COMP6044   Just another ECS Blogs weblog

Am now looking at a book on economics called, ‘Markets not Stakes: The Triumph of Capitalism and the Stakeholder Fallacy.’ This is written by Professor Patrick Minford and was published in 1998. He outlines why he thinks that the stakeholder culture was mistaken and how capitalism was thriving. The stakeholder concept was supposed to find the middle way between ‘failed socialism and free-market capitalism.’ The blurb discusses the way in which regulatory proposals were to create more rights for workers, allow the government to override the pull of market forces on investment in an attempt to curb the 80s short term corporate culture.

I am particularly interested in this because it would seem very easy now to say how obviously mistaken this view was. However, it goes on to say that ‘Stakeholding is no different in essence from interventionist and redistributive taxation, its only difference is its lesser transparency, which therefore deceives people into believing it to be innocuous.’ Although he then apparently goes onto argue that it destroys incentives (the meat and blood of economics, according to ‘The Armchair Economist’ ) I’m initially quite interested in the transparency issue.

When I worked for a FTSE100 company that was quite concerned about corporate governance and hence ‘transparency,’ a word which we hear all too often nowadays, the other word that was always brandished was ‘stakeholders.’ Generally the more your job was to do with explaining figures and processes to people, the more you had to take ‘stakeholders’ into account. This actually meant not just anyone who had a right of some sort (surely just one’s bosses in a monolithically hierarchical company structure?) to poke their nose into what was going on, but those who felt that they ought to have a right. Or those, like me, who were just very, very curious about how it all worked. The more stakeholders there were (in a PLC serving most of the country’s households, that was at least 18 million) actually the less possible it became to be transparent. I’m increasingly convinced that the possibility of transparency decreases exponentially in any very small company (say, 7 or fewer employees) or any company that has over say, 300 employees, just because of organisational factors. I’m also wondering whether this is not accidental, but actually deeply tied into company size (depending on its structure, or how the power gets passed around). So am quite interested to read this book and see what comes out.

Am reading it alongside ‘The Armchair Economist’ which is interesting, but is leaving me feeling vaguely unsatisfied at present.