Simon Haskel on the importance of social values to a healthy economy
In spite of running budget deficits, cutting interest rates and expanding the money supply, the recovery from the financial crisis has been much slower than we would have liked or expected. So I wonder, are we looking in all the right places? Or are we looking too narrowly? Is the reason for our disappointing prospects not only economic but also social?
The government’s reaction to the Panama papers is that this type of activity is damaging the economy - and I agree. But so must the misbehavior by some of our leading companies: huge socially divisive salaries, banks misleading consumers. Trusted car brands have falsified test results. A big chain of chemists has been shown to be ripping off the NHS. Microsoft and Google are in trouble with the EU Commission. I could go on.
Another social concern about our economy is that it is unfair. We are all for innovation and technological change, but we have not convinced everybody that these benefits will be evenly shared. All it will do is add to inequality.
So what is to be done? Fortunately, there are some good examples and mounting evidence of what works. Firstly, get away from the pressure to deliver short term outcomes which has led to a decline in long term investment. This means a purpose beyond shareholder returns needs to be the end result. The advantages of reducing the complexity of financial intermediation and simplifying the investment chain are well rehearsed. So are the benefits of longer term horizons to asset owners and fund managers.
We also know that a strong focus on customer satisfaction, employee engagement, collaboration with the suppliers, and working with society have been part of the reason why some companies are successful and others are not. To my knowledge, these ideas have been around for 20 years.
Studies show that only 37% of the population trust business. So more than ever, our economy depends on consumers because it is a good way of helping people in work deal with the uncertainties of the changing world of work, due to artificial intelligence and robots. And that’s one way of dealing with the concerns of the public at the direction in which business is going.
It is time for economic policy not only to deal with economics, but also to bring together investors, executives and boards together with the government to make this social approach equally important. Economics alone won’t do the job. We have to persuade companies to raise their social game too.
Encouraging these values will also help business to deal with other social pressures. Climate change, sustainability, reacting to the national populism which is becoming a feature of our politic and the need to be a good corporate citizen. As I have said, little of this is new: it is just becoming a lot more relevant and its time has come. So if the government wants to reposition itself as a force for good, here is a chance to do so.
Lord Simon Haskel is a backbench Labour Peer. He tweets @simon_haskel
Published 28th April 2016