IN PART 5 of this series I looked at inflationary risk. In this short essay I look at a further factor and perhaps underappreciated force in undermining price stability and more importantly personal choice and preference; what I describe as woke economics.
The definition of being woke is imprecise. The cynic might say it is whatever the radical left want it to be at any time to suit their ends but the Oxford Dictionary defines woke as alert to injustice in society.
That could mean many things. This clearly is broad and, to an extent, subjective definition but in the context of the impact on an economy I take it to mean the economic impact of ‘progressive politics,’ on the economy. This impact I believe is becoming an increasingly significant and potentially illiberal, anti-free market and inflationary force.
Accepting my definition of woke economics is broad includes, therefore, the economic impact of going ‘carbon neutral’; or the economic cost of increasing the minimum wages not just in the home market but further down the supply chain; or perhaps the regulatory cost of increased compliance to a number of progressive goals. While BLM or the so called Extinction Rebellion might be at the spearhead, the impact is being felt far and wide.
These factors are hard to quantify globally and nationally as there are often long lead and lag times and adoption rates are gradual and non-uniform – but the direction of travel is clear and gathering pace – and ironically it is often trade bodies and so called ‘corporate governance professionals’ who are driving a series of diverse, environmental and woke goals.
Much of this woke revolution that is sweeping western, particularly Anglo-Saxon countries, does not come from Government directly but from quangos and a burgeoning compliance bureaucracy feeding on itself – committees, osmosis and fear of being ‘left behind’ rather than philosophical belief in the cause.
Western economies are thus moving away, at very rapid pace, from a traditional model of fairly light regulation, where shareholders are the key stakeholders and free trade, personal preference and economic efficiency the primary motivation, to a world where there are multiple stakeholders – from employees, to government whim, from a regulatory quangocracy, to environmental ‘emergency.’
This is a world where economic efficiency is no longer measured as profit, re-investment and market-led innovation, competitive choice and productive efficiency but a multi-dimensional world where profit and traditional economic efficiency is but only one factor added into a bubbling melting pot that now includes modish and often radical social and environmental causes, diversity before merit, risk constraint and quantification, abstract political goals, and critical parameters defined by regulators – all with limited, or completely absent of, customer input or recourse.
Moving, however, from an optimal economic efficiency model to a more politically driven woke approach is likely to be very expensive – and not just from inflationary pressures as less optimal economic solutions are sought but also from the classically liberal perspective of personal freedom and choice.
Since the Industrial Revolution, as a generalisation, corporations have been measured primarily by productive efficiency and market demand. Today, while that may remain partially true, it they now operate within the bounds of a much tighter framework where the lowest cost of production for a quality level is no longer the sole or in some industries even the primary motivation.
A simple example is the combustion engine. It might be that 2050 is the legal cut off for all cars to be ‘carbon neutral’ and it might be that the last diesel car will role of the production line some time in 2030 but while what replaces them may, in some peoples’ arguable judgment, be a more environmentally friendly product it is almost certainly not the most economically efficient.
Further, whose call should it be? The man from the ministry or yours? Surely in a free society the individual should make that call? Improved technology and innovation is certainly a noble and right call but to do so summarily by legal pen closing overnight whole industries employing literally hundreds of thousands of people offers up not just significant economic shock but also a democratic one.
Similarly, if living wage practice is employed simply in the UK the impact on the cost of a garment may be moderate as the domestic labour element is relatively small. If however, pressure is applied to enact living wage regulation in Vietnam or Bangladesh, where the garment may be made, the impact on Primark will clearly be significant. The pressure to apply the so-called living wage across the supply chain and borders is very real, as Boohoo discovered, and the impact on the price of clothing may, in time be material.
There are numerous examples of woke creep and while individually each may have a small impact in totality the effect is to reduce economic productivity and increase the cost of production. Worse, in many cases, it reduces choice and imposes one set of morality on others, like it or not. Wearing a trendy tee-shirt or playing footie with, respectively, garments and balls made at western pay levels may make some feel righteous – but how do they feel about the cost to workers made unemployed who cannot then put food on their tables for their starving children. Where is their concern when the documentary makers and the flown-in-today and flown-out-tomorrow journalists are not reporting the unintended consequences?
This woke revolution has been gathering pace for several years and what was a stream is now becoming a flood. Fortunately, Brexit will make it easier for us to resist changes that will undoubtedly be adopted with alacrity by the EU.
Unless we can find an antidote to the compliance, risk reduction and increasingly regulatory world that is pervading business we risk creating a dystopia where the traditional model of market economics and personal preference is overthrown into a highly regulated, politically volatile and modish morality dictated by a few self-proclaimed moral guardians.
It is neither economic nor democratic, it is making all life political but without any say for the consumer of goods, services and the exercising of basic freedoms.
Photo of international footballers taking the knee by Andrew Dowling Photo / Shutterstock.com