01 May 2009

Starting Over

Written by Published in Issue 15 - Renew Read 2845 times

As the governments of the Western world go head to head with protestors and industry chiefs who would like to see trade and the economy overhauled from the bottom up, could we really be on the brink of a new way of life

I am the founder of a Swiss bank’s private equity fund, chairman of one of the UK’s fastest-growing private companies, winner of Entrepreneur of the Year awards and an Institute of Directors’ Director of the Month. I am also an anti-capitalist. Or so you would have to conclude, if you listened to the broadcast media’s blanket classification of the G20 summit protestors’ concerns. A capitalist believes in growth, open markets and free trade. Those who oppose these holy grails, or even harbour concerns about them, are anti-capitalists.

On the eve of the summit a worried CBI appealed for a mass governmental repledging to the capitalism of the last 15years, saying that political leaders woulddo well to remind the world that over thatperiod the holy grails lifted hundreds ofmillions out of poverty. Maybe, but theyhave also spawned global problems primed to be net destroyers of global wealth, ableto drag billions into poverty, given time,unabated. Climate change heads thelist. The almost unregulated trading ofgoods in almost unregulated markets hashad much to do with the fact that manyserious people are now panicking aboutthe enhanced greenhouse effect. Thisconcern is what motivated many of the G20 protestors, and so itshould. Take one particularly active chain in the trade-for-growthstory. The ‘stuff’ that consumers are asked to consume more oftencomes from factories powered by Chinese coal, and is wrapped,shipped, trucked, stored and distributed burning Middle Eastern oil.

All this creates many megatons of greenhouse gas right down the chain to the methane-emitting landfill where the oft unneeded stuff commonly ends up. In their desperate search to restart consumption – including much of this kind of dysfunctional, nay suicidal, consumption – the G20 leaders seem to be trying to return us to the world as it was in 2007. But 2007 meant not just a systemic failure of collective responsibility in one of the world’s largest industries, it also meant record greenhouse-gas emissions. Both of these market failures pose threats enough to economic well-being and social cohesion. Together – let me exercise restraint – they add up to more than the sum of their parts.

America, Germany and others may now want prefects supervising the whizz-kid derivatives designers, but they don’t want to consider reducing exports, advocating – among other growth-at-all-costs measures – China boosting its domestic consumption to make markets for a reverse flow of trade. But that would entail the same auto-destructing carbon chain, distinct only in that it has coal of a different nationality at the start of it.

The financial crash is but one manifestation of the fact that capitalism, as we have run it for 15 years or more, is broken at the systemic level. It is entirely reasonable for demonstrators to demand deep system change. I know that growing numbers of people in business harbour this view too. It is time for us to speak out. Our concerns are not being addressed by the G20 governments, or the CBI, as things stand.

Why should society continue any longer to measure its economic health primarily in terms of the growth of GDP and equity-market value? GDP classes many patterns of ultimately destructive behaviour as assets. Let us adopt instead some of the alternative economic measurements that Joseph Stiglitz and other eminent economists will produce in their report later this month. We know already that they advocate indices factoring in social well-being, and taking account of the limits of nature on global and national balance sheets.

Equity markets are run by people who are generally incentivised not to think beyondthe next quarter’s results. Let us find ways tostop fund managers pushing for returns todayby mortgaging tomorrow, off their balancesheets. Let us redefine fiduciary responsibilityand good governance. Why should pension fund trustees be motivated to report shorttermvalue growth if that comes at theexpense of undermining the future, even to the extent of imperilingcivilisation by the time pension-fund owners come to retire?

As well as failure to question growth in any way, the G20Communiqué downplayed the green new deal that has begun tofeature of late in some leaders’ rhetoric. What is the point of stimuluspackages if they boost carbon that fuels greenhouse warming thatends up destroying more wealth than it creates? Society needs green jobs, and the low-carbon fruits thereof, not high-carboninfrastructure and enhanced risk of runaway greenhouse warming. 

The root-to-branch re-engineering of capitalism sought by disenfranchised businesspeople like me will entail lower incomes for many, but it will generate wealth worth having and proliferate a higher quality of life. We are in search of a voice, and it does not come from the G20, or the CBI and other business groups exhorting the old capitalism of limitless growth, however positive they may be about renewable energy. Business leaders seeking a new capitalism will need to create a new voice.

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