in its place, as both the Treasury and Bank of England – the oldest and most central institutional structures of the UK state – sought to raise their own fears of what a Brexit vote would mean to the elite transnational status quo.

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The elites were trembling, and, as it turned out, they had good cause.  The sight of Bank of England governer Mark Carney standing in Threadneedle Street promising that the Bank would step-in to rescue the financial markets, and stablise the global financial system, was evidence of how seriously those elites were rocked. That other Central Banks immediately joined forces to make the same promises is only evidence of the transnational nature of those elites.

Why has inequality risen?

Again, I and many others have addressed the underlying reasons for rising inequality in a number of places, such as my talk in launching the Global Inequalities research cluster at Leeds Beckett, and in a workshop paper to an ESRC seminar at Goldsmiths University late last year. There is also no shortage of explanations. Again, the OECD, the IMF et al. have all jumped on the bandwagon of explaining rising inequality.

The most remarkable thing in terms of the New Politics of Inequality is that the explanations put forward by these elite organisations now are remarkably similar to those put forward for a long time by critical scholars in international political economy and the wider social sciences.  Ofcourse the different proponents of these explanations place varying degrees of emphasis on different parts of the explanation, and often use different language to describe them.  Semantics aside the more or less accepted basket of factors that have increased inequality include:

  • Increasing competition resulting from increased openness to trade and, in some circumstances, increased migration, also. Migration though tends only to have shorter-term and more localised effects and it should be remembered that the migrants themselves are the subject to the negative effects of this competition.
  • Offshoring and globalization as some industries and occupations have moved overseas.
  • Skill Biased Technological change – resulting from the substitution of machines and computers for labour, meaning some occupational roles have disappeared while other more skilled jobs have attracted higher wages.
  • Privatisation of state owned enterprises, which has invariably put a downward pressure on wages in public sector employment, often more dominated by women.
  • The decline of trade union membership and collective bargaining.
  • Labour market policy, including anti-trade union legislation and reduced employment protection legislation.

Of course where critical scholars and the elite international organisations part company is that these are the very changes long-recommended by the OECD, IMF etc.  And in the face of rising inequality and social destabilization they still recommend that the answer is more competitiveness.  But, as Paul Cammack has long argued, pursuing competitiveness as a solution to the problem of increased competition is a fairly circular argument.  Its hard to find a different path out of a tricky situation if one is going in circles!

The European Union and the New Politics of Inequality

European integration was very much the product of the post-war international compromise; motivated by geo-political desires to tie the countries of Europe together in a peaceful free-trade zone of collaboration, while bolstering them against the threat of Soviet expansion. These geo-political concerns suppressed and held in check the tension between two important component elements of EU integration. These were first a political and social liberal project to spread and realise the individual rights of citizens through constitutionalism ;and second an economic liberal project to promote market integration.

After the end of the Cold War the geo-political suppression of tensions between these two projects was removed, and the market liberal project began to emerge as dominant.

As Paul Beeckmans and I argued in a recent paper, the process of economic meta-governance in EU integration has increasingly pursued the objective of economic competitiveness to the detriment of concerns to build a ‘Social Europe’.  The suppression of wages and living standards has been encouraged by the European Commission as an element of EU integration to meet these ends.  If in any doubt about this, just ask the Greek population that has been at the harshest end of this discipline over the last 6 years.

In sum, EU integration has increasingly taken on the concern with competitiveness that has generated the inequality underpinning the damaging ‘new politics’ I describe above.  So, if I am so critical about EU integration as was my friend and the wider ‘Lexiteer’ (Left wing leave voters) campaign right about the need for the UK to leave the EU?

My answer would be ‘no’, on several grounds.

First, while the EU – and the European Council and European Commission in particular, have worked to promote competitiveness at the cost of greater inequality and social tensions, they did not really have this impact in the UK. That is principally because the UK government (under all political parties) has always run ahead of the EU in these objectives.

Indeed, many other Member States have often complained about the role of the UK in encouraging market-oriented reform in the wider EU.  While European integration has been consistent with the types of reform that have realised the New Politics of Inequality in the UK, it has not been a cause of it and at times has acted as a substantial drag on UK ambitions.  Constant debates over the implementation of EU directives strengthening workers rights are prime evidence of this, with the UK often being oppositional in the European discussion on these matters and sluggish to implement the resulting watered down versions that could be agreed in the face of UK objections.

Second, the majority opinion among the political elite (among remainers and leavers alike) is that leaving the EU should be complemented by immediately rejoining the single market or negotiating other equivalent trade deals.  Leaving aside the difficulty of this, as pointed out by Gabriel Siles-Brugge, the direct implication is that leaving will see more market oriented reform and a greater dominance of the economic liberal project over the political liberal one.  Put simply, as Ruth Cain also persuasively argues it will accentuate the conditions which generated the New Politics of Inequality in the first place.

Third, the subordinated aspect of EU integration – shared citizenship, a European identity, the idea of peace and cooperation between nations, cosmopolitan values of tolerance and openness, individual rights and Europe’s great gift to the world: the idea that we collectively have a social and economic responsibility to one another, as expressed through the institutions of a welfare state and social protection – may all be on the back foot, but they are not gone.  We should be promoting a radically different Europe that defends and promotes these values, not turning our back on it.

Where to now?

Plenty of commentators have spent the last week worrying about the precise ways in which the fallout from Brexit will play out in terms of the potential for a second referendum, Scottish cessation from the Union and the politics of Party leadership.  The blogosphere is alight with this stuff and it is all many of my colleagues, friends and acquaintances have been able to talk about since July 25th.  It is not just ‘lefty academics’ either. I have overheard conversations in shops, on public transport and in pubs that all suggest a very much heightened interest in politics and a dawning realisation of the dynamics I describe above.  These things are clearly significant and comment worthy in themselves.

However, the big story here is not so much the contingent terms in which the immediate processes of responding to the vote pan out.  Rather, it is in the underlying socio-economic trends and their rival interpretations in cultural politics. The apparent rise of racial harassment and violence is one immediate expression of this, but so too is the widespread antagonism between the two sides of the debate. My Facebook spat is clearly part of this!

In the fallout then there is increased responsibility on all sides.

Politicians have a clear responsibility to engage with the problems in place of Westminster games.

Academics, such as those coming together in this new think tank, have a duty to do more to engage with public opinion and inform scrutiny of politicians. Critical academics working in the fields of international political economy, sociology, social policy, European studies and critical management studies have long been aware of rising inequality and its consequences in the form of alienation and disenfranchisement.  It is crucial that those critical analyses find their way from the lecture hall and conference room to the public debate.  We need to do more to engage the public directly and to influence the political debate in the media.  This is the objective of my colleagues who have come together to create InformED.

The public also have an obligation here.  The stories over the last week or so about Brexit voters immediately becoming ‘regrexiteers’ when the implications of their actions became clear and about the prominence of ‘What is the EU?’ searches on Google suggest a democratic obligation to be better informed before contributing to collective decisions.  They also suggest an increased realisation of this.

Acting on these responsibilities is no ‘academic’ issue.  It is of vital importance if we are not to travel further down the road of cultural divisions.  As a divided nation we are easier to rule in the interests of the few and not the many.  Divergent cultural political reactions to common insecurities risk the many blaming each other for our common inequalities, and letting the few of the hook.

Moreover, these circumstances – common insecurities, fear of the future, disenchantment with existing institutions – look much like the political conditions that led to the downward spiral into the Second World War. I don’t say we are anywhere near that now, but we are closer now than we were, and the warning signs are clearly there.  It is imperative that we all act now to ensure that we do not travel any further down that path.

 

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New Paper on EU Meta-Governance

Things move slowly in the world of academic publication.  Around 18 months ago my collaborator Dr Paul Beeckmans and I submitted our paper on ‘Continuous Adjustment in EU Meta-Governance’ to the International Journal of Public Administration.  It was accepted well over a year ago and only last week was it finally published.

The wait means that the paper is somewhat out of date in terms of the latest changes in EU meta-governance and in particular the myriad developments in the ongoing saga of Greek bailout negotiations. To a large extent though, this doesn’t really matter for the argument that Paul and I wanted to make.

CC - courtesy of Wikipedia

CC – courtesy of Wikipedia

The paper started in response to a call for papers issued by Laura Horn and Lindsey Whitfield at Roskilde University for a two day workshop on the theme of ‘Structural Adjustment Comes to Europe’, which was held in November 2013.  The theme addressed a question that was attracting much discussion at the time: did the austerity measures imposed on some EU member states (notably Portugal, Ireland, Italy, Greece, Spain) by the EU institutions, amount to much the same process of externally enforced neo-liberalisation as experienced by African and Latin American governments and societies in the 1980s under the banner of ‘structural adjustment’?  If the answer is/was ‘yes’, then should the same outcomes of income polarisation, social conflict and political destabilisation be expected to result from this adjustment?  Several papers have been published in the academic literature which effectively address these questions.

Paul and I though, wanted to take a different approach.  To us, it wasn’t entirely accurate to view the experience of bailout countries as separate and distinct to that which is inbuilt in the process of European integration.  We thought that the notion of ‘structural adjustment’ conjured up images of a one-off adjustment to changed external economic realities.  We wanted to suggest that European integration has been a mechanism to secure ‘continual’ adjustment to the demands of international competitiveness since at least the Delors White Paper on Competitiveness published in 1993.  Since then that same commitment has been pursued through a variety of headline strategies including the Lisbon Strategy and now Europe 2020.

Where we were in agreement with the terms of the call for papers was that this adjustment was neo-liberal in orientation.  Acknowledging that this is often a ‘woolly’ and under-specified term, we were specific about what we mean by this: a set of policy reforms designed to shift the gains from economic growth toward capital rather than labour; to finance over other sectors of the economy; and frequently with the effect that income inequalities increase.

The implications of our argument that adjustment is continual and an integral feature of EU integration are that all EU member states are subject to adjustment and that this will continue into the future. We documented in some detail the ways in which neo-liberal adjustment is built-in to a variety of aspects of the meta-governance process. Importantly this is about much more than fiscal policy and extends into significant areas of social, welfare and employment policy.

Our overall conclusion is in line with that of Bob Jessop that EU meta-governance has become subordinate to the process of world market integration and that this is best understood as a multi-scalar process.  Meta-governance is a process of securing compliance with the demands of world market integration at a variety of other scales including state-level welfare reform, but also at the level of local and regional service provision and the organisation of individual households.

In making these arguments we contest some of the findings in the mainstream EU-studies literature that EU meta-governance is relatively ineffective at driving policy coordination among EU member states.  By contrast we argue that the frequent invocation of failure in relation to member states’ efforts to meet EU wide objectives (in relation to social, employment, welfare or economic policy) are actually a useful tool to reinforce the message in favour of continual adjustment. In this sense we support the wider findings of authors such as Jamie Peck or Susan Soederberg that EU meta-governance repeatedly ‘fails forward’.  The failure to fully implement one round of neo-liberal adjustment becomes the justifying logic to undertake the next round.

The full paper is available at the pages of the International Journal for Public Administration.

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A pre-publication copy is also available here.

A Perverts Guide to … ethical business

This post also appears on my own personal blog.

Why the former chair of the US President’s Council of Economic Advisers (and a few others) should watch a ‘Perverts Guide to Ideology’ and a few other thoughts on Corporate Social Responsibility and ‘Ethical Business’

Reading Project Syndicate…

This week Project Syndicate published a piece by Laura Tyson, a former chair of the US President’s Council of Economic Advisers and a professor at the Haas School of Business at the University of California, Berkeley, on the eternal debate on Corporate Social Responsibility.

Tyson, wades in apparently on the ‘progressive’ side of this debate.  She responds to earlier comments by Robert Simons of Harvard Business School that American companies were guilty of going soft by following CSR strategies and embracing “a long list of gauzy, feel-good values, such as social responsibility, environmental sustainability, and inclusiveness”.

…CSR as fundamentally subversive…

Simons’ critique is a familiar one and echoes Milton Friedman’s 1970 assertion that CSR was a “fundamentally subversive doctrine” because it polluted the proper objective of business which is to seek profit, respond to their shareholders’ demands and customer needs.

…but what if its more complicated than that…

Tyson’s response is that this is too simplistic a formulation.  She has five specific objections which, she argues, make the (business) case for CSR:

1. That Friedman himself acknowledged that business should “…make as much money as possible while conforming to the basic rules of society…”.  Society expects ‘ethical’ practice.

2. That in reality shareholders are people and have a variety of motivations and values that may include, but may not be reducible to, the profit motive, and even then will embody different time horizons.  Some will balance profit motives with other concerns, some will prefer short-term and others long-term profits.  Businesses need to balance these competing demands.

3. Businesses can take the lead in shaping shareholder motivations and the ‘ethical’ stance that they take will draw particular types of shareholder/investors to them over time.  Ethical businesses may therefore attract investors with synergistic motivations.

4. Businesses also affect the wider societies in which they operate and therefore have an interest in affecting society in ways that will be good for their own interests over the long-term.  They therefore have an interest in societies where consumers can afford their products, where employees are hard working and accept the legitimacy of business activity.  The Friedman-Simons’ critique forgets that governments cannot provide all of these conditions for business, and so it follows that business itself should contribute to the creation of prosperous, stable and business-friendly societies.

…the understandable but misplaced logic of business school frustration with ‘toothless’ CSR…

All of this reminded me of the friendly engagement (see the book) between myself and a number of colleagues (Prof. Ralph TenchDr. William SunDr Brian Jones) at Leeds Business School who are frustrated with the ‘impotence’ of CSR at actually changing business behaviour.

The business case position put forward by Tyson (and earlier by a range of academics including, but not only, Peter Drucker), they argue, has ultimately failed to lead to significant change in business practice.  Arguing for a reconfiguration of CSR to CSI – Corporate Social Irresponsibility – they argue that the time has come for more explicit targeting of unethical and damaging business practice to embarrass them and force a change.

On the surface of things there are reasons to be sympathetic with this case.  CSR practices are attractive to those companies – as Tyson acknowledges – that can extract brand value from them.  But Tench, Sum and Jones worry that this leaves a wide range of negative business practice unaffected.

Over the last year high profile examples of unethical corporate practices have abounded, such as dangerous sweatshop conditions in Bangladesh among suppliers of high street outlets like Primark; phone tapping at News International and other newspapers; and the poor labour conditions in Foxconn factories that assemble Apple iPhones and iPads.  Ofcourse these are just some of the well reported cases, worse and more will remain forever unreported.

…its not a matter of choice – it’s a structural problem …

My position on this is that both Tyson and my colleagues are forgetting the structural conditions in which capitalist enterprises operate.  Ironically, in this case Friedman is closer to being right.

Tyson and my colleagues argue as if the adoption of CSR and ‘ethical business practice’ were simply a matter of choice.  Friedman knew that it was not.  Neither side in the debate (want to?) highlight the structural or systemic conditions that drive business practice.

You can read my fuller argument here, but for the purposes of this blog post let the following summary suffice:

1. Businesses operate in a competitive environment.  Unless they compete, they will go out of business.  There is always a rival firm that will produce more cheaply if it can, for that will mean more profits or market share.  If a business chooses not to do this, they will soon lose market share (because they are more expensive) and/or they will be starved of new investment.

2. That competitive logic will impel businesses to cheapen their production costs (including most importantly their labour costs) and that of their suppliers and curtail unnecessary costs associated with containing any negative effects they might have on society (what economists call externalities – pollution, waste etc).

3. This competitive pressure also creates social problems in the aggregate.  Some of these are obvious – poor working conditions, poverty, unemployment etc.  Some of them are less obvious but equally important.  The drive to compete makes capitalism a fundamentally expansive system.  It needs always to grow to satisfy the demands of capital for profit.  So one of the aggregate problems generated by competition is resource depletion, environmental damage etc.

Now, none of this precludes business behaviour that superficially appears to be ‘ethical’:

  • Sometimes individual managers or operatives will exploit institutional and organisational opportunities to pursue objectives other than those suggested by the demands of competitiveness.
  • Sometimes there will be a coincidence between apparently ethical behaviour and the demands of competitiveness.  This is the ‘business case’ argument.  Some businesses will carve out an ethical niche consciously and others will be forced to amend their behaviour from more negative ‘market pressures’.  In the first instance ethical brands will seek to draw in consumers motivated by the values and quality of their product or service.  This strategy is usually highly dependent on visionary owner-operators, is necessarily small scale (niche!) and fraught with danger. As Green and Blacks, Bodyshop (see here for a discussion) and over the last week the Cooperative Bank have all found out, such strategies are always susceptible to being overtaken by the need to secure larger scale finance.  Similarly, poor working conditions in suppliers is occasionally an embarrassment to retailers and big brands who will then respond to the episodic appearance of widespread consumer concerns.  The recent announcement of pay increases in Bangladeshi textile firms is one example of this.
  • Finally, competition doesn’t always hold. There are markets and circumstances where monopoly conditions or only weak competitive pressures hold (who else makes the much in demand iPads and Macbooks…).  In these conditions, businesses can exercise more choice, but the case of Apple suggests that they may not.

…What a Perverts Guide can teach business school professors…

What all this suggests is that those who worry about corporate behaviour should shift their attention from the actions of individual firms to the system in which they operate.  The trouble is that this is very difficult to do.

This weekend I went to see the recently released Perverts Guide to Ideology, and was reminded of Slavoj Zizek’s oft repeated but brilliantly insightful comment that it is much easier for most people to imagine the end of the world than it is for them to imagine an economic, social and political system other than capitalism.

I don’t agree with everything Zizek says either.  But Laura Tyson, Peter Drucker and my colleagues would do well to watch the film and think about what Zizek has to say.