Capitalism is not an end in its own right

A week ago I wrote, "the end must always be achieved by good means". I was commenting on the fact, "increasingly the tech giants find themselves in the media spotlight for the wrong reasons", due to their bad behaviour. This article, and the book it reports, on explain how bad ideas are the root causes, and good ideas are the solutions.

Most of the good ideas are not new. They have been tried and tested, and they work. They represent a "fairer form of capitalism". A form that offers "fairness for all". The solutions recognise that "Capitalism is not an end in its own right, it needs to be part of a value system". And, "Smart societies cannot be created without fairness, equality and enfranchisement, and businesses have a crucial role to play".

These statements are found in Fairness For All, a book by Mark Price, the former Managing Director of Waitrose and Deputy Chairman of the John Lewis Partnership. He is also the Conservative government Minister of State for Trade and Investment and a member of the House of Lords.

Sympathy with the causes of the protesters that were part of the Occupy Movement camping outside St Paul’s Cathedral in London for five months from October 2011 was his inspiration for writing the book. It is an urgent call for a fairer form of capitalism. Price believes "more than ever capitalism needs a different approach; a kinder, more thoughtful, tolerant, patient, engaging and inclusive approach”, and that “It needs to embrace the many, not the few, if it is going to survive as the world’s prevalent economic force", and, "It needs to weigh up carefully its long-term impacts on future generations”.

He conveys the urgency of the need for change by drawing parallels between the Great Depression of the 1930’s and the Great Recession of 2007/8. The former gave rise to discontent and to the extremes of Fascism, Marxism and Communism. The latter has given rise to today’s discontent expressed as ‘populism’ and political polarisation to the right and left. Price also thinks it has a lot to do with the outcome of the Brexit vote.

He notes that it was in the shadow of the Great depression and its consequences that John Spedan Lewis initiated a more enlightened approach to business, “created wholly and solely to make the world a bit happier and a bit more decent”. In writing the book I think Price hopes to spark a similarly enlightened business re-think as the answer to today's problems. And he offers the lessons of the John Lewis Partnership as inspiration.

Whilst Price advocates the benefit of the John Lewis Partnership model of shared ownership, he also recognises few have copied it despite its success. He recognises it is not for everyone. But he also observes an increasing number of businesses are adopting elements of it. The approach is simple, but not easy Price tells us, and adds, it requires virtually no investment, will save money in the long-term, and ensure companies perform better. But it requires a new way of thinking.

Given the obvious failure of the neoclassical economic ideas such as maximising shareholder value, there is growing recognition of the need for a focus on “shared value” or “stakeholder value”. And this was the declared aim of Lewis’s model, created almost a century ago. Lewis called it “Partnership for all” and “Fairer Shares”. It meant “to balance and promote the interests of all stakeholders – employees, customers and suppliers – both to secure its long-term sustainability and for the benefit of society,” says Price.

Whilst management guru Peter Drucker suggested the purpose of a firm’s existence was to “earn and keep a customer”, Spedan’s view was that the happiness and satisfaction of employees must be the first concern. Price dedicates a chapter to explain why “employees are the most important stakeholders, the drivers of it all”. He explains how employee happiness leads to increased engagement and greater productivity, which is essential to growing prosperity.

Price also says, “If employee engagement has been proven to improve productivity, and it has, we owe it to ourselves to explore the option seriously”. And the chapter does just that, with evidence to back-up every claim. One sentence summarises his views, “Trust and shared responsibility are the keys to success”, he says.

Then, of Zero-hour contracts, subcontracting, temporary contracts, part-time arrangements and non-standard contracts such as those offered by UBER he asks, “How can these arrangements lead to workers feeling engaged and involved in a company’s success?” And he adds, “And consider for a moment the impact on society as more people feel less connected and engaged with their employer and its role in their community”.

His comments are clearly highly topical and quite incendiary in the current political climate. But he is right to suggest, “Perhaps we should reflect again on what is wrong with the notion of a ‘job for life’?” He asks readers to consider, “Would a commitment by employers to retrain and reskill lead to a more confident workforce and society?”

The answer is obvious. In a world in which every employee feels insecure, including the CEO whose average tenure in a listed firm is again below 5years, we have a growing “every man for himself” culture populated by ‘mercenaries’. Few employees buy the rhetoric employers offer; that their employees are their “most valuable assets”. Too frequently the evidence tells them employers view them only as 'human resource' to be used like other assets, and disposed of when of no further use.

It is reassuring to know that neither Drucker nor Lewis or Price, believe in “probably the dumbest idea in the world”, as Jack Welch eventually called the idea of 'maximising shareholder value'. But if the primary concern of business is not for shareholders, should it be for customers as Druker suggested, or Employees as Lewis and Price suggest? 

When trying to answer this question it is easy to get confused. But in my opinion, the answer is not very relevant or helpful. Business cannot survive without them all. And others must be added to the list. Business must also fulfil its social contract obligations to society, for example. It is also likely to have certain suppliers on whom it depends.

Rather than argue about which group has primacy, I suggest it would be better to focus on the primacy of value creation as a purpose; and on achieving it through collaborative relationships and the fair sharing of rewards. A balanced approach will boost engagement by all, improve performance and productivity by all, and lead to greater prosperity for all. And, Anything less than the full engagement of all stakeholders, with a focus on value creation, will deliver suboptimal outcomes for all.

This is the core belief upon which Valueism is based. Valueism is “business and capitalism focused on value creation”. Today our potential levels of prosperity is unrealised. Because of the false assumptions foisted on us in the form of flawed economic theories about efficient markets, competition, rational decision-making and self-interested decision making. 

The ideas put forward by Price, and those that I advocate, are very different to those taught in business schools. What gets taught is usually based on ideas that have been proven wrong, and spectacularly so. I recently made these arguments in "A transformation in management theory and practice is needed”. So, I was pleased to read that Price came to similar conclusions based on his interaction with business schools.

Fairness For All is full of Price's ideas, all of which should be applauded and embraced. And I hope the book meets the objectives of its author. I would just go further and suggest that efforts to engage all stakeholders fully will do even more.

In concluding let me say, the last chapters also offer interesting thoughts on topics such as diversity, and I encourage you to read the whole book and be inspired.