“General Motors is not in the business of making cars. It is in the business of making money.” Thomas Murphy, then-CEO of General Motors
There’s a kind of collective insanity in the boardrooms of our major corporations and in the offices of government. It’s an insanity born of cowardice, ideology, greed and short-sightedness. In some cases it’s held knowingly and with intent, and in many it’s simply a kind of herd-mentality – although even the herd-mentality is culpable, because we’re entitled to expect better from these highly-paid ‘masters of the universe’.
It’s insane because even if it gets away with its aims, it will ultimately destroy itself – and the consequences for everyone – even for the children of those making themselves rich through it – are likely to be catastrophic if it’s left unchecked.
This insanity has its roots in the neoliberal idea of the profit-motive. I usually dislike using ‘neoliberal’, because people might not know what it means, but basically it’s an ideology that says government involvement is a Bad Thing, private companies doing everything without regulation and for profit is a Good Thing, and whatever it takes to prevent the first and achieve the second is acceptable.
It’s taken as read these days that a company’s primary purpose is to return the maximum possible profit for its investors. If you see the world like that, then anything that reduces profit is another Bad Thing. Taxes should be avoided; people are a commodity – the fewer you employ and the less you pay them, the better; innovation and creativity are risky – you might spend a lot of money and not make a return – so the key performance indicator of the people who run your companies becomes the ability to cut costs and to keep cutting them. This takes little imagination, so you end up with a typical executive who lacks imagination and can’t see beyond the next set of cost-cuts.
Much of this is rooted in fear. If one company in an industry adopts the ‘cut everything’ approach, then the executives of its competitors feel pressure to follow suit – if they can’t match the returns of their competitors, investors might look elsewhere. Far, far better to improve the top line by innovation, but that takes imagination and nerve (true entrepreneurial skills). So in a short time, everyone is trying to out-compete each other in cutting – to win the ‘race to the bottom’. When costs can’t be cut any further locally, CEOs decide to ‘offshore’ – building factories, offices, laboratories in countries where there’s an abundance of cheap labour and closing facilities in countries with higher pay.
Of course, logically speaking it’s very clear that this approach is going to defeat itself as the law of diminishing returns kicks in. If every company lays off more and more staff, cuts the wages of those who remain and then sends all its jobs to India and the like, eventually you’re going to impoverish the key markets for your products and services. People won’t have the money to buy what you make, and you’ll either have to reduce profits and give your goods away at knock-down prices, or else sell far less and make less profit. If every company squeezes its suppliers’ profit-margins until the pips squeak in the search for ‘efficiency’, then every company supplying to business becomes less profitable – and its employees become less able to buy the products of the companies that sell to consumers. You don’t need a business degree to understand this – just a little common sense. So it’s perfectly valid to wonder why the ‘smart’ people running companies and countries don’t get it.
The problem is that the mindset has become so deeply-ingrained that most people can’t imagine another way. We’re on a roller-coaster and it’s too late to get off, so we just have to hold on tight, go along for the ride, and hope somehow to avoid the unavoidable crash.
Lacking the imagination to conceive different and better ways, the people at the top collude to try to extend the lifetime and reach of their power and privilege. You might not want to think that they can be so calculating, cold-blooded and selfish. I don’t like to think it either. But if there is such collusion to try to perpetuate inequality and continue to maximise profits in the absence of true entrepreneurship, you would expect to see measures such as:
– Cuts in corporation tax
– Increased unemployment – people who are scared of losing their job are much easier to coerce into accepting wage & pension cuts and with being expected to work harder for less
– Making it easier & cheaper for companies to fire employees
– Welfare cuts, so that people are even more scared of losing their job, and so to create a pool of people who can be forced into jobs that don’t pay a decent wage
– Pensions cut while individual contributions are pushed up, so that costs come from people’s income rather than from corporate profits
– An increase in low-paid, low-hours work in place of real employment
– Concerted campaigns to divide the population against itself so that these unpalatable measures can be imposed and resistance minimised
– Massive cuts to public-sector numbers, wages & pensions so that corporate profits don’t need to be taxed to pay for them, and to further increase insecurity and the pool of people who have to be willing to work for slave-wages
– Concerted media campaigns to conceal the true reasons for all these measures, and to numb and distract people from the real issues, so that no one starts to question the established order
Are these not exactly the things we’re seeing today in our country? Draw your own conclusion.
But people won’t be fooled for ever – and the longer the lid is kept on the pressure-cooker, the greater the explosion when it blows. If the people at the top – those of ill intent and those who are simply too weak or unimaginative to dare a better way – are allowed to continue to get away with what they’re doing, while the numbers of the impoverished and disenfranchised grow and grow, then eventually there’ll be a societal explosion that will make the 2011 riots look like a Women’s Institute picnic. The whole edifice will be brought down – and those at the top will fall the hardest. Riches won’t be of any use if currencies crumble and money is simply regarded as a piece of paper with no intrinsic value. If law and order break down, then the descendants of the rich will suffer along with the children of those they exploited. It may seem an extreme view of the future, but it’s merely the logical conclusion of the current insanity – and yes, that word ‘neoliberal’ again – if it’s allowed to continue unchecked.
So, is there really no better way? I believe there is, but it’s going to take an effort no less intense or concerted to shift the world-view of enough people to achieve change – and to devise policies that are radical and well-aimed enough to make it happen.
We need a fundamental change in the way we see society, the way we see companies, and what we expect from them. Companies need to be seen – and to see themselves – as existing to provide employment, promote the necessary bonds and structures of society for the common good, and to pay full taxes to maintain the fabric of a decent, healthy society that protects its vulnerable; shareholder expectations need to be moderated – by law, by public pressure and by whatever else works; and the people that run companies need to be incentivised according to how well they run their companies to achieve these greater ends rather than for short-term ‘gains’ at the expense of a proper contribution to the well-being of society.
Here are a couple of ideas to get the ball rolling:
– instead of paying executives obscene sums to slash costs by put people out of work, let’s pay them a good salary, let’s say capped at £250k. Then any earnings on top of this basic salary – paid for as a direct deduction from the company’s tax contribution – depend on achieving an increase in the number of employees while staying in profit
– Set up a government tax-auditing department to assess every company’s tax liability according to strict, simple, public criteria, so that companies pay their fair share and can’t employ ‘creative accounting’ to reduce and even eliminate tax, as happens now. Then, discount these strictly calculated tax revenues according to increases in the number of people employed and the amount they are paid, so that companies are motivated to employ and to pay well, rather than the opposite.
This is my small, initial contribution to the debate. I’m sure I’ll come up with others. What are your ideas?
Of course, there’ll no doubt be lots of people who’ll hear ideas like this and call them unworkable, unrealistic, anti-competitive; who’ll say that such measures will drive the rich out of the country, that ‘top’ executives won’t come to this country to run companies if they faced these challenges to their income. To which my answer is, let them go, or not come. If they don’t have the imagination to find ways to create employment rather than cutting it, and isn’t committed to building a society that’s good for everyone, then we don’t need them. Anyone can cut, and we don’t need to pay exorbitant salaries for that – and in any case the kind of economic growth that only benefits people who are already wealthy isn’t worth having. Their absence will create space for people with genuine leadership and entrepreneurial gifts to step up – and will be a step in the right direction of creating a new way of seeing society, and the place of business in it.
We need a different way of seeing and of being. A better way. Will we have the courage to devise one – or will we just go with the current flow like lemmings until we all fall off a cliff – along with our profits and everything that’s good about our society?