What has gone wrong with today’s capitalism? It seems that every day we hear about a new outrage. Should we be surprised – perhaps not, but after many years of working with some of the best companies through charitable partnerships, I had allowed myself to become optimistic about the prospects for a new kind of ethical capitalism. There are still many positive examples of good companies that seem genuinely to care about their customers and employees, the planet and even about those too poor to afford many of their products. But the new political mood reflected in the Brexit vote and the election of Donald Trump, seems to be paralleled by a retreat to old style rip-off, get-what-you-can, profit-at-all-costs capitalism. Is this a coincidence – probably not – just as the retreat into nationalist, protectionist, nasty, misogynistic, anti-other politics has given permission to racists and bigots to let loose their prejudices, so it seems that the same mood is allowing a new generation of loadsamoneys, yuppies and spivs to tread roughshod over the rights of workers and consumers alike while the resurgent politics of greed, blame, austerity and hate draws political leaders away from the kind of regulatory control that should inhibit such bad behaviour. Either they are too busy with Brexit or they just can’t keep up with the scams that new technology makes possible – probably both – or maybe they just don’t care enough?
The so-called ‘gig economy’ has been challenged, sometimes successfully, in the courts but so far inadequately by regulators. Regulatory bodies established by Government – OF-this and OF-that – seem to be either toothless, in cahoots with the businesses they exist to control, or taking aim at the wrong targets. While we are all inundated by scams and rip-offs, unwanted calls about PPI and junk mail from ambulance chasing claims firms, Ofcom chooses to fine the British Heart Foundation and the RSPCA! While we are confounded by confusion marketing and utility tariffs that punish loyalty, the regulators and the Government just tell us to switch supplier while allowing comparison sites not to include the cheapest tariffs – they are more interested in encouraging competition between the comparison sites than making life simpler for the poor consumer.
My newspaper this weekend includes the following examples of apparent corporate irresponsibility:
- Courier DPD charges it’s ‘franchisee’ drivers £150 if they take a day off sick.
- A Citizens Advice survey found that 84% of people signing up for free trials online didn’t understand that terms hidden in an unreadable mass of legalese and small print meant they were signing up for a continuing subscription to be charged to their credit card.
- Two drug companies were accused of colluding to charge the NHS 80% more for lifesaving drugs.
- A report into conditions at a zoo in Cumbria found that nearly 500 animals had died from causes including emaciation and hypothermia.
- A worker for a housing organisation was suspended after she became homeless and was forced to seek shelter in the garage of one of the organisation’s properties.
- The CEO of Uber has been filmed swearing at a driver who claims he’s been driven to bankruptcy by the company’s policies.
- Volkswagen’s cheating on diesel emissions revealed the true nature of diesel pollution which is now leading to new clampdowns on diesel vehicles leaving drivers who thought they were helping the planet subject to new costs and charges.
- Hertz charged someone as much for a satnav they didn’t ask for, as the entire cost of their car rental and refused to budge when challenged.
This litany is shocking. Some of these examples may be infringements of the law. Many are not. But I think it would be hard for any of the companies involved to make a case that they are behaving ethically. And what’s worse is that they don’t seem to care and go to great lengths to try to defend such practices.
The simple theories of competition I learned in Economics were all about how competition drives prices to an equilibrium (above which new entrants can offer a better deal, and below which businesses would go bust). But these theories assumed a product or service had a cost of production which was passed on together with a small profit margin to the consumer giving the business a return on capital. But nowadays it seems that nothing has a fixed price – you get charged more for being a loyal customer, you pay different rates depending how long you are willing to lock yourself in to a contract, or what time of day or year you want the service, and you only get a decent price if you are prepared to phone up and haggle and threaten to go elsewhere. And you need an accountancy qualification and a penchant for spreadsheets to be able to understand what is a good deal and what isn’t from the hundreds of different tariffs available for a simple service like electricity or broadband. It seems that both the workers and the consumers are being squeezed, the former through self-employment at below minimum wage, the latter by confusion and complexity.
Personally, I’ve never used Uber (the Hailo app will get you a black cab in London just as easily) and I get my electricity from a renewable energy provider where there is only a single tariff, revenues are reinvested in renewable energy generation, and I am charged the same for paying for what I actually use as I would be for paying a monthly estimated Direct Debit. I bank with a mutual Building Society and usually buy my insurance from another mutual company. But I still have to negotiate the complexity for mobile phones, broadband and more. It could be argued that many can’t afford to pay more for simplicity and fairness, but I suspect the poorest and most vulnerable are the ones that end up paying the highest prices while the better off negotiate the best deals.
Yet socially responsible investing has never been more popular and there is remarkable evidence that ethical and responsible businesses do better. Ethics is good business. The website Ethisphere found that the most ethical companies’ share prices produced an ‘ethics premium’ of 3.3% (http://worldsmostethicalcompanies.ethisphere.com/). A spokesperson for Ethishpere said: “the papers are filled with scandals and companies that made judgment errors, that made policy errors or that don’t have good practices in place to handle things like non-retaliation or transparency or open reporting, or have had a crisis and handled it poorly. But there a lot of companies that are really trying to do things the right way.”
I was for many years involved with the FTSE4Good index of companies ranked by social responsibility indicators (http://www.ftse.com/products/indices/ftse4good). None of these measures of corporate ethics is perfect and we each draw our red lines in different places, but the FTSE4Good ranking is thorough, objective and independent and a great deal of effort goes into getting it right.
Isn’t it time we used our consumer power to incentivise ethical behaviour rather than often misleading low headline prices? Websites like moneysavingexpert do a great job of helping people to navigate the complexity, but could do more to challenge the confusion marketing system that makes such navigation necessary in the first place, as well as highlighting issues of sustainability and social responsibility alongside price. Perhaps we need a publicly accessible ranking service to enable us to make our buying decisions based on corporate ethics and responsibility as well as price, quality and service? How about a comparison site where you can input what you need and find the most ethical supplier of that product or service? I would definitely use it.