The Future of Business & the Economy, The Great Transformation That’s Stalling, Plus the Politics of Regress
I’m Umair Haque, and this is The Issue: an independent, nonpartisan, subscriber-supported publication. Our job is to give you the freshest, deepest, no-holds-barred insight about the issues that matter most.
New here? Get the Issue in your inbox daily.
Quick Links and Fresh Thinking
- Amazon River may be altered forever by climate change (Science)
- Online images amplify gender bias (Nature)
- Did Wall Street kill the American Dream of homeownership? (Fortune)
- Democrats keep bragging about the economy. But here’s the problem. (WaPo)
- The Unheralded Labor of Fighting Book Bans (Prospect)
- Social media harms teens’ mental health, mounting evidence shows. What now? (Science News)
- Why Some Companies Are Doubling Down on Climate Action (Time)
- Vaclav Smil and the Value of Doubt (The New Yorker)
- The growing peril of national conservatism (The Economist)
The Future of Business & the Economy
In the last half-decade or so, a micro trend’s swept the globe. Business has gotten…enlightened. A little bit, anyways. Let me put that in context, before you splutter, objecting angrily. Think of the way the world’s changed. The far right sweeping every corner of it. Nationalism, fascism, authoritarianism, all on the sharp, sudden rise. Conflict erupting. Societies destabilized, people at each others’ throats.
In that light, something curious has happened. Business became one of the world’s…more…progressive forces. I don’t mean every business, to be sure. It’d be laughable to put, for example, Facebook or any number of other corporate laggards on that list. Now, of course, when we attempt to make such distinctions, just as not every Big Business is on the list, so too, within every organization, the picture is never black or white. But by and large, business has—or at least many of the world’s leading businesses—have been more progressive than a world slinking into regress and decline.
How precisely has business been a force for progress, in the context of a world turning regressive? Think for a moment about strikingly different corporate priorities are than many national ones—nations turning so far to the right the political world’s tilted off its axis. Within the larger micro trend lie two components. Today we know them colloquially as “ESG” and “DEI.” In broader terms, this sort of business became focused on sustainability and governance—and something of a revolution began to happen: mega-corporations like Coca-Cola, for example, poured not just small, but large fortunes, into understanding just how dirty and wasteful and toxic their entire supply chains really where, for example, a major, globe-spanning endeavor. Meanwhile, businesses of this sort began to take diversity—by which we should really just mean equality—more seriously, removing glass ceilings, expanding possibilities, doubly important as Big Businesses became global institutions. Chief Sustainability and Diversity and so forth Officers became a very real office and position, leading departments of new kinds.
So was all this just “greenwashing” and good washing”? Again, I want to caution, none of that means businesses of this sort are perfect. But the changes above were real ones—in hard terms. They were structural ones. A decade ago, most businesses didn’t have sustainability groups or departments or chiefs or care much about diversity or write public reports revealing that data in granular terms—now, plenty do, and especially most of the biggest. It’s not perfect—but we’re talking about little steps of progress, not grand dreams of perfection.
Yet now things are set to change. The age of progressive capitalism, conscious capitalism, enlightened business—it appears to be coming to a swift end. As many of us worried about. Consider the following, in two separate articles from the Times and the Post.
Now, Wall Street has flip-flopped.
In recent days, giants of the financial world including JPMorgan, State Street and Pimco all pulled out of a group called Climate Action 100+, an international coalition of money managers that was pushing big companies to address climate issues.
Wall Street’s retreat from earlier environmental pledges has been on a slow, steady glide path for months, particularly as Republicans began withering political attacks, saying the investment firms were engaging in “woke capitalism.”
But in the past few weeks, things accelerated significantly. BlackRock, the world’s largest asset manager, scaled back its involvement in the group. Bank of America reneged on a commitment to stop financing new coal mines, coal-burning power plants and Arctic drilling projects. And Republican politicians, sensing momentum, called on other firms to follow suit."
In recent weeks, Zoom axed its internal DEI team amid broader layoffs, and Snap cut workers who worked on retention and engagement efforts for employees from underrepresented groups. Meta, Tesla, DoorDash, Lyft, Home Depot, Wayfair and X were among major corporations making steep cuts in 2023, slashing the size of their DEI teams by 50 percent or more, Revelio’s data shows.
Corporate America’s retreat from DEI has coincided with increased legal risk and political animosity toward systemic efforts to boost racial equity. State legislators have introduced at least 65 anti-DEI bills since 2023, according to the Chronicle of Higher Education. The resignation of Claudine Gay, Harvard University’s first Black president, amid plagiarism allegations in January was billed as “the beginning of the end for DEI in America’s institutions” by the conservative activist who led the campaign to oust her. Mentions of DEI on corporate earnings calls have plunged in the past year, according to the Wall Street Journal."
So what’s all this about? Just politics? Sort of, but the real issue—structural change and transformation—goes much, much deeper.
Why Business Got (a Little Bit More) Enlightened
Why did Big Business end up as one of the world’s most progressive forces—for a time, anyways, even if that age appears to be ending—especially as the world plunged into swift regress? It wasn’t a moral decision, made for sentimentalism’s sake—and this is the part that doesn’t get discussed enough.
Business went “woke”—or got a little bit more enlightened—for pragmatic reasons. About a decade ago, reams of research began to come out, some of it mine, plenty of it by many of the world’s leading academics—and it showed that firms who began to took sustainability, governance, the environment, and the planet seriously did better. Way better. Their share price ended up significantly higher—not just because of better PR, but because they were just better managed: they faced less risk, invested more wisely, and had stronger connections to their customer bases. Following that, another wave of research revealed that the one of the biggest factors affecting the performance of teams and organizations wasn’t militaristic command-and-control, or leadership, but…diversity. Diverse teams, and that means across gender, race, generations, social class, all of it outperformed—just like with sustainability, by a long way.
The corporate world’s a lot of things, but it’s not stupid. It pays handsomely to keep abreast of the latest research, and these findings struck it like lightning. In an era where growth was harder and harder to come by, here were two new answers, untapped veins. And so the world’s smartest businesses embraced this new model—Apple’s a good example. Again, no, it’s not perfect, and yes, of course, it’s a business, but it’s a far cry from a Facebook. The point is that business was swept up in a wave of enlightened commerce, constructive capitalism, call it what you like, for a practical reason: it made for higher-performing, stronger, better results, organizations, teams, everything.
Now think about pulling back on all this. It’s how politicizing things make us all poorer and worse off. These results are based on pretty hard social science, and giving up on them is going to…shrink the economy. Cause losses of investment, potential, possibility, and surplus. For what good reason? And so a vicious cycle ensues—regress becomes stagnation which fuels regress. So why is this reversal beginning to happen?
What’s different about now? Everything. But not just politics. I’ve been worried for a while that this age of progressive business was about to draw to a close. Why? Because the economy’s now facing long-run stagnation. The IMF says it’s “limping along,” and growth forecasts for the next decade are effectively flat. Factoring in carbon emissions (we’ll publish that research soon), the economy’s shrinking in real terms.
It was easy for business to be enlightened and progressive when times were good. The pandemic, while it was devastating for small businesses, was pretty good for big ones. Profits soared, while people received handsome support from governments. And then, as that drew to a close, spending bounced back, and business went into a kind of post-pandemic high. It imagined the good times would go on…and on.
But now? Layoffs are sweeping industry after industry, from tech to publishing to banking and beyond. Businesses are cutting back for a reason—the economy’s not going to grow much if at all in real terms across the globe for the next decade, and they need to prepare for that, and of course the way they do that is that the axe falls. On whomever and whatever’s most expendable, first.
It’s harder to be progressive and enlightened in tough times. Lean times. I worried that as soon as the post-pandemic high ended, business would put it’s new elements of progress on the chopping block. Especially as it faced growing political pressure. That part of the equation’s easy to understand, in a way.
Political pressure raises the risks of being a progressive, enlightened business. Take the examples above, or just think of, say, Disney under attack. On the other side of the ledger, the new elements of progress, diversity, sustainability, good governance, caring about the people and planet—they have long-term gains. But if the short-term risks exceed the long-term gains, many businesses will make the decision to…back down.
Even if it’s a poor one. The gains that come from long-run investments, like in people, planet, circular manufacturing, better leadership, truer equity—they scale up sort of exponentially, if you like. The gains increase sharply over time. But political pressure’s costs and risks are now. In that sense, it’s a foolish decision—because you forego much, much more than what you lose. Still, though, given that calculus, it’s easy to see just why business is already backing down—short term costs today exceed gains, which happen over the long term, and that form of myopia is, infamously, what business is notorious for.
So is this the end of enlightened business, progressive capitalism, call it what you like? Perhaps not the end end. But we are likely to see a significant pullback. Businesses of all sorts will continue to slash investment in “DEI” and “ESG”—and I don’t like those acronyms because they hide the truths we’ve discussed above, the reasons these elements of progress matter. Only the hardiest and most committed organizations will persevere with these models and paradigms—Apples, Disneys, etcetera. They’ll do better over time, but they also have the resources—deep pockets, global brands, relationships—to survive the pressure. The rest? Many will back down, too easily, and forego building organizations fitter for the future, more robust, trusted, higher performing, capable of real wealth creation and building bonds with alienated, cynical customers.
The Great Transformation That’s Not Happening (Fast Enough)
All of this is about a great transformation. That’s stalling out. The transformation to post-capitalism. This is another macro trend, and we’ll save a deeper discussion for another time, since this has already gotten too long.
What is the global economy? Right now, it’s a bizarre hodgepodge of…capitalism, communism, and authoritarianism. That’s America, China, and Russia, plus India, if you like, who are its major players. And the truth is that this strange mixture of a global economy isn’t one that’s working. It’s not working for the planet, obviously, which is heating up at rates where scientists are questioning if climate tipping points are being hit. It’s not working for people, who are now getting poorer in real terms, on average. It’s not working for democracy, which is currently imploding, amidst the fear, rage, fury, and despair at it all. It’s only really “working” in one sense, which is make the already ultra rich even richer.
Whether we like it or not, this system is on its way out. Post-capitalism is the 21st century’s most necessary transformation. Even if that’s not quite the right phrase for it, because the world economy is this strange hodgepodge. That transformation is about a lot of things: businesses reinventing their purposes and bottom lines, nations reinventing what they measure as “GDP” and “productivity,” finance reimagining what “risk” and “reward” really are, and international institutions agreeing on new rules to bind all that together.
The problem is that this transformation has stalled. And it’s now stalling badly. Business pulling back on its cutting edge investments is post-capitalism stalling—one end of it. Another end of it the ongoing failure of nations, especially rich Western ones, to reinvent measures like GDP and growth and so forth. Yet another one is the striking fact that we don’t have something as simple as a carbon tax as a world. Still another one is that financial markets haven’t fully priced in the risk of planetary carbon meltdown, for example.
The transformation to post-capitalism is stalling, and that’s not a good thing. For a while, progress was being made—in the form of micro trends like enlightened business, or attempts at new ways to measure economies, or to create new forms of organizations and bottom lines, or understand notions of “impact” and other ideas of true wealth creation. Now, though, those efforts are fewer and further between. The energy and impetus is leaving the room, as conflict, hostility, and stagnation sweep the globe. The longer this macro trend, takes, though, the more a vicious cycle continues: without reinvention, the global economy will continue to stagnate, which will fuel regress, socially and politically, which will only cause more stagnation and decline and conflict.
It’s at this scale that our world, and leaders, need to think about where we’re headed. The path we’re on is an increasingly dangerous one, and you can feel and see that by the day. Breakdown now surrounds us. Our task in an age like this isn’t to simply pull back, though, and retreat—it’s to redouble the intensity with which we create the future. Wiser businesses know that, and I wish wiser countries did, too. This is a crucial turning point for us all, these next few years and decades. Reinvention is never easy—and often, too soon abandoned, for the sake of expedience. In age of meltdown, we should be humble enough to remember that deep lesson of history.
❤️ Don't forget...
📣 Share The Issue on your Twitter, Facebook, or LinkedIn.
💵 If you like our newsletter, drop some love in our tip jar.
📫 Forward this to a friend and tell them all all about it.
👂 Anything else? Send us feedback or say hello!
Member discussion