The global business and political constellations are studded with star managers capable of delivering on particular objectives. Most business managers want to do what is best for their shareholders. Political managers want their party to gain or remain in power in the next election, which is never more than five years away.
Sadly, the hallmarks of good leadership in business and politics are rarely seen in today’s realities. Last week I discussed how in the previous 40 years, the gap between the haves and the have-nots in our society kept increasing as the winners of capitalism cared very little about those who lost out. Massive economic changes found many workers unprepared to reinvent themselves and still prosper in a fast-evolving economic scenario.
The fractures in the economic model adopted by most, but not all, western countries are now too big to be left unattended without risking substantial social disruption. Maverick populists exploit the greed of business leaders and the selfishness of most politicians and project themselves as the solution to the problems that many workers displaced from the new economy are facing.
FT journalist Martin Sandbu and a group of economists who are concerned by the risks of rising earning and social inequality have some interesting proposals on how politicians and the business community can come up with a blueprint of an economy that works for all. They also challenge some of the strategies being proposed by populist politicians like President Donald Trump who believe, for instance, that today globalisation is the root cause of all economic problems.
Social dumping and reliance on low-productivity, low-cost labour has done severe damage to the concept of globalisation. But the solution can never be the reversal of globalisation.
Investing in more automation rather than importing cheap labour should be the way forward. This strategy has worked in Scandinavian countries, and it should work elsewhere in Europe if only we had politicians that are prepared to look beyond the next election when defining their economic strategy. The Scandinavian socio-economic model remains the most relevant for economic recovery.
A second priority should be the shifting of labour-market risk from employees to employers. This shift implies more radical policies to curb precarious work conditions for the low-skilled low-paid workers. It also means introducing family-friendly social measures for all families to strike a balance between work and family life. Better investment in public education and health is an essential element for improving the mobility of workers.
More automation should be the way forward
These changes will imply increasing corporate taxes and lowering income tax rates. But this should no longer be a taboo strategy. Those countries with weak educational achievement and reliance on low-paid low-skilled workers for economic growth need to consider introducing new taxation on wealth rather than work.
Taxation competitiveness can easily attract the aggressive reaction of powerful countries who resent beggar-thy-neighbour economic tactics.
Macroeconomic policies need to aim to promote more investment in job creation with a particular emphasis on jobs that enable workers to live decently. Governments and central banks will do well to support those entrepreneurs who review their business models regularly to make them more sustainable while ensuring that they retain as many of their workers as possible.
Diversification of economic activities is another essential element to ensure that when an economic downturn erupts in any sector, the rest of the economy continues to create wealth. This diversification is a tough challenge. Investing in today’s ducks that lay golden eggs seems so tempting and deceptively risk-free.
Economic sustainability is more likely to be achieved by countries that continuously revise their business model to venture in new areas where their skills base gives them a competitive advantage. This is why education, rather than just smart legislation, can lead to a better long-term return for investing in a particular sector.
The hallmarks of good leadership include the ability to think the unthinkable and to address long-term challenges sooner rather than later. It is so tempting to go for the low-lying fruit and let your successor tackle the hard-to-reach fruit at the top of the tree.
Like many, I was surprised how middle-of-the-road, boring politicians suddenly adopted radical policies to fight the pandemic. This proves how true it is that people produce their best results when their backs are against the wall.
Mainstream political parties have for long abandoned ideology. They now need to reinvent themselves by taking radical decisions to make the economies they serve work for all, rather than just for the few.