Mainstream economics justifies the primacy of individual shareholder interests. Henry Leveson-Gower, CEO of Promoting Economic Pluralism, argues that unless we challenge this paradigm, the green economy could remain marginal.
Friedman’s 1970s dictum that managers of companies should only consider the interests of their shareholders has now become business common-sense. Other stakeholders, employees, customers, suppliers and wider society, are only considered as far as it is in the interests of those shareholders. All action to protect the environment or be corporately responsible must be justified in terms of a business case ie the effect on the bottom-line.
Many claim that companies and their shareholders can only thrive in the long-term if they do operate in the interests of these wider stakeholders. However, in a world of investors requiring short-term returns, can we rely on this? Even if companies resist these short-term demands, can we rely on their interpretation of our long-term interests, when ultimately, they only care about their shareholders?
Some companies may be able make a business case for investing in renewable energy and other forms of green growth. However, this is likely to only apply to a limited part of the economy. Certainly fossil fuel companies seemed to have given up on this as it turned out they were experts at extraction not energy. They remain a huge economic power which will continue to resist action on climate change. Can we rely on profit alone to drive a green economic revolution of the type the IPCC’s latest report suggests is required? Or will the better business case be to invest in political capture and PR?
“ The 2008 crash revealed the extraordinary inadequacy of traditional economic models and led to many students rejecting their mainstream economic teaching.”
I am not suggesting giving up on promoting green regulation, incentives and investment but I do think we also need to look at more fundamental reform. Surely if companies ultimately privilege the interests of shareholders, we cannot trust them to promote wider environmental interests. So we must consider reforms of corporations that put social and environmental interests at their core. This may be thought a big ask but the British Academy already has a project to do just that lead by Oxford Professor, Colin Mayer.
Such reform involves a full frontal assault on the fundamentals of mainstream economics as well as a powerful set of corporate, financial and political interests. In the light of that how can we make space for this sort of thinking?
The 2008 crash revealed the extraordinary inadequacy of traditional economic models and led to many students rejecting their mainstream economic teaching. There is now regular commentary on the ‘crisis in economics’ in the mainstream press. The ESRC, the Government’s economic research funder, has established a centre to ‘revolutionise macro-economics’. The Bank of England, EC and OECD are all exploring new modelling and analytical approaches.
This has not however meant that there has been immediate reform in top economic departments - mainstream economics itself suggests that monopolists will resist competition. However, they have been fundamentally weakened. There is now an openness outside academia to new ideas that has not been seen previously.
We are seeking to capitalise on this by raising the profile and legitimacy of innovative academics outside mainstream departments. There are a wide range of academics on the margins of the economics profession who have built on a rich legacy of thinking on institutions, complexity and uncertainty from the likes of Keynes, Schumpeter and Polanyi which had been discarded by mainstream economics. Furthermore, academics in other disciplines have turned their attention increasingly to socio-economic issues.
This disparate group is growing as it draws in new young researchers, many inspired by the students’ movement for curriculum reform and high-profile non-mainstream economists such as Steve Keen and Ann Pettifor. However it is fragmented across disciplines and departments without a common identity or much traction with policy makers as yet.
We intend to work with these innovators and other stakeholders to build a common identity and most importantly an increased profile outside academia to be able to influence policy and practice.
As a first step, we are doing this by creating an accreditation system for Masters courses that take a pluralist approach to economic teaching, ie: recognise more than one way of thinking about the economy and encourage critical reflection. This is a key potential interface between these innovators and students about to enter or re-enter work, many going into policy careers.
This type of teaching is already happening in many departments and centres of learning,as can be seen in the list of courses here. It is happening in the same high-ranking universities where the economic departments themselves defend the status quo. Our initial campaign will seek to raise the profile and legitimacy of those questioning out-dated assumptions of traditional economic models.
So what can you do to support change in these urgent times? For a start, you could register your public support for this initiative here. It is crucial that we demonstrate diverse and wide-ranging support for this initiative particularly outside academia. As you can see on our website, we already have some great supporters - so you'll be in good company.
Beyond that you can get involved in actually co-creating this scheme. This doesn’t mean that you necessarily have to get involved in the detail or devote huge amounts of time to it. We will ensure people can give their views on the principles and broad approach as easily as possible. Please sign-up here to be involved and if you first want to find out more, sign up for a webinar here.
We look forward to building this new institution together to support the essential task of organising economies that put social and environmental values at the centre, rather than the margins.
- Henry Leveson-Gower, Promoting Economic Pluralism
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