Big shift towards a new consensus

As the fallout from Brexit continues, there’s growing agreement about the causes but a lack of clarity about what comes next.

US President Theodore Roosevelt

A clear consensus is emerging around the underlying cause of the Brexit vote. It was less about the specifics of the EU or unique to the UK and more a reaction to wider trends, notably economic – open border globalisation, economic slowdown, growing inequality and mounting mistrust of most institutions including big business and now ‘experts’ too. My initial comment last month holds largely true.

John Lanchester, author of How to Speak Money, puts it well when he says “whole swathes of the UK have spent the last decades feeling that things are being taken away from them: their jobs, their sense that they are heard, their understanding of how the world worksand their place in it”. His full analysis in July’s London Review of Books is well worth sitting down to read. (Coincidentally, How to Speak Money belatedly made it on to my summer holiday reading list this year; written in 2014, it remains an insightful and humorous demolition of the ‘dismal science’ of economics and City group-think specifically.)

When even a Conservative prime minister says “we need to reform the economy to allow more people to share the country’s prosperity”, as Theresa May did in July, you know the game is up.

I say “even a conservative” not to make a party political point, but simply to note how far the consensus now applies. Indeed it is only comparatively recently that conservatism became synonymous with the proposition that state intervention is generally a bad thing and that it is generally better to leave market forces to work things out, however painful in the short term. That gained hegemony over the last thirty years as so-called Thatcher Reagan neo-liberalism.

Go back further, say to Roosevelt in the USA – that’s Theodore in 1901, see above, not the avowedly big government Franklin Delano in 1933 – and you find a Republican curbing the power of big business, breaking up monopolies, protecting consumers and arguing for progressive taxation on inherited wealth.

Today it remains to be seen if politicians now coming into office, whether in the UK, in the US in November, or in France and Germany next year, are serious about the sort of fundamental reforms that would reassure the 52% and get them back on-board. There may be a consensus about the symptoms, but not yet about the cure.

Meanwhile for individual companies it means asking – and answering – awkward questions most CSR reports frankly skirt around. What are our pay differentials between top and bottom, going well beyond the mean and median gender pay gap which will have to be reported by law in 2018? Who gets what share of the value we create, between employees, suppliers, financiers, owners and governments – how is that changing over time and what proportions are we aiming for in future? (A 20 year back-analysis would be most revealing about big shifts by many companies, favouring capital over others.) And critically and more complex, who gets the money up and down our extended value chain? A start is to depict that as shares of the final sale price of a typical product right back to raw materials.

Some companies have put a toe in the water with this sort of analysis. South African Breweries (as was) published one of the first cash value added charts, back in 1999 – I know as I did it for them. Diageo once illustrated how the cost of a bottle of Johnnie Walker splits out, showing rather a lot going to governments, as it happens. Nike did the same, showing how much the stitchers of their shoes actually get – rather a little.

So there is precedent. But generally the inconvenient truths here are too painful. That was the case with country-by-country tax reporting, which many companies vigorously resisted, only to have governments impose rules. So my advice is – seize the initiative and get ahead of the curve. There’s a big shift coming.

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