From our President – Two Contradictory Principles

25 September 2014

I try to live by two contradictory principles, firstly to say what you do and do what you say, but also to over-deliver, so I’m pleased to say I accomplished both on our summer holiday. Having reported in my previous blog post that my holiday reading would be the two books by fellows Tara Stubbs on Ireland and American authors (American Literature and Irish Culture, 1910-1955: the politics of enchantment. Manchester University Press, 2013), and Martin Ruhs on migration (The Price of Rights: Regulating International Labor Migration. Princeton University Press, 2013), I set a new personal ‘holiday reading’ record by not only completing those two, but also reading Thomas Piketty on inequality (Capital in the Twenty-First Century, Harvard University Press, 2014), and Saïd Business School professor Colin Mayer on the need to reintroduce trust into corporate behavior (Firm Commitment: Why the corporation is failing us and how to restore trust in it, Oxford University press, 2013).

Dr Tara Stubbs’s book is a masterful analysis and exposition of the way in which Ireland – or at least how it is perceived – influenced American authors of the 20th Century. One point I hadn’t previously appreciated, although now that it’s been pointed out it is rather obvious, is that although the image of American ‘Irishness’ today is associated with the St Patrick’s Day parade in New York, and support for republicanism, the Irish heritage in America – and hence in American authors and literature – of course included that from the North, and Protestantism.  However, some authors from that cultural background may still have tried to have the best of both worlds, conjuring up an image of Ireland that also incorporated the whole island.

I find one of the great things about Oxford is that it continually reminds one – or at least, it continuously reminds me, of just what a small proportion of human knowledge I have a grasp of or could even aspire to understand. And in my case, no-one manages to remind me of this better than Tara.

Dr Martin Ruhs has written the definitive book on the relationship between rights afforded to migrants to enter countries, and the rights they are entitled to once they arrive. (His book was launched at a joint event with Tara at Kellogg, where they introduced each other’s books; there is of course an obvious link given the importance of migration to both Ireland and the U.S. – indeed, one of my grannies was American, although of German origin, whereas the other was Irish, although moved to England. My American granny recounted being on holiday in Germany in 1936 when the SS Officer came round the restaurant tables collecting for their ‘youth summer camps’, to which she responded no, she had already donated to the Jewish Defense League.)

Martin argues that the obvious and common appeal to have ‘migrant friendly’ liberal policies, that enables people to migrate, and affords them full rights, may sound worthy but is intellectually lazy and actually rather worthless. Because if one does the empirical work – which Martin has done – one finds that affording full rights post-arrival is likely to be accompanied by rather small numbers being allowed in. So if one wants to provide migrants with the opportunity to move to other countries, you may need to settle for a less than full set of rights in order to facilitate this. This has not been easy or popular to argue, but it does appear to be correct, at least in terms of the evidence. Of course, there are some rights that should not be negotiable, and Martin includes a careful and sophisticated discussion of the ‘hierarchy’ of rights in this context. The work reported in this book was the subject of two of Oxford’s REF ‘Impact Studies’. And his book has deservedly won a prize from the American Political Science Association. Indeed, Martin has not only written the definitive book on the subject, he has pretty well established the subject itself, which previously had been largely avoided.

Piketty’s book on Capital in the 21st Century details the huge inequalities up to the time of the First World War, followed by major ‘capital destroying’ events in the form of the First World War, the Great Depression, and the Second World War, which led to a reduction in inequality. The ‘Golden Age of Capitalism’ from 1945 to the mid-1970s was generally accompanied by the development of welfare states, commitments to full-employment, and a conscious attempt to create and maintain a degree of equality, along with taxation on the wealthy and high earners which both helped to deliver the desired degree of egalitarianism, and helped pay for the welfare state commitments. However, from the 1980s onwards, these commitments have been largely abandoned, especially following the collapse of the Soviet Union and the loss of faith that there was any alternative to capitalism, however unequal or unjust capitalism might become, hence removing the political requirement to deliver on welfare or employment – or on egalitarianism. Piketty documents the rise in inequality that seems set to re-establish pre-World War One degrees of ‘Downton Abbey-esque’ economic and social stratification.

Piketty also claims that with the return on capital set to exceed the general global rate of growth over the coming decades, the rich are set to get richer, and inequalities of wealth and income seem set to widen. He argues that this will be unsustainable – that something will have to give. But rather than wait to see what form that might take, he urges that action should be taken now, in the form of a wealth tax and the return to more rigorously progressive income tax systems to prevent any further exacerbation of inequality.

It took me back to my PPE days of reading The Wealth of Nations, Capital, and The General Theory. None of those publications would, perhaps, have been deemed admissible to the REF, but it is great to have some ‘big picture’ theorizing combined with detailed empirical work and thoughtful policy discussion. For Piketty’s 600-page, heavily footnoted tome to have become an instant international best seller is quite something.

Piketty briefly touches on the role of inequality in creating the 2007-8 global financial crisis and subsequent global recession of 2009 from which the world economy is still only uncertainly recovering five years later – a far weaker recover than in the Great Depression, when five years after the 1929 Wall Street Crash recovery was generally more established. Another take on where it all went wrong is presented by Colin Mayer, a Professor and former Dean of Oxford’s Said Business School, whose book argues that companies should exist for a purpose, namely to produce goods or services, and that companies should have long-term commitments to do this with the best combination of high quality and cost effectiveness that their customers seek. With those goals in mind, companies will deliver for their customers, their employees, their owners and the communities in which they operate. The diversion down the ‘shareholder value’ road of the past 30 years, with increasing focus on short-term decision making to boost share-prices, with Executives often being rewarded with stock options that pay out more the higher the share price has been engineered, has been disastrous corporately, economically, and socially. That short-term financial engineering fuelled much of the pre-crash hubris which proved ultimately value-destroying rather than enhancing – but then, much money was made along the way, and the winners generally kept their winnings, whilst others were suffering the consequences or paying the price.

Colin Mayer’s conclusion about the need for trust, including the actual formation of ‘Trusts’ that would give legal form to positive visions, resonates with some of my own work on non-shareholder corporate forms of co-operatives, mutuals and employee-owned companies. I’m pleased to say that Colin is leading a major research programme funded by the Mars Corporation (of chocolate fame) whose founding charter incorporates ‘mutualism’ as a core principle. It is still a family-owned business, and the project will research the nature of mutualism in business, with Kellogg College’s Centre for Mutual & Employee-owned Business participating in the project, and Kellogg Fellow Ruth Yeoman leading the project along with Colin. I was looking forward to working with Colin (with whom I collaborated during an ESRC Programme in 1992-97) even before reading his book. Thank goodness for holidays – I’ve now discovered that we share more thinking than I had appreciated, and I’m more excited than ever about getting started on the research.

Jonathan Michie, September 2014