Is the dominance of big business good for the world?
Business has been run for the last few decades along the lines of minimising costs and maximising productivity to achieve competitive pricing, increase sales, and, of course, ultimately maximise profits.
This has benefitted us all in terms of reducing the prices of material possessions, and more exotic food and drink, which we can now afford to indulge ourselves in, and of course, profits are essential for a business to survive, but the huge profits of a core of global businesses have not, in the main, benefitted everyone, only the most senior execs of those companies who are paid "fat cat" salaries. Indeed, the greed of the banks to profiteer caused a global recession to the detriment of everyone, except themselves, who seem to have come through it almost entirely unaffected so far (apart from the few that went under).
Is the availablility of cheap products and exotic food and drink a worthy benefit from modern business? Are the demands for people to be connected to their work 24/7, and during their holidays, good for family life, or do they prevent people having any work-life balance at all, with the result that marriages, and the bringing up of children suffer?
The situation in the UK
In the UK we have an apalling unemployment problem. Over a million graduates cannot find a job, and over a million highly qualified and experienced people, made redundant from their last role by companies undergoing cost-cutting exercises, cannot find a new job, even though they are desperate to get back into work, and are doing everything they can to find a new job.
So should global companies be off-shoring to reduce their costs, or should they be trying to create jobs in the UK to address the huge unemployment problem, and thus create more disposable income in the UK which will mainly be spent in the UK?
Is it better to pay the top execs of global companies £10millions in bonuses, or should the company create 250 new jobs instead to help address unemployment, and reduce the working hours of those in jobs, so that people can spend more time with their families?
Will anyone do anything about it?
There is a lot of talk in the UK press of the masses, especially the middle class masses, saying "enough is enough" and rebelling. We saw some riots in the UK (probably more opportunism than rebellion, but the analysis continues), and, of course there was the so-called "Arab spring" which actually deposed leaders of countries. Could that happen in the western world too?
Will there be an actual rebellion against "fat cats" and the way business is run, or just a load of whingeing?
What can the UK government do?
The government has to wrestle with the problem of over 1million graduates thrown on the scrap heap unable to get a job, and an increasing number of jobless middle class people desperate to get back into work. How will they address this? Will they take radical steps?
Will the dominance of global business be allowed to continue and increase its dominance, or will governments, not just in the UK, take steps to curb the power of big business and take back control of their country’s “big picture” by stopping big business doing things which are detrimental to the country as a whole? We know that the EU is keen to regulate banks more closely, but how far will they go?
From a UK government perspective, it would be advantageous to try to prevent, or at least to discourage UK businesses from off-shoring, or to encourage them to recruit more staff instead of giving huge bonusses to the top level execs. This would help the government to solve the unemployment problem, reduce their spend on benefits, and increase their tax take from those employed in new jobs. Politically, however, will they be keen to make such a move?
Do we need a paradigm shift?
Is the current world model of decreasing the cost base of businesses to maximise profits a sustainable paradigm, or are we heading into a world of greater inequality, where those in a job are materially wealthy, but there is a massive underclass of those who cannot find a job, however skilled and experienced they are, because there are simply not enough jobs to go around?
Or do we need to shift the culture to a paradigm where "Corporate Social Responsibility" means employing more people instead of cutting jobs, and where it means reducing the hours worked by staff and ensuring that their time off really is time off, where they can devote themselves to their families and non-work interests, which may be public spirited volunteering and community activities.
We know that despite the introduction of computers, which were supposed to make our lives easier and give us more free time, people are working longer hours than they did in the past, as they are always connected and never allowed their own free quality time. We know that there are major issues with parents having very little or no quality time to spend with their children.
At the same time, our government's own figures show that the ratio of average earnings between the top 5% of earners and the bottom 5%, has changed from 8.6 to 1 in 2004/5, to 14.7 to 1 on 2008/9, and in 2011, the average pay of the FTSE100 top level execs was 145 times the average salary. Here are some examples from the government's High Pay Commission report:
"Previously unpublished figures show that pay at the top has spiralled alarmingly to stratospheric levels in some of our biggest companies. In BP, in 2011 the lead executive earned 63 times the amount of the average employee. In 1979 the multiple was 16.5. In Barclays, top pay is now 75 times that of the average worker. In 1979 it was 14.5. Over that period, the lead executive’s pay in Barclays has risen by 4,899.4% – from £87,323 to a staggering £4,365,636.”
”During the last 30 years rewards have been flooding upwards, with far more modest returns going to the average employee. Since the mid 1970s, the general workforce’s share of GDP had shrunk by over 12% up to 2008. In UK companies today, the pay gap between bosses and the average employee has grown dramatically. In the last year alone, as economic growth has slowed, executive pay in the FTSE 100 rose on average by 49% compared with just 2.7% for the average employee."
So what we see is that the cost reductiuons and efficiencies are not being used to create more jobs, but are making most employees work harder and longer for minimal pay increases, whilst the top level execs take all the cost savings as pay. Can this be of any benefit to the country at all?
The High Pay Commission report: “Cheques with Balances: Why tackling high pay is in the national interest” says that it is highly detrimental.
There are a lot of questions in this hub, with not many answers. I'm interested in views and comments, and people suggesting answers to the questions raised.
My own belief is that the current paradigm is unsustainable. The greed of the top level execs, and banks, etc. has already caused a global recession, unemployment is increasing, a whole generation of graduates are being thrown on the scrap heap with little chance of finding a job, and those who have worked hard all of their lives, but are still short of retirement age, who have so much experience and skill to offer, are being made redundant and cannot find another job, at the same time that they are being told that no one can afford to pay their pensions, so they need to keep working to 70 (but they can't get a job at 50).
I don't know how it will change, or who will drive the change, but I feel that it has to, by evolution, revolution, or disasterous collapse of the status quo. We need to aim for a fairer distribution of wealth, a decrease in working hours for individuals so that more jobs can be created and people can spend more time with their families and doing volunteer and community work. That's what I think. What do you think?