Prophets Of Profit

For UK readers the series is at 
https://www.bbc.co.uk/programmes/m0027bnq/episodes/player 

Economics is something I have never studied, so The Prophets of Profit, a series of five 15-minute programmes on BBC Radio 4, was something of a revelation. For me, it gave new insight into what seems to have gone wrong in corporate Britain and America over the past fifty years. I am thinking of disasters such as water companies paying large dividends and bonuses, and borrowing huge sums, while failing to invest in their networks, and the Post Office prosecuting hundreds for theft when they knew full well that their own computer system was at fault. I was aware of much of this, but not in such clear focus. This is my, probably naïve, understanding of what the series said. 

It begins in 1970, when Milton Friedman argued that the purpose of business should be to maximise profit, and nothing else. Employees, suppliers, customers, and other stakeholders, were not the concern of business. Nor were social or environmental responsibilities. Those things would look after themselves as greater profits filtered through society. They would create more economic growth and employment. 

Business academics then began to think through what this might mean in practice, and the idea that shareholder value was all that mattered became predominant. Businesses began to do whatever they could to maximise share prices. Chief executives who thought otherwise soon found themselves out of a job, or their companies taken over. 

I thought back to my own experience of the nineteen-seventies, while still working as an accountant. I spent a couple of years with The Burton Group, centred around the clothing retailer. I was in the Property Division, and at that time we were busy selling off our shops and leasing them back. 

Sir Montague Burton, the company founder, had spent a lifetime buying the best retail sites in every town and city in the land. It was said that in the early days he stood counting the numbers of passers by, and bought the sites with the most. Think of almost any Burton branch you can remember, and the chances are it was on the busiest corner plot in town. 

Making and selling men’s suits was profitable business. Apart from work clothes like overalls and boiler suits, men wore little else. The best suit would become the everyday suit, and then that would become the suit for leisure activities. I have photographs of my father and grandfather sitting on the beach at the seaside, wearing suits. 

The Burton Group also owned other businesses. I remember Top Shop, Top Man, Dorothy Perkins, Evans Outsizes, and Ryman the stationer, but there were probably others, all in prime retail locations. You can easily see that selling off these properties and leasing them back would release bucket loads of cash, which could be used to pay large bonuses and dividends, boosting the share price. 

Actually, Burtons were not that bad, but many companies took things to extremes, breaking up their businesses and selling or closing down the least profitable parts, with no regard for the social consequences. Privatisation was part of this ethos, too. It was thought that private ownership would attract more investment in public utilities. 

For a period, this philosophy re-invigorated tired Western economies, but the world as Friedman knew it changed, with unforeseen consequences. He did not anticipate changes in working practices, corporate deregulation, and globalisation. 

Again, thinking back to the nineteen-seventies, we started work and left at the appointed times. We took the specified lunch breaks. Work was social, and we had time to chat with our colleagues. We spent many lunch breaks playing cards in the office. We even played games with elastic bands and paper clips during work time if we could get away with it. Practices such as zero-hours contracts, timed toilet breaks, and the regular ten-hour day, would not have been tolerated. Most were paid enough not to need to juggle multiple jobs. Now, for so many, this is the reality. Another recent radio series, Workplace Britain, explored these changes. There were accounts of helpdesk workers so busy they never exchanged a single word with the person in the desk next to them. These things may generate greater profit and efficiency, but can’t be good for mental or physical well-being. 

As regards globalisation, if company ownership goes overseas, so do the profits. Australian investment bank Macquarie owned Thames Water for ten years to 2017, during which period it took huge bonuses and dividends without investing a penny of its own money. Since privatisation in 1989, water companies have paid £72bn to shareholders, while taking on £60bn of debt. Some privatised companies are even owned by overseas state utilities. One trade unionist said that we seem to have no objection to state ownership, so long as it is not Britain. 

Much worse, some overseas owners have more interest in closing down businesses and moving them to their own shores. Think of Chinese ownership of strategic industries such as steel works and oil refineries. We need oil and steel, so if they take away our ability to produce our own, they can hold us to ransom for theirs. 

The 2008 stock market crash brought home just how badly wrong the shareholder value movement had gone, with a degree of renewed concern for the planet, providing secure jobs, and progressive social change: diversity, equity, and inclusion. But many think this went too far, and putting profit above all else may be returning, especially in American politics.