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How can business keep Globalisation alive?

Penny Brooks

25th January 2017

The Boston Consulting Group regularly publishes BCG Perspectives, with article examining topics of broad interest and deep importance for business strategy. One of their latest articles looks at the challenge for business posed by the political wave of 'populism', the term given to the global shift to dissatisfaction with political elites that has led to anti-establishment votes for Brexit in the UK and for Donald Trump in the US.

The piece starts from the perspective that "the free exchange of goods, services, capital, and labour—commonly known as globalisation—and the march of technology have ... increased productivity, opened up markets, and created opportunities for billions of people to improve their lives", and that these drivers are now under threat from a backlash of protectionism based on a deep distrust of political and corporate elites. It gives good reasons for this: the "British vote to leave the European Union was motivated in large part by frustration with economic stagnation and inequality, and it has created fertile ground for nationalistic, anti-immigrant sentiment. The English West Midlands, the region with the highest “leave” vote, has experienced stagnating median household incomes for nearly two decades."

Meanwhile in the US, 70% of the workforce has experienced no increase in their 'real wage' in the last 4 decades, and Oxfam have just reported that 50% of the world's wealth is in the hands of just 8 individuals. The conclusion, according to BCG, is that businesses could face a political environment which compromises their ability to invest, to access markets and talent, and to innovate and create wealth.

On the premise that addressing the challenge of inequality in our society must be in business's best interests, the article proposes seven aims that might allow CEO's to reconcile the need to meet shareholders' requirements for growth and dividends with more inclusive economic prosperity which will strengthen the enterprise for the longer term. It is, to say the least, idealistic, with proposals ranging from encouraging those who develop new labour-saving technologies to implement them in an 'inclusive manner' to avoid de-skilling and redundancy of thousands of workers, to asking firms to contribute to society by establishing social businesses alongside their core profit-maximising organisation. But it also considers motivation and the mis-match between performance and rewards throughout many organisations, and the opportunity for business to work with online education providers or take direct responsibility for reskilling.

The article is a challenging one for students, but would make an excellent one for them to critique, as part of their developing ability to evaluate.

Penny Brooks

Formerly Head of Business and Economics and now Economics teacher, Business and Economics blogger and presenter for Tutor2u, and private tutor

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