Brexit and now Trump are the delayed detonations of the unexploded bombs left behind by the Great Crash of 2008-2009. It seemed clear then that the financial meltdown was the logical end-point of a fundamentally flawed version of capitalism that had for ideological reasons inverted the real order of things, placing finance and shareholders as the centre of the universe round which the productive economy revolved, and patronisingly advising everyone else to wait for the benefits to trickle down. Brexit voters and the half of Americans who are worse off than they were in 1999 – and barely better off than in 1967 – have decided the wait is over.
The explosion didn’t go off in 2009 because an equally petrified left and right, despite rhetorical ferocity over marginal differences, united to assure their followers that despite the glaring flaws there was no alternative to the restoration of bankrupt ‘business as usual’, on both political and economic fronts. As in the 1930s (think Weimar Republic) it was a hopeless failure. ‘Quae non possunt non manent’ – things that can’t last, don’t. It’s the borrowed time of the previous consensus, based on the easy assumptions of social and economic liberalism, that has just come come to a noisy and vituperative end.
It’s been too glibly assumed that liberal social attitudes – to race, gender and sexual orientation, immigration, welfare, crime and punishment – which are now under such attack in the US and much of Europe, go hand in hand with democracy. Only up to a point. They are much more, perhaps only, sustainable in a healthy, balanced economy in which jobs, income and new resources funding some kind of social safety net, ease the pinch-points that aren’t caused by, but are blamed on, social liberalism. As we know to our cost, austerity is sooner or later death to tolerance and fellow feeling along with economic wellbeing, and best friends with resentment and anger over what’s felt to be lost, fear of the other and of what’s to come.
This is why real economic change is now both the priority and a possibility. As Paul Mason has noted, ‘It is entirely possible to construct a humane pro-business version of capitalism without…austerity, inequality, privatisation, financial corruption, asset bubbles and technocratic hubris’ – provided we go beyond defeatist determinism that sees the middle and working classes as victims of inevitable globalisation and technological advance, as if these were ineluctable forces of nature over which we have no agency. This is simply false.
It wasn’t abstract economic flows that caused the the derivatives bubble that led to the Great Crash, but catastrophic management decisions, bent by unrealistic assumptions about human nature, about what companies are for, and how they should behave. In exactly the same way, it’s not globalisation itself that is (in part) responsible for stagnant wages and lack of good jobs, but what financialised, short-termist companies and managers have done with it. As former Greek finance minister Yanis Varoufakis expressed it recently on the radio, globalisation in the shape of the international movement of goods, capital and people is one thing; globalisation as the ability of giant corporations to play hide-and-seek with international profits, arbitrage tax regimes and domicile, and lobby for international treaties allowing them to sue countries for actions that damage their profitability, is something that no one signed up to.
It’s no use economists vaunting globalisation and free trade as ‘goods’ in the abstract. They are only good if they are designed to be. Perhaps it’s that conditionality that J. M. Keynes, not noted as a narrow thinker, had in mind when he wrote in the 1930s: ‘I sympathise with those who would minimise, rather than those who would maximize economic entanglements among nations. Ideas, knowledge, science, hospitality, travel – these are things that of their nature should be international. But let goods be homespun wherever it is reasonable and conveniently possible, and above all, let finance be primarily national.’
Similar considerations apply to technology, perhaps even more so. The reason for pessimism over the current direction of technological travel does not lie in the nature of technology itself, nor in the belief that no other direction is possible. Precisely the contrary. It is that the world is experiencing the first great wave of technological advance to take place under a regime in which managers who make resource allocation decisions are enjoined, not to mention highly incentivised, to privilege investments that benefit shareholders (among them themselves), whatever the consequences for other stakeholders. This is why they favour low-risk efficiency gains over less certain but potentially much higher returns from more ambitious and expensive innovation. Consider in this context the ‘sharing’, or better, ‘gig economy’. If you thought it appeared by virgin birth out of the blue of cyberspace, think again. Following logically on from downsizing, outsourcing, offshoring and the end of career, task-based employment, or the end of the job, is just the latest efficiency-driven, technology-aided manifestation of managers’ ongoing determination to bring market mechanisms into the company, in the (wrongly) presumed interest of shareholders.
Peter Drucker believed that corporations were far too important for the health of the wider society to be under the control of any one interest. He also believed that when institutions and beliefs outlive their founding assumptions, as they do, they become afflictions, threatening the whole of civil society with upheaval and unrest. Which is why innovation and entrepreneurship – ‘pragmatic rather than dogmatic, modest rather than grandiose’ – ‘are needed in society as much as in the economy, in public-service institutions as much as the economy’. No one can fail to see the relevance to the events of today. This year’s Global Peter Drucker Forum has as its subject ‘The Entrepreneurial Society’, its subtext the need for self-renewal drawing on the combined practical capabilities of state, civil and private sectors. Never has a major conference theme been so apt or so urgent.