Walking around the area of Thamesmead in South-East London is an oddly disorientating experience. A little over ten miles from the pulsating financial heartland - the Shard a distant syringe plunging into the epidermis of clouds, the Canary Wharf cluster closer still - there is a juxtaposition that resonates, not only in the abstract ambience, but in the very physical Brutalist architecture that once symbolised such promise for its inhabitants.
Stanley Kubrick filmed ‘A Clockwork Orange’ here, and it’s not a giant imaginative leap to discern a certain prophesy fulfilment in terms of such a futurist locale degenerating into urban decay and deprivation. Plastic bags float like jellyfish in the murky lake, a pair of bedraggled horses graze amongst a glade of fag ends and weeds, whilst a couple of teenagers sit astride a concrete bench sharing a silent spliff. According to a 2013 report, 31% of children in Thamesmead and Erith are living below the poverty line.
It is just one very proximate example of how removed so much of the UK now feels from the burgeoning business engine that the Conservatives champion as evidence of a sturdy economic recovery. Thamesmead could be Hartlepool, it could be Rochdale, or any number of poor towns isolated from any semblance of a recovery. It is in places like this that a very real underclass begins to spread like a malignant rot and, wherever it may be, the salient fact remains that business has done very little to decelerate or reverse it.
Business and Poverty
The epoch of global laissez-faire - enshrined and exported by the ‘Washington consensus’ - is heading into terminal desuetude. This should come as scant surprise given that free market capitalism is, by its very nature, self-destructive; eroding the traditional foundations that enabled its implementation – trade unions, a strong state, widespread political engagement, even the family unit itself.
The economic shift from productive enterprise to financial manipulation, in which free marketeers play the inflated ‘virtual economy’ like a casino, has remade the political landscape beyond the possibility of substantive reversal. Even after the longest recession in living memory, Washington’s consensus still remains firmly enshrined. As John Gray elucidates in his prophetic ‘False Dawn’, it remains the last bastion of Enlightenment thought that was promoted as a utopian ideal to transform western civilisation, particularly post-Cold War, to ‘democratic capitalism’.
Politically, Britain (like America) has been neutered by the business sector, and yields to London pumping like a sclerotic heart to try and keep the rest of the country from atrophying. Anyone deviating into heretical thoughts against the state-inculcated neoliberal faith is pilloried as an ‘enemy’, as Chancellor George Osborne expressed recently in an Institute of Directors speech, urging them to “raise their heads above the parapet” and fight back against charities and pressure groups that “make arguments against the free market and stand in the way of prosperity”. Many view Ed Miliband’s vague challenges to the orthodoxy as mere fig-leaves for how toothless Labour have become since Tony Blair leapt gleefully into bed with neoliberalism’s acolytes. Since these dogmatic political elites have, in effect, abdicated their social responsibility to the free market system, and devolved morality to the ever-expanding charity sector, business must surely take over the reins.
What can business do?
Banks and investment firms must be encouraged to increase their lending to small and medium-sized enterprises, since the lack of credit remains a major obstacle to upward mobilisation. Despite an estimated £1 trillion of public finance being used to bail out financial institutions, a 2013 report by the British Banker’s Association candidly revealed a lending fall in over 80% of the UK’s 120 postcodes between 2011 and 2012.
Establishing a state-run bank in which loans could be offered with favourable interest rates to lower earners might appear worthy, but could result in a ‘catch 22 situation’, whereby a bank lending public money to the higher risk poor would in effect be following ‘immoral’ banking practices, whilst a more prudent bank would be deemed ‘moral’. However, continued low lending merely serves to turn the poor into ‘Wonga bait’, whose vastly inflated interest rates only exacerbate poverty.
Much is made of today’s children being taught metadata and coding, but still it is possible to leave school with negligible economic and business skills. Improved education in financial planning is vital, as only through being better informed can those from disadvantaged backgrounds hope to transcend their circumstances. The government should offer more subsidies to businesses that invest in young people from all backgrounds, through sponsorships and apprenticeship schemes. The scales of respectability need to be rebalanced away from favouring academia and further towards vocational training; the fertile ground that businesses should be far more active in cultivating.
Perhaps the most axiomatic step for business to take in alleviating poverty is by increasing wages and job security. It would seem a simple solution for businesses to pay enough so that their employees could afford to live and work without having to rely (as an astonishing proportion do in Britain) on welfare; and yet the prolonged degradation in wages and conditions (reported by the TUC recently as being at the lowest levels since the 1860/70s), is the overall legacy of unregulated global free trade.
Noam Chomsky has described tax credits as ‘basically a subsidy to employers for them to provide low pay’, which adheres with the formation of a ‘precariat’ – those who live a precarious existence on the periphery of society without hope of improving their situation. It was Alan Greenspan’s lauded theory of a healthy economy (success based on ‘growing worker insecurity’), that has become enshrined as the default mentality for free market capitalists; as evidenced by the expansion of zero-hours contracts that pinion people into poverty as living costs rise inexorably above wages. Right the way back to Adam Smith, the reliance on slavery conditions and a disenfranchised workforce was recognised as a poor economic policy for businesses to pursue.
The contrast between politics and business in terms of trying to engage the poorer classes is an issue of potential gains filtered through the prism of self-interest. Politicians may not seek to expend much energy courting those on lower incomes since they make up a declining proportion of the voting base (the IPPR reported that by 2010 in the UK, individuals in the highest income group were 43% more likely to vote than those in the lowest). Conversely, businesses see homogeneous potential customers and it is this fundamental difference that should inspire the establishment, hiring and enfranchising of those in deprived areas who will consume goods and services far more reliably and, in some cases, more loyally, than voting. Such was the strategy of Henry Ford who, realising that his Michigan labourers were also potential customers, raised wages so that they too could afford to buy the Model-Ts they were producing.
As Thomas Piketty has illustrated, the rise of ‘super-managers’ has led to executive compensation spiralling beyond all merit and into realms of absurdity (since 1950, the US CEO-to-worker pay ratio has increased to 1,000%). It is this continual accumulation of wealth amongst the ‘1%’ that represents the Gordian knot of capital pulled ever tighter so as to prohibit any downwards unravelling.
Entrepreneur Nick Hanaeur stated in a challenging missive to his ‘fellow plutocrats’ earlier this year, ‘the most insidious thing about trickle-down economics isn’t believing that if the rich get richer, it’s good for the economy… it’s believing that if the poor get richer, it’s bad for the economy’.
The multiplier effect stipulates that capital will circulate several times over before eventually dissipating. Since a greater portion of the poor’s earnings are likely to be funnelled back into the economy through consumption, rather than being stored in offshore tax havens, savings accounts or property portfolios, they will have a greater effect on the economy’s multiplier and subsequently growth. At the same time, the welfare state would not be relied upon to cast quite so many lifelines into the turbulent waters of poverty.
Business and Third World poverty
Insofar as the question of how the business sector can reduce poverty has been pondered at all in recent years, it has related predominantly to non-OECD countries where extreme levels of poverty persist.
Abhijit Banerjee and Esther Duflo’s ‘Poor Economics’, concludes that the impetus should be on handing anti-poverty policy back to the poor who are better placed to instigate necessary improvements. They point towards business-centric Community Driven Developments in which communities choose and manage collective projects, successful in post-conflict environments such as Rwanda, Sierra Leone and Indonesia.
This chimes harmoniously with the social entrepreneur Paul Polak, who has promoted the theory that instead of charities, NGOs or international aid dominating the fight against poverty, they should give way and instead allow big business to climb into the ring. As evidence of his logic he points to China’s businesses connecting with the global economy, thereby elevating millions out of extreme poverty; or the rate of business expansion in Africa, one of the world’s fastest-growing economies.
With market-bias injustices in mind, such as medication in a Mumbai slum costing ten times the amount in the centre, the era of Corporate Social Responsibility (CSR) has bloomed into life; the maxim being that profitability breeds that most enigmatic of things - sustainability. The emerging business case is now aimed at seeking out the opportunities at the ‘bottom of the wealth pyramid’; developing profitable markets that concurrently serve poor consumers and improve their living standards. An example of such a scheme is Unilever’s Pureit, a product designed for water filtration that was marketed and sold widely in Nigeria. Pursuing profit in a competitive market and providing a social good are the dual poles by which the canvas of deprivation can be hoisted.
Of course, it is wise not to overstate corporate altruism; for, when a business decision must be made in favour of either CSR or shareholder expectations, it doesn’t take a mystic to foretell which way the axe will fall. In addition, the risks of pandemics such as ebola, or national governments reversing business-friendly regulations (for instance, the Irish government’s recent scrapping of the ‘double Irish’ tax policy), must be shrewdly factored-in when deciding where and how far to embed corporate-regional foundations. Transparency, local accountability and enforceable regulations must be promoted above a ‘profit at any cost’ mentality to safeguard as far as possible against tragedies such as Rana Plaza.
Do the business sector want to reduce poverty?
It is this ‘profit at any cost’ mind-set that gives rise to the question that must be posed as to whether business actually can influence, or even necessarily covets, the reduction of poverty at all.
The notion that a business is duty-bound to its shareholders to pay the lowest possible rate of tax, even if this involves exploiting nefarious loopholes prised open by forensic accountants, whilst at the same time advocating and pursuing policies of social responsibility, is a classic case of cognitive dissonance.
The common apologia for business malpractice is, ‘they all do it’ and ‘its lax regulations that enable their actions’. However, as businesses have become enshrined in law as ‘human entities’, they must surely be held to the same morally responsible principles as human beings, who have a tacit duty to society inasmuch as they have a duty to pursue their own interests.
Leaving the grey area of morality aside, it can be said that the state’s ability to tackle poverty is hindered by business finding means to escape paying socially responsible levels of tax, and by exerting an increasing influence on policy. As Owen Jones has written recently in ‘Establishment’ –‘billions are lost through tax avoidance. Accountancy firms say they advise clients to the letter of the law. Yet they are intimately involved in forming the scope and parameters of such laws.’
Of course, governments seeking tax advice from the business community is not strictly negative, but at the very least, the lighthouse beam of scrutiny needs to be trained through the fog of these government interactions with entities that are accountable to nobody save shareholders. The most egregious current example is the TTIP agreements, being conducted behind closed doors that will enshrine the primacy of business over state interests, and (although it cannot be said definitively) it is unlikely that business responsibility for alleviating poverty is at the forefront of the discussions.
People power over business
With these things in mind, it could be argued that those in poverty should pursue collective action rather than wait for business. Throughout employment history workers have had to fight for positive change rather than wait for the philanthropy of business leaders; women’s equal pay, improved safety standards, fair redundancy packages, minimum wage levels, and so on.
Whether this takes the idealistic form of anarcho-syndicalism, in the form of worker-owned enterprises that consolidate power at the base rather than at the top, or at the very least have workers from across the business hierarchy represented at boardroom level, there are improvements that could be made to effectively enfranchise the lower classes. In practice, such developments can be seen in the many worker/community-owned cooperatives in the old ‘rust belt’ of Ohio where workers have taken direct responsibility over management of the businesses in which they have a stake.
To begin with, low income workers need to become far more active in a union sector that desperately needs reenergising, along with a socialist movement that has at its core the interests of working people. Parties such as UKIP should not be able to claim a monopoly on the electorate’s disenchantment with the system.
With workers acting in coalition with unions, positive action can be achieved. Just look to progress currently being made in the US with fast-food workers (traditionally one of the most exploitable sectors) successfully campaigning against McDonald’s for an increase in the minimum wage to $15/hour. Yet the denigration of British trade unions has become so total due to the legacy of the 1970s, that it cauterises any notion that they could be healthy entities if operated in a less factionalist and more efficient way; whereas, equally myopic financial institutions are repeatedly deemed ‘too big to fail’, excused by the establishment and allowed to continue without notable reform.
Conclusion
Walking around Thamesmead, you could be forgiven for thinking the problems of poverty are set as adamantine as concrete. Yet if meliorism can overtake pessimism and the collective will dictate, society could function not just for the benefit of the few but for all, including the places deprivation seems most intractable. The heavy shroud of Enlightenment ideology that has culminated in neoliberalism may be fast wearing down to its hempen strands, but it will take a seismic effort of comity to bind society tighter together with an alternative fabric.
In his message to plutocrats, Nick Hanaeur warns of ‘the coming pitchforks’ should they fail to act, but such paranoia should remain unfounded. The business world must realise that their relationship with society’s poorest could be mutually beneficial, if only there is the creative innovation, humility and strength-of-will to make it so.
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