Political peacocking – is pre-election debate missing the point?

 

Business leaders will recognise what’s going on in the UK election. It’s the kind of behaviour companies indulge in when they are known takeover targets. They publicly rule out all kinds of liaisons, partly to increase their purchase price, and partly to signal intent. This silliness is quite helpful, because it’s information. But for whom? For other politicians, of course. The electorate might as well leave the room. All this peacocking just looks like a fight to carve up power, at the expense of addressing pressing issues that concern real people.

Added on 19 March 2015 by Eve Poole

Peacock showing feathers

So what should the election be about? One urgent topic that springs to mind is the economy.

Righting the economy is a mammoth task, but as I have highlighted in my forthcoming book, Capitalism’s Toxic Assumptions, one that is by no means beyond us. The blueprint we used to build the market, used design assumptions that have not lasted well. Long past their sell-by date, they are starting to become toxic to the system they helped create. So, you might ask, what do we need to change?

Competition

Mathematicians argue in favour of co-operation as a primary strategy because it yields better outcomes over time. Sharing information increases the size of the pie, instead of restricting the debate to arguments about how best to cut it up. Prioritising competition is sexist, too. While male fight-or-flight physiology favours competition, particularly in challenging environments, it disadvantages female physiology. Research suggests women have a different physiological response, dubbed ‘tend-and-befriend’. So favouring competition may be guaranteeing sub-optimal outcomes, reinforced through the norms of traditionally masculine business environments. 

The ‘invisible hand’

This optimistic economic myth offers a reassuring but inaccurate justification for self-interested behaviour. Order can rise out of chaos, but there's no evidence to suggest that this always tends towards the good, and certainly none sufficient to justify society’s reliance on it. Leaving things to the ‘invisible hand’ skews the market in favour of the strongest.

Utility

This is only a good way to measure market health if the 'invisible hand’ really exists. Otherwise, the concept is an empty one - utility for what? If there's no guarantee that individually selfish behaviours produce a good outcome overall, a system based on this thinking can't be moral without help. The sort of help this requires – government intervention – is exactly what economists try to avoid, because it interferes with the smooth functioning of the market.

Agency theory

Adam Smith’s original notion about a conflict of interests between owners and managers has had catastrophic consequences. It's used negative psychology to generate HR policies that assume employee recalcitrance, limiting the ability of organisations to unlock human potential. Worse, it’s been used to justify the disastrous ubiquity of executive shareholding, which has made corporate strategy both short-termist and manipulative.

Self-regulating pricing

The assumption that the price mechanism, left to its own devices, will settle at a scientific equilibrium, is nonsense. It ignores the interplay between supply and demand, and the potential for both of these to be manipulated. As well as airbrushing out the historical debate about ‘just’ prices, market pricing ignores historical questions about cost. This obscures a very important debate about hidden costs (or ‘externalities’), like the environmental cost of pollution. In an age where the limits of the Earth are starting to be felt, can we ignore such important questions?

The shareholder myth

The belief that the shareholder is king owes more to a romanticised ideal about the nature of shareholding than it does to reality. The average share is now held for just 11 seconds - blink and you’ll miss it. Sticking to the shareholder fallacy allows companies to neglect wider issues of accountability by ignoring other company stakeholders. This has fuelled the exponential rise of boardroom pay, and created an unhelpfully narrow measurement of corporate performance.

Limited liability

The dominance of the limited liability model is extremely risky. In a global economy, the resilience of the system will always depend on diversity, so no single model should prevail. But 98% of companies registered in England and Wales enjoy limited liability. More encouragement in law and public policy of alternative models for enterprise would introduce healthy ‘competition’ between business models. More employee ownership and mutualisation would spread risk, and create a wider range of businesses with different risk profiles and models of success.

And where are any of these needs addressed in the current election debate?