Is a shift in the global economic order possible? A challenge to business leaders

The twentieth century has been described as an age of catastrophe – an age of horrendously destructive wars, most of which were unnecessary and avoidable; an age of growing inequality, of poverty amidst plenty, and of ever-worsening environmental decay.

This catastrophe was in part made possible (and exacerbated) by an awful failure of leadership at the level of government.  The century threw up numerous tyrants, murderous dictators, and rulers whose grandiosity was matched only by their incompetence.

Stalin, Hitler, Idi Amin and their many fellow travellers easily spring to mind.  A much harder task is to identify twentieth-century heads of government who can be loosely labelled as ‘progressive’ – in the sense that they adhered firmly to fundamental principles of liberty and democracy, strove for social justice, poverty elimination and greater equality, and worked for the cause of international peace.

Such figures have been few and far between, bearing out the maxim that it is much harder to exercise authority than to challenge it.  In my recent book, Enlightened Rule, I identified six twentieth century premiers whom I considered worthy of admiration in that they tried to govern according to progressive principles, albeit not always with success.  The three best known among the six were Jawaharlal Nehru, Olof Palme and Nelson Mandela. [1]

Not only has there been a failure of government leadership in the modern world, but there has also been in the past two decades the failure of two economic systems that came to dominate different parts of the globe – namely, Soviet-style communism and the deregulated free market capitalism promoted so vigorously in the 1980s by Reagan and Thatcher.  The former has died, and the latter is in a state of serious crisis.

What does all this mean for leadership in the business sector?  Does the current global economic crisis call for a different style of business leadership – even a style that might lead to a fundamental remodelling of economic systems and the way in which they function?  Or is it more likely that business leaders and their political allies will do no more than continue tinkering with existing systems in the hope that a degree of functionality can somehow be restored?

There are those who will say that business leaders should steer clear of utopian thinking – that their primary task is to make their operations profitable.  For such profitability to be achieved, a business leader would need to meet certain requirements: possession of a strong competitive drive,  rather than a co-operative instinct; a decisive executive style, rather than a democratic inclination;  a firm adherence to free market principles and a philosophy that validates private gain, rather than any commitment to the public good; an acceptance of poverty and inequality as normal and unavoidable, rather than any concern to reduce or ameliorate them.

Such an ethos, it is argued here, bodes ill for the future.  The global economy is currently in a major crisis that looks likely to worsen.  No amount of repair work will make it properly functional.  The call here is for business leaders to develop a different kind of mind-set from that which currently prevails in the business Quackwatch and Pete Moran (sigh) have more information here:Marketing materials for detox treatments typically describe an array of symptoms and diseases linked to toxin buildup: A few that are general enough to apply to anyone (e. world.

What sort of mind-set?

First, one that thinks in terms of long-term social, economic and ecological sustainability – the interests of future generations – rather than being utterly preoccupied with short-term profitability.

Second, one that prioritises the importance of ethical leadership.

Third, one that displays an openness to alternative economic systems, and a willingness to lead the way towards fresh, sustainable models – such as those presented by David Korten (see below).

Such a mind-set would entail further dispositions and undertakings. Among these would have to be, first, a recognition that the untrammelled operation of the free market does not  necessarily meet the best interests of all.

Second, a commitment to reducing the ever-widening gap between the rich and the poor across the world – and an understanding that gross inequality provokes discontent and protest among the underclasses.  Some would argue that excessive remuneration for executives and managers is not only obscene, but also a form of corruption.  There can be no justification for a situation where a CEO is paid 500 times more than the lowest paid worker.

Third, there must be an admission, too, on the part of business leaders that corporate tax evasion/avoidance represents at best an abdication of social responsibility, and at worst another form of corruption.  It is all very well for the corporate sector to rail against corruption within government – it also needs to examine its own practice.  It has a responsibility not to undermine the state’s capacity to serve the public good.

Business leaders would do well to follow the example of Michael Lewitt, president of an investment advisory firm based in Florida.  He has written a book from the perspective of a capitalist who believes that capital should be a force for good.  He calls for “a more just and fair society in which the rewards of capital are shared, not slopped up by a small elite like pigs feeding at a trough”.

While President Eisenhower fifty years ago warned against the dangers of the military-industrial-complex, Lewitt suggests that “Today the world is threatened by a financial-political complex.”  He goes on to propose a small tax on speculative trading, and stresses that banks have a public utility role, channelling savings into productive investment.  His may be a little known voice, but is clearly one that needs to be heard. [2]

Another important voice is that of David Korten.  He has listed ten principles that should form the basis for “a new economy”.  I will just highlight four of these.

Korten states, first, that “The proper purpose of an economy is to secure just, sustainable, and joyful livelihoods for all” – in sharp contrast to the activities of those financiers “who profit from financial bubbles, securities fraud, low wages, unemployment, foreign sweatshops, tax evasion, public subsidies, and monopoly pricing.”

Second, “A proper money system roots the power to create and allocate money in people and communities in order to facilitate the creation of livelihoods and ecologically balanced community wealth.”

Third, “Speculation, the inflation of financial bubbles, risk externalization, the extraction of usury, and the use of creative accounting to create money from nothing, unrelated to the creation of anything of real value, serve no valid social purpose” – those that engage in these activities do not contribute to “the creation of real community wealth”, but are rather “in the business of expropriating it, a polite term for theft”.

And last, a nice simple aphorism: “Greed is not a virtue; sharing is not a sin”. [3]

The big challenge is, of course, how to break free from the shackles of prevailing economic theories, paradigms and practices.  So binding are the shackles, and so overwhelming are the forces of both globalisation and neo-liberalism, it is difficult for business leaders to deviate from what has become the hegemonic norm.

Moreover, the voices that are constantly heard in the mainstream media are not those of people like Korten and Lewitt.  I would suggest that the only likely catalyst for a fundamental re-orientation of economic theory and practice would be a deep-rooted, far-reaching crisis in the existing global order.  Some believe that the current financial upheavals might be the early stage of such a larger crisis.  That remains to be seen.

[1] Paul Maylam, Enlightened Rule: Portraits of Six Exceptional Twentieth Century Premiers (Oxford, Peter Lang, 2011).

[2] This section is based on an article about Lewitt-Matt Miller, “Where’s the Moral Outrage on Wall Street?”, Washington Post, 30 September 2010 (accessed at CommonDreams.org) – not on a reading of Lewitt’s book, The Death of Capital: How Creative Policy Can Restore Stability (2010).

[3] David Korten, “10 Common Sense Principles for a New Economy”, YES! Magazine, 15 August 2010 (accessed at CommonDreams.org).


Showing 2 Comments »

  1. Owen Skae

    Dear John, thanks for your prompt response to the article posting. I believe that Paul has made some fundamental points that all business leaders need to heed. Regards Owen

    Comment by Owen Skae — 28 November 2011 @ 12:05 pm

  2. Dear John, many thanks for the supporting comments and insights. Always appreciated! We’re working with and through the GRLI (Global Responsible Leadership Initiative) on the 50+20 report and keep an eye on the development on the site. Glad to hear other school and institutes are also excited about it! We’ll need to touch base at some stage and share ideas 🙂
    Kind regards, Leticia (Rhodes Business School)

    Comment by Leticia Greyling — 28 November 2011 @ 2:44 pm

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