Sunday, 8 March 2009

What Does "Sustainable Capitalism" Mean To You?

The latest series of stock market plunges has signalled capitulation by the last of the diehard, old-school capitalists. We've seen significant dividend cuts amongst old faithfuls. The chairman of a major bank has finally conceded that he can't also feasibly chair a major reinsurer, and the Financial Times has launched "Capitalismblog", the first post of which is "A Survival Plan for Capitalism".

This suggests we're moving through the 'acceptance' phase of the Credit Crunch "change curve", and starting to figure out how to adapt to a changed economy.

So what is the new reality, and how can each of us adapt to it?

Clues emerge from a number of converging trends:
  • Politically, we still buy New Labour's twist on Thatcherite capitalism - it's okay for everyone (not just a some people, Madge) to make money, so long as it's not at the expense of people on lower incomes. But we've now learned that this too can be overdone. Mightily. So, we're hastily adding the words "within reason" and trying to figure out what that really means. But we are far from entering a new age of conservatism, or attempting to maintain the status quo (we're in a hole!). And we are certainly not keen on the ugly notion of a "no-growth economy". Nor should the desire to steady the financial system, by nationalising the banks if necessary, be seen as a vote for a centrally-planned economy or the mass redistribution of wealth from rich to poor. If anything, the rhetoric is for a return to consumerism in an effort to get people to at least buy something. But what? And for how much?
  • As previously noted, this political process has coincided with a plunge in faith in society's institutions during the past 30 years, yet an increase in our political awareness and informal political action. The recent Eurobarometer poll on the subject found that only "50% of EU citizens trust their local and regional authorities, a level slightly higher than for the European Union (47%). This level of trust in the local and regional authorities is considerably higher than the level of trust in national governments or parliaments (34%)." With trust levels so low we aren't likely to look to have much faith in the authorties' efforts to sort all this out, and Gordon hasn't helped in the UK by prematurely claiming he'd saved the world.
  • Similarly, we've seen the rise of lean, technology-based facilitators who've enabled us to wrest control of our own personal affairs from the one-size fits all experience offered by the likes of music labels, book publishers, retailers, package holiday operators, banks and political parties. Such platforms and marketplaces are based on rules that promote openness, fairness, and transparency, and these principles could extend to the democratisation of the financial markets, now that the individual taxpayer has a seat at the table.
  • Two corollaries of the last two trends are that leadership in the new economy is a bottom-up dynamic and brands need to facilitate rather than dictate to their customers.
  • I've also previously suggested that we've entered the Age of Conspicuous Thrift, in which our preferences for certain goods will increase as their price falls, over and above the traditional supply and demand effect. This partly stems from financial necessity, but also from a desire to demonstrate that we are savvy, pragmatic, authentic and environmentally aware. As opposed to Madoff investors. In essence, this signals a commitment to sustainability rather than merely consumption, although chasing prices to zero might ultimately prove counter-productive.
  • Of course, I would love to point to low cost government as a trend, but ministers and officials seem incapable of either preventing structural waste (initiating stupid projects) or improving operational efficiency. We suffer from the same top-down thinking here, as we do in the financial services industry. Here, too, only bottom-up pressure from the participants will drive change - as it has done to some degree with MPs expenses.

The term "sustainable capitalism" itself encompasses many aspects of these trends.John Ikerd's book deserves a mention, and Al Gore and David Blood use the term in a global, macro-economic sense, backed by a sophisticated grass-roots programme. However, a Google search reveals that at least the debate over the meaning of the phrase is transcending the champagne and canapes at Davos - 'normal' people are really discussing and wrestling with the concept of living sustainably.

How all this looks and feel to you on a personal level is going to vary enormously. My own personal economic journey suggests that if you're in denial about any of these trends, you'll need a new mindset to get comfortable in the new economy.

For me, that change in mindset evolved in stages from one of a fairly integrated cog in the corporate wheel in 1996, to thorough disillusionment in early 2004, to a fairly confident "myself as a business" outlook from August 2005. Each of us is an entrepreneur, as Reid Hoffman recently pointed out - thanks, Wendy. This marked a transformation from pressing my nose against the glass of Jaguar and Mercedes showrooms, to taking some satisfaction in the plan to drive a lesser marque until the wheels fall off. I still enjoy a decent glass of wine and even the odd cigar, but I've also focused on the 7 lifestyle aspects identified by Green Thing as helpful to the environment.

As with most consumer choices, apparent inconsistencies from this perspective are actually driven by rational concerns from other standpoints. I won't be buying an electric sports car, because the core proposition is still "speed", which feels too self-indulgent today. In fact, the pragmatist in me feels okay with the notion that many UK speed limits will be reduced from 60 to 50 mph - the first such change since 1978. Speed doesn't matter so much in a world where we work longer and harder, communication is instantaneous, and the UK roads are basically parking lots. Similarly, I ride to work on a motorcycle not because it goes fast, but because I can squeeze past all the parked cars, eliminate variation from the trip and use my time more efficiently. My fast, "green", electric sports car would just sit around in the traffic.

But enough from me. What sort of journey does "sustainable capitalism" mean for you?

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