Sunday, 20 May 2007

Actual Existing Capitalism- An Update

With some people in the City making silly amounts of money for doing eff-all (at least sportspeople, musicians, actors/actresses, writers and those in the arts entertain people on occasion), nearly every big company in Britain subject to speculation that it will be taken over by some body or other (more often than not a private equity firm), and radical opposition to the status quo apparently at sixes and sevens (the wipeout of the Scottish Socialists and the failure of the Labour Left to stick a candidate up to challenge Gordon Brown's coronation as Labour's leader suggest that British Socialism currently couldn't organise a piss-up in a brewery) it might seem that all is going swimmingly for the collective behemoth of corporate capital, financial institutions, private equity and their numerous hangers on (not least in the major media) as it reduces the rest of us (ie blue and white collar proles, small businesspeople, the self-employed, the bohemians and everyone else who doesn't get a kick from ordering others around) to the level of chattel.

However, it doesn't have to be this way. When I was younger I was inclined to make some daft predictions about the future on the planet. Now I'm older, if not much wiser, I rarely dip into the water of political Mystic Meggism (although I will stick to my view that the next election will result in a hung parliament followed by a Government comprising an-all party alliance of "modernisers" "reforming" us all to death). Even when I fearlessly predicted the future I was not a fan of "futurology", which appears to me merely to extrapolate present trends and stretches them forward ad infinitum. Having said that, there was a piece in the news a few weeks back (I will track it down!) where amongst the usual predictions of more climate change, terrorism etc, a group of futurologists said that the early 21st Century will see the rise of Middle Class Marxism in the West.

The cynical may say that Marxism has always been middle class, right back from the days of Marx and Engels. However, for most of its history Communism in Western Europe managed to attract a following in heavy industry, such as the engineering and mining sectors. As Eric Hobsbawm wrote in a recent edition of the London Review of Books (April 26th- not online, I'm afraid) the CPGB was fatally undermined from the 1960s onwards by the expansion of higher/further education, as young intelligent working class radicals, who previously would have stayed in manual jobs and joined the CPGB to organise their fellow workers, went to university or polytechnic, and were effectively declassed. It is from the 1960s onwards that Trotskyism makes a noticeable appearance on the British political scene, as most Trot groups were able to recruit students in higher/further education. Those who stayed in Trotskyite groups then moved on into public sector jobs ie teaching, local government, the civil service. With the decline and collapse of the CPGB, very few Marxist groups on the British mainland had any real base in the old style working class, based around heavy industry and urban council estates. Militant, which lives on in the Scottish Socialist Party/Solidarity and the Socialist Party of England and Wales, and Red Action, which has transformed itself into the Independent Working Class Association, are the only two Marxist groups that have any real presence (and council seats) in traditional working class areas anywhere in Britain.

Bit of a detour there! Back to possible Middle Class Marxism in the future. By the number of people who wear Che Guvera T-shirts around the place you could have said that the time is rotten ripe (Copyright Lenin/Trotsky Productions) for such a phenomenon. However Che and the ideas he represents will just remain a fashion accessory unless the material conditions encourage people to push matters further. It must said that the moment the Middle Classes (there is more than one, just as there is more than one Working Class, and more than one Ruling Class ie at least in countries of the Anglosphere, each ruling Establishment has its Tory and Whig wings) tend to look in horror at those below them ie those they see as the Lumpenproletariat. When they see those above them, those who benefit most from the continued existence of Actual Existing Capitalism, as the main threat to their way of life, Middle Class Marxism will be on the agenda. As this piece by Peter Wilby suggests that time is perhaps closer than one could imagine.

Peter Wilby on why inequality will top the agenda, New Statesman, May 21st 2007

Consider this headline from the Daily Telegraph business section: "The backlash has started against income inequality." Or this, from the Daily Mail leader page: "I deplore the billionaires who contribute so little to Britain." Or this, from the Washington Post: "Free trade's great, but offshoring rattles me." That last one doesn't seem so startling until you know that the article beneath it is written by Alan Blinder, a Princeton economics professor and former vice-chairman of the Federal Reserve. A rough equivalent would be: "God's great, but the Resurrection rattles me." By a Vatican cardinal.

These three articles, along with much other evidence, suggest we are on the brink of a great political transformation, comparable to the worldwide shifts to welfarism in the 1940s and to neoliberalism in the 1980s. I do not think the assumptions that are now shared by just about every government in the developed world - particularly new Labour and now, following Nicolas Sarkozy's election, even the French - can survive another decade. Inequality is about to move back to the top of the political agenda. It will be put there, not by the working classes or by the socially excluded, whom we usually regard as poor, but by the middle classes.

They are about to suffer what hit the working classes 20 years ago: the effects of globalisation. As Blinder puts it: "We used to think, roughly, that an item was tradable only if it could be put in a box and shipped. That's no longer true. Nowadays, a growing list of services can be zapped across international borders electronically."

So far, this has involved mainly low-skill jobs such as telemarketing. But computer programming and accounting are already moving offshore. Architects' services, engineering design, radiology and some legal business (drawing up contracts, for example) could follow.

So could teaching and even journalism. For example, British GCSE and A-level students can use an online tutoring service from India this summer, while Reuters news agency has a thousand staff in Bangalore, including a hundred writing financial news stories. A California news website is recruiting Indian reporters to cover local council meetings through a live internet feed.

All this, says conventional economics, is for the best. The costs of services will fall, as the costs of goods have done, and productivity will rise. Western resources will be released for new industries, new products, new jobs. We'll be richer, and so will India and China. But think of the programmers and accountants who got themselves educated and trained as they were told to do, and now find their skills don't make them any more employable than assembly-line operatives.

Blinder reckons 30 to 40 million American jobs - between a quarter and a fifth of the total - are potentially offshorable. Not all will go, but the threat will send a shiver down the spine of Middle America and, Blinder predicts, transform its attitudes to social safety nets.

Combine that with the rise of the super-rich. This is another effect of globalisation: capital can ignore international barriers and drive down taxation by setting one country against another. Under new Labour, Britain has become a tax haven for the very wealthy and, as we are slowly realising, the distorting effect on the London-area housing market is profound. A generation of middle-class youth is moving into its thirties without the smallest prospect of owning a home.

That is what lies behind those headlines in the Mail and Telegraph, which might have been taken from the New Statesman. The Mail writer notes that "under new Labour, the worth of the 1,000 richest people in the country has soared by 263 per cent" and that many of them are foreigners. The Telegraph columnist complains: "The politically influential middle classes are missing out most. They pay proportionately more in taxes and are failing to benefit from the massive increase in salaries enjoyed by the super-rich." Something is stirring in the political undergrowth and Gordon Brown's chances of winning the next election depend, I suspect, on understanding what it is.

Globalisation and the super-rich: for ten years it has been heresy in new Labour's eyes to resist either. But these issues will shape the next decade, and Brown cannot escape them.

No-one has ever explained what people in the West will do when all the "old" blue-collar industries have been closed down and most of the "new" white-collar jobs have been exported "off-shore". I don't have a real problem with Western Europe becoming one big historical theme park playground for rich tourists from the emerging economic giants of China, India etc (if the Big One blows up between the USA and an Axis of Affluence the other side of the globe Europe might well be the safest place to be). However I can't see how millions of underemployed people in Europe, North America and Australasia can live on credit indefinitely. Something's got to give eventually.

I've worried about Britain's economic future for a long time. We've basically got very little industry left (thanks largely to that traitorous hypocrite Margaret Thatcher) and urinated the windfall of North Sea oil against the wall (ditto). We've become perilously dependent on overseas inward investment (ditto). If the world economy should go belly up at some point most overseas inward investment in the UK will pull out pretty quickly (most other countries still have some concept of the "national interest" meaning protecting their own economies first in bad times). Then we'll be on our own basically (although the usual useful idiots will probably use such a crisis to push for closer links with the EU and/or the USA) and do you think we have the gumption to pull through? The article below should make anyone question our ability to do so.

Talk is cheap: We don't manufacture anything any more. Most of the world won't buy our records or watch our films. Only our gift of the gab is keeping Britain's economy ticking over. But how long can the hot air last, ask Larry Elliott and Dan Atkinson
The Guardian, Friday May 18, 2007

We all know what the Germans are good at. They do precision engineering: all those quietly humming washing machines and the cars with their sleek bodywork and gleaming chrome. We also know that Germany is a country in serious trouble, failing as it has to embrace the need for flexibility in the tough new global environment. We know this because Gordon Brown has told us many times over the past 10 years that the European model is washed up.

Germany was so abysmally competitive last year that it ran a record trade surplus and was the biggest exporter of any country in the world.

We know what the Japanese excel at also. In Tokyo and Nagoya there are world-beating companies in the field of electronics, designing the latest consumer gizmos. We know, too, that despite Sony, Panasonic and Mitsubishi, Japan, like Germany, is a country in serious trouble. It, too, has tried to stick its head in the sand and persist with an industrial model that may have worked in the 1960s and 70s but is an anachronism in 2007. Poor, washed-up Japan ran a trade surplus of around £50bn last year as it found a ready market in China for its exports.

And so it goes on. The French have an ultra-competitive manufacturing base that specialises in food and drink; the Scandinavians are a dab hand at mobile phones; the Americans do computers, aircraft and movies; even the poor, benighted Italians have upmarket designer clothes. So what is Britain good at? Where does the UK fit in this world of changing economic geography, in which nations will increasingly concentrate on the things they do best? The answer is simple. We count the money and we do the bullshit.

Britain, on the 10th anniversary of Tony Blair's arrival in Downing Street, is a place whose default mode for earning its crust is to employ the gift of the gab. The Germans may have the engineers, the Japanese may know how to organise a production line, but the Brits have the barristers, the journalists, the management consultants and the men and women who think that making up jingles and slogans in order to flog Pot Noodles and similar products is a serious job. It has the deal-makers in the City who make fat fees by convincing investors to launch bids for companies, and the corporate spin doctors who tell former pals in financial journalism that tycoon X will make a better fist at running Ripoff plc than tycoon Y. It has the publishers and it has the "film development" companies, some of which have actually been known to produce a film. The four iconic jobs in 21st-century Britain, according to a thinktank called the Work Foundation, are not scientists, engineers, teachers and nurses but hairdressers, celebrities, management consultants and managers.

Before he came into politics, Blair was a lawyer, as was his industry secretary Alistair Darling and the transport secretary Douglas Alexander. Brown's sole experience of the go-getting world of the private sector was as a journalist for Scottish Television. Not that the other parties are much different. David Cameron prepared for the task of repositioning the Conservative party by acting as PR for Carlton TV in the 1990s. He was described by one business editor, the Sun's Ian King, as a "poisonous, slippery individual" and a "smarmy bully who regularly threatened journalists who dared to write anything negative about Carlton". When you get down to it, this is a country that tries to make its living from talk, talk and more talk.

But how has Britain fared when it comes to paying our way in the world? Have the traders in the forex markets and the regulars at the Groucho Club earned enough to make the UK's age-old problems with the current account a thing of the past? Sadly not. Britain still has a world-class pharmaceutical industry, and still makes a tidy sum from selling arms abroad, often to some pretty unsavoury regimes. Yet the deficit in visible trade in goods - stuff we make - was more than £60bn in 2006. That's around 5% of GDP, far bigger than anything the UK has witnessed in the postwar period. Trade in services - accountancy, insurance, banking, architecture, advertising - brings the deficit down to around 4% of GDP. But for the past decade, the only thing that has made the deficit manageable is that Britain has been earning more money on its investments abroad than foreign investors have made here. One way of looking at Britain is as one big offshore hedge fund churning speculators' money while asset-strippers draw up plans for the few remaining factories to be turned into industrial theme parks.

That is not the way the government sees it, naturally. Labour believes Britain is at the cutting edge of the knowledge economy and that Britain's well-educated (sic), highly skilled (sic) and entrepreneurial (sic) workers are ready to kick German, American, Japanese and Chinese butt all round the global village.

The essence of successful bullshit is that the really top-notch exponents not only manage to convince others but also manage to delude themselves. Some explanation has to be provided for Britain's increasingly lopsided economy, dominated as it is by those not-so-heavenly twins, the City of London and the housing market. And the explanation is that the UK's future lies not, as might seem apparent at first glance, in the drinking factories, the estate agencies and the clothing chains that make up Britain's monochrome Identikit high streets, but in the knowledge economy.

Even more laughably, some cling to the idea that the way ahead is the even more nebulous "creative economy". This fantasy, a particular favourite, is that while Britain may no longer carry the overt industrial clout it once did in the days when it was the workshop of the world, it can still be the world's creative hub. The country of Shakespeare and Wordsworth, of Chaucer and Larkin, still has a literary tradition of which to be proud. Rock'n'roll is an English-language medium and there are billions to be made by our cutting-edge bands. Britain's television is a cut above the rest, and the only reason the film industry has declined since the days of Passport to Pimlico is a lack of government backing, now happily remedied, for the inspirational new film-makers emerging from university courses.

Well, we did warn you that the bullshit merchants are good at what they do.

We'll return to the creative industries, but you have to admit that Britain as the world's creative hub sounds a lot more impressive than saying that Britain is at the cutting edge of the call-centre economy, even though the number of people answering phones and inputting data into computers in white-collar industrial sheds now stands at just under one million. And it really would not do to say that Britain is a servant economy, even though there are at least four million people "in service" and the proportion of the population employed by the well-off to do their cooking, cleaning, childcare and gardening is as high as it was in the 1860s.

This, in the modern political jargon, is not the right sort of narrative. The idea that millions of people are toiling away in menial, low-paid, low-skill jobs jars with the impression Blair and Brown wish to convey: that Britain is an exemplar of how vigorous and committed western nations can ready themselves to meet the challenge from Asia. This, though, has proved only a minor difficulty. In Bullshit Britain you simply come up with a different kind of reality that provides you with the sort of narrative you prefer.

The story as far as New Labour is concerned is that our failure in the second half of the 20th century to exploit the potential of higher consumer spending on cars, washing machines, hi-fis and personal stereos has actually left us better placed to exploit the sunrise industries of the 21st century - biotechnology, robotics, environmental protection, pharmaceuticals. Successful economies will require brains more than brawn, and Britain is full of smart people.

There is an element of smoke and mirrors in all this, however. It is true that as countries develop, the number of people employed in services tends to go up. The reason for this is that productivity growth in manufacturing is much faster than it is in services: it takes far fewer hours to make a car today than it did 100 years ago, but the same time to cut someone's hair. It is also true that each wave of capitalism since the industrial revolution has been based on a distinctive technology: coal and steam, then railways and electricity, then mass transportation and consumer goods. Although the vast numbers of poor people in India and China (let alone Africa and Latin America) suggest there will still be strong demand for consumer durables and machine tools for a good while yet, information technology and the human genome may be at the centre of the next long upswing.

But how do you square this with what's happening in Britain? It's simple: Britain has a long tradition of excellence in science, especially chemistry, and the government's commitment to the knowledge economy is evident from its target of ensuring that 50% of young people go to university. New Labour, therefore, has a neat syllogism. Britain is turning out more and more graduates. They are entering the workforce with the knowledge they have acquired through the education system. So, work is becoming more knowledge-based.

The problem, though, is that the syllogism is false. Many graduates are doing fairly menial jobs for which they do not need a degree (or anything like it). Research by Essex University's Institute for Social and Economic Research in 2002 found that a third of men and 41% of women were overqualified for the first posts they took up after graduating. As James Heartfield's study Great Expectations: The Creative Industries in the New Economy found, most employment growth has been, and will continue to be, at the low-skill end of the service sector - in shops, bars, hotels, domestic service and in nursing and care homes. The fastest-growing occupation in the UK between 1992 and 1999 was hairdressing.

'Braining up" may not be a bad strategy for the UK, and there are undoubtedly areas of the knowledge economy where Britain excels. But the size and strength of this high-productivity, high-profit sector has been massively exaggerated. A case in point is spending on research and development, something that is seen as a vital ingredient in developing new product lines and is one of the government's economic priorities. Every year the Department of Trade and Industry publishes an R&D scoreboard to show how UK firms compare with the rest of the world. The findings are chastening, with Britain's presence virtually insignificant in seven of the 10 sectors measured. More than half of the UK's effort in R&D is spent in just two sectors, pharmaceuticals and aerospace - two sectors, incidentally, where support from the government via the NHS and the Ministry of Defence has been considerable over many decades.

Analysis by the Guardian showed that one factor in Britain's poor performance was the higher cost of raising funds for investment in the UK, a constant complaint from industry for at least a century and probably longer. In all 10 sectors looked at - automobiles and parts, IT hardware, pharmaceuticals and biotechnology, electronic and electrical, software and computer services, chemicals, aerospace and defence, engineering and machinery, telecommunications, and health - the UK cost of funds was among the highest in the developed world.

A report last year from the National Endowment for Science, Technology and the Arts (Nesta) admitted that, judged by the traditional yardsticks, Britain does poorly. It devotes a smaller proportion of national income to R&D, and that investment tends to be heavily concentrated in just one or two sectors. According to one international study cited by Nesta, only 38% of British enterprises were engaged in "innovation activities" - three percentage points below the EU average and well below Germany (61%), Sweden (47%) and the Netherlands and Finland (45%). The picture was still worse when more radical forms of innovation were considered: only 21% of UK enterprises had introduced new or significantly improved goods or services over the previous three years, compared with an EU average of 31%.

Yet, according to Nesta, Britain still had "one of the strongest economies in Europe". This, said Nesta, was a paradox. If innovation was really so important, how come the UK had been growing robustly? Its answer was simple: the data were misleading. "The resolution of this paradox lies in the way in which innovation has typically been measured." Well, that might be one explanation. Another might be that growth in Britain had been boosted by a substantial expansion of the public sector, with Brown using the budget surpluses built up in the late 1990s to keep the economy afloat during a global downturn. Another might be that a colossal wave of property speculation was allowing consumers to borrow against their main asset and so live beyond their means.

Nesta's list of areas in Britain where innovation was alive and well only heightened the suspicion that it was scratching around for some good news. These included the National Cycle Network, regulations and incentives to improve social housing, networking among NHS scientists that has resulted in new genetic tests, and "aggressive" tax planning. Now, it could be argued that a National Cycle Network is a fine idea, but so was the idea to create the National Parks during the Attlee government. Similarly, NHS scientists have been working to alleviate pain and save lives since 1948. The idea that some of the smartest (and best-paid) people in Britain spend their time dreaming up ways for the super-rich to avoid paying tax would be fine economically, if not perhaps morally, were the proceeds of this innovation sufficient to make up the deficiencies elsewhere.

Still, the fantasy lives on that even if Britain eventually outsources all its manufacturing to cheaper countries abroad it will still be able to do the tough and lucrative bits - the design for new products - at home. In the days of Cool Britannia back in the late 90s, Blair called the UK the "design workshop of the world", while three years later, the Department for Culture, Media and Sport noted that "Britain is a top exporter of design worldwide and many design consultancies earn a significant portion of income from work outside Britain".

Not, however, as much as they did. Overseas earnings from design fell from £1.4bn in 2001/2 to £699m in 2004/5, while the number of people employed in the design workshop of the world fell from 82,000 in 2000/1 to 71,000 four years later.

Optimism, though, is what Bullshit Britain is all about. Some of it, to be fair, is justified. Britain has real and enduring strength in business services: in accountancy, banking and insurance it runs a healthy trade surplus. The City is one of the world's three financial hubs, and perhaps the most vibrant. Some of the claims made for the new knowledge economy are, however, nothing more than hype, and nowhere is this more true than in the case of the creative industries.

The idea that Britain could be the Athens to the rest of the world's Rome, compensating for its dearth of economic and political clout through intellectual and cultural superiority, first became popular around the middle of the last century. In 1996, David Puttnam took up the theme, writing that Britain was no longer the "island of coal surrounded by fish" that Nye Bevan had talked of. More questionable, however, was the second part of Lord Puttnam's analysis - that Britain was now "an island of creativity surrounded by a sea of understanding".

New Labour was only too happy to go along with this notion. Blair made much of the fact that he was a member of the rock'n'roll generation, inviting members of the Britpop aristocracy for champagne receptions and letting it be known he liked to play a few licks on his Fender Stratocaster. As New Labour's veneer of liberalism peeled away, rock stars quickly backed off. They soon worked out that the fact that Blair could play the guitar did not mean he was right on; it simply meant he knew the chords to Stairway to Heaven. Even so, the creative industries still feature heavily in government propaganda.

A large number of people work in the creative industries, broadly defined, although not nearly as many as the hype would suggest. There are three times as many people working in domestic service as there are in advertising, television, video games, film, the music business and design combined; the creative industries represent around one in 20 of the people working in Britain today. Between them they account for around 4% of UK exports of goods and services but, as the Nesta report made clear, it is hard to make serious money: "The UK's creative industries are facing increasing international competition . . . UK television exports have fallen for the second year running (despite an overall increase since 1998). In design, overseas earnings have halved since 2001, while the value of exports in music, the visual and performing arts in 2003 was down 20% from 2000."

The report goes on to note that employment in advertising had fallen by 20,000 in three years, after reaching a high in 2001. Film production spending was nearly a third lower in 2005 than in the previous year. The number of people working in games development had fallen by 6% since 2000.

Despite repeated attempts to use romantic comedies starring Hugh Grant to revive the British film industry, there is not the remotest sign of Hollywood's stranglehold on the UK market being weakened. In 2004, US-financed films accounted for almost three-quarters of UK box office receipts, while the number of UK films in 2005 released stood at 37, well down on the peak of 84 in the late 1990s. "The UK industry is vulnerable in structural terms," Nesta concluded. "It is organised primarily around individual film projects rather than sustainable production and distribution companies, as in the US."

That is, perhaps, one way of looking at it. Another way is to draw the conclusion that Hollywood operates like a proper industry; it makes films it thinks punters will want to watch. The UK industry, as Heartfield noted in 2000, is dominated by dilettantes who make films they think punters ought to want to watch: "Down-at-heel bohemians make films about the working classes. Unsurprisingly, mass audiences find these patronising diatribes uniquely unappealing."

The idea that the same may be true of British television has gradually been percolating in the national consciousness over the past few years. Jimmy McGovern, who created one of the better TV series of the past two decades, Cracker, went on the attack at the 2006 Edinburgh Television festival against "latte-drinking, pesto-eating middle-class" TV executives for their patronising and offensive treatment of Britain's working classes. "I am delighted to see the state ITV are in," he said. "It is simply because they have utter contempt for their audience. These executives don't sit around and say, 'What kind of intelligent, informative, thought-provoking programmes would we like to watch?' They think, 'What will the ignorant plebs that watch our channel want to see?'"

When TV executives are not pushing at the boundaries of trash TV, they are importing programmes from abroad to fill the gaps in the schedules. Although the UK television industry employed more than 111,000 people in 2004 and spent more than £2.6bn on original programmes, it was still not enough to meet demand. In 2005, Britain had a deficit of £332m in TV.

Finally, there is music, a sector that has been a real breadwinner for the UK ever since the Beatles arrived in New York in February 1964. Here, too, the recent signs have not been encouraging. A month after they appeared on the Ed Sullivan Show, the Beatles filled the top five places in the US charts; in 2002, for the first time in the subsequent 38 years, a year went by without one British artist making it into the US top 100. The same trend applied to albums.

So, to sum up, the film industry is in trouble, the television industry is in trouble and the music industry is in trouble. The creative industries, for all the attention lavished on them by New Labour, were actually in a much healthier state when Harold Wilson and James Callaghan were in Downing Street in the 1960s and 70s. One way of looking at the British economy of today is to say that there are clusters of excellence around science, finance and the arts. Another way of looking at the economy is to say that the pharmaceutical industry will eventually migrate to the United States, where the money is; that big finance would come a cropper in the event of a bursting of the debt-driven speculative bubble; and that Bullshit Britain reaches its apotheosis in the lionisation of the cultural industries.

It is conceivable, just, that Bullshit Britain really is the future, but that those of us wedded to traditional measures of success are not sufficiently hip to cotton on to the fact. But consider: China and India are churning out more graduates than the UK; science departments in British universities are being closed down; the British band that attracted the most attention in the United States last year was not the Arctic Monkeys but the Who.

It would be comforting to think that Sir Paul McCartney had passed on responsibility for fixing the hole in the balance of payments to his fashion-designer daughter, Stella. The reality, though, is that the iconic figure in modern Britain is neither Sir Paul nor his daughter, but his second wife, Lady Heather Mills McCartney. She managed to woo one of Britain's richest men into marriage and claimed a share of his £800m fortune when the blissful partnership strangely went sour after four years. And she understood the essence of the bullshit economy: with luck and attitude, you can make a tiny amount of talent go a very long way.

Extracted from Fantasy Island, by Larry Elliott and Dan Atkinson, published by Constable, £7.99.

Found some holiday reading there!

Of course, if everything here goes belly-up there will be clamouring for "strong" business leadership to get Britain back on its feet. Some of that clamour will come from the same simple souls who think that Anita Roddick, Alan Sugar or Richard Branson would make a "great" PM. The fact that running big businesses, which are hardly paragons of democratic virtue, is not the same as running a country (at least no-one could accuse the owner of Virgin Trains of making them run on time, a la Mussolini) seems to escape the grasp of some. There is also little evidence that the cliched concept of "strong" leadership in business is in itself a good thing.

Strong leadership in action, Part 473...

Why fearless leaders are something to dread
Simon Caulkin, The Observer, Sunday May 6, 2007

The painful unravelling over the last year of the public and private lives of one of the UK's most iconic businessmen, Lord Browne, is a sobering example of the pitfalls of the cult of leadership. Raising expectations far beyond the capacity of one human to fulfil them - neither BP's successes nor its more recent failings were ever down to Browne alone - hero leaders often end up destroying themselves and wounding the companies that helped to make them.

The love affair with Leadership - capital L - is deep-rooted and pervasive, as a look at almost any copy of Harvard Business Review or Fortune will confirm. April's HBR establishes both the tone and the assumed relationship with 'What Your Leader Expects From You'. February offers 'Discovering Your Authentic Leadership', while January 2007 - a special issue devoted to 'The Tests of a Leader' - sports a cover picture of a shirt-sleeved executive (male, naturally) pumping press-ups on the boardroom table. 'Leadership is for lone He-Men' is the clear message: leaders are managers on steroids.

Of course, we need leaders to focus, decide, rally and sometimes inspire. From playgrounds to football teams to political parties, human groups do not remain leaderless for long. But the business need for heroic leadership - and its corollary, the lament for the lack of it that kicks off most articles on the subject - is something else again.

Where does the desire for heroes originate? One source is the quest for certainty. This intensifies as the world becomes more uncertain; perversely, by raising expectations it also increases the likelihood that they will be dashed. Another source is the way the leader's job is specified. Theoretically, the need for hierarchy, with a strong leader on top, stems from the idea that employees' and companies' interests differ, so a strong boss is needed to ensure the workforce does what is required for shareholders. The boss must also decide what they should do. Obvious, really: in any case, the alternative - running a company from the bottom up - is surely a recipe for chaos and anarchy?

Except that these notions are dangerous half-truths. In theory and in practice, hierarchy doesn't work, and no one put the reason better then GE's Jack Welch, himself an iconic manager. Hierarchy, he said, defines an organisation in which people have 'their face towards the CEO and their ass towards the customer'. The more charismatic the executive, and the more centralised the power, the more perverse the effect.

Centralised power and decision-making, central planning by another name, is not only bad news for the customer. It leads to a cult of personality that wrecks good management. In Ego Check: Why Executive Hubris is Wrecking Companies and Careers (Kaplan), Mathew Hayward notes that chief executives who become celebrities are a danger both to themselves and their followers. They believe their own press, attribute success to their own brilliance and failure to the incompetence of others, and vastly overestimate their decision-making prowess. Success only supercharges this process, generating feelings of invincibility that make an eventual fall inevitable.

When CEOs become celebrities, their firms' performance starts to decline, Hayward finds. Before their downfalls, Martha Stewart, Enron's Ken Lay, Hank Greenberg at AIG, Sunbeam's Al Dunlap, Dennis Kozlowski at Tyco, and WorldCom's Bernie Ebbers all figured in laudatory cover stories in prominent business magazines. He also discovered that companies with starry CEOs pay more for acquisitions. And consider this: by acting as positive feedback, stellar pay can reinforce executive hubris and its damaging effects. Hayward writes: 'By fostering false confidence, greater compensation can actually diminish our resourcefulness and productivity.'

At bottom, the cult of leadership is based on a false opposition. The opposite of top-down hierarchy is not bottom-up anarchy. It is what John Seddon of Vanguard Consulting calls 'outside-in', or, to reverse Welch's image, turning the company through 180 degrees to face the customer rather than the boss.

Making the organisation demand-led instantly changes the role and requirements of the CEO. Of course, courage and judgment are still necessary. But they are no longer arbitrary, the product of supposed omniscience. Nor is the job any longer one of coercion, but rather to support front-line employees in serving customers. In short, the leader sets the context in which the interests of company and employees can, as far as possible, coincide.

As ever, be careful what you wish for. Outside-in, demand-led companies don't need hero leaders, we should beware of creating them, and they should beware celebrity's duplicity. As for investors, when a CEO makes the front cover of Fortune, or appears at the head of a 'most admired' list - sell.

So strong leadership may be not it's all cracked up to be. The same with Actual Existing Capitalism. My big fear is that if it all goes belly-up for A.E.C. the beneficiaries here will be the BNP, as well as other ROROs (Racially Or Religiously Obsessed) here and elswhere. My big hope is that something decent vaguely on "the Left" will emerge to challenge both A.E.C and the ROROs. (Message In A Bottle by The Police has suddenly come into my head, for some reason!) Perhaps the collapse of the vote for organised socialism in the Scottish Elections, combined with the failure of "a Left" candidate for Labour leader to get nominated, may shake things up at long last over the summer. It would be a triumph of hope over experience, but, to coin a phrase, it's coming some time (maybe).