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Fundamentalist economics and Cretan restaurants

Fundamentalist economics and Cretan restaurants

Chatting to a friendly restaurant owner during my recent holiday in Crete, we got round to talking about the secret of success. “First good meat, fresh vegetables, good chef; second, satisfied customers; then the money comes.” But if he went after the money first, if he cut corners to increase his profits, he’d be “like all the others” – he waved his hands towards the other nearby tavernas – and eventually go out of business. But above all it was his pride in what he did that made him want to run a honest restaurant, not just fear of losing trade.

The conversation reminded me of a review of UK equity markets conducted by Professor John Kay of LSE for the Government two years ago. He contrasted two statements of basic company policy posted by ICI, the first in 1987 which said:

“ICI aims to be the world’s leading chemical company, serving customers internationally through the innovative and responsible application of chemistry and related science. Through achievement of our aim, we will enhance the wealth and well-being of our shareholders, our employees, our customers and the communities which we serve and in which we operate.”

The second, issued in 1994, was very different:

“Our objective is to maximise value for our shareholders by focusing on businesses where we have market leadership, a technological edge and a world competitive cost base.”

The first ICI statement embodies the same philosophy as the Cretan restaurant owner (whose “good chef”, incidentally, was his wife). The second applies to those he dismissed with a wave of his arm. And ICI no longer exists. How not very surprising.

ICI’s first statement was, in summary, a commitment to serve the common good. The second was a commitment to make money for investors. The second was an example of what we call market fundamentalism or neoliberalism, capitalism stripped to its bare essentials. It has no regard for the social consequences, or for the interests of employees, customers, suppliers, or the wider community. And it doesn’t care much about the quality of the product either.

And that’s not the end of it. Obviously if you run a business only to enrich the owners, you are going to put more money into the hands of those who already have it, and that inevitably increases inequality. Supporters of market fundamentalism used to tell us that enriching the rich also enriched the poor, but that doesn’t happen anymore. Inequality is increasing, the rich are getting richer, and the poor, i.e. all the rest of us, are just staying the same. Or if were on benefits, getting poorer.

Enter Aristotle, with Natural Law philosophy and a Biblical sense of social justice in tow, and what you get is not so far from Catholic Social Teaching. That puts the emphasis first in human dignity and the common good, and insists that wealth creation is only good when it serves the interests of all the stakeholders, not just the owners. Increasingly, that means long term planning, not just in research and development for new products – new dishes to delight the palates of your restaurant customers – but also sustainability, especially for the sake of the environment. So if a fisherman offers you fish from local waters that you know are overfished, you tell him no, even though your regular fish supply costs you more because it comes from further away, where fish stocks are stable.

Neoliberalism is the heresy of the age. The only credible challenge to it I have seen comes from Catholic Social Teaching, an idea whose time has come. Not a minute too soon.

Clifford Longley’s essay, Just Money: How Catholic Social Teaching can Redeem Capitalism is available to download from here 

Image by Chris Isherwood from flickr.com under the Creative Commons Licence

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