Monday, 2 June 2014

Macro Level Trends – Capitalism Revisited – Platters of Platitudes or True Re-Imagination

Tuesday 27th May saw various power-brokers and thought leaders from across a wide spectrum meet at The Lord Mayor's Mansion House and The Guildhall (here in London) to discuss the role of global capitalism into tomorrow.

The event named “Inclusive Capitalism” is the support event to 'ICI' (the Inclusive Capitalism Institute) a non-profit organisation which seeks practical ways to “renew capitalism as an engine of economic opportunity and shared prosperity”.

A broad international array of speakers and attendees participated, spanning: British royalty, an ex US president, seniors from the IMF, BoE, SWFs, consulting groups, academia, varies types of large finance houses (retail banking, institutionals and investment banking), holding companies, sector specific corporations, trade union umbrella bodies, national and regional governments and financial press; all hosted by the current Lord Mayor.

The Re-Emerged Right vs Left Debate -

The heart of the global establishment invariably stands centre-right within the political spectrum. Necessarily so as to effectively purport the advantages of capitalism, which though noted by Winston Churchill as structurally imperfect, has largely submerged communism (and the threat of world wars), and which even after the 2008 financial crisis is still seen as the singular pathway remaining for humanity's progress.

It has largely proven itself as a system for improving the lives of the impoverished, even if today for the mass of the western middle-classes the model itself has either stalled. That the establishment does indeed seek to re-energise profit-making is the logical panacea, since prosperity is the 'naturally correlated' (ie free-market) outcome of ever more economically integrated human activity. Capitalism offers the many to participate in various forms, most notably as employees, or as entrepreneurs and both directly and indirectly within the stock market, itself acting as a key instrument in the allocation of funds and thereby dedicated human effort. Yet this same establishment also recognises the need to provide financial stability and improved socio-economic input from presently disenfranchised western economic beings.

Uninvited naysayers – who range across the remnants of the left-leaning 'occupy movement' (with its overtly propagandist slogan “we are the 99%”) to fully entrenched life-long socialists to the poor working class through to the growing non-WASP ethnic-minority groups - will undoubtedly publicly or privately highlight their viewpoint. That no matter how seemingly socially acceptable representatives of 'power families' appear – primarily the Windsor royals (nee Sax-Co-burg, nee Witten) and Rothschild (historically closely allied to European royals) – the same old power structure remains.

Many of these groups have either intellectually arrived, or led, to the conclusion that capitalism is little more than a conspiratorial 'smoke and mirrors' socio-economic system, consisting of a closely orchestrated banking-political-military-industrial-media mechanism to push the Judo-Christian 'western agenda' so as to gain worldwide power. All to the detriment of the masses. This conference then little more than a staged play, or at best soon to be forgotten 'lip-service', designed to placate the now disenfranchised broad masses (from old senior managers to young graduates). All so that the 'squeeze 'em dry' process can re-start in a more amenable guise to entrance the marginalised worker. But that any future gain of the average individual will once again be comparatively minuscule given the realities of 'the western condition' compared to the worldwide reach of the profiteers.

Reality of the Shattered Middle Ground -

As with most oppositional stances, any rational concept of an optimal, morally legitimate, position lays somewhere in the middle ground. Somewhere between the hyper-competitive right to the hyper-idealistic left, in which a natural equilibrium of effort and reward is achievable on personal and social levels.

A sound and functioning middle-ground, devoid of the ill-will and surreptitious guerilla machinations that actually goes on in supposed civil society as people strive to better their lot.

Yet what is true – far from such Mansion House meetings of very the hard-working but highly rewarded, highly cosseted and often very 'removed' - is the fact that the average (wo)man who was once stereotyped as riding upon the “Clapham Omnibus” now seethes about the fact that not only can he/she not afford to live in suburban districts (such as the 're-gentrified' Clapham), but that increasingly he/she cannot afford to live in those areas to which in the past have been viewed as socially improving, aesthetically pleasing and so educationally character-building.

Furthermore, many others are physically trapped, and so very psychologically constrained, by the fact that they cannot even afford to take public transport, so become geographically contained within what appears to them to be an evil intention of 'top-down' social engineering.

This the British, European and American reality today, in which the long-term personal experiences for millions demonstrate what is viewed as an innately immoral unfairness to modern society. The worst aspects of which lays well under the socio-political radar, and only surface through anti-votes such as that seen in Britain with UKIP.

That financial frustration has a tremendous impact upon all facets of a person's life, yet paradoxically the resulting frustration and anger is more often than not masked beneath the increasingly thin veneer of 'social-normality', so creating internal turmoil. This effects people of whichever ethnic background, but at least typically closely knit minorities tend to have social cohesion and mutual support.

Whereas ironically, social disenfranchisement (and long term alienation) has perhaps become especially pertinent for portions of the indigenous middle-class; those who were brought-up on the specific edicts of education, hard-work and deferred pleasure for a better tomorrow.

The trouble is that this deferral now appears ever-lasting, the promised pleasure foregone. Especially true for what may be termed the middle-class intelligentsia, far beyond the walls of academia, themselves long betrayed as important but under-appreciated component parts of capitalism, but upon whose specific and generalist knowledge progress relies.

A strong middle, which acts as a central hub of stability for society, can only exist where there is general social cohesion, even if not respect or warmth, across the three seemingly everlasting class levels. But the middle itself is now viewed as a shattered ideology from a notional golden yesteryear which in retrospect itself for appears somewhat of an illusion.

Ultimately, yet another part of the western post-modern 'grande-narrative' lost and awaiting, if possible, foundational re-building.

Fundamental Issues -

The prime concerns for much of the west are:

- Income Levels: wide inequalities and inconsistencies
- Industry: divestment and collapse of various mid-value industries
- Industry: loss of associated knowledge (R&D to hands-on)
- Regional: disparities as a consequence of regional 'vacuum'
- FDI: partly replaced by foreign interests over past 30 years
- Policy: partly replaced by debt-funded 'phantom' employment
(eg public-sector, charities and NGO employment)
- New Vacuum: resulting from necessary 'phantom' de-staffing.
- Population: economically, rationally and emotionally disenfranchised by “the system”
- Education: need to question various structures, methods and practices
- Education: need to question of many participant's personal dedication
- Policy: transitional process from education toward employment / entrepreneurism
- Commerce: proportionate imbalance even within services sector.
- Commerce: proportionate imbalance of high value research
- Commerce: proportionate imbalance of high value manufacturing
- Social: return of personal privacy (a now eroded endemic human right)
- Economic: true “Capitalist Renaissance” vs Managed “Proto-Socialist” Decline
- Leadership: corporations as de facto emergent global powers
- Leadership: corporate autocracy vs corporate social responsibility.

These just a few elements of the transitional process in 'western future-forming'.

Reduced 'High-Value' Western Contribution -

Whilst the west obviously maintains various advantageous 'high-value' capabilities which lead the world, it is perceived that this portion of economic contribution may well have remained flat or even declined over the last three decades in proportion to the actual broad economic whole of everyday activities undertaken by western countries.

Two factors appear to have made this the case, when supposedly better education and training for an expanded mass of participants should have been raising the 'high-value capabilities' of western states.

Firstly, the overt economic boom period existing largely between 1985 and 2008. This credit-fuelled, property-price driven 'party' induced overt wage-price inflation as a partial consequence of financial deregulation. Though seemingly rational upon an introspective pan western regional basis it arguably over-inflated the true participatory value of many mainstay activities; ranging from brick-layer to PA to dentist. Whilst the housing boom (even including periodic 1992, 1999, 2001 contractions) invariably through the demand-pull of housing credit effectively lifted the income of the masses, it also served to starve funds from more truly rational and value-adding science and innovation and efforts; with perhaps only the special relationship between Silicon Valley and Wall Street gaining true support and momentum. Other countries efforts too little too late in comparison.

Also, very probably the case that potentially 'high-value' activities that had been associated with those mid-value industrial sectors either “hollowed-out” or divested to EM buyers, were ostensibly lost, aside from very specific, narrow academic explorations.

Keeping it in the EM Family” -

The last twenty-five years have witnessed many EM nations individually and collectively undertake a veritable economic leap-frog into a truly new era. Not just toward economic, technological, social and political modernity (though many millions are still yet to gain) but with it the sense of truly redressing the age-old notion of international inequality vis a vis the west. The G20, EM trade pacts and academic and industrial alliances illustrate the efforts for 'global reform'.

However, the recognised reality for the west is that its once broad and deep semi-controlling connections to the slowed but still growing EM nations, whilst in tact appear increasingly weak, as EM leaders co-create with each-other utilising modern principles and technologies previously gained from western corporations; the re-nationalisation of Venezuelan oil a prime example.

Because of the very size of EM populations and the rise in standards still to be provided for many, it may be the case that having imported much knowledge and technology over the last decade, that the economic value to be created and extracted, will be done so internally within EM nations; especially so now that many countries must shift from investment-led growth (naturally aligned to foreign joint ventures to capture modern plant and offer quality goods) toward internal consumer-led growth (the majority of the spoils expectedly retained domestically).

So whilst the west promotes its role of high-value services and manufacturing, and its role regards global environmental guardianship, the disturbing fact could be that western participation within the global whole actually diminishes.

This was seen previously as ex-colonial nations such as India in the mid 1960s bought-in western know-how and previous generation technology (eg Austin Oxfords and Fiat 1100 cars and taxis. Those same vehicles were manufactured with only small changes and utilised in society on the for many decades as the Indian firms producing the cars gained strong profits on a captive markets.

Whilst this era of specific market protectionism and internal exploitation of such domestic markets is no longer the case - with most EM nations seeking to lower tariff barriers to enable cross border trade and so nurture their own strong competitive capabilities - such 'mutual inwardism' does obviously serve the vested co-interests of specific regions. Thus such complementary intra-trading and manufacturing scenarios formed officially or unofficially, and already a stark reality across SE Asia and South America, even with efforts such as the US's Pacific Pact, could well lead to the ongoing erosion of western influence, trade enablement and so western wealth creation.

Thus then another well recognised, but unstated concern, amongst the corporate leaders and bankers attending the Inclusive Capitalism conference.

If indeed (heaven forbid) today's well inter-connected global world of trade does indeed not further integrate, but disintegrates across 'new-power' vs 'old-power' regional lines (not ideological lines); then the west will be forced to rely ever more upon its presently disenfranchised peoples.

Starting Over via “ICI”-

Importantly, the western establishment well recognises the need to address ongoing mass populace dissatisfaction. Obviously no coincidence that this seminar has been run during what appear the first stages of economic renewal, the financial markets massively buoyed by QE but awaiting the intrinsic true economic traction or the real economy.

Using the the acronym “ICI” is seemingly a subtle attempt to regenerate examples of past success and capture broader cultural diversity.

It has knowing cognitive association to the yesteryear UK chemicals (and multi-play) company which both innovated, created value and spread worldwide wealth from its homeland roots, during its era as a progressive conglomerate player it was admired as a force for good, both operationally with the likes of strong research base and best practice methodologies, and for spreading wealth across diverse local industrial and agricultural communities as far apart as NW England and rural India. And for the older generation refers to the crop of yesteryear 'good eggs' such as its ex-head Sir John Harvey-Jones.

ICI” also is the acronym for a number of culturally influential associated bodies, such as the 'Islamic Counter-Terrorism Institute', 'International Compaq with Iraq', ' Istanbul Cooperation Initiative', 'Institute of Cultural Inquiry', 'Institute for Competitive Intelligence', 'Institute of Cooperation of South America' and the 'Investment Company Institute' of America).

[NB Conspiracy theorists will also cite the 'International Commission on Illumination', as pertaining to association with (the supposedly all powerful) “illuminati”].

The “Inclusive Capitalism” Agenda -

As seen “ICI” seeks to both find alternative methods by which to remould capitalism, principally to be seen as more 'new age' responsible and in doing so eliciting greater 'fresh thinking'.

In essence the grand mission is for major investors of whichever ilk (pension funds to hedge funds to private equity) to ensure that all attendees, but perhaps especially so the executive and management teams of individual corporations and firms, recognise the need to re-mould capitalism as a force for good.

Thus the notion is that of an extended CSR , across what investment-auto-motives terms a “3-D perspective”. Encompassing consideration of those critical macro, micro and time-line issues across:

1. Macro – greater cohesion and clarity within global economic frameworks, geographies and demographics ...(on what investment-auto-motives terms the 'vertical plane' of today)

2. Micro – strengthened cohesion of critical commercial ties from initial project assessment and investment through various stages and phases to 'end of life' value re-capture...(the 'diagonal plane')

3. 'Chrono'- logical – increased consideration of cause and effects upon future generations and people's into the distant future...(the 'horizontal plane'...literally the 'chrono-logical').

The forum the idea of creating a more intelligent and conscientious economic culture, with as vital input, an understanding of how the successful socio-economic case studies of Germany and Nordic countries can possibly create platforms for renewed western economic systems.

Thereby promoting a greater sense of inclusive capitalism.

Main speakers at the IC forum naturally reverberated the same sentiment – it was after all a talking shop for that very cause – but there were other more esoteric takes.

At its most extreme, as purported by economist Jeremy Rifkin, this sees an emergence of 'near zero marginal cost' enablers, primarily via the “precipitating agent” of the internet, which powers massive productivity gains.

This connectivity so moulding a mentality of a “new sharing economy”.

Critics of such a future would call such a world little more than psuedo-communism given a capitalist slant. With no or little financial gain for the contributors / sharers; in effect a multitude of no or low pay 'cottage industry participants', increasingly over the global level as cyber-space becomes increasingly dominant.

Thus this supposed new form of 'turbo-capitalism' instead reflective of the low marginal costs which underpinned the USSR's ideology, and which eventually sapped people's enthusiasm and energies so stagnating socio-economic progress.

Those who are historically attuned will well recognise the parallel the west has today with that of Eastern Europe a century ago, whereby the once prosperous Prussian lands and Austro-Hungarian empire entered a socio-economic tipping-point into disarray and eventually communism once its capital saw new opportunities further afield in Western Europe and North America.

A concept too far?

The social dynamic of even London today appears that way.

At times with its mass cycling, the influence of the smart-phone as a tool to socially influence the screen-fixed, often unthinking “easily-led” amongst both the hooded and huddled increasingly tribal youth and the 'cyber-grouped' middle-aged. Plus especially the effects of a camara-phone wielding antagonistic society which (akin to stasi informers), means that London and elsewhere appears to mimic the worst aspects of the communist years in Warsaw, Budapest and Belgrade.

The “ICI'” Influence -

To add basic insight of the meetings apparent importance, the BBC states that when combined the financial fire-power of the attendees adds up to $30 trillion; approximately one-third of the world's investable assets.

To highlight the once prevalent power of the industry as a force for good, the IC forum's sponsors include the Ford Foundation, established by Edsel Ford in 1936 but long since separated from the auto-corporate. Given its long-standing social influence it inevitably has close ties to the US government, and obviously seeks to promote the USA's the soft-power hopes within the 21st century.

Reviewing the Structure of Capitalism -

Here investment-auto-motives posits that one and all should start to consider the very 'bones of capitalism', so as to better understand the often nebulous ideology which moulds our society.

What was previously termed western capitalism, now global capitalism, is a complex system of interactions, both individually within and symbiotically.

Actions and reactions plying across the four notionally distinct worlds of 'financial services', 'main street' (both physical and cyber economies), the 'socio-political' all set within the broad context of the 'inter-geo-political'.

These realms act upon each-other in a myriad of inter-relationships, individually with domino-effect upon neighbour, and collectively during strong winds of positive or negative change and so outlook.

However, with regard to investment decision-making,the constant 'investor' perspective is the interpretation of a specific market's innate dynamic.

This consists of: available liquidity vs price vs perceived value.

Very simplistically, it appears that necessarily so, the historical process of capitalism is that of a process of ever fragmenting and more detailed commercial activities set within an ever growing volume of challenges/opportunities on a per head demand; valuation driven by the apparent “scarcity or balance of resources”.

Thus, expectedly so, the nexus of Adam Smith's and Robert Malthus' theorems which underlay “the dismal science” which it turn compels investment thinking toward the satisfaction and creation of demand and supply.

A Final Pause For Thought -

The staging of the IC conference is highly positive.

However, the citing of exemplar cases present and past invokes the idea of an easily achievable goal, when the restrictions and expectations of the real world will make any such journey harder than expected.

The 'guiding light' countries of Norway, Sweden, Finland and Germany are socially, culturally and structurally very different creatures to the likes of Britain, the USA or much of Southern Europe. Northern Europe's evolution into mutually inclusive, fair, modern societies stem from many reasons and critically core value systems which at heart have intrinsic central identity systems.

Likewise, 'guiding light' businesses such as Britain's John Lewis Group (which is ostensibly employee owned, and so provides for group participation and motivation) because of its self-determination, tends to better withstand economic recession given the willingness of staff to align to management's requirements. Critics will say that reliant upon recycled free-cash-flows and fixed income debt notes, such firms invariably operate as self-serving 'clubs', and are effectively closed to major structural reforms that would boost operational efficiencies and profits, and being remote from the accessible realm of publicly quoted stock markets, in good economic periods, act instead as an eventual constraints on true value creation for broader society.

Furthermore, there are those who view today's times as a modern-day parallel to the socio-economic climate which gave rise to the historic origins of the 19th century cooperative societies. If Wall Street and The City and the network of nation-wide big businesses cannot be trusted to best serve the people, then time to create new cooperatives; to philosophically replace the morally defunct Co-op, itself largely subsumed by 'Mammon'; and undermined by its sloth-like historic executive structure wholly unsuited to a very much changed operational environment from its yesteryear heyday. Such highly valuable social enterprises were born from the need for workers to escape the local foodstuffs and goods monopolies of local robber barons, and did indeed bring far greater fairness in local trade, wider availability of choices and so life-style improvement for the many who joined such co-ops. But today (with very few rural exceptions) no local monopolist rules the conditions of local trade, and instead hyper-competition such as the 99p shop, the £1 shop and Dollar stores providing exceptional value for basic goods compared to only twenty years ago thanks to imported goods and globalisation. No new local co-op start-up could hope to match such purchasing and distributing power, unless much finance was injected into such a national campaign

Exactly how to re-shape the primary activities and outcomes of capitalism, so as to still promote proportionate endeavour and reward, yet also ensure that those in need are better served, is an age old dilemma.

Whilst the 'guiding light' cases do offer partial assistance, western capitalism (beyond the 'Valley' and 'Street') and guided by past political will, has already demonstrated its lost opportunity to create the type of and level of 'high value' activities, supported by well educated peoples, needed to maintain its role within the concept of global capitalism, itself increasingly influenced by EM capitalism.

This watershed could make for great change

But any simplistic notion of philosophically and practicably stepping onward from the seeming mass notion of capitalism as an unfairly tilted, 'zero-sum' game (with sharply contrasting winners and losers) toward some kind of truly even 'Nash equilibrium' (wherein all gain from rational choices), is ultimately a fatuous hope.

It would be little more than a farce if the IC forum were seen to offer such an outcome. It well recognises the complexities of capitalism and its participants across the social spectrum.

Platters of platitudes ? No.
True re-Imagination ? No

As ever, case of “ongoing work in progress”.