Business and Society in Bed Together (Shock! Horror!)
I’ve read the New Statesman from cover to cover every week for decades. The only exception is their supplements; mostly they are not worth the effort and serve to publish dry-as-dust material that no-one would pay for. Last week’s supplement, about business and society, was an exception and I went out of my way to read it. “Should Business Play a Role in Addressing Poverty in the UK?” can be found in the 23 – 29 October edition or you can download the pdf by clicking on the link.
The supplement is based on a report, supported by the Webb Memorial Trust, about the potential role of business in reducing UK poverty.
Just like most of these supplements, this makes sober reading and the very first sentence does not bode well. “Business and society are often portrayed as being unlikely bedfellows.”
What does this say about our society? How have we found ourselves in a place where the purpose of business is not seen as the benefit of society? The only other possibility is that the purpose of business is to enhance personal wealth and I fear that may not be far from the truth, not only in the public mind but also in the minds of many wealthy owners of corporate businesses.
The Poor Contribute More to Cashflow
It is worth referring to this blog post, “Why companies don’t just target the rich – because the poor have most of the cashflow”. This is a more polemical piece but the point it makes in the first graph is certainly true (although it isn’t referenced at the time of writing). The bottom 50% in society own almost no wealth but provide 30% of the cashflow. The top 10% own 70% of the wealth and contribute 20% to spending.
I argue in this blog, wealth is of no value to society if accumulated in bank accounts. It adds value when it circulates. It seems the poorest contribute proportionately more to circulating finance in the economy than the wealthy.
So, it is not business per se that is the problem. The problem is what happens to the wealth created by businesses. Distribute more of it to the poorest and there will be more cash flowing in the economy and more businesses benefit.
Excessive accumulation of wealth not only locks people into poverty but also makes business more difficult. The various scams described in the “Why Companies …” blog post would not be necessary if more money were circulating.
Private Sector Benefits from Tackling Poverty
Return to the New Statesman supplement and turn to page 7, where you will find a table listing how the private sector benefits when it tackles poverty:
- Productivity
- Reputation
- New opportunities
Poverty it seems “with its associated physical, mental and emotional problems, contributes to reduced productivity.” I’m sure that’s right but the point is inequality also contributes to poor business prospects by reducing the money in circulation. Poor circulation will affect productivity too because it means it is harder to meet costs.
Reputation suffers because businesses resort to scams as described in the “Why Companies …” blog post.
New opportunities implies the challenging financial climate opens up new business opportunities and revenue streams. Really? I understand the argument, for example climate change could mean more jobs for businesses installing renewable energy sources or insulation.
But the main blockage, true since the recession in 2008, is there is too little money in circulation. You can’t get a loan to finance your business ideas.
In the end, the supplement demonstrates the poverty of thinking endemic among the political classes. It’s not that poor people’s stress affects productivity so much as the inequalities that make them poor in the first place. If our political leaders do not understand this, what chance have we of a fairer society?
Business and society are natural bedfellows, it is our blindness to the impact of globalisation and the corporate élite that both increases poverty and reduces productivity.