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Capitalism’s Toxic Assumptions—Redefining Next Generation Economics: By Eve Poole, Bloomsbury, 187 pages, Rs499
Capitalism’s Toxic Assumptions—Redefining Next Generation Economics: By Eve Poole, Bloomsbury, 187 pages, Rs499

Eve Poole: Capitalism’s flat-earth mindset

Fixes for some outdated capitalist ideas include hiring more women, and changing the manager's job from instructing to coaching and steering

From fixating on competition to placing too much importance on shareholder value, modern-day capitalism has many problems, writes Eve Poole in Capitalism’s Toxic Assumptions: Redefining Next Generation Economics. In an email interview, Poole, who teaches at the Ashridge Business School in the UK, talks about why capitalism is a great system in need of fixing. Edited excerpts:

Why do you say that some of the concepts in ‘Wealth Of Nations’ are past their sell-by date ?

Adam Smith’s Wealth Of Nations (1776) has long been considered the blueprint of modern capitalism. Many of the concepts he introduced and made famous have stood the test of time, but others have not kept up with the times. I’m calling these “toxic assumptions", because an unquestioning allegiance to them in spite of their being well past their sell-by date is slowly poisoning the system as a whole. As a huge fan of capitalism, I can’t bear to see it fail on my watch.

Could you give an example?

A cornerstone of Adam Smith’s design is a commitment to competition. The game theorists still support competition in zero-sum games where the players will not meet again, but
co-operation is the better strategy to improve outcomes in iterative games like business. This isn’t about never competing, but it is about limiting competition to where it is appropriate, and maximizing value by collaborating elsewhere; for example, on sourcing or back-office operations. And the biology of stress suggests that “fight or flight" men—fuelled by testosterone—feel more comfortable with competition than “tend and befriend" women, fuelled by oxytocin. Promoting more women might therefore be the quickest way to detoxify this assumption.

What does this mean for talent management?

Another area where capitalism needs to ditch its flat-earth mindset is agency theory. The notion that the workers need to be brought forcibly into line with the interests of shareholders has unleashed a negative business culture characterized by trade union activity, manipulative human resource (HR) processes, and stock options for boards that turn their heads away from managing their businesses to managing the financial markets instead. Companies that do more to understand and release the intrinsic motivations of staff find that their engagement and retention scores improve, and this shows up in the bottom line through increased customer loyalty and a reputation for excellent service. Semco in Brazil is normally cited as the exemplar for this, but so many companies are now embedding metrics like the Gallup 12 into their staff surveys that modern HR is already blazing a trail to overturn this rather gloomy Freudian view of humanity. When performance management becomes peer rather than management-led, and talent is about processes not elites, workplaces will again become positive places in which everyone can grow and flourish. Metrics like the Best Companies To Work For index suggests that these kinds of destination employers outperform their rivals by some margin, because they attract better and more motivated staff. But too many workplaces still seem to be characterized by “managerialism".

What is managerialism?

It is the word usually used to describe “too much management." At one extreme, the critics argue that management is inherently unethical because those managed are treated as means to ends, rather than as end in themselves. Others use the word to criticize the transplantation of management techniques into non-commercial contexts, for example, the education and health sectors. Both are problematic largely because “management" is the professional discipline charged with resolving agency
theory. Of course, if you recognize the toxicity of that as a concept, you can immediately relax much of your management effort, which is generally about control and mistrust rather than about releasing employee potential. If we can rescue the idea that all jobs can be both vocational and meaningful, the manager’s job will be about coaching and steering, rather than instructing and coercing.

What’s capitalism’s most toxic assumption?

Perhaps the defining assumption of our time is shareholder value. But this is toxic because the shareholder is about as real as Santa Claus. With the bulk of trading now driven by algorithm, the average time for which a share is now held is 11 seconds. So it’s anyone’s guess who the shareholder actually is at any moment in time. Their historic contribution to most businesses is now so slight, and their legal rights so minimal, that it is bizarre to give them this pivotal role.

Are you writing off capitalism as a system?

Capitalism is an extraordinary system. It really works. But it would work a lot better if we updated some of the old code. Like an old car, we can keep on replacing the tyres and the engine, or we can just stop driving with the brakes on. The world has moved on since Adam Smith wrote Wealth Of Nations in 1776. Our thinking needs to move on with it. As the economist John Maynard Keynes famously said, “When the facts change, I change my mind. What do you do, sir?"

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