Book Review: The New Political Capitalism by Joe Zammit-Lucia
Surfing the Wave: The “New Political Capitalists”
Where to begin? It is undeniably the case that after decades of consensus that we should keep politics out of business following the triumph of Thatcherism the past ten years has seen increasing awareness of the political and social infrastructure that underpins our economy. The 2008-2009 Recession, Austerity, Brexit, COVID-19 and now the Russo-Ukrainian War has made business more sensitive to political factors and the power of the state.
On their better days, there is does seem to be some awareness amongst business leaders and the TED Talk intelligentsia that things cannot continue as usual. Unfortunately, that resolve is merely fleeting, to be stated only in the maelstrom of crisis to buy time. Yet, every time our current economic model rides out a period of instability, the more it reinforces that capitalist realism Mark Fisher identified. In this world, there is no real alternative, merely technocratic tweaks to our economic model with the hope that they will somehow deliver different results.
It is capitalist realism that leads to books such as Zammit-Lucia’s work The New Political Capitalism: How business and societies can thrive in a deeply politicised world. To adapt Voltaire’s adage about the Holy Roman Empire the book is neither New, Political nor about Capitalism. Instead we are treated to the indecision and apprehension of the business elite, the waking nightmare of our politically unstable world. A world that has been unstable through the short-termism of business.
Reform? Apart from a sentence about the author’s support for changing the responsibilities of Directors to consider “all stakeholders”, there are no reforms. What Zammit-Lucia offers is a plea for business to “surf each wave effectively.” Should business change? Not really. It merely needs to develop “well-developed cultural and political antennae…read the political runes and focus on adapting to and even driving further the emerging political direction.”
The Leopard Paradigm
Everything must change for everything to remain the same, says Tancredi in Lampedusa’s novel The Leopard. This is the paradigm that Zammit-Lucia and ‘progressive’ business leaders. There are pages in Zammit-Lucia where the author threatens to follow through with his insights. “Business is part of our panoply of political institutions. Corporations are political and social actors”.
So why are we constantly reforming state structural, but not business? “When business leaders declare any particular policy initiative to be ‘anti-business’, what they are mostly saying is that they are operating within a moral framework regarding the role of business in society that is different to that being put forward with policymakers.” Why is their moral framework separate? “Globalisation…provides a shield from necessary innovation in the production process.” What role, therefore, for reform of global capital markets? Yet these one-liners are not followed through.
Zammit-Lucia recognises that the behaviours of business on pay, environmental damage and exploitation of poorer nations creates political anger. But the solution is not for business to change in any meaningful sense. Rather, the solution is “cultural leadership” to ameliorate the worst excesses of the system. “This widely swinging political pendulum does not benefit anyone, least of all private enterprise” says Zammit-Lucia, appealing to the self-interest of his audience. What we need is “partnership” between public and private sectors. Where have we heard this before? Ironically, Zammit-Lucia also decries “corporatism”, which one would assume he would support given the need for partnership, so it is hard to see what partnership and collaboration really mean in practice.
In Zammit-Lucia’s Leopard Paradigm, businesses should become more politically aware and recognise the need to speak out and take sides on political issues. They should change their brand and their engagement; business should look and feel different. Business should not, however, fundamentally alter its structure. Don’t change your financial expectations. Don’t upset the financial and cultural primacy of shareholders and investors. Don’t sacrifice your businesses interests for the wider social good. Don’t given up on a globalised vision.
Zammit-Lucia is clearly someone who keeps on top of business news and there is a great deal of reportage in the book itself. This makes it all the more puzzling that Zammit-Lucia cannot see that the very structures of business undermine the limited transition that he wishes to see.
The usual examples of businesses changing are trotted out, but these are becoming out of date. Danone, the celebrated “enterprise a mission” of France, is referenced, but one page after this example is put forward, we learn that Danone’s pioneering CEO, Emmanuel Faber, has been pushed out, investors have fled as the stock price fell by 27 per cent and that the honourary chairman has said that Faber was “more interested in saving the planet than saving his firm”. Unilever pops up a few pages later, with its purchase of ‘progressive’ brands such as Innocent and Ben & Jerry’s. Yet this is the same firm that is currently under attack by activist investors who have also questioned why the firm is trying to save the planet and society, rather than focusing on making money. The share price has fallen by 15 per cent in six months. Unilever has also sold its tea business to private equity, hardly known of its focus on environmental and social concern. Oh, and Unilever’s CEO just got a 42 per cent pay rise, despite the ‘political’ damage that Zammit-Lucia recognises excessive pay awards create (and the fact there is nothing to show that higher pay makes companies perform better).
The author also overlooks the structural barriers to reform referenced in his own book. Zammit-Lucia references a 2005 survey by Duke University and University of Washington in the United States of 401 financial executives. In his survey, 80% of respondents said that they would decrease value-creating spending on research and development, advertising, maintenance and hiring in order to meet short-term earnings benchmarks. A few pages later, in referencing the rhetoric and ‘targets’ of banks and investment houses to support social and environment progress, Zammit-Lucia notes that these institutions have actually shifted little of their money in practice. JP Morgan, the author notes, said that it would get out of investing in private prisons because of ethical concerns, yet it had the largest position in a bond issued by a private prison provider just two years later. If you do not structurally change the system that allows this behaviour and allows individuals to keep the rewards from this anti-social behaviour, then how can anything change? Bold claims, political sensitivity and business as usual. This is the New Political Capitalism in action.
Zammit-Lucia says that he once asked a bunch of CFOs he was leading a workshop on to think like citizens, rather than CFOs for the purpose of the meeting. It’s a simple request but one that needs to be extended from one meeting to the whole structure of business. Polanyi in his Great Transformation wrote about fiction of 19th Century capitalism that it could somehow be disembedded from society and the environment around this. This led to people, land and the environment being turned into ‘fictitious commodities’ that could be theoretically traded and parceled up in any form suitable for profit making but led horrific squalor in the industrialising cities and pollution of rivers and land. Zammit-Lucia seems to accept Polanyi’s insight and the need to reconnect business to society, but cannot will the means.
We need to turn companies from being legal persons without political and national sympathy back into citizens of political communities and, like citizens, expected to act in the interests of the wider community. Zammit-Lucia quotes the old phrase “what is good for General Motors is good for America” and the hollowness with which it rings today. Yet this corporate citizenship, this idea that GM should be a servant of the United States and that its interests should be aligned with the country that gave birth to it is the paradigm we should aim for.
Whether that commitment was more honoured in the breach than the observance is besides the point. We can learn the lessons from the past and the need to create a fiscal, tax, legal and regulatory regime which makes clear that business is a political institution and in return it must put the wider political goals of society at its core. In return for the willingness to put innovation and productivity capacity is profit and power, but not without limit. Reforms to create this would be a New Political Capitalism, and would be worthy of a book with such a name.
You can purchase The New Political Capitalism from Bloomsbury Books (£14.99)