The Russian invasion of Ukraine has reminded us that we live in the real world, not the world as we would like it to be.
In this context, it is especially troubling that governments have allowed myths about the purpose of business to proliferate. They have let the belief to take hold that business’ profit maximising impulses have to be tempered with a host of other non-business objectives. This is not true. Trade and the profit motive are forces for good.
To be sure, not all businesses are the same. State-owned business in Russia and China have very damaging impacts on the global economy. Government distortions that damage free markets are just as bad as private anti-competitive activity which we rightly discipline. Businesses can damage the economy when they operates as a cartel, act in a predatory fashion, or lobby for protectionist barriers to new entrants. But these are exceptions to the general rule that the pursuit of profit is the best way to promote growth, both in the UK and around the world. The idea that making money is bad unless a business is also protecting wildlife or increasing the diversity of its board, puts that growth at risk.
Of course issues that have little to do with business, such as labour, environment, gender or human rights are legitimate topics of concern. There are equally good and proper venues for these to be debated, and those discussions should of course be supported by governments. But it is a fundamental axiom of economic policy that you should only have one goal for one policy tool, otherwise you will fail on all fronts.
But this is precisely what we expect out of business – to be a panacea for all the perceived ills of the world. If we impose those desires on UK firms we will end up destroying them.
Politicians are also addicted to small businesses. They regard them as the plucky Davids fighting against the Goliaths whose only desire is to swallow them up or force them to fail. But this too is false. Small businesses make up the vast majority of traders but are a much smaller part of the total value of trade. They are also entirely reliant on supply chains which are controlled by larger players. When big businesses catch a cold, small businesses in their supply chains get pneumonia.
On the other side of the political debate, there is a libertarian school of thought which suggests that government shouldn’t intervene in businesses at all. I am sympathetic to this idea, but it has limits, especially in the world as we actually find it. Governments should not distort their markets for trade or competition advantage. But that does not mean the UK government should stand idly by while the French, US and German governments wrap their businesses in their countries’ flags.
So what should the UK government’s approach to its biggest businesses be? Simply put, it needs to stand up for them. It needs to loudly advocate for them, just as the French, German and US governments do. This does not mean spending public money – although we should not unilaterally disarm things like export finance while others around the world continue to make that available to their firms. But it does mean deploying every advantage that the UK government can muster to the benefit of its largest companies. This includes its prodigious and world leading soft power, its peerless educational offerings at all levels, and its newfound confidence as a result of leaving the EU, and leading the opposition to Russian military adventurism.
What form might that support take? The Government can help businesses engage with the world by understanding what their objectives are and backing them. That means supporting CEO roundtables of the largest players, and having a responsible minister or senior official for the largest businesses, so their complex aims and the challenges they face can be properly understood across the whole of government.
If we impose on business all the myriad objectives of the woke left, they will be unable to do anything anywhere. The West has become distracted by soft issues while forgetting that much of the world is still only moved by hard power. Global competition is not a tea party, nor is it a Junior Common Room where we can debate issues with despots. Businesses, in particular large businesses, and the UK has some of the largest in the world, are engines of global growth. We must allow them to run free, and we must support them if we are to continue to lift millions, if not billions, out of poverty.
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