The meaning of Advent

I must first make a confession. I love carol services. I love singing carols. I love the Christmas tree. I love Christmas decorations. I love the festivities of Christmas. They remind me of when I was very young singing carols from house to house in Fforestfach which was then a village. When it was suggested that CRPA (Christian Responsibility in Public Affairs) might hold an annual carol service I was wholly supportive.

Christmas is a festive season and in the words of our carols a cause for celebration: “Rejoice, Rejoice, Emmanuel shall come to thee, O Israel; Heavenly hosts sing, alleluia, Christ the Saviour is born; Listen to the story of the Jesus Child; Come thou long expected Jesus, born to set thy people free”.

While Christmas is a festive season, Advent in the church calendar is a time for reflection to think about the real meaning of Christmas.

As part of our reflection I would like to suggest we consider three aspects of Advent.

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Advent is a Reality Check

First, that Advent is a Reality Check.

Jesus’s birth was not some random historical event. It was foretold by Jewish prophets. He came for a purpose. On the night of his birth the message of the angels to the shepherds was “For into you is born this day in the city of David, a Saviour, who is Christ the Lord”. There is a clear road from Bethlehem to Calvary.

Some time ago we spent our summer holidays one year in Dorset. En route to West Bay we stopped off at Bridport and quite by chance happened to park the car near a second-hand bookshop. I couldn’t resist wandering in and to my amazement found a book with the title The Lord Cometh. Even more surprising

was the name of the author: Christabel Pankhurst. I had always thought of her as one of the most courageous as well as militant leaders of the suffragette movement, imprisoned on a number of occasions for civil disobedience. But I had never thought of her as a person of Christian faith and practice.

How wrong I was.

She writes in the book of how her faith had been “too fragile a flower of belief to speak of and expose to the cold wind of other people’s scepticism”. I love the way she expresses that and if we are honest, how many of us would share that thought? Following the political enfranchisement of women, which she thought was “a necessary measure of justice”, she expected that “once certain other obstacles were removed” it would be “full steam ahead for the ideal social and international order”. By 1918 she realised that like many others she had lived in an “atmosphere of illusion” and had to face the fact that the Great War was not “a war to end war but a beginning of sorrows”.

For her, discovering the reason for the birth of Jesus as the fulfilment of Old Testament prophecies dashed her illusions and changed her understanding of life and the world. She concluded that the problem was “not laws, nor

institutions, nor any national or international machinery, but human nature itself” with its “passions, greeds, ambitions and lust for power which would be a continuing curse.”

We also live with illusions.

For the past 10 years, Frank Field — MP for 40 years for Birkenhead, now a peer and peerless campaigner against poverty — has been writing a book which is a personal reflection on his faith and politics. He has discussed the text with my wife Rachel and myself on many occasions. He has written it because he feels he has not been sufficiently clear in making it known that the motivation for his work in tackling poverty has been his Christian faith. In Soul Searching — A Political Journey, he relates how he battled against the illusions of both militant Marxists and social reformers, such as Professor Richard Titmuss and Brian Abel- Smith, two stars of social administration at the LSE in the 1960s and 70s.

His conclusion is identical to Christabel Pankhurst’s: the problem is human nature. Both the views of Marxists and the optimism of the centre-Left reformers were an illusion: if we could change peoples circumstances we would change their behaviour and eradicate poverty. In all of his extensive reading he says that he came to the Gospels late — in fact, very late — but when he did, during the dark days when he was threatened with deselection by the far-Left in the mid-1980s, it led him to discover the meaning of the Incarnation and the importance of the Kingdom of God. It changed the direction of his politics, making “self-interested altruism” the core of his approach to welfare reform.

Christabel Pankhurst wrote early in the twentieth century against the background of the Great War, the beginning of our sorrows. We in this century have already witnessed 9/11, the Iraq War, the financial crisis and now Covid.

Advent should be a reality check for us. We need to check whether our understanding of life is based on illusion or reality. And not just in terms of the big political, economic and social issues of the day, but in personal terms as well: relationships, work and aspirations.

Advent is an Unfathomable Mystery

 Secondly, Advent invites us to reflect on the unfathomable mystery of the Christmas story.

The claim made in the gospels is that in a known geographical place (Bethlehem) and at a point in history (when Quirinius was governor of Syria) something unique happened; a baby boy was born who was just like us in that he was fully human but at the same time fully divine. The claim is that he was God and not just any God, like the gods of Greece, Rome or Egypt. He was the God of the Hebrews, the God of Abraham, Isaac and Jacob. The God who had rescued the Jewish people from slavery in Egypt. By any standards this is a staggering claim.

We may not agree with Jesus’s teaching but we can understand it. It is not a mystery. Similarly, crucifixion was a common enough event at the time for us to accept that he was crucified. Again, not a mystery. The resurrection is more of a stretch, but weighing up the evidence of the many eye-witnesses who saw the empty tomb and met the resurrected Christ, it is not inconceivable that something remarkable happened on that first Easter day.

Birth is a very normal thing. It’s not a mystery.

But the idea that the Creator of the universe could be born as human as we are and yet at the same time be divine is something inexplicable, an event that human reason is incapable of solving. As Charles Wesley wrote in the eighteenth century

“Our God contracted to a span, Incomprehensibly made man”.

Over the last 150 years many clerics and theologians have done their best to remove as much of the supernatural element as they possibly could in order to make the story more acceptable to modern thinking. It seems to me that you can reject the story, you can accept the story, but what doesn’t work is to remove as much of the supernatural element of the story as your imagination will allow and then claim it as the historical record.

Starting with the Old Testament prophecies regarding the birth of Christ, then the unnatural conception of John by Elizabeth, the appearance of angels to Zechariah, Mary, the shepherds and finally the arrival of three astronomers or astrologers looking for the birth of a new king, from beginning to end the account of the birth of Jesus is inexplicable without the supernatural.

Not only that, but without the supernatural the rest of the New Testament would make no sense. It would literally be nonsense. C S Lewis compares the account of the birth of Jesus, the Grand Miracle, as he called it, to possessing parts of a symphony or a novel, which by themselves make some sense but make no sense as a whole. There is a missing part. The story of Advent for the understanding the rest of the New Testament is like discovering the chapter on which the whole novel really turns, or the main theme of the symphony.

Advent is the Basis for Hope

 Thirdly, Advent is not only a reality check and an unfathomable mystery — it is a basis for hope.

Lord Carey in his opening remarks read the Anglican collect for the first Sunday in Advent. It refers not just to the first Advent but to a second Advent when Christ will return to this earth on “that last day, in his glorious majesty, to judge the living and the dead”. The promise is based on the words of Jesus himself. “If I go and prepare a place for you, I will come back and take you to be with me that where I am you may also be” (John 14:3)

The basis of Christian hope is not just the birth, but the life, death, resurrection and ascension of Jesus Christ. Our hope is not a form of fatalism, least of all a pretext for withdrawing from public life, politics, business or the arts. Quite the opposite.

St. Paul writes that in the Incarnation, “Christ Jesus …. made himself nothing taking the very nature of a servant, being made in human likeness” (Phil 2:7).

The life of Jesus is our example of humility and service.

In this context Christian Responsibility in Public Affairs is concerned to bring together Christians and others in public life, from different churches and different parts of the political spectrum, to discover the way the Christian faith relates to the political, social and economic issues of our time. It is not just a place debate but a preparation for being involved in countless ways in serving others, for the common good, not just private good.

Let me conclude. Advent is a time of reflection and hope based on the unfathomable mystery that God became man in the person of Jesus. We cannot test or measure it by the standards of scientific inquiry. However the experience of millions since that first Advent is that it is not an illusion. It is something real. It is a mystery that has changed the world and continues to change the lives of those who are prepared to believe.

The hope of Advent is not just a future expectation but a living reality now for those who believe. In the person of Jesus, Emmanuel, God is with us. Our only response should be the words which appear in each verse of that wonderful French carol “O Holy Night”:

Fall on your knees, O hear the angel voices O night divine, O night when Christ was born.

This is a talk given on 1st December 2021 at St. Michaels Church, Chester Square, London.

Lord Griffiths is the Chairman of CEME. For more information please click here.

Committed churchgoers – defined as those who attend weekly – have a considerably more positive view of business and the market economy than those who lead them and teach them.

This is the result of polling conducted for the Centre for Enterprise, Markets and Ethics. Savanta ComRes polled six audiences between 10th May 2021 and 5th August 2021 to secure their findings: the general public, regular churchgoers, business leaders, Muslim and Jewish people, and Church leaders. They also conducted in-depth interviews between 10th May 2021 and 5th August 2021 with ten Anglican and Catholic bishops. The total sample size was just short of 3,500 people.’

The result show that those who preach to the flock hold opinions on business and enterprise, tax and society far removed from those who listen in the pews, if they are still listening. Perhaps the faithful are more in touch with God?

According to the polling, 51% of church leaders viewed higher taxation as a better way of achieving a fairer society than lower taxation.

This is probably predictable as nobody really seems to make the case for a low-tax economy in this day and age. Perhaps the case needs to be made afresh? There would certainly be an open door among the faithful; only 34% of weekly churchgoers had the same rose-tinted view of high taxation as the clergy.

There are things to celebrate, not least the widespread trust in small, medium and family businesess and their contribution to society, but the dislocation between clergy and flock reveals an underlying loss of confidence in the nation and in the economy by many church leaders.

A mere 30% of church leaders believe employers care about their employees; yet, among the regulars that figure is 54%.

Maybe the church is not setting a good example in the treatment of those that work in the spiritual domain?

Meanwhile amongst ordinary worshippers there appears to be much more appreciation of their employers. Seventy-five per cent of church leaders think business leaders are paid too much. Amongst monthly churchgoers this is 59% and the weekly number, at 65%, is close to the general public average. This might reflect the poor pay conditions of the clergy.

The message is the same when it comes to trust in multi-national corporations.

Unsurprisingly the church leadership has bought into the narrative that multi-national corporations are somehow evil, though I don’t suppose clergy use Amazon any less than everyone else. The congregation members are, perhaps, simply more realistic. Multi-nationals deliver what we want, they do so on the basis of size, global reach and capacity to deliver. They are, for the most part, good employers and invest in the countries where they operate.

But what about the tax? The popular storyline of the Left is that multi-nationals pay little or no corporate tax and that this somehow constitutes a moral scandal, whilst still pressing the ‘order now’ button on Amazon.

This line fails to take account of total tax take and the wider economic contribution of these businesses – ideas perhaps more familiar to the flock than the shepherds?

For example, according to PwC’s 2020 Total Tax Contribution survey for the 100 Group of Finance Directors, for every £1 paid in corporation tax these businesses paid £2.89 in other business taxes, irrecoverable VAT, employers’ national insurance, business rates and petroleum revenue tax. In addition, for every £1 of corporation tax paid, these companies collect £8.34 of taxes on behalf of the government, mainly PAYE, national insurance, VAT and customs duties – collect it, that is, free of charge. Not to mention the jobs and the investment.

The faithful in the pews probably understand this better than the preacher. Only 30% of church leaders expressed trust in multi-nationals; 73% of the weekly regulars did so – a big gap by any standards.

Disturbingly there seems to be among clergy a loss of confidence not only in many aspects of the market economy but also in the nation itself. In response to the question whether Britain was an attractive place to do business, only 46% of the church leaders thought so, compared to 66% of the congregation members.

Church leaders are out of touch with Christian opinion. Clergy convey a lack of understanding of key aspects of business, display excessive reliance on the power of taxation and government, and lack confidence in larger and global businesses – and indeed in Britain as a nation. A message is being preached that is not believed by most of its recipients.

This article was first published in Christian Today.

Jeremias Prassl is a Fellow of Magdalen College and an Associate Professor in the Faculty of Law at Oxford University. He advises public and private sector organisations on regulating the gig economy. In his book entitled Humans as a Service, Prassl re-evaluates the merits and pitfalls of the “gig economy” and seeks to discover ways that society might benefit from the gig economy without falling into “extreme forms” of labour force commodification (page 4).

For those of you wondering what the “gig economy” is, Prassl describes it as “…an ever-growing number of start-ups, […] online platforms and mobile apps [that] connect consumers, businesses, and workers – often for jobs lasting no longer than a few minutes” (page 2). The term “gig” invokes an artist’s gig for a time-limited and (usually) one-off performance.

This new and growing space labelled as the “gig economy” poses both opportunities and challenges.  On one hand the digital space has enabled an unparalleled level of growth and innovation in the exchange of goods, services and other forms of capital at instant speeds – creating value for all participants (page 3). On the other hand, critics argue that a deregulated gig economy leads to a commodification of labour whereby “those with money will be able to […] hire those without money by forcing an online bidding war to see who will charge the least for their labour” (Ibid.).

The book seems to be written with the “educated reader” in mind. The author makes extensive use of practical examples whilst limiting overuse of legal jargon, which makes the book accessible to the specialist and non-specialist alike. The contents are structured among six main chapters and while we will not detail each in part here, we will touch upon some of the key points that may warrant further discussion.

Chapters I and II lay out the foundations of the gig economy: its internal workings, the role of digitalisation, the role of regulation (or lack thereof), and so on. Prassl points out that large actors within the gig economy are mistakenly given the benefit of the doubt when found guilty of mistreating their employees (or contractors). This is largely done by hiding under the “innovation” banner and perhaps abusing the public’s perception of innovation as a natural industry disruptor. Once section in the second chapter highlights the discrepancy between the authorities’ response to Mike Ashley’s Sports Direct zero-hours contracts scandal, and the ill treatment of ride sharing drivers for Lyft & Co. in the US (page 41-42). Prassl asks, “Why, then, is it that Mike Ashley was (rightly) subjected to parliamentary humiliation, whereas the sharing economy is celebrated by its very own cross-party caucus in the US Congress?” (Ibid.).

Chapters III and IV continue the discussion and look at life within the gig economy and the dilemmas that innovation can give rise to, particularly in respect to applying the appropriate level of regulation. Prassl points out an “innovation paradox”: “…it is undoubtedly true that key elements behind the rise of the sharing economy are completely new – first and foremost, their reliance on the internet, smartphone apps and digital platforms […] When it comes to work in the on-demand economy, on the other hand, the story is a very different one” (page 72). It is the capacity to accurately differentiate between the truly novel and the outwardly novel that policymakers will need if they are to develop an appropriate regulatory framework.

Chapters V and VI conclude the discussion by looking at various approaches of harnessing the benefits of the gig economy whilst restoring and protecting workers’ rights. Prassl argues that a key element is ensuring that everyone plays by the same rules, “…we need to redress structural imbalances and create a level playing field – with employment law at its foundation” (page 119).

To conclude, Humans as a Service by Jeremias Prassl is a great overview of the opportunities and challenges that the gig economy brings for all stakeholders involved. However, (and given that this piece of work is primarily written from a legal perspective), one cannot help but feel that insufficient voice has been given to the non-legal (or non-regulatory) solutions to the problems facing the gig economy. Some of these might include: allowing for market corrections and re-structuring, online reputation management, the implications of reputation damage, the increasing role of independent reviews in online decision-making, and so on. This would encompass a much broader discussion that the book sorely misses.

That is not to say these are unequivocal answers – yet a more thorough investigation into the non-regulatory means of transforming the gig economy would have benefited the book greatly. If readers can look beyond the “regulation is the answer” approach (which no doubt, some will), Humans as a Service is a good and informative read. It is just a shame that it missed the opportunity of being an excellent read. Perhaps an economist’s response to the book would help – let’s hope that we see such endeavour in the future.

Prassl, Jeremias. “Humans as a Service: The Promise and Perils of Work in the Gig Economy” was first published in 2018 by Oxford University Press (ISBN:9780192517388). 199pp.

Andrei E. Rogobete is the Associate Director of  the Centre for Enterprise, Markets & Ethics. For more information about Andrei please click here.

This was first published in The Article.

The Article was proud to publish one of the most important pieces we have ever carried: a warning to the Bank of England from the economist Brian Griffiths that unless it acts now to curb inflation, the UK risks sinking into the mire of stagflation — as it did in the 1970s. 

In the latest of a series of essays on inflation, Lord Griffiths — who was head of Margaret Thatcher’s Policy Unit in the late 1980s and has recently retired from a senior position at Goldman Sachs — explains just how precarious the outlook now is. His first article, “The spectre of inflation” appeared well over a year ago, when the threat of a return to inflationary times was ignored or dismissed by those in authority. The official line has been that any rise in inflation above two per cent would be “transitory” and that prices would soon return their pre-Covid levels.

Now it is a very different story. Last weekend the Governor of the Bank of England, Andrew Bailey, indicated that the Bank would “have to act” on inflation and the markets now expect a rise in interest rates after the Monetary Policy Committee meets next month. Today, the Bank’s chief economist Huw Pill warns that the inflation rate could rise above five per cent early in 2022, which implies that the retail price index will exceed this figure by two or three per cent.

As Lord Griffiths explains, once inflationary expectations are baked into the economy, with markets, employers, trade unions and consumers all anticipating a significant decline in the value of money, the danger of a wage-price spiral becomes acute. Such inflationary expectations are difficult to eradicate. Only co-ordinated action between the Bank and the Treasury over a period of years rather than months will squeeze inflation out of the system. 

This means not only higher interest rates than we have been used to, but an end to quantitative easing and much stricter control of the money supply. That in turn implies tighter limits on government spending and borrowing in the run-up to the next general election, due by 2024. Tensions between the Prime Minister and the Chancellor are bound to resurface. The economic cycle and the electoral cycle may not align, but if inflation is allowed to get out of control, the Government will be blamed. Boris Johnson will not wish to be remembered as the Prime Minister who undid all Mrs Thatcher’s work. 

The alternative to taking action against inflation now does not bear thinking about. Stagflation is the worst of all possible worlds: stagnant growth, rampant price and wage inflation, high unemployment and low productivity. When Britain was last caught in this trap, during the 1970s, it was mocked abroad as “the sick man of Europe”. Even the momentous step of joining the European Economic Community, as it then was, did not bring salvation. That only came when the Thatcher government (of which Lord Griffiths became a key adviser) bore down on inflation by controlling the money supply. Initially the sacrifices were painful for the entire country: unemployment rose to more than three million and stayed high for years; taxes rose and spending was cut; inflationary wage rises ended. Strikes led to bitter, sometimes violent clashes as unviable industries cut labour costs. The Miners’ Srike in 1984-85 nearly brought down the Government. But Mrs Thatcher and her ministers held their nerve; as inflation fell, growth and prosperity gradually returned. Then, as the economy boomed, inflation rose again. This is the situation that the UK finds itself in today: an economic recovery, but with a sharply rising money supply and inflationary expectations.

The Bank of England now enjoys operational independence, as it did not in the 1980s. The risk of this is that the Government may try to evade responsibility for inflation. That, however, would be an illusion, both in theory and in practice. It is Parliament that is sovereign and which sets the Bank’s inflation target of two per cent, which in normal times functions as an anchor. If underlying inflation is now running at more than twice this level, the Treasury must answer for the consequences no less than the Bank. The global crisis caused by the Covid pandemic, combined with the localised dislocations occasioned by Brexit and the political imperatives of the Government determined to occupy the centre ground, mean that a return to austerity is unthinkable. Yet the tough choices that now face us cannot be shirked if we are to avert a plunge into the abyss of stagflation. 

For years, if not decades, the pendulum of economic orthodoxy has been swinging away from the monetarist ideas that influenced Mrs Thatcher and her colleagues. New Labour worshipped at the shrine of Keynes rather than Hayek or Friedman, while the coalition and Conservative governments that followed never embraced monetarism. Boris Johnson and Rishi Sunak have pursued classic Keynesian policies to kickstart the economy after the pandemic. Now, however, they need to pay heed to the voice of experience. The analysis and remedies offered by Lord Griffiths are supported by many other economists, particularly those with expertise in monetary policy. The fact that Huw Pill, the Bank of England’s new chief economist, is clearly worried about inflation getting out of control next year explains why the Governor, Andrew Bailey, is now talking about imminent action. 

Their tone has altered just since last June, when Lord Griffiths warned of “A new age of inflation” and the danger of delaying a course correction that could be “too little, too late”. “The major monetary policy lesson of the post-Second World War years,” he wrote then, “is that it is far better to take one’s foot off the accelerator now rather than slam the brakes on later, jeopardise the recovery and raise unemployment.” In June, Andy Haldane was still the Bank’s chief economist. Now Huw Pill has taken over. He appears to have taken that lesson to heart and persuaded Andrew Bailey to act. We are about to discover whether Rishi Sunak can persuade Boris Johnson to let him do the same.

Daniel Johnson is the founding Editor of TheArticle. For two decades he was a senior editor, editorial writer and columnist for The Times and the Daily Telegraph, before leaving to set up Standpoint magazine, which he edited for 10 years. He contributes regularly to Daily Mail, Wall Street Journal, Commentary, New Criterion, National Review and other papers, magazines and websites.

UK inflation is suddenly back with a vengeance. In an interview with the Financial Times, Huw Pill, the chief economist at the Bank of England (and my former colleague at Goldman Sachs) warns that the official rate of inflation may rise above five per cent early next year. This means that the retail price index could rise to seven or eight per cent.

For three decades we have lived with stable inflation averaging two per cent. This is the official government target set by the Treasury for the Bank of England. Along with financial stability, it is the Bank’s primary responsibility. For the first twelve months of the Covid lockdown, annual inflation was below one per cent. Last month it had reached just over three per cent on the official measure (five per cent on the retail price index). The UK is not alone. In Germany it was 4.1 per cent, the highest for 29 years. In the US it was 5.4 per cent. In fact, rising inflation has become a major challenge for all advanced economies.

The current global inflation is a classic case of “too much money chasing too few goods”. Lockdown led to a collapse in output and employment. In order to avoid a 1930s style Great Depression, deficit spending by governments of advanced economies rose to its highest recorded levels in peacetime. Central banks, including the Bank of England and the US Federal Reserve, cut interest rates to zero and whether intentionally or not expanded their balance sheets to finance the deficits (monetary financing). The result has been a massive fiscal stimulus and excessive money creation. At the same time supply chains have broken, shortages have appeared (petrol and building materials, for example) and energy prices have soared. In all advanced economies there is a general shortage of labour. In the UK following Brexit, migration has fallen dramatically and Boris Johnson has argued powerfully that he wishes to see the UK building on the success of Brexit by creating a “high wage, high skill, high productivity economy”. Unless productivity is raised, higher wages would lead to higher prices.

Meanwhile central banks have argued that the rise in inflation is “transitory”. As governments withdraw the budget stimulus and furlough subsidies, they expect inflation to return to two per cent. The working assumption has been that supply disruptions, such as the shortage of microchips, will continue but are being corrected and that because unionisation has been falling since the 1970s, the threat of wage push inflation is weak. Within this framework price expectations have not fundamentally changed: after this current blip inflation is expected to return to two per cent. Until now, central banks have consciously decided to take no action, either to cut back on money creation or to raise interest rates in order to deter spending.

In the last few weeks as summer turns to autumn and temperatures fall, central banks have begun to acknowledge that inflation may be more persistent and higher than previously thought. Even though the prospect of inflation had become a spectre on the horizon as far back as the summer of 2020, they have made no attempt to curb money growth or raise interest rates. 

This last weekend, Andrew Bailey, the Governor of the Bank of England, acknowledged that the Bank needs to act. “Monetary policy cannot solve supply side problems — but it will have to act and must do so if we see a risk particularly to medium-term inflation and to medium-term inflation expectations. And that’s why we at the Bank of England have signalled, and this is another such signal, that we will have to act. But, of course, that action comes in our monetary policy meetings”.

For central banks stagflation — the combination of rising prices, rising wages, low productivity, low growth and rising unemployment — has only been a distant dark cloud on the horizon. I wish to argue that stagflation is endemic to inflation, but that action by central banks and governments even at this late stage can avoid it. I am not suggesting a return to the 1970s, when inflation reached 28 per cent in 1974 and averaged 18 per cent over the four years 1974-77. Operational independence granted to the Bank of England in 1997 means that a return to the catastrophic inflation and stagflation of the 1970s is most unlikely. However, unless checked, we could experience unnecessary volatility in inflation with sudden spikes, jerky changes in interest rates, low productivity growth and high unemployment. 

There are a number of reasons why this could happen.

Expected inflation is no longer anchored at two per cent

First, medium-term price expectations are no longer anchored at two per cent. Actual inflation depends, in part, on what we expect it to be. If people expect inflation to rise to five per cent, businesses will want to raise prices by at least that number, workers and trade unions will wish to see wages rise by an equivalent number and landlords will push up rents by a similar amount. If inflation is anchored, an upward blip in the recorded rate will not lead people to change their behaviour and so a temporary increase is “transitory”.

When medium-term price expectations were anchored at two per cent no one was taking about the threat of inflation. Today everyone is talking about it. What will become of the triple lock for pensions and welfare payments, the cost of air fares for next summer’s holidays, the price of petrol at the pumps (now nearly higher than ever), rising gas bills, future interest rates and mortgage repayments?

Similarly, businesses face higher wage costs, higher input prices (tin, steel, wheat, oil and gas) and higher taxes (national insurance, corporation tax). They will wish to raise prices to preserve revenue and profit. Investors will keep trying to guess how and when central banks will change interest rates.

One reason central banks have not so far taken action is because inflation is in their judgement “transitory”. In reaching this conclusion they depend on their assessment of the “output gap” between existing output and full employment output. At a time when Brexit and Covid have created major structural changes in the economy, it is far from clear how much confidence we can place in measuring the “output gap”. Structural changes resulting from digitalisation, replacing “offshoring” with “reshoring”, the huge switch to investment in green energy from fossil fuels, the mismatch between jobs made redundant by Covid and the skills needed for new jobs created are making it unusually difficult to measure potential output.

For the Bank this is confirmed by consumer surveys, independent economic forecasts and implicit forecasts from financial markets, especially government debt markets. However, the last of these has much less reliability than it used to have, because of the extent of central bank intervention in markets. The most recent household survey by the Bank is for inflation of 2.4 per cent next year, falling to 1.9% after two years, which is what the Bank has been more or less telling markets to expect. Similarly forecasts from independent sources are just above two per cent. I believe it is difficult to attach too much weight to surveys, in view of their failure to anticipate what has actually happened this year.

The International Monetary Fund (IMF) in its recent annual report expects inflation to return to pre-pandemic levels, but even so the IMF qualifies its prediction by stating that “considerable uncertainty surrounds those forecasts particularly related to economic slack”, and that “any assessment of inflation anchoring cannot be decided entirely on the basis of relationships observed in historical data” as well as “when expectations become de-anchored, inflation can quickly take-off and be costly to rein back in”.

Trade unions ready to roar

The sharp rise in inflation, along with an unexpectedly rapid recovery of the economy, means that trade unions can once again create a wage-price spiral, adding a cost push factor to excess demand. 

The UK labour market is at its tightest for four decades. Current UK employment (29.2 million) and job vacancies (1.1 million) are at record levels, with staff shortages in pubs, restaurants, supermarkets and transport. The most recent figure for annual wage growth (which comes off a low base) was six per cent  and including bonuses was 7.2 per cent. Vacancies in road haulage drivers of up to 100,000 have been a focus of attention because of their role in breaking supply chains and creating shortages. Part of the problem is due to restrictions on immigration following Brexit, but what is extraordinary is that there are between 60,000 and 80,000 vacancies for lorry drivers in Germany and 400,000 across the EU. More generally there is a European-wide shortage of labour.

The three decades since the beginning of the 1990s and following the integration of China, Eastern Europe and India into the global market economy witnessed a massive increase of two billion workers into the world economy. The bargaining power of labour was weakened and trade union membership in private sector companies in major advanced economies fell dramatically. The contrast between the power of trade unions to push up wages in the UK in the 1970s and create a wage-price spiral and their inability to do so in recent decades could not have been more marked. Yet now the balance has altered again, this time in favour of organised labour. The newly acquired power of trade unions has been further strengthened by two further factors: the breakdown of globalisation due to the conflict between China and the US over trade and demographic forces, namely the fall in the dependancy ratio (the number of workers relative to dependents) and the growth in care for the aged.

For trade unions the ball is now at their feet. Because of an unexpected increase in inflation, most workers are facing cuts in the spending power of their wages. Some economists argue this is good, because supply shocks require workers to move into different jobs. This is done much more easily through cuts in real pay rather than by management having to lay off staff. But workers are not irrational. Neither do they suffer money illusion, any more than employers. Only last week strike threats over pay were announced by Scottish railway workers and refuse collectors during the coming Cop26 summit in Glasgow. Similar threats have been made by the largest UK trade union, Unite, on behalf of lorry drivers over relatively low pay, anti-social hours and poor driver facilities at service stations. The UK government is taking steps to address those problems. However, overall, the current red-hot state of the UK labour market suggests a wage-price spiral is a distinct possibility. 

Broken supply chains and shortages 

So far we have considered two reasons to be concerned that the current surge in inflation could produce stagflation. One is that price expectations are no longer anchored at two per cent. The other is that trade unions have become more powerful and could create a wage-price spiral. The third is the combined impact of Covid and Brexit in breaking supply chains and creating shortages.

Covid is not yet completely behind us and is still having a large and continuing impact on many aspects of our lives, forcing us to ask fundamental questions regarding purpose, lifestyle, location, compensation and time. Covid is the source of major structural changes in the economy, such as the extent and resilience of global supply chains (reshoring, offshoring, just-in-time), changed expectations in the labour market (working from home, working conditions generally), health risks (future pandemics), skills mismatches (higher wages), digitisation (shopping online) and online technologies.

One problem which was not foreseen initially was the massive impact which the scale of the initial monetary and fiscal stimulus, coupled with lockdown, would have on certain sectors of the economy. For example, when a large number of people decided that lockdown was the moment to improve their homes, suddenly there were shortages of timber, plywood, plasterboard, cement, insulation, adhesives and wheelbarrows, followed by rising prices. Broken supply chains and shortages, whether of petrol, building materials or toys and turkeys for Christmas are, for the foreseeable future, likely to be a continuing problem. Some are due to lockdowns followed by recoveries in different countries taking place suddenly and at different times and for varying duration. These are made worse in shipping by containers being in the “wrong” places, disruptions at ports and not enough lorry drivers to deliver goods. Brexit has definitely played a part in creating shortages, especially in the hospitality and transport sectors, but it is too easily overestimated as a major source of such problems. Felixstowe has a shortage of capacity as a port, but so do Rotterdam, Hamburg, Antwerp and, across the Atlantic, Los Angeles and Long Beach, the largest ports in the US. This is not just a UK problem.

The key conclusion is that we simply do not know how long supply restrictions will last and so lag behind increasing demand.

The Bank of England needs to act now

The rise of inflation over the past year, coupled with the Bank of England’s insistence that it is “transitory”, has left it open to the charge of complacency.

The present time is a great opportunity for the Bank of England to act decisively and bring inflation under control by anchoring it again at two per cent and ensuring the UK economy does not drift into stagnation. Three elements of this are important.

First, the Bank must take action now to end quantitative easing and raise interest rates. A start could be made with the Monetary Policy Committee meeting in November. Its members are best placed as to the way in which rates should be raised, whether by small amounts of one quarter of one per cent or by larger amounts, as well as the target level to which they should rise. I think they need to be raised at least to a level between 1.5 per cent and two per cent.

The one absolutely critical point is that interest rates must rise to a level which will reduce monetary growth and ensure that the public have confidence that the Bank is really committed to getting on top of inflation. After a time, inflation will then begin to fall. Central banks can only influence price expectations to a certain extent by making pronouncements. It is when inflation falls to its target and, through central banks’ actions, remains near target, that price expectations really take hold.

The danger we face is a reluctance by the Bank to take the tough steps necessary to achieve this. It will face criticism from people with variable rate mortgages and zombie firms which are no longer viable, as well as from economists who argue that higher interest rates will threaten to derail the recovery. Unless they are determined to bring inflation under control, however, they risk even higher interest rates later on. The key lesson of the post-war years in the UK and the US is that the longer central banks delay raising interest rates, the higher rates will ultimately have to rise and the greater the check to the recovery. 

Second, the Bank must communicate its medium-term policy in a way which is credible and coherent and must be committed to stick to it. This is not to suggest that it should follow a rigid monetary policy rule, but that it lays out its medium-term financial plan to avoid the “temper tantrums” experienced in the US when the Fed Governor Ben Bernanke embarked on his policy tightening in 2013.

Third, sound monetary policy must be backed by fiscal credibility. This requires the Chancellor of the Exchequer to lay out credible fiscal targets for the next few years, covering spending, taxation and borrowing. 

If the danger of UK inflation drifting into stagflation is to be averted, the Bank of England must act now; it must explain its policy in the medium term; and it must be supported by the Treasury’s fiscal policy.

This was first published in The Article.

Lord Griffiths is the Chairman of CEME. For more information please click here.

The Centre for Enterprise, Markets and Ethics (CEME) is pleased to announce the publication of Ethics and Economics: Economics as a Servant or Master? by Barbara Ridpath.

A copy of the publication can be found here.

The publication can be purchased in hardcopy by contacting CEME’s offices via email at office@theceme.org

Management as a Calling is aimed primarily at business students but it has far wider relevance.  Andrew Hoffman says that he wants “to personally challenge every business student, every business executive, and every business school professor to think about the system in which students are beginning their careers and to push back when it is steering them away from their calling” (page 18).

Hoffman is the Professor of Sustainable Enterprise at the University of Michigan Ross School of Business. His basic thesis is simple: there is a crisis in capitalism of which the symptoms are income inequality and climate change; governments have a role to play in providing solutions to the relevant issues but the leading role has to be played by business since “if there are no solutions coming from business, there will be no solutions” (page 4); treating the sustainability challenges as mainstream business issues and fitting them into the market as it exists will not provide solutions; what is needed is not incremental change but a radical change of values and culture involving future business leaders being taught “to consider management as a calling – one that moves away from the simple pursuit of a career for private personal gain and toward a vocation that is based on a higher and more internally derived set of values about leading commerce and serving society” (page 5); and this requires that we should be turning “to religion and philosophy as a way to augment the market in making this shift” (page 116).

At times, the book loses its business focus and cannot seem to decide whether it is about business management or about the best way to build a political and societal consensus that permits the tackling of climate change. Nonetheless, Hoffman pursues his theme with evangelistic fervour, concluding with an alter call: “You, the next generation of business leaders, have been born into this reality, and you have no choice but to respond. You did not choose this reality but you must embrace it. The nobility of your lives will be determined by how you respond to the challenges you face” (page 138). This is an inspiring message but as a rule evangelists have weaknesses as well as strengths and Hoffman is no exception to the rule.

On the negative side, some of his attacks target Aunt Sallies. For example, he points to the growth in the Stock Market in recent years as evidence that share values are divorced from underlying economic reality and he dismisses Gross Domestic Product growth as a measure of wellbeing or even a reliable measure of economic success, but few would dispute these things and they do not assist in proving his case. On occasions he is also guilty of overstatement or misrepresentation. For example, his linking of the Wells Fargo, Volkswagen and Sackler scandals with Adam Smith’s “invisible hand” does grave injustice to the sophistication of Smith’s economics, let alone his moral philosophy. Conversely, when advocating change, Hoffman is on occasions guilty of dubious logic (the most egregious example of which is his twice stated assertion that “Our problems are manmade – therefore, they can be solved by man”, page 118). Furthermore, his discussion of issues relating to inequality is very brief and superficial. Indeed, no issue is covered in great detail, the book being only 138 pages long.

Hoffman’s vision of the future is both vague and, by his own admission, Utopian. He asserts that “perpetual growth is not possible and its continued pursuit is self destructive”, quoting with approval Naomi Klein’s statement that we have to “come face to face with the hard truth that the conveniences of modern consumer capitalism [are] steadily eroding the habitability of the planet” (page 33): he calls on us to be radical and attacks those who believe that the solution lies in technology, such as electric cars. However, his positive suggestions sound surprising incremental rather than revolutionary. They even include the use of electric cars and, despite quoting Naomi Klein’s challenge, he never discusses in detail what we have to give to up to deal with the problem that he perceives and how our living standards will change in consequence of this.

Having said that, there is much that is commendable and thought provoking in the book. Hoffman does not pretend that he has all the answers, recognises the fact that we do not currently have the infrastructure to be ecologically neutral and criticizes over simplistic debate; he notes that “social media outrage” increasingly drives social discourse and laments that the resulting behaviours and emotional perspectives “are not conducive to the kind of tempered, thorough, and compromise seeking discourse that democratic government needs in order to function well” (page 61); he recognises that part of the reason why the public ignores scientists is because there are some within the scientific community who hold the public in low regard and others “who subscribe to a view of scientism that elevates the natural scientists in relation to all other ways of knowing the world around us” (page 75); he is also cautious about the role of so-called “activist CEOs” and recognises the danger that theoretical accountability to everyone in practice means accountability no-one (i.e. the danger that the effect of weakening accountability to shareholders will be precisely the reverse of the effect that its proponents desire); and, most importantly, he calls for business thinking to encompass more than growing the bottom line without regard to the means or consequences of doing so.

Hoffman’s aim is not to set out a road map to Utopia or to some less desirable but at least sustainable future. Instead, he wants to add new dimensions to the business debate, change mindsets and provoke productive discussion, starting in the business schools. He aims, in this way, to generate new business models that “begin to coalesce around a composite model that brings the full scope of market transformation into greater clarity” (page 39).

Readers of Management as a Calling may well disagree with a number of Hoffman’s assertions, particularly one or two of the more left-leaning of these but few will doubt the need for business discourse to encompass fundamental values as well as ethics in a narrower sense. Unlike Socialism, Capitalism does not, or at least should not, claim to be an all embracing philosophical, social and economic system.  It needs to be supplemented by well thought through values. Despite its failings, Managing as a Calling is a valuable reassertion of this point and an important call to both existing and future business leaders to think more broadly about what they are seeking to achieve. It is well worth reading.

“Managing as a Calling – Leading Business Serving Society” by Andrew J. Hoffman, was published in 2021 by Stanford University Press (ISBN – 13:9781503614802). 138pp.

Richard Godden is a Lawyer and has been a Partner with Linklaters for over 25 years during which time he has advised on a wide range of transactions and issues in various parts of the world. 

Richard’s experience includes his time as Secretary at the UK Takeover Panel and a secondment to Linklaters’ Hong Kong office. He also served as Global Head of Client Sectors, responsible for Linklaters’ industry sector groups, and was a member of the Global Executive Committee.

Some would say that with the National Insurance hike of 1.25%, Boris Johnson seems to have all but erased the (already thin-wearing) conservative ideology found within the Conservative party. However, there are some broader debates we should be having that do not cross party lines.

Let’s give Boris the benefit of doubt and assume that the NI increase was the only feasible way to raise the necessary funds for the NHS and other public expenditure. After being accused of breaking the Tory manifesto pledge on taxes he admitted that, “…a global pandemic wasn’t in our manifesto either”.

Yet it is curious that the tax increase was solely on NI contributions (effectively a tax on jobs), and no change to Income Tax or VAT – why is this? The answer is perhaps more driven by politics than it is by economics. The clue is in the name – the public are more inclined to see NI contributions as exactly that, a ‘contribution’ to the post-covid recovery effort. This makes taxing via NI is undoubtedly more politically palatable than increasing other means of taxation. In addition, half the levy will be on employers. Although workers are likely to bear the cost of this ultimately, through fewer job opportunities or lower wages, it is almost invisible. If it is deemed necessary to raise taxes, should an ethical government not raise money in the most transparent and visible way possible and justify its case?

Perhaps the lack of transparency was the main reason there was little to no revolt among Tory MPs. A YouGov snap poll found that Britons are split 44% to 43% on raising National Insurance by 1.25% to pay for NHS and social care. That could be seen as a favourable result given that it was an explicit break of a manifesto promise.

Nonetheless, this raises more profound questions: why is tax viewed as an act of seeming benevolence in promoting the common good? Indeed, is it desirable for government to be seen as both the go-to de facto and de jure agent in alleviating society’s ills?

I recently returned from a conference where, among other topics, we discussed the common assumption in Britain that being inclined towards higher taxes and government spending makes a person more ethical or moral. Conversely it tends to be assumed that being inclined towards a smaller state, and emphasising individual freedom and responsibility, necessarily makes a person any less emphatic and moral.

Traditional liberal theory challenges this premise by starting from the level of each individual’s moral duty and agency. Only by transforming the individual can we talk about real and profound positive change at a societal level.

The ‘father of Liberalism’, John Locke developed his moral philosophy by drawing life’s pursuit back to personal motives first, and collective motives second (or in consequence). In An Essay Concerning Human Understanding he recognises the utmost importance of morality:

“Morality is the proper Science, and Business of Mankind in general. […] The Skill of Right applying our own Powers and Actions, for the Attainment of Things good and useful. The most considerable under this Head, is Ethicks, which is the seeking out those Rules, and Measures of humane Actions, which lead to Happiness, and the Means to practise them. The end of this is not bare Speculation, and the Knowledge of Truth; but Right, and a Conduct suitable to it.” (The Essay, IV xxi-ii 3-11)

It is the individual’s innate gifts and abilities that are best suited in the achievement of what Locke refers to as “happiness”, or in broader terms the good, fulfilled life. Yet even Locke recognises that this sense of moral responsibility is a duty, not a given – something that each individual must develop through their own intellectual analysis and evaluation. Moral truths a “…man can attain by himself and without help of another, if he makes proper use of the faculties he is endowed with by nature” (An Essay, Book IV xx 2).

There is an important insight here.

A free society frees individuals to respond to their conscience, take the unique responsibility that belongs to them and act to permeate a moral conscience more broadly within society. This includes promoting action at every level which would solve many of the problems we now “delegate” to the state.  Whilst we need a state to step in when all else fails, it should not be automatically assumed that, if somebody supports less, rather than more, government when it comes to the provision of welfare that they are somehow less “ethical” than somebody who believes that government should take primary responsibility for welfare: charity is not synonymous with taxation and society is not synonymous with the state.

Andrei E. Rogobete is the Associate Director of  the Centre for Enterprise, Markets & Ethics. For more information about Andrei please click here.

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This book is the product of an extensive research programme undertaken between Mars Catalyst, which is the internal think-tank of the Mars company, and the Saïd Business School at the University of Oxford. Professor Colin Mayer is a leading voice in the debates around business purpose and has written and spoken extensively in the field. His previous writing in this area includes Firm Commitment (OUP, 2013), and Prosperity (OUP, 2018). He is insightful and measured and this comes through in this volume. Bruno Roche was formerly the chief economist of Mars, Inc. and the head of Mars Catalyst. He brings both practical business experience and a commitment to thinking about and developing both the ideas and practices around business purpose. He developed the idea of the ‘economics of mutuality’ a surprisingly confusing concept, but one with a lengthy history in Mars. A fascinating and interesting project.

The book has four parts. The first deals with consists of an introduction and overview by the editors. Part II consists of seventeen contributions designed to deal with the core components of the ‘economics of mutuality’ including reflections on purpose, various aspects of non-financial capital (human capital, natural capital, social capital), accounting and measurement issues and the role of micro-equity, investment funds, partnerships, NGO activism and other matters. Part III includes 14 case studies and then Part IV is a conclusion.

The book contains some significant insights, offering areas for further research and useful debates on important topics, all of which build on current knowledge and research in this increasingly important area. However, the book seeks to achieve far too much and consequently ends up with disconnects between the debates in Part II and the subsequently case studies.

The book’s premise is that the classic Chicago economic model of profit/shareholder value maximization was misconceived in its very nature but that business is in a position to be a profitable force for good that transcends self-interest ‘for the benefit of people, planet and profit’ (page 4) which is labelled mutuality. There are merits, as well as flaws, in the Chicago model but few would argue with the second part of that statement.

The history of the idea of mutuality as it relates to Mars is set out by Jay Jakub in chapter 4. Forrest Mars Snr wrote, in a 1947 letter, that the aim of the company (page 57) ‘is the manufacture and distribution of food products in such manner as to promote a mutuality of service and benefits,’ listing consumers, suppliers, competitors, government, suppliers, employees and shareholders as all sharing in this mutuality.

The economics of mutuality takes specific account of a wider range of impacts on people and planet, not least through embracing human, social and natural capital (chapters 10-13). The term ‘economics of mutuality’ though is confusing. The ideas extend beyond the ideas of mutual ownership (see chapter 17) but that is what most people will immediately think of and hence might be distracted from the wider argument. The terminology cannot be readily grasped.  There remains a distinct vagueness when discussing the range and measurement of alternative forms of capital. The editors define mutuality as involving trust, a wider and more pragmatic view of the firm, measuring non-financial performance and developing simple metrics and reporting. The book would have carried more coherence if this definition had more clearly formed the shape of the book and then developed in the case studies. This would have given both a sharper and yet more in-depth analysis.

At the heart of the argument is the idea that the effective boundaries of the firm should be extended beyond the contractual definitions of the traditional corporation which then enables the establishment and pursuit of wider purposes. This argument merits much more discussion as it is a genuinely innovative and creative idea. Colin Mayer and Bruno Roche argue, ‘companies are part of larger business ecosystems and as such, have responsibilities to individuals, communities, and resources that contribute to business performance’ (page 14).  Few would disagree with that and yet extending the boundaries of the firm poses challenges for the structure and nature of the corporation and there remain several conundrums. What is the legal structure which will shape the future corporation? How will the various contractual relationships be reflected in that structure? Are there different possibilities for public, private and family companies?

Another area of significance identified and certainly in need of further research is the development of metrics of measurement for the wider range of capitals identified leading to the idea of a mutual profit and loss account. Chapters 13, 14 and 15 dealing with accounting for natural capital (Richard Barker), implementing a mutual profit and loss account (Robert Eccles and Francois Laurent) and the impact of mutual profit on business behaviour (Robert Eccles and Judith C. Stroehle) were all excellent chapters pushing at the boundaries. Yet, it remained theoretical. One was left wondering whether anyone had actually implemented this sort of accounting approach. As Eccles and Laurent note, to be ‘meaningful and effective, the mutual P&L relies on the selection of material issues and initiatives, the right metrics, and a certain degree of stability over time’ (page 197). This is essentially a rather vague and highly subjective set of criteria; accounting and measurement, however, depends on objective criteria. No concrete examples were actually given and the idea was not explored in the case study section.

The case studies are all examples of businesses which pursue wider purposes and objectives for the good of society, for people, for planet and also for profit. The examples range from supply change management, micro-equity initiatives, fair trade, alleviation of poverty and specific examples of business eco-systems designed for the good of society. Some are well-known. All are good, even inspiring examples of profitable business for good. What was much more difficult was to see the specific (rather than general) link between the earlier chapters and the case studies.

Overall this book is a helpful contribution to the wider debates and draws on a number of important areas for further development and future research. The question remains of how business, mainstream commercial business, can be refocussed in positive ways for the benefit of the various mutually inter-dependent players, rather than simply some good examples of business for good. This requires a more focused approach, reflection on legal structures, their limits and boundaries, and how to reflect new structures as well as the issues of measurement and reporting across a wider range of metrics.

Putting Purpose into Practice: The Economics of Mutuality, edited by Colin Mayer and Bruno Roche was published in 2021 by Oxford University Press (ISBN: 978-0-19-887070-8). 404pp.

This book is a collection of eighteen separate but thematically connected papers which were given at an international academic conference in Belgium in May 2018. The organising principle is an enquiry as to whether the ‘will to serve’ must always be ‘crowded out in the real economic arena of hard competition’ (page vi). The authors are very diverse, with global perspectives offered, although there is an inevitable impression at certain moments that one is eavesdropping on a room full of academics talking to one another and there is some repetition, notably when it comes to the description of what ‘servant leadership’ might be.

I found some of the papers stronger than others but I enjoyed reading all of them, and was left with ideas and questions about re-discovering a wider view of how businesses and companies operate within society. Originally the granting of ‘limited liability’ was seen as a privilege that brought responsibilities towards the community. Those responsibilities have at times been largely overlooked in the single-minded search for profit, which in turn has shaped the kind of leadership the corporate sector has embraced and this volume is a helpful contribution to a growing literature that urges a wider view of what makes for good leadership (whether described using ‘servant’ language or not), as well as a broader view of the very purpose of business and enterprise itself.

It is difficult to summarise such a diverse set of essays, and even the over-arching theme of servant leadership seemed not to be dominant. There are three sections: (1) Philosophical and Spiritual Foundations; (2) Social Entrepreneurship: Serving the Common Good; (3) Servant Leadership in the Context of Business. The general movement through the collection is from concepts to practice, although there is plenty of overlap.

Section 1 (Philosophical and Spiritual Foundations)

I found the most thought provoking of the seven essays in Section 1 to be Ipseistic Ethics Beyond Moralism: Rooting the “Will to Serve” in “The Reverence for Life” by Chris Doude van Troostwijk and The Dark Side of Servant Leadership: Power Abuse via Serving by Volker Kessler. 

Despite its title, the former is very readable. It uses Albert Schweitzer’s life-story as a vehicle for the author’s argument, which is an attempt to answer this question: ‘Is there a way that respects both the self-centered impetus of human life and the altruistic needs of life in general?’ (page 82) I was especially intrigued by the author’s appropriation of Darwin’s ‘survival of the fittest’ theme so as to re-evaluate ‘fit’ as a social idea – the cooperation needed for someone to be a ‘good fit’ within an organisation.

Volker Kessler’s paper contrasts strongly with the others, in that the author (a practitioner with his wife Martina) draws upon a data-base of stories to describe eight mechanisms of power abuse in Christian organisations. The main issues are those of inappropriate obligations and commitments, and a culture of dependency masked as being reciprocity. This sentence stood out for me: ‘Many of the misuses listed… could be avoided if leaders would not call themselves servants.’ (page 119) Every Christian leader would benefit from reading and reflecting on this article.

Several of the other essays are also interesting. Two take a Christian perspective: Patrick Nullens’ paper (The Will to Serve: An Anthropological and Spiritual Foundation for Leadership) looks at the moral aspects of servant leadership, and makes theological links to Christian love and Christ the servant/slave. Nullens raises human fallenness, and therefore the need also for justice – a wider concept linked to the common good; and Heiko Wenzel’s essay (Reading Exodus 18 and Robert Greenleaf) refers to Exodus 18 (Moses’ leadership) as a way of exploring the differences between hierarchical leadership and a ‘first among equals’ model. Issues of organisational culture and participation, and how they are shaped, are considered. In contrast, in Simone Weil and a Critical Will to Serve Michael J. Thate draws on Simone Weil’s thought, in which the theme of ‘creative attention’ is prominent – this being attention towards the world, and a kind of ethical awareness that avoids rigidity.

The other two essays in Section 1 are disappointing. First, Servant Leadership Beyond Servant and Leader: A Buddhist Perspective on the Theory and Practice of Servant Leadership by Ernest C. H. Ng sketches out a model called ‘Interdependent Leadership’. This suggests that changes can be delivered only when confronting thoughts are transcended and any place for opposites or ‘contest’ is removed, but I struggled with understanding how this analysis might become a practical tool.  Secondly, Christianity and Servant Leadership by Peirong Lin among other things considers the concept of the ‘leadership moment’ (page 124), and the need to hold leader, follower, purpose and context together. I liked the phrase, ‘Normal things have parable character’ (page 135), borrowed from Dutch priest and professor Tjeu van Knippenberg, but overall this article felt fairly general to me.

Section 2 (Social Entrepreneurship: Serving the Common Good)

All six essays in Section 2 provoke thought, especially for Christians. The section opens with Emilio Di Somma pushing back against the Milton Friedman version of economics, and seeking to find a place for power-relations, politics, and human dignity within the discussion (Protecting the Weak and Creating Community). Serving is therefore mainly characterised as relinquishing power, and the example of Adriano Olivetti as an exemplary and socially responsible entrepreneur is used. I found myself arriving at the interesting conclusion that ‘making things well’ might be more important than making a profit, although the two are of course not mutually exclusive.

Foundations for Social Entrepreneurship: An Integrative Indian Perspective by Sharda S. Nandram, Puneet K. Bindlish, Harsh Purohit, Ankur Joshi, & Priti Hingorani explores the idea that entrepreneurs might be drawn towards social entrepreneurial activities because of themes lying within Indian philosophy. There is some methodology and interpretation, although I was left wanting more of this. The most interesting concept is that of the ‘public domain’, and why some entrepreneurs seem willing to gift their ideas and creativity to the world, for example Tim Berners-Lee and the world wide web.

Workplace Spirituality in Social Entrepreneurship: Motivation for Serving in the Common Good by Natasha Gjorevska describes ‘spiritual entrepreneurs’ as a category, and explores a complementary relationship between the concepts of social enterprise and workplace spiritual leadership. ‘Spiritual’ here is not necessarily ‘religious’, but embraces themes such as ‘meaningful work’, ‘purpose’, and a ‘sense of community’. However, there are plenty of resonances with Christian thinking about vocation, and the common good.

Mindful Servant Leadership for B-Corps by Kevin Jackson provides some helpful (for me) background information about B-Corps, which are essentially public benefit companies that also exhibit non-instrumental motivations: ‘…ethics for their own sake…’ (p.213). The other main strand within this paper concerns ‘mindfulness’, which keeps a leader’s view wide, and therefore overlaps with the bigger societal purposes of a B-Corp. I translated this for myself into a Christian understanding of prayerfulness, and the big-picture view of creation, and new creation in Christ. With a bit of interpretation this article would be of interest to Christian business leaders and entrepreneurs as they look to the wider purposes of their organisation.

In The Religious Leader as Social Entrepreneur, Jack Barentsen begins by raising the concern that an apparently ‘servant’ religious leader might only or mainly be motivated by the need to proselytise. However, the argument is put that this is usually not the case, and that a broader view of the common good is in mind. One specific example is peacebuilding. Barentsen notes the well-known fact that people of faith are much more likely to volunteer (‘serve’), and therefore contribute to social capital, and he has a useful section, albeit descriptive rather than analytical, on religious leaders as entrepreneurs. I liked his final question asking, are religious leaders helped and trained to be social entrepreneurs, or common-good-builders. My sense is that in the church I belong to the answer is, ‘No’.

Serving the Poor: The Case of the EoC Enterprise ‘Mercurio Net’ by Mara Del Baldo & Maria-Gabriella Baldarelli is very different from the other essays. EoC stands for ‘Economy of Communion’, which is a network of companies initiated in Brazil in 1991 by Chiara Lubich, and which connects to the Roman Catholic Focolare Movement. Lubich’s vision was based on reducing poverty and the need for a broad understanding of happiness and ‘human flowering’. (page 256) She wanted to see a new generation of companies producing wealth on behalf of those in poverty by providing good work. The authors tell us that there are now almost 1,000 EoC firms around the world. I knew none of this, and was grateful to learn, as well as being reminded that the place for servant leadership is critical when it comes to an attentiveness to the poor.

Section 3 (Servant Leadership in the Context of Business)

The third section of the book begins with Jakob Willem (Pim) Boven’s observation (with which I agree) that a theory of leadership (entrepreneurship) is very under-represented in the standard neo-classical economic theories (Servant Leadership in Market-Oriented Organizations, Does that Make Sense? An Evaluation from an Economic-Organization Theory Perspective). The author therefore suggests that we need to take seriously the institutional reality of the company, and he points us to the growing body of research into Organizational Economics. His main point is that there are resonances between Organizational Economics and the theme of ‘Servant Leadership’.

The next two essays in this final section seek to learn from specific situations. The first, The Importance of Calling in Realization of Life Projects: The Case of Maverick and Serial-entrepreneur Hans Nielsen Hauge with Implications for Business Education by Knut Ims, Truls Liland, & Magne Supphellen is the more analytical.  It is essentially a very interesting case study of Hans Nielsen Hauge (1771-1824), who was an influential entrepreneur in Norway – a preacher and businessman whose impact is still felt today. I did not know his story before reading this article, and found it inspiring. Of note for me was the feudal context out of which Hauge sprang, and which he implicitly challenged, as was the link between the spiritual experience of his ‘call’ (described on page 313) and his practical entrepreneurship. The authors point to these key ingredients in Hauge’s life: self-determination (an intrinsic motivation); meaning; persistence. These combine to give prominence to a holistic view of life, rather than life as a series of attempts to optimise choices. This rallying cry towards the end of the paper seemed powerful and important to me: ‘We need a type of business education and business training, which assists students in defining life goals and life projects.’ (page 325).

Rethinking Fashion Retail: The Case of MrSale by Gabor Kovacs takes the form of a qualitative mini research project focused on a small private company called MrSale, which was founded in Budapest in 2000. Kovacs is seeking evidence about the source of genuine ethical commitment in business. The answer is to do with the motivations of serving society and contributing to social well-being, with a link to meditation and Buddhism. The often-observed benefits of an ethically run business are, in this case, seen to be those of satisfied employees, increased innovation, higher levels of trust with suppliers, growth, and ultimately profits. Case studies are always engaging, but I was hoping for more critical comment and interpretation.

The final two essays consider the thinking of two very different people: Aldous Huxley, who was famously the author of Brave New World in 1932, which took a pessimistic view of the rise of science and a mechanised economy; and John Wesley the prophetic teacher and preacher, who created a large-scale business and who had links to the world of commerce and trade.

In Aldous Huxley’s Anarchist Entrepreneurship Based on Spiritual Capital, Gerrit De Vylder plays Huxley’s fiction off against the theme of servant leadership – a creative endeavour which yields surprisingly rich results. The idea which most caught my eye was the value ascribed to localism and the link to the ‘small is beautiful’ economics of E.F. Schumacher. This paper, and indeed the entire book, pre-dates the covid-19 pandemic, but I wondered if the new post-pandemic desire to build more resilient supply chains and to reduce dependence on global trade routes might have added to the discussion.

In the final chapter of the collection (John Wesley: Prophet and Entrepreneur), Clive Murray Norris gives a concise description of John Wesley’s ministry and observes that Wesley’s prophetic voice had a dual focus: personal spiritual renewal, and the need to address the problems and injustices faced by society. This in turn meant that Wesley avoided the trap of a ‘prosperity gospel’, and instead demonstrated a strong sense of stewardship and the fruitfulness of good works in a broad, societal sense. My knowledge of John Wesley’s activities was improved by reading this paper, and the conclusion, with four points for reflection aimed at today’s social entrepreneurs, made for a fine ending to the entire book. Summarised, these are: (i) the need for a holistic view of humanity’s spiritual and physical needs; (ii) the desirability of borrowing ideas from others, accepting that not every idea will work, and focusing on practical action; (iii) the importance of having friends and partners across the community, both rich and poor; and (iv) the imperative that all share a common purpose, that all are welcome, that anything is possible, and that action must start now.

“Servant Leadership, Social Entrepreneurship and the Will to Serve – Spiritual Foundations and Business Applications”, edited by Luk Bouckaert and Steven C. van den Heuvel, was published in 2019 by Palgrave Macmillan (ISBN-13: 9783030299385). 394pp.

Edward Carter is Vicar of St Peter Mancroft Church in Norwich, having previously been the Canon Theologian at Chelmsford Cathedral, a parish priest in Oxfordshire, a Minor Canon at St George’s Windsor and a curate in Norwich. Prior to ordination he worked for small companies and ran his own business.

He chairs the Church Investors Group, an ecumenical body that represents over £10bn of church money, and which engages with a wide range of publicly listed companies on ethical issues. His research interests include the theology of enterprise and of competition, and his hobbies include board-games, volleyball and film-making. He is married to Sarah and they have two adult sons.

Is the delegation of monetary policy to independent central banks that are granted constrained discretion a good or a bad thing? Most non-specialists have probably never pondered this question and many that have done so have probably concluded that it is a good thing. But is it? Peter Boettke, Alexander Salter and Daniel Smith think not and in Money and the Rule of Law they argue their case.

Parts of the book are difficult for a non-specialist to evaluate and some readers will find its US centricity unhelpful. The endless citations of previous works within the text rather than footnotes and the existence of a significant amount of repetition is also irritating. However, none of these failings should put off potential readers whether specialist or not and whether American or not. The book raises issues that deserve to be debated far more widely than they are.

The authors’ starting point comprises two points: first, that good money is essential for human flourishing and that, consequently “monetary institutions are not peripheral, but central, to human betterment” (page xi); secondly, that as Adam Smith long ago pointed out, governments have an unfortunate habit of spending in excess of revenue, accumulating these deficits into long-standing public debt and paying off the debt through the debasement of their currency. This tension creates a problem that needs to be addressed by all modern societies.

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To many, the solution lies in the existence of an independent central bank because it is seen as a way of transferring control over monetary policy into the hands of experts free from government interference. Furthermore, the conferring of discretion on these experts is considered necessary in view of the balance of policy considerations involved and in order to allow flexible responses designed to preserve macroeconomic stability, particularly in a crisis.

This solution superficially appears convincing but Boettke, Salter and Smith attack it head on. First, they challenge the notion that the US Fed has contributed to macroeconomic stability saying that “the Fed’s century-long experiment with discretionary central banking is at best inconclusive, and at worst a failure” (page 147). In particular, they argue that, far from discretion being essential in a crisis, it makes matters worse, asserting that the Fed contributed to the Great Depression of the 1930s and that its interventions may have made the recession resulting from the Global Financial Crisis worse than it would otherwise have been and, at the very least, have added to moral hazard in the financial sector. These claims may be surprising to some but they are by no means self-evidently wrong and, in relation to the Great Depression at least, the authors are able to point to the support of Ben Bernanke, the former Chair of the Fed, as well as Milton Friedman and others.

The failings of the Fed and other central banks might be accepted as unfortunate but inevitable stages in their learning process but Boettke, Salter and Smith suggest that the problem is far more fundamental than this would suggest. They point to the serious problems faced by central banks including technical problems (e.g. lack of clarity as to objectives), knowledge problems (uncertainty being, as Alan Greenspan put it, “not just a pervasive feature of the monetary policy landscape but the defining characteristic of that landscape”, page 23) and incentive problems (including the internal and external pressures brought to bear on central bankers, which the authors catalogue with some enthusiasm). They recognise that some of these problems are, at least in theory, soluble but they argue that “Knowledge problems render discretionary central banking not just difficult but impossible” (page 4). Discretionary central banking fails for exactly the same reason as other forms of central economic planning in that “monetary policymakers lack a feedback mechanism that generates the requisite knowledge to maintain, or even tend towards, monetary equilibrium” (page 37).

These are important points. It is odd that the West has largely rejected central economic planning on practical as well as philosophical grounds and yet appears to believe a planned monetary system is workable and it is even more odd that, despite evidence to the contrary, many continue to believe that it is possible for central banks to fine tune the system, turning the steering wheel to adjust to unexpected irregularities of the route, to use Friedman’s analogy. Consideration of the track record of central banks and appreciation of the problems that they face might thus of themselves be sufficient to cause us to doubt the merits of discretionary central banking.

That said, the failings and problems of central banks are not the primary reason why Boettke, Salter and Smith object to discretionary banking: their primary objection is that “discretion on the part of monetary policymakers is inconsistent with basic jurisprudential tenets of post-Enlightenment political thought” (page 13). In particular, it is “incompatible with the justificatory tenets of constitutional democracy” (page 15) and “fails to adhere to the rule of law in any meaningful sense” (page 146).

These claims may seem to be extreme but they deserve close attention. A proposal to transfer control over tax policy to an independent body of experts exercising “constrained discretion” based on vague and conflicting policy objectives would doubtless be greeted with incredulity. It would be regarded as incompatible with accepted principles of democratic control and the fundamental tenet of the rule of law that “questions of legal right and liability should ordinarily be resolved by application of the law and not the exercise of discretion” as well as the principle that “the law must be accessible and so far as possible intelligible, clear and predictable” (Bingham, The Rule of Law 2010). So why is the transfer of control over monetary policy viewed differently? It may be felt that control over monetary policy is very different from control over taxation, but is it? Monetary policy has a huge indirect impact upon property rights (e.g. it may result in an arbitrary redistribution of wealth and inflation results in a form of arbitrary taxation) and central banks now exercise discretionary power over the grant of liquidity that is opaque and unconstrained by anything other than very vague principles. Furthermore, the problem has become progressively more acute as central bankers (including even the European Central Bank) have interpreted their mandates widely and changed their views as to the way in which to balance various policy objectives and as they have engaged in increasingly novel activities (e.g. the Fed is now lending directly to US corporations which represents an extraordinary lurch away from free market principles).

So how should these concerns be addressed? Unfortunately, Boettke, Salter and Smith have no precise answer to this question. They argue that central banking should be rule-based rather than discretionary and, at one point, suggest that the answer may lie in the “Richmond Fed doctrine”, which “holds that the central bank should limit itself to the creation and supply of high-powered money to the market, even during financially turbulent times” (page 118). However, they clearly recognise that this could only ever be part of the solution and they describe the conflicting views of the three leading economists who have shared their concern about central banking (Hayek, Friedman and Buchanan) without clearly expressing their own views on the relevant issues. This is a significant failing but it is only fair to point out that the authors’ illustrious predecessors also struggled at this point and changed their views radically over the course of their careers. Perhaps the only viable and effective options (e.g. potentially, Hayek’s competing currencies or Friedman’s computer automated monetary policy) are so radical and so untried in a modern context that we all find them difficult to contemplate.

In any event, Money and the Rule of Law comprises a wake-up call: we need to ask ourselves whether we are sleep-walking into an economy governed by discretionary central planning that is both economically damaging and philosophically unacceptable. The book deserves to be widely read.

“Money and the Rule of Law: Generality and Predictability in Monetary Institutions” by Peter J. Boettke, Alexander William Salter and Daniel J. Smith was published in 2021 by Cambridge University Press (ISBN 978-1-108-79084-0). 184pp.

Richard Godden is a Lawyer and has been a Partner with Linklaters for over 25 years during which time he has advised on a wide range of transactions and issues in various parts of the world. 

Richard’s experience includes his time as Secretary at the UK Takeover Panel and a secondment to Linklaters’ Hong Kong office. He also served as Global Head of Client Sectors, responsible for Linklaters’ industry sector groups, and was a member of the Global Executive Committee.