Looking Down from Mount Olympus

With Olympics fervor at its height, it’s tough to resist Homer’s description:

“Olympus was not shaken by winds nor ever wet with rain, nor did snow fall upon it, but the air is outspread clear and cloudless, and over it hovered a radiant whiteness.” Homer, Odyssey.

Today, the equivalent of the 12 Gods on Olympus are, maybe, the G-20, or G-2, or the UN or any of the international organisations that are set-up on our behalf.

Or, maybe it’s closer to home – the national heads who make up the EU or the lesser number that make up the EZ; the 100 Senators in the US Congress.

Or, maybe they are the 1% who own 40% of the earth’s assets (financially-speaking).

Or, how about Forbes Global 2000 – the top 2000 of the world’s companies that, between them, account for $149 trillion in assets and employ 83 million people. This compared to McKinsey’s estimate of $212 trillion value of the world’s capital stock in 2011 – a huge percentage.

Icy Slopes

The Greek Gods took their place after a war with the Titans – who ruled before them. Mythology into reality – our new Gods rule in much the same way after a 20th Century where totalitarian regimes fought each other, amongst each and against  democratic nations in bloody conflict. Millions died in China, the Soviet Union, Europe, Vietnam, Africa, Indonesia and elsewhere as different theories of government battled for supremacy.

Francis Fukuyama declared it “The End of History” as liberal democracy supposedly triumphed. We know now that he was wrong (as he has himself declared). For, the winner (for now) was not democracy but a form of capitalism that promotes a new set of god-like creatures and a new Olympus where the wind does not blow and the air is clear. This new capitalism – the complete dominance of quantity no matter what type of government is in power – was relatively bloodless in its conquests, but no less callous in its purpose. Indeed, its callousness is worse than before as it is merely the “invisible hand” that drives the marketplace that has led to the victory of the new Gods.

Now, sitting upon the summit, surrounded by the icy slopes that let few into their circle, they can look down upon the rest in their eco-defended enclave.

How the War Was Won

 

The titanic struggle was won on the back of the primacy of goods – developing the ability for ordinary people to secure their basic material needs and then onwards to “choice” and leisure and luxury. This has been wonderfully accompanied by the ability of business to promote their products so that demand could be developed without the consumer realizing it. This ability to influence demand (so brilliantly described in Galbraith’s “The Affluent Society”) has led to a victory of quantity over quality in the West and will do so elsewhere.

The victory was made easier by Governments’ willingness to adhere to the 19th Century economic theories that made “growth” and GDP the concepts upon which all governing was placed – but, placed them in simulations which cannot reflect reality. Mathematicians and econometricians have extended the fallacy – we live for numbers. The evidence for this can be seen so well in Russia and China. For most of the 20th Century, both held out as anti-capitalist bastions as the world moved to strengthen democracy. Neither has succumbed to democracy – Russia is a gangster-elite State, China is a legalist, centralized State. But, both yielded wholeheartedly to the market.

Who Won the War?

Many argue that the democratic West won the war (as Fukuyama attempted to suggest) but this is wrong. The western form of liberal democracy with its desire to provide representative government, elections and low corruption levels (comparatively) as well as supposed access to education and upward social mobility is losing out. It is arguable that even in those countries that still pursue these ends, there is now a vastly worsening separation between rich and poor and a hardening of social structures – with far less mobility.

In China and Russia, elites have won the war and their instruments of war have been capitalist – as their citizens climb up Maslow’s hierarchy of need from the very bottom, quantity of goods is supreme no matter how they are derived. As Jonathan Fenby describes in “Tiger Head, Snake Tails” this is, in China, despite rampant corruption, ecological degradation and vast differences in wealth between elites as well as complete indifference to the vast population when their houses are demolished to make way for new buildings or motorways (for example).

Who Lost the War?

Millions of lives were lost in the 20th Century as nations defended themselves against the onslaught of totalitarianism. But, a new totalitarianism has taken root right beneath our noses.

It is the totalitarianism of the elites that control the markets – markets fed by a constant diet of GDP statistics and growth targets.

The losers are (in Orwellian-speak) supposedly the winners – the mass of the population that has grown “wealthier” throughout the latter half of the 20th Century.

So, it seems to be a benign revolution but the problems are becoming clearer by the day.

In Greece, home to Mount Olympus, the country is in its fifth year of recession. In Spain, 24.6% of people are now officially unemployed. In most countries, the gap between the wealthy and the rest is growing steadily.  Economic strains are now working their way around the system as growth (measured traditionally in 19th  Century models) stalls outside of newly developing nations (yet, who believes the measures coming from China?). Today’s youth in the developed west are unlikely to be “wealthier” than their parents in pure GDP terms.

But, we should not be focused on pure numbers. Economic growth is also threatening the ecology of the planet at an alarming rate. Whether or not fossil fuels are near their end, the effects on the planet are growing and recent changes to our weather patterns merely the first signs. Our damning footprint is ever more etched on the planet and real risks are emerging that the life styles we live now may not be available for long. As Rumanian economist Georgescu-Roegen surmised over fifty years ago, maybe we can’t change and will simply go out in a puff of smoke.

Maybe, though, society will not, for ever, tolerate the new totalitarians, the new Olympians.

The Gods were not immortal

 

Of course, nothing lasts forever. The Greek Gods did not survive (except in mythology) and neither will the current ones.

The problem is that we are engrained with the belief that quantity is the key to good life (which it may be up to a point) and have lost a connection with what society is about. Mass production has led to greater wealth but, as Galbraith saw 60 years ago, society cannot be all about quantity.

Maslow, developing his Hierarchy of Need as a marketing tool, expected that we would go beyond quantity to some form of self-actualization. We have definitely not managed that yet but we have some signs that societal self-actualization is possible.

A major problem in the way of this is that different countries are at different stages of economic development. China has a massive population still well down the material scale and there will be no let-up in the leadership’s drive for “growth” to stem the dismay of their people on all other issues. In Africa, the longing for material wealth is as strong and who can blame them bearing in mind the economic and social torment they have suffered?

So, initiatives like Zero Impact Growth being developed by John Elkington and his Volans company are worth considering.

This is an approach to growth with zero impact on the planet and ultimately to give back more than is taken out. Where others seek to quantify (and there are dangers in the approach of quantifying everything), the Elkington approach is to develop a maturity matrix as follows:

Maturity Level Definition from ‘The Zeronauts’ Analogy: Characteristics of a company on that level
No strategy and goals No definition The company barely understands the relevance of restructuring its actions towards sustainable solutions and hardly reports on sustainability. Furthermore, no strategy has been defined and no targets have been set.
Eureka Opportunity is revealed via the growing dysfunction of the existing order. The company understands the relevance of restructuring its actions towards sustainable solutions. No considerable actions have been taken yet and almost no strategies and targets have been set. The company does already understand the relevance of the topic though, has started reporting and communicates plans to ameliorate its sustainability performance in the future.
Experiment Innovators and entre­preneurs begin to experiment, a period of trial and error. Although the company has started its first inno­vation efforts and internal programs in certain sustainability areas and has developed initial policies and strategies, no concrete milestones and an overarching future vision have been defined yet.
Enterprise Investors and managers build new business models creating new forms of value. The company has developed a short- to mid-term strategy ( ≤ 2020) for specific areas and has set measureable targets. Nevertheless, almost no long-term milestones have been defined. Furthermore, they do not communicate an over­arching future vision.
Ecosystem Critical mass and part­nerships create new markets and institu­tional arrangements. Measureable, ambitious (zero) targets based on a mid- to long-term vision (≥2020) are set. Nevertheless, a conjoint approach and some collaborative aspects are still missing since the holistic zero impact growth vision has not been (fully) adapted.
Economy The economic system flips to a more sustainable state, supported by cultural change. The company has fully adapted the zero impact growth vision. Measureable zero targets that have been adapted jointly are set out for each field of action. A clearly defined strategy is in place on how to achieve these targets, with defined short- and long-term milestones. The underlying benchmarks are clearly defined.

Maybe there is some fight left and the reality behind the model is clear – we can’t fight the invisible hand but maybe there is a chance for society to develop some self-actualisation behind the corporate drive towards zero impact growth where the planet survives along with humanity.

That doesn’t impact on the gap between the wealthy and the rest as the focus is on economics and sustainability. Inequality is as important a problem as ecology. Numbers should be seen for what they are – where money is one aspect of our lives not the only one. Demos, a UK think-tank has just published: Beyond GDP – New Measures for a New Economy.

It is an attempt to seek a rationale for economics beyond numbers. Briefly it posits that:

  • GDP does not distinguish between spending on bad things and spending on good things.  By this measurement, the BP oil spill in the Gulf of Mexico “positively” contributed to the economy just like the many good and services that people actually want or need.
  • GDP doesn’t account for the distribution of growth. Our total national income has doubled over thirty years, and so has the share of national income going to the wealthiest households, but average households have seen little or no income gains. GDP doesn’t care if growth is captured by a few or widely shared.
  • GDP doesn’t account for depletion of natural capital and ecosystem services.  If all the fish in the sea are caught and sold next year, global GDP would see a big boost while the fishing industry itself would completely collapse.
  • GDP doesn’t reflect things that have no market price but are good for our society, like volunteer work, parenting in the home, and public investments in education and research.

Two studies that show on this morning after that wonderful Danny Boyle-inspired Olympics night – where values were keenly shown as more than just money – that the slopes of Mount Olympus are slippery but not completely impassable: a Danny Boyle-inspired dose of self-actualisation.

From Euro Chaos to Chasm

As Greece Votes

I was on an ethics panel this week – organized by CGMA and Accounting Magazine. This has been arranged to discuss the outcome of CGMA’s recent survey “Managing Responsible Business” http://www.cgma.org/Resources/Reports/Pages/ManagingResponsibleBusiness.aspx

This survey explored the range of issues around business and doing things properly – ethically. It found that most businesses tried to, CEO’s were handing down responsibility for this to other staff, the ability to do so changed by country and there was real pressure not to in some countries.

With elections in Greece on Sunday and the Euro in everyone’s mind, the issue of business ethics seemed mighty small in comparison.

Ethics – moral rectitude, the rules of conduct – are not just about business. It is from society that ethics emerge and it is the destruction of the rules of good conduct that has tipped Europe and many other parts of the world into an economic, political and financial chasm. It is a chasm that threatens our way of life and, deep inside that chasm, there is not a lot of light.

The Chasm is not just a Banking one

 

We are continuously being told by our politicians that the current banking crisis can be resolved with large amounts of cash. The latest attempts are the £100bn on offer by the Bank of England of low rate loans to banks to regenerate lending in the UK and the €100bn on offer to Spain to prop up their banks.

In the chasm, sticking plasters don’t work.

Banking liquidity is not the problem anyway. The problem that banks have in Spain, for example, is solvency – their very being is at stake not their ability to lend in the short-term. They were over-stretched by awful decisions ten years ago to lend to get-rich-quick property schemes that were doomed and, when the tide went out, were shown to be naked. Borrowers across the western world were too highly geared – over-leveraged. While companies have managed to get their act together, individuals have not and while savings are higher, they are still, by normal standards, far too over-leveraged – which is still leading to house price reductions everywhere but London (where funds are rushing in from all corners of worse of countries).

But, the banks are hiding behind the problem in front of them – national insolvency. The transfer from nations (i.e. taxpayers) to banks has been enormous and continues. Well over a trillion dollars was poured into the US banking system and the same in Europe. The estimate is that this needs at least to be doubled. National solvency is at stake throughout Europe (west, south and east especially) and the austerity programmes now in place are a testimony to them.

Like the 1930’s, this is leading to massive unemployment and a risk that the chasm into which nation by nation is being thrown will swallow them whole. In Europe, the answer, we are told lies with Germany – they should assume the debts of all the others with Eurobonds – a financial answer to a financial problem.

But, the chasm is bigger than this.

The Chasm is engulfing Politics, Economics and Finance

Behind the financing of banks and the insolvency of nations lie the root causes. These are the disenfranchisement of the mass of people in most nations – disenfranchised not by their inability to vote every few years but by the paucity of choices on offer.

Greece offers a great example of a nation in economic chaos but the causes and the choices open to the people there are not often recorded.

Whoever read Michael Lewis’s “Boomerang” will understand some of the corruption that underpins the chaos. It is endemic and led by a political elite that have rampaged through the economy and gouged out any life from it. At the same time as The President of Equatorial Guinea is about to meet with four NGO’s (including my former employer, Global Witness) to discuss the rampant corruption inside his country, who is meeting with who to ensure that Greece can emerge with some dignity from its corruption?

Who can blame voters for, at last, running away from Pasok and into the arms of Syriza – the main concern is not the Euro, it is the corruption of the political elite and complete lack of trust in any politicians. The whole political class is tainted.

Outside Greece, the same is true to some extent in Spain and in Italy, where technocrats (unelected) now rule. The paucity of choice for voters – why vote for politicians when they are all the same and as corrupting and corruptible as each other?

The euro problem is much deeper. It is not just about emulating hard-working Germans, it is about serious change needed throughout Europe where leadership is absent or tainted by nations that are corrupt, unable to raise taxation, where the cash culture is rampant. This is true in Greece, Spain, certainly southern Italy and elsewhere. Why would Germany want to pick up the tab for this when the problem is chasm deep – not the surface banking or financial issue that has been painted?

The Ruling Class

In democracies, we are supposed to be able to vote out political parties that do a bad job. What happens when the whole political class is damned? The whole electorate is disenfranchised as a result.

This is true throughout the Eurozone – political parties have joined forces with other powerful elites to seemingly run countries – now, it is clear they have run them into the ground or, worse, into the chasm where conventional politics, economics and finance are drowning.

The ruling classes – politicians of all political persuasion, big business, the public sector – decided to run off with the benefits and have left the rest behind. Somewhere those funds reside in tax havens, well away from the hands of civil society. If it was all about harder effort, there could be some light ahead, but the problem is so deep that it will take years of real change and real hurt to recover to anywhere near where countries thought they were until recently.

From Chasm to ……what?

The European dream of one country living under one flag, which to many is a nightmare, is not a new one as the wars of the twentieth century showed. Now, a war just as savage is being fought – but a war where the fighting is hidden and where the soldiers don’t even realize they are in the trenches. Greek citizens and the young in Spain (where 50% are out of work) probably realize the consequences of the post-war European experiment. Many others don’t yet, but soon will.

Papering over a crack or two is relatively easy. Papering over a chasm is impossible,

The core problems of societies need to be resolved – corruption has to be ended, taxation has to be collected, public servants have to serve the public, politicians have to be credible and respected and people have to believe that if they work hard they stand a chance of being successful. For banks to function, they need finance; for businesses to succeed, they need markets and finance; for an economy to succeed, it needs good business but also a society that works – and that is not riven with insidious corruption of people and dignity.

Many African states (with massive natural resources) are corrupt and wealth is held by small elites. We did not believe that the corruption in Europe was on the same scale and, indeed, it is not the same – but the scale may be greater and just as endemic.

Solutions will not be found purely through the injection of more money into a chasm – the chasm has to be filled first or cleansed at least. Liberal democracy was supposed to be the best solution (the best worst solution). The 21st Century struggle may not be against the same totalitarians as in the last century (fascists and communists) and, hopefully, it may not be sullied by war and death, but, metaphorically, it will be just as bloody and won’t be complete until political elites are brought down to earth and civil society gets inside the tent.