(This concludes the Ten Principles for a New Economy series, based upon the New Economy Network publication Principles for a New Economy“.  Part one and part two looked at the Ten Principles in detail; this post looks at four things a new economy should NOT be.)

The first two posts in this series looked at Ten Principles for a New Economy and how these could fit into today’s business environment.  This last post looks at four things a new economy should not be.

The Ten Principles document states that:

“the purpose of an economic system is to organize human activities in ways that support healthy and resilient communities and ecosystems for both present and future generations”

It then goes on to describe how current global, regional, national and global economies have failed.  In today’s language the economy is largely made up of for-profit businesses, so if there is any fault to be found in the economy then it also points to faults within how businesses conduct themselves.

These failures show that businesses, along with the wider economy, are currently:

Unsustainable

“They over consume and degrade the resources upon which their long term prosperity depends.”

Over-consumption is not just a question of wastefulness: it’s also a question of simply trying to grab as much as possible today without any thought of what is needed for tomorrow in terms of environmental, mineral and human resources.

The biggest trouble is that it’s impossible to second guess what long term prosperity will need. Sustainability by its very definition means that a precautionary principle needs to be adopted: if its not necessary, then don’t use it.

Sadly, sustainability is too often seen as efforts to offset emissions or reduce outbound waste.  Rarely is it seen as as a need to reduce consumption, both in terms of business inputs and the sale of products or services to the wider business and consumer communities.

Until these fundamental points are tackled on an economic scale business, as a whole, will remain unsustainable.

Unfair

“They multiply financial advantages to those already advantaged at the expense of those most in need.”

The biggest flaw in capitalism is that it relies upon capital investment.  Those who have the capital to invest can take the risks and reap the rewards, those who don’t, can’t.  As a one off scenario this seems fair enough, but when it’s multiplied over decades or generations you realise that those with financial assets are more likely to remain wealthy, while those without are more likely to remain poor.

While this is not a class system as such it is still based on income and wealth, not merit and ability; this is profoundly unfair.

This is why I remain profoundly cynical about Bottom of the Pyramid marketing.  It’s a nice idea to alleviate the absolute poverty rampant throughout the world, but it does so by reinforcing the unfairness in the system which condemned these people to destitution in the first place.

Unstable

“They lack resilience in a time of growing volatility and rapid social, political, technological, and ecological change”

The secret to resilience is that there should never be a single point of failure in a system.  In economic terms this means you should not have institutions which are too big to fail and an economy dominated by one sector.  Businesses need to support the economy by ensuring they don’t get so big that they destabilise the local, national and even international economies.

The standard reply to that would be “why can’t businesses get as large as regulations allow?”  The answer is because that could well be irresponsible and I always thought CSR was about responsibility, not regulatory compliance.

Undemocratic

“The operate with inadequate democratic controls and accountability on the part of their most powerful organizations – corporations, financial institutions and governments”

The whole way Greece has unraveled demonstrates how profoundly undemocratic the institutions which make up an economy have become, including the government.  The latest and most poignant example is the suicide of Dimitris Christoulas, a pensioner who saved privately all his working life only to find on retirement he had nothing to live on.

There is now deep mistrust of financial markets and governments running across the world from the highly paid chief executive down.  The political ramifications of this are already being felt: the Pirate Party, which calls for greater government transparency and participation and the reform of most intellectual property rights, has spread around the world like wildfire.  International affiliates are officially registered parties in over 20 countries, including the US, Russia and the UK , and it’s now the third largest political party in Germany and has won nearly 200 state and city councillor seats.

Business itself is only slowly reforming.  Companies tend to be dictatorial in nature, with managers instructing employees in what they should be do: ownership is defined solely by financial investment and voting is generally in block form and uncritical.

So to the future….

Social accountability has to become embedded within both business and the economy. SRI and CSR should be watchwords to encourage the major players in the economy to look at how they can best create sustainable, inclusive, stable and holistic organisations which don’t pursue profit to the detriment of everything or anything else.

However the trouble is business, like politics, is inherently conservative and dislikes change when it’s not in its own interest.  So it is that we have the slow baby-step by baby-step transformation which is so painfully slow it can almost make you cry.

Against this you have movements such as Anonymous and the Pirate Party which are taking direct action to reform the economic and political institutions they hold in contempt.  Both of these movements have attracted widespread public support around the world and cannot be considered fringe groups by any means.

This is why proposals such as these principles are so vitally important.  They move the debate away from the old, stale and largely defunct capitalist-socialist arguments of the last century and look to how a more sustainable, stable and inclusive economy can be built.

For businesses raised and grown in a capitalist environment this can be a challenging vision, but if they don’t reform soon they may find the pace of change is pushed along even faster.

^{Picture Credit: Rosie from the New Economy Network website.}

• Ten Principles for a New Economy 2/3
• Ten Principles for a New Economy 1/3

 Corporate Eye

(This post follows on from Ten Principles for a New Economy 1/3 and covers the second 5 principles in the New Economy Network’s Principles for a New Economy (PDF) )

Taming Finance

“All monetary systems and financial institutions shall be regulated as essential public utilities for the benefit of society as a whole, and for nurturing the real economy.”

The two key phrases here are “essential public utilities” and “real economy”.

One core reason there was a financial meltdown in 2008 was because the real economy (the actual production of goods and services) had become secondary in financiers’ and politicians’ minds to the buying and selling of shares, options and positions on the financial markets.

This is like expecting a car to drive as fast as possible irrespective of the engine put into it.

Another core reason, and arguably a much more important one, is that finance remained essentially in the hands of a few people even though it’s almost impossible to survive in today’s capitalist society without getting into debt.  It is, in effect, a utility required by society in order to function correctly, and so should be treated as one.

This is a good moment to pause and reflect on why these Ten Principles are actually “good stuff” and worth taking on board.  They’re not anti-capitalist or pro-socialist … there’s no mention in there of nationalising banks, and there’s no concept that capital investment wil always be for society’s good.

Like sustainability, these Ten Principles push businessmen and economists beyond the left/right wealth and class arguments of the past century and look instead at how politics and finance can be shaped in a way which reflects today’s multi/social media society .. not the society of our great-grandparents who barely knew what a letter or an automobile was.

Enhancing Fairness

“Significant economic inequality shall be understood to be inherently and profoundly antihectical* to achieving human and ecological well-being, and shall be rapidly reduced.”

One of the deep flaws of the market economy is that it relies upon economic inequality.  This is why we’ve had cheap goods from China for so long and where there is now a rush to market at the “Bottom of the Pyramid”.

There will always be social and economic inequality .. that’s the nature of the beast.  However whether that inequality translates to unfairness is a different matter.  There are plenty of examples around, from a privately educated child who’s expected to write 10 pages on the solar system vs a publicly educated one who’s expected to write one sheet of A4 on one planet, through to the withdrawal of the Colombian candidate from the race to be President of the IMF because he felt the contest had become politicised.

Equality has to mean equality of opportunity, not equality of income, wealth or social standing.  It is how the economy is run and regulated which allows people to make their way according to their desires and abilities, not their background, race, gender or class.  Today financial return is allowed to trump these equitable considerations,  and that makes the economy profoundly unfair.

Providing Fulfilling Livelihoods

“Individuals shall be assured of substantial opportunities for decent paid work, employee ownership, and the right to organize in the workplace, and shall be accorded proper recognition for work performed outside the formal wage economy owing to its fundamental role in enriching community and family well-being.”

In other words: no more slaves, no more servants.

Many people’s quality of life has deteriorated significantly over the past 50 years or so.  Gone is the suburban commute of Reggie Perrin (or even the consummate breakdown) and in are long working hours, evening and weekend toil and the sacrifice of personal fulfillment over professional advancement.

Employees at all levels must have a significant voice in how the business is run, have opportunities made available to them as they arise and should be able to count their professional training as part of their working day.  This is the only way in which a proper work-life balance can be achieved.

Fostering New Values

“Economic values shall be redirected, by all fair and reasonable means, away from excessive materialism and shifted towards values that prioritize flourishing communities, individual happiness, and a healthy and resilient world based on lower material flows”

The economy, through consumerism and capitalism, has become an engine through which luxury is sold to those who can least afford it, no matter where on the income scale those consumers sit.  This emphasis on luxury means that people are encouraged to get into debt in order to gain more material possessions.

In the meantime pubs and corner shops are closing, effective working hours are increasing and social media is exploding. There is no halcyon of yesteryear which we should try and restore, but we need to look very carefully at how the need for stuff is driving us apart and causing us misery.

The values which are being inculcated into our communities are driving us apart, reducing our ability to meet each other face to face and driving brand-orientated wedges between sectors of society who could otherwise get on with one another.

A new set of values are needed which will put the community at the forefront and enable people of disparate background and wealth to view one another as equals.  These are the new values of the new economy.

Redefining Globalization

“International economic relations shall rest upon the same principles enumerated above that apply to economic activities within nations, such that economic justice also becomes embedded in such relations.”

Globalisation, like capitalism, is a fact of life today.  Get over it.

However globalisation, like capitalism, has to date been driven by the near medieval need to make profit and dominate communities.  Thanks to the liberal policies of yesteryear this trend has also gone hand in hand with a desire to educate and enlighten the local population, meaning that people around the world now realise they have been taken advantage of, used and abused in order to make a few people at the top even more wealthy.

I’m not going to say “this has to stop”.  To do so would be like condemning a farmer for sowing his crops because he then has a monopoly on selling his farm’s produce.  Out of his own effort he has produced the basic nutrition upon which we all rely.  Of course he has a right to retain power and control over his own farm, but he would rightly be condemned for withholding produce on the grounds of who could pay for it and would be doubly condemned for making healthy sustenance a luxury item.

The simile extends quite happily into the economic environment.  Any part of the economy should address the public need and provide tangible benefit to the community addressed.  This is where globalisation has gone wrong.  Big brands, from sports goods manufacturers to peddlers in nicotine and financial advisors, see nothing more in globalisation than an opportunity to sell their product or service for a centralised profit.

It may be their only community involvement is that they’ve brought their brand into a new community which will better that community because, um, they’re now buying that brand.  Or, perhaps, a vanishingly small proportion of the profit made from selling in that community will be reinvested in it. Wonderful!

Globalisation needs to be redefined, and with it the very premise of capitalism.  The use of capital to support and invest in businesses should be primarily to build a a more equitable and resilient economy for the good of all concerned. This is the change of values which is needed, and globalisation should see it propagated the world over.

*antihectical is a remarkably obscure word, even for an essay on economic principles.  I’ll leave to you to look up for yourselves, but suffice to say its meaning is self evident by its context

(This is part 2 of Ten Principles for a New Economy.  Part one can be read here; part three will look at the four things a new economy should NOT do)

^{Picture Credit: Meeting image from the New Economy Network website}

• Ten Principles for a New Economy 1/3
• Ten Principles for a New Economy 3/3

 Corporate Eye

One of the wonderful things about the new networked globalised economy is how you suddenly discover the links which exist between one business and another.  This can have both productive and detrimental effects on a business, depending upon your point of view.

For example, take Apple’s highly publicised involvement with Foxconn.  The good side is that Foxconn allows Apple (and other tech manufacturers) to access the cheap Chinese technology manufacturing market.  The bad side is that there has been a spate of suicides by Foxconn workers which, whether relevant or not, will stick to Apple as a negative influence upon their brand.

Another “wonderful thing” is finding out the different aspects of a corporation when you’ve only known one. Take, for example, the New Economy Network (NEN).

NEN was founded by the Tellus Institute in 2010.  It comes from the same stable as the Global Reporting Institute (GRI), which is now a de facto sustainability reporting tool amongst businesses.

However, whilst many companies may support the GRI reporting regime I suspect few would put their wholehearted weight behind NEN’s Principles for a New Economy (PDF).  Why?  Because, like any Tellus Institute initiative they cut against the establishment’s grain.  To understand this more fully, let’s look at the principles in more detail:

Measuring Progress

“Economic progress shall be measured in terms of the well-being of all human societies, other living species, and ecosystems”.

Governments now realise that GDP alone doesn’t capture people’s productivity and ambitions.  This is because you cannot measure either the nation’s economy or people’s happiness in terms of money spent.  Yes, to manage you have to be able to measure, but you also have to accept that it’s impossible to measure the commercial benefit gained by someone drying their laundry in the sun.

So the first principle is that commerce is not the answer, just one of the solutions which can be deployed.  Money should not empirically equal power any more than guns should.

Respecting Natural Limits

“The economy shall draw from, and inject into, ecosystems only what is compatible with maintaining a healthy and resilient natural world over the long run.”

This is the fundamental point of sustainability, and as such it should stand as an over-arching principle to guide the economy.  In order to dig ourselves out of the financial hole which engulfed the world in 2008 we’ve created debts for the next generation — that’s breaching natural limits.

Similarly, the green energy revolution simply replaces carbon intensive methods with rare earth minerals.  This is like deciding to stop eating apples and start eating pears .. a change in the product consumed may have a short term benefit, but it has little or no impact on longer term prospects.

We are, in short, consuming too much.  “STOP CONSUMING!” should be the core message of any form of sustainability.

Democratizing the Economy

“All institutions that manage, regulate and execute economic activity, including private corporations, shall be democratically controlled by all affected stakeholders in order to serve long-term societal goals”.

Consumption (consumerism) is based upon your ability to pay, not the cost to produce.  A correspondent of mine recently wondered why a chocolate Easter egg wrapped in foil should cost more than the same egg wrapped in the same foil and packaged in a cardboard box.

It’s easy to demonise business in this context but the reality is that business only takes advantage of the regulatory framework they’re presented with. This is a fine line these days, when consumers happily equate business responsibility with regulatory oversight.

In short, business and government have to work together to ensure democracy reigns supreme and make sure  that ” long-term societal goals” are more important than the short term profit based motive.

Ensuring Economic Progress

“Governments, on their own and in conjunction with private markets, shall work to ensure prosperous and resilient economic outcomes by making adequate investments in health, education, nutrition, shelter, physical infrastructure, and technology”

“Progress” and “growth” are pretty nebulous concepts.  However, ensuring peoples’ health, education and nutrition is fundamental to any functioning economy.  Their complete absence is what is commonly referred to as absolute poverty.

The fundamental question is therefore whether a business’ right to make a profit should be more important than the peoples’ right to have the best possible health, education and nutrition provided to them.  In this context, “progress” takes on a perspective which has nothing to do with financial gain.

At the end of the day the economy, like any form of investment, is a long term game.  It needs to be prosperous but it also needs to be resilient.  Financial prosperity has been trampled over social resilience in the past few decades and it’s high time the scales were rebalanced  in favour of overall economic progress.

Localizing Control

“Economic policy shall favor subsidiarity, i.e. the localization of economic decision-making and control to the greatest extent possible consistent with democracy, equity, efficiency and resilience”

One of the greatest ironies of politics is that both left and right wing governments can be dictatorial and oppressive.  Both can, and do, advocate greater centralisation and greater localisation in the same breath.  It’s enough to send you Monster Raving Loony.

More seriously, there is a growing realisation that localism has been trampled underfoot over the past 100 years or so.  As populations have exploded so has the desire to centralise political and economic control, creating monolithic and homogenised institutions which have become “too big to fail”: from the office of Prime Minister/President down to the rapacious corporation which seeks only to “consume” its competitors.

This needs to change if we truly believe in an articulated society and economy which is *always* in tune with the needs and views of the communities.

(Part 2 will deal with the second five principles for a New Economy, Part 3 with the four things a New Economy should not be).

^{Picture Credit: Meeting Image B from New Economy Network website.}

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• Ten Principles for a New Economy 3/3
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 Corporate Eye

One of my great interests is how western capitalism (as focused through broad based consumerism) impacts those cultures and economies which don’t necessarily share such values.

This inevitably ends up as being a discussion about human and indigenous rights.  How the Bushmen are pushed off their mineral rich land, for instance, or how Apple’s i- revolution appears to have been underpinned by regular suicides.

I firmly believe that if western consumers knew of such tragedies they would think again about buying the goods they take for granted.  Who wants to know that their mobile phone has perpetuated civil war in the Democratic Republic of Congo, or that the cheap fashion they just bought may have just condemned another child to starvation?

There are many NGOs out there who seek to remedy this deplorable situation, and one of those who have my profound respect is Impactt.

Impactt are currently celebrating 15 years since their foundation.  As part of this they’ve released a report, entitled “Finding the Sweet Spot: Smarter Ethical Trade That Delivers More For All”, and will be hosting their first ever conference on the same subject in May.

Putting words into action

However I’m left feeling rather hollow after reading Impactt’s anniversary report. Not because it’s a bad report … it’s an *excellent* report and I recommend it to anyone capable of clicking on a hyperlink.

My feeling of hollowness comes from realising that Impactt’s golden rules, while aimed at developing world supply chains, can be equally and just as relevantly applied to any UK or western business.

Gareth Kane, Director of business sustainability consultancy Terra Infirma, recently blogged Seven pathetic excuses for doing nothing on corporate responsibility.  He’s right, down to a T, on every single one; not just on the environmental side but on the social and supply chain side as well.

No business is too small to be sustainable, and no business (even a sole trader!) is too small to consider its supply chain.  These rules should be adopted and promoted as best practice by all businesses across their supply chain.

Three golden rules of employee engagement

So these are Impactt’s rules, developed for international supply chains but just as relevant when every businessman inks a new contract.  When Impactt refer to “workers” they mean employees, subcontractors and freelancers.

1) Speak to workers as equals. Ultimately this is a matter of respect.

Much as yesterday’s Wild West coach driver was in charge of a team of horses, so today’s business manager relies upon harnessing the skills of others which he or she can never fully understand or appreciate.  Seniority in a company is all about what an investment driven business values, not about the empirical skills a person possesses or, even, the wage a person earns.

Business isn’t about power: get over the desire to dominate and instead learn to collaborate.  Good businessmen should always value their workers as equals, from the tea-boy up, and not treat them as animals to be whipped whenever results aren’t as expected.

2) Be curious: what workers have to say can be very important.

There are some wonderful cost savings stories out there. One of the best known is how the removal of a single olive from American Airline’s salads in the 1980s led to a saving of $40,000 per year.  Another is the Swan Vestas tale of how a factory worker’s idea of removing the striking strip from one side of the matchbox saved the company millions in the 1970s.

So workers can also have great business ideas around exploiting niches and bringing better products forward to the customer.  Only the tip of the iceberg is usually seen: those who have the confidence to set themselves up as entrepreneurs.

Countless other opportunities are lost to businesses because they’re not curious about what their workers think.  None of these opportunities can ever be fully leveraged unless a business treats those workers with respect, putting intellectual and technical insight on a par with financial and investment concerns.

It is this “employee liberalism” upon which the dominance of the likes of Microsoft and Google has been based.  It’s no accident that as the liberalism is stifled into still management structures, so the innovation of the company also starts to fail.

3) Keep your questions open.  Don’t influence your employees.

It’s a really fundamental part of engaging anyone in a formal environment but you’d be surprised how many managers don’t do it.  This is because business management is a form of politics through which you seek other people’s opinions and take on board those you agree with and dismiss those you don’t.  Promotions and sackings often hinge on such things.

But if you really want to engage, treat your workers as equals and be genuinely curious about their opinions, what then?

It’s easy.  Don’t try and get workers to reflect your priorities.  Instead, get to know their priorities and reflect them in management discussions.  Be open to change and get your board to understand that many of the best ideas grow from the grassroots up.

I’m not anti capitalist, but…..

In all honesty, there’s very little in these three golden rules which isn’t already part of accepted business practice.  But only if you put the word “pretend” and the front of each statement.  “Pretend to speak to workers as equals”; “pretend to be curious about what workers think”; “pretend to be open in your acceptance of workers’ opinions”.

How many businesses really speak to their employees or suppliers as equals?  How many employees or suppliers feel empowered to be able to talk to their employer or client in honest and straightforward terms?

This at the heart of what CSR is attempting to tackle.  CSR is not about enforcing blanket wide philanthropy upon businesses: it’s about a promoting a wholesale change in the imperative behind commercial activity away from maximised profit for shareholders towards equitable benefit for all stakeholders.

In other words capitalism is great, but it must realise that pursuing return on investment can have a detrimental cost on individuals’ freedom of expression, including their engagement with their client or employer.  The moment this is embraced by businesses and investors, the better it will be for business.

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 Corporate Eye

Often the greatest advances can be made by a single individual or by micro organisations who, while not necessarily radical, grasp the essence of an issue where larger corporations faff with trying to meet the needs of their share- and stake- holders.

This is why I spend a lot of my time looking at minor players in the CSR world.  Sometimes such SMEs provide radical thinking, but more often than not they provide clear thinking, unrestrained by the social, political or economic factors which so often constrain larger corporations.

One such organisation is the Ibero-American Forum on Social Responsibility, hosted and organised by Perla Puterman.  A hint of what this collective is about can be seen straightaway in the group’s name.  It doesn’t limit itself to just Latin America  nor does it definitively align itself with North, Central or South American countries.

Instead it looks to build bridges between Spanish and Portuguese speaking countries, whether they are in the Americas or the Iberian peninsula.  When you add to the mix the rise of countries like Brazil and Venezuela in the global economy and the growing need for the improvement in responsible trading relations between European and South America, then you start to see the sense of an Ibero-American Forum.

Three core items for responsible media engagement

As well as hosting #RSEChat events on twitter, Perla also blogs on items of interest to the Ibero-American community.  Recently, one of these concerned how the media can take steps to make their reporting of business activities more “responsible”.

This should be seen within the context of supply chains, of which PR functions and media commentators are part and parcel.  So, seen from a business’ point of view three of the core values which Perla recommends are:

1. Ensure your news is disseminated in a fair and balanced way. 

   A recent change in UK law has meant brands can quote their competitors’ prices in their advertisements.  This is fair and balanced and should be encouraged.  So when you’re talking to a news organisation recognise the wider business world beyond the “stovepipe” of your individual business, and above all give details of your competitors’ products and services

2. Ensure the media organisation has procedures and controls in place. 

   No company wants to find itself misrepresented or to have given implicit support to an editor or publication which doesn’t support its core values.  Perla outlines some fundamental points which any PR worth their salt should take on board:

   • look for the Code of Conduct, which should define how sources are collated and privacy preserved
   • request the Procedures Manual, which defines how a conversation with sources will be handled according to the Code of Conduct
   • investigate how ethical standards are implemented by the media organisation, in particular how it facilitates comment and reaction to a published piece in a fair and equitable way.
3. How does the publication’s financing influence your own company? 

   It may be more than likely that one or more financial institutions have a stake in both your and the media company.  This should be recognised.  Furthermore, businesses often have direct stakes in media companies, or vice versa.

   In today’s shareholder environment, investment is deemed to be ownership and there is an obvious conflict of interest when a media company is an investor in a company it has regular communication from, even through a third party (or vice versa).  In order to be “responsible” and “transparent” your company should be willing to investigate and publish the financial links it has with any publication which carries its news or opinion.

There are many questions in CSR media engagement and there are few who have the right answers.  It’s a developing field which itself steers the CSR agenda as much as it is steered by it.

However this article should give food for thought for media professionals and, I hope, show that they have a responsibility just like any other procurement centre in a business.

Picture Credit: Engagement 1.0 by Mark Berry Reid under CC Attribution License.

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