BGA | BUSINESS IMPACT
all care about the kind of society in which we live. Given that, how come so many businesses continue to declare themselves to be ‘apolitical’, seemingly trying to absolve themselves of any role in how our societies work? How is it that so much business education continues to ignore politics? What is business? To get to business, let’s start with economics. There was a time when economics was recognised for what it is – a branch of politics. There is no economic theory or decision that is not political in nature which is why we all used to talk about the political economy. All the great economists, from Adam Smith to Karl Marx to JM Keynes, had political thought as a central part of their economic work. All of this was swept away when economics developed 'physics envy' and wanted to turn itself into a mathematical science. Neo- classical economics dismissed social, political and institutional factors (things not easily subject to turning into elegant mathematical equations) as being ‘exogenous’ to how markets operate, rather than accepting that they are integral to how markets function. The fiction of ‘homo economicus’ took off and the narrative around human beings was turned into one of a bunch of automatons making so-called ‘rational’ decisions based on their own economic self-interest. In other words, economics was extirpated from the political context in which it belongs. Where economics went, business followed. The artificial (and highly damaging) separation carried through to business thinking, which saw itself as belonging in the economic realm rather than the political realm. Over time, neo-liberal economic thinking infected the business perception of itself and its role in society. Milton Friedman’s seminal 1970 article, ‘The Social Responsibility Of Business Is to Increase Its Profits’, poured scorn on the idea that business had any wider responsibility to society other than making money for shareholders. This idea spread like wildfire. It was welcomed by the business community
because it simplified their lives, giving them a single target to work towards – shareholder value. Eventually, the idea became embedded in executive compensation programmes and linked exclusively to short-term stock price performance. A number of Business School curricula are still stuck in this paradigm – highly damaging and outdated as it is. The job of business is to maximise profit and deliver money to shareholders, many still claim. The world has changed Economist and former Dean of the University of Oxford’s Saïd Business School, John Kay, puts it like this in a 2021 article for Prospect magazine: ‘Business has lost political legitimacy and public trust by pandering to an account of itself that is both repulsive and false. The corporation is necessarily a social institution, its success the product of the relationships among its stakeholders and its role in the society within which it operates.’ This perverse view that business has of itself is the legacy of neoclassical and neoliberal economic thinking – thinking that has also caused huge social, environmental and economic damage and that none of us, including Business Schools, can afford to continue to perpetuate. Things are changing. Fast. We are entering a new era – what I describe as 'The New Political Capitalism'. It is an era in which business is rightly seen as being embedded in our social fabric. Where businesses recognise that they are political actors, through their power and their capability of having a significant impact on the sort of societies we live in. ESG modules are insufficient From pressures to address environmental, social and governance (ESG) issues, to how we deal with climate change, to the rise of what some have called ‘political consumerism’, to the changing nature of globalisation due to new geopolitical tensions, political questions are increasingly integral to continued business success.
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‘Politics is the mechanism by which we collectively decide what kind of society we wish to live in’
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