Britain faces a huge economic challenge to be competitive and pay our way in the world,; and to build an economy which delivers fairly for the squeezed middle. Both depend on the successful spread of the ‘good company’ – profitable businesses and corporations which add value both to the economy and to society by being good at what they do, not exclusively focused on the bottom line.
But business stands at a crossroads. We need to fundamentally rethink what type of company we want operating in Britain. There are two paths that businesses can go down in the coming years, only one of which will lead to the long-term growth and prosperity that the country needs.
In one direction lies the short-term pursuit of profit, at the expense of long term business growth; the banker who tells families to get over the banking crisis when its real impact on their lives, incomes and public services had only just begun; companies who don’t train the workforce, and who assume customers don’t care if low-waged services are delivered by the unsuitable or the uncaring; investors in Southern Cross who managed to separate their financial interests from the very purpose of the company itself; and asset strippers who cash in on the value of cherished brands. Every British company up for auction, every day.
But there are increasingly insistent voices in British boardrooms and beyond who argue that a different model is better both for business, and the wider society. They include companies like Aviva, PwC, GSK, GKN, DESSO, Rolls-Royce and many more. And it’s not just large corporations, either, but voices from SMEs as well.
The good company. The company that sees beyond the nearest horizon and grows its business for the long term, not the short term; is committed to constant innovation and investment; to developing the skills of its own workforce; nurturing its wider supply chains; valuing its customers for the long term; is open and transparent with high standards of corporate governance; puts sustainability at the core; values employee engagement and trade union relationships; delivers fair rewards at every level; and sees their success as part of a broader, national, success story. Business with these values will deliver a resilient economy with profitable companies that are competitive abroad, fair at home, and strengthen our communities.
And we need to remember that there are social and political impacts of the right business models. The governor of the Bank of England has talked of living standards falling for six years. And this is not just because of the global banking crisis and our stuttering recovery; though it is being made worse with living standards squeezed by George Osborne’s VAT hike and higher inflation under this government. Average wages fell between 2003 and 2008 and are set to fall for many more years, with many people in jobs with low skills and productivity.
You don’t have to predict Greek-style conflict to recognise that both politics and business are surely going to run into trouble if the best we can offer is years of falling living standards, followed by growth whose benefits are as unfairly shared as they have been in recent years.
We look to work for ability to pay our way, to raise our families well, to secure our retirement. And for the lives we build around it; the friendships we make; the way we are valued; the ability it gives us to develop our skills – to get on; the respect and autonomy we enjoy. In a free society with a free economy, that’s surely the deal.
Yet the evidence suggests that our economy is not offering those rewards to millions of people who have jobs but who do not have decent work. In the medium to long term, the nature of the growth and the jobs we create is crucial to the overall success of the economy and to those who work in it. Otherwise both the country and its families face a bleak future.
We must look beyond the short term, and create an environment where successful business models which create economic value in a way which also achieves social value are rewarded. Long-term business models can be encouraged by activist government polices to develop key sectors of the economy, supported by reform of the financial system and changes to merger and acquisition policy. Fair pay policies can be encouraged by a combination of regulation, incentive and transparency. Strong consumer protection and enhanced disclosure can enable consumers to make fully informed choices in fair markets. A fundamental review of regulation will ensure that the burden of regulation and enforcement falls on the poor company without imposing new risks on the good. Government procurement and regulatory policy can reward innovative companies with new markets. Labour law should encourage effective employee engagement.
The Tory-led government is making the wrong choices for Britain. Just as they have made the wrong choice on the rate of deficit reduction, so they are making the wrong choices on business policy. There is too little policy certainty to encourage long-term investment, and no vision of a better balanced and resilient economy. The emphasis is on making work less secure and less well rewarded. Investment in skills is being reduced. Consumer rights and protection are being eroded.
British business is at a crossroads. In the years to come it will be clear that British government business policy offers a clear choice too.
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John Denham MP is the shadow secretary of state for business, innovation and skills
Re-instatement of comment posted on 27 July 2011, 9:31:10 PM (paragraphs restored)
[This also refers to the Mandelson article mentioned in today’s letter]
On the present basis under which global capitalism operates, it is difficult to see how a “good compay” can survive. Cadbury was supposed to be one of those and look what happened to it. Before the Blair government came into office, its leader was declaring (in a Party Conference speech) that he wanted security for the British people. Now, the Archbishop of Canterbury has talked about the real fears of people at the lower levels of society.
Labour lost the last election because New Labour blew it over the 13 years it was in office. Largely, I suspect, because it gave uncritical support to the concept of “free markets”. Unfortunately, the logic of free market capitalism means that the living standards of the working classes (which now means more or less everybody who does not cavort with billionaires and oligarchs on their yachts on the Mediterranean – though those people do work in their own sort of way) will homogenise throughout the world.
The lowest paid will share the fate of the humblest peasant in China and those without a job will end up on a par with the Mumbai slum-dweller. The squeezed middle is already being computerised out of existence.
The recent falls in real after-tax pay in the UK are part of this inexorable process and it’s no good saying “Oh, woe”, but one must take positive remedial action. That is what French governments do for their own people, but one gets the impression that British governments do things for everybody else, except their own people.
However, help is at hand. Those of us who know about these things realise that markets can be rigged, manipulated, influenced, distorted, call it what you will in the particular circumstances. They also operate (or should operate ) within the scope of externally prescribed constraints. The latest Euro-reprieve for Greece is an example of how politics can over-ride a market’s apparent imperative.
The Euro-zone wants to build the ideal future John Denham describes (and which Blue Labour is groping for). It may, for example, have, in due course, to institute exchange controls on the Euro (comparably to what Brazil has done to restrict the rise in its currency). It just needs tough government, both national and supranational, and not the pious hopes, “come on chaps”, approach we are hearing too much of. If you want apprentices, for example, legislate and no nonsense. And, if you want well-nurtured supply chains, you legislate to prohibit the rotten contracts the supermarkets impose on their suppliers – something New Labour lamentably failed to do. And, there’s lots more that can be done.