A Capitalism of Owners: Policies for a Fair and Sane (Business) World

For all its faults, the private business system has been, and should remain, a driver of innovation, a creator of wealth for all, a harbinger of economic freedom. We have seen and experienced in the former socialist countries of Eastern Europe the suffocating system of fear and scarcity that emerged when markets were eliminated and private business enterprises banned.The benefits of markets and private enterprises are again at risk, but this time not from leftist ideologues and agitators. Under the vicious, pervasive influence of financial markets, anchored in a self-serving neoliberal ideology, corporations of the “contemporary” kind, particularly in the financial sector, are turned into nests of greed and tools for the enrichment of speculators.This sort of economic arrangement, which came about over the last 20-30 years in so-called Anglo-Saxon countries and was adopted broadly in many parts of the world, has brought the international financial system within a hair’s breadth of total collapse1. It plays a key, but often overlooked, role in almost all business shenanigans. It drives management to take actions that are not in the long term interest of the corporation or of the society in which it operates.This type of corporation has grown over the years, abetted, even promoted, by institutional investors and governance champions.Although well intentioned, they failed to realize they were planting the seeds of destruction of the sort of managerial capitalism that served societies so well for so long.How have we come to this state of affairs with recurring crises, financial double-binds and easy willingness to inflict on citizens the pain of failed policies? The answer resides in the neo-liberalism that has dominated policy making since Reagan-Thatcher but with a renewed fervour after the fall of the Berlin wall in 1989, which left “free markets” neo- liberalism as the only ideology standing.If governments of threatened countries (the USA, several members of the European Community) do not bring about a return to some fairness and sanity in their business and financial world, they may well trigger unmanageable social unrest and an acute loss of legitimacy, which arealways the forerunners of political and social mayhem. The whole world would bear the economic costs of this nasty turn of events.For, people will not accept for long to serve as “bank fodder”, as guinea pigs for “financial innovations”, as patsies in the game of global finance.In our previous book, Black Markets and Business Blues, we traced the evolution of business enterprises over the course of the last thirty years. We showed how and why managerial capitalism was replaced by financial capitalism, a corrupted system which brought about repeated fiascos. Then, as a member (Allaire) of the Global Council on the Role of Business of the World Economic Forum, we made several rather radical recommendations to bring about change in this system, recommendations which were surprisingly well received by a group made up of several chief executives of large American and international corporations as well as university scholars. This book builds on these two foundations. Its purpose is, so to speak, to rub the nose of readers in the stuff of which financial markets are made, to bring readers close to the action, right in the midst of the dynamic interplay between financial analysts, investors, speculative funds, corporate management, and boards of directors. Only with an empathic understanding of the pressures exerted on the management of publicly listed corporations can one fathom the depth of changes that need to come about to bring some sanity back to the world of business and finance.