VISION Consulting Annual Leadership Forum with Adam Tooze

The World in Flux: Understanding the Global Economic Landscape

With economic historian, commentator, and best-selling author Adam Tooze.

Introduction by Billy Glennon, CEO of VISION Consulting

This is the second year since COVID that we’ve hosted this event. Last year was really special and, this year, it’s the same feeling for me. I’m absolutely delighted to welcome you all here, to these incredible surroundings with their great sense of history. And I’m delighted to welcome Adam Tooze as our main speaker.

A friend of mine, Howard Foster, who is in the audience, called me on 17th March 2020 and said: “Billy, I’m really sorry, but you’re going to have to take all of your team off-site.” It was the beginning of COVID. And from January, when we had planned a 50% increase in business, I ended up for the first time in my life with no business. Nothing. And many of us went through something similar during that period. The impossible happened. It was Lenin who said: “There are decades when nothing happens, and there are weeks when decades happen.” And I feel we’re very much in one of those moments right now.

Adam is going to speak to us tonight about what’s happening in the world. He’s a renowned author and writer who produces a fascinating blog and is a compelling speaker. What also interests me about Adam is that he doesn’t just observe history, he lives it. If you read his blogs, he is constantly applying the lessons of history to what is happening right here, right now. One of the ways that we can cope with the world now is to find voices who are able to anticipate what’s happening. And Adam is one of those voices. Please give him a big welcome.

You can watch the video of Adam’s lecture here.

Professor Adam Tooze

Good evening. It’s an enormous pleasure to be with you. Thank you so much for that very kind introduction and it’s a privilege to be part of this event. And you’re right, I do think we’ve been living through times that are unprecedented in their intensity, maybe not quite 1917-level, but I love meetings when Lenin is invoked early in the evening! Nevertheless, it has felt like a rolling barrage of complexity and difficulty, and in that kind of setting you need good company. You need fellow travellers, you need companions to go on the march with and it really is a privilege to be working with Billy and his team.

It’s also fascinating to be involved in these conversations because business, whether it likes it or not, is at the coalface, caught up in the maelstrom of the current moment. And I don’t envy you, frankly. The more I go through life as an ivory tower academic, the more I come to appreciate the privileges that go with that. It isn’t a quiet life, but at least I don’t face the barrage of problems that any group of senior business leaders have faced in in recent years. And there is a sense that, whichever way you turn, you face political and social pressures of a type that you have not faced for a long time, over issues that go into the very guts of the business on pricing. You see the politicisation of the supply chain. And you see the avaricious, almost incessant demands for business to deliver the giant investments that we all know are necessary for the survival of our civilization, with green energy transition at the forefront of that. So what I want to spend the next 25 minutes talking about is how we’ve come to this situation and offer some pointers as to how we might think about the dilemmas this raises. And in that context, I can’t help but think of Jamie Dimon’s immortal words when he said rather grumpily in 2012 that the trading floor business of JP Morgan simultaneously required the sound counsel of a lawyer and a psychiatrist.

Whenever I speak to business folk in leadership at this current moment, there is a slight sense of wounded pride. The business community, notably in the West over the last couple of decades, feels that it has been on a journey to enlightenment. You started with shareholder value – that was the great learning of the 1980s and the 1990s. The crisp focus on the delivery of shareholder value, the new religion of the corporate world from the 80s onwards, no more of these conglomerates with all of that self-serving delivery. But at some point, of course, it became obvious that that was not enough. And this was the step that was then made into the brave new world of ESG. ESG changed the game in many ways at an operational level in many companies. It has been a transformative in changing the way in which business thinks, and it’s been hugely productive. And I think the bewilderment of the current moment is that we seem to be entering a new phase in which even this complex grid that people have worked so hard to train their organisations to address deep within their organisational culture is not enough. Instead we’ve run up against the maelstrom of the last two to three years, and you’re dealing with a pandemic, with war, with inflation and with the cost of living crisis, which politicises the pricing mechanism in a way we haven’t seen in decades. You’re dealing with political systems that are polarised to the point at which they are barely functional. And we are seeing a tearing apart at the seams of the fabric of what globalisation really amounted to since the 1990s, which at its core, was the triangular Sino-US-European relationship.

And so the question is, how does one begin to navigate in this space because it does feel like one of these moments at which history accelerates. What we’re facing right now is not one crisis, but the multiplication of crises and their interaction in ways that we haven’t seen like before. It’s what myself and others such as Martin Wolf and Larry Summers are calling a poly crisis. The three of us have all been thinking in the same direction about how we try and encompass this phase which appears to be beyond the frame that we were so familiar with for several decades. A phase which forces us to deal simultaneously with massive geopolitical tension, climate change, environmental shocks such as the pandemic, macroeconomic imbalances and political polarisation.

When you look at that list, each one of the crises is in a sense familiar and has a logic which a sub discipline of social science or biological sciences can address. But when you put the list together, they appear not to have any logical connection and that is precisely what the poly crisis term is trying to capture – what Larry Summers called “disparate, incoherent shocks”.

One way I think about this is that it’s like a buffet. When you go down to breakfast in the morning, you expect it to have a kind of logic. You expect the croissants to be here, and then you move by way of the waffles to the eggs and the bacon. That’s what a well-organised buffet looks like and that is what a comprehensible historical crisis looks like too. The problem with a poly crisis is that it’s offal and French fries and waffles and strawberries all next to each other in the same buffet. And that’s what this notion of poly crisis is trying to get to.

One of the pushbacks I get to the idea that we are in a poly crisis is: “You’re just a liberal intellectual. You’ve lost your way and don’t understand what’s going on so you’re projecting your inner demons and, basically, you’re in a funk.”

And my pushback is: “You mean you’re not in a funk?” It is undeniable that there is a poly crisis mood there out there – your colleagues are anxious, your customers are anxious, the media is anxious. If you teach people, if you employ people, if you work with teams, if you have a family, you will know this feeling of stress. It’s coming at you, from the inside and the outside because business has been politicised in many ways in recent years that are novel and painful and difficult. From the left, you’re going to hear that you’re responsible for climate change because you dragged your feet and are still engaged in greenwashing. From the right, you’ll get the accusation that you’ve sold out to woke and are all remainiacs at heart. And both sides will converge on the view that business was both the shadowy driving force behind globalization and neoliberalism, and its chief beneficiary.

Now you could say to yourselves, well, okay, we’ll step back from politics. We don’t want to have anything to do with it. But the problem is you can’t. In the age of poly crisis, the giant balance sheet of the public sector and politics has to intervene in business. So we’re in a situation in which we kind of can’t live with each other, and yet we somehow have to. We are in a world in which, whether we like it or not, we’re dependent on the state and government to provide essential stabilising functions when things get tough. But those interventions themselves induce what you could call second order crises where we have to deal with the fallout effects from the lockdown policies that were necessary to contain the pandemic risk and save the health service.

So the jarring reallocation of resources within the world is one thing, but what you’re now having to deal with in addition is the response of the American national security state to China’s rise, which creates a whole other set of problems. Then we have climate change where, unless we act swiftly to contain the crisis, at some point a shock will arrive a little bit like the pandemic. And looking at this now, you probably can’t help thinking to yourself: “Oh, my God, remember when all we had to worry about were profits, shareholder value and ESG?”

How did we lose that? Well, unfortunately, that was the world, that is now generally referred to as neoliberalism, and it’s gone. We are now in a world in which politicians and people are continuously sucked back into an engagement with business. If you are a government embarking on a green industrial policy or a vaccine race you can’t do it yourself, you need business to deliver.

But what does business need from the politicians? Well it needs leadership and a clarity of vision. It needs a societal licence to operate, a stable and favourable regulatory environment and, ultimately, access to the public balance sheet through which we can handle even the sort of catastrophic macroeconomic risks we saw in 2020.

So where do we go from here? Here are five lessons from the poly crisis that might help us.

1. Don’t expect anyone to say ‘thank you’

Think about the pharma industry and the vaccine race. It was flat out one of the most dramatic miracles of R&D and human achievement, full stop. And without it, we wouldn’t be here this evening. It was a triumph of public-private partnership, a kind of rapid fire industrial policy. So you would think that the pharma industry would be riding high on the wave of humanity’s appreciation for transforming society and enabling us all to carry on our lives. But that’s far from the case and in Europe, in particular, they’re currently facing a major effort to rewrite the rules. We don’t need to go into the rights and wrongs of generic drug pricing this evening but the point is that there is no quick payback here. Even gigantic successes that literally transform society are not going to carry through in any simple, straightforward way with rounds of applause and decades of legitimacy for what you do as business people. And you’re just going to have to suck that up and live with it, and learn the attitudinal psychological stances that will allow you to cope with a relationship which, if not abusive, is certainly going to be tough.

2. Learn to look around corners

If you were talking to colleagues before 2020 who were involved in China and asked them for a low-risk route to making money, the classic answer was to focus on the central growth story focus of the Chinese middle class. For example, what could possibly go wrong with selling high-value educational services to the ambitious middle classes? This was going to be a $50 billion gross market! But then Xi Jinping decided that market-floated private tutoring organisations did not have a place in China’s future. What the Chinese were saying was: “We think your business is betting on inequality because you are selling a highly valued service to the Chinese who can afford it, through which their children will replicate the social and cultural advantages their parents already have. And we don’t think that is in the interest of Chinese social stability.”

3. There are no safe spaces

How could you possibly go wrong with ESG? It’s all the good stuff! Well that may be true until you try it out in Texas, the largest and most important economic powerhouse in the US outside California. Texas has just passed a raft of legislation banning interaction between public financial bodies and any American actor, particularly financial actor, that professes commonplace ESG rules within its business plans. You could just say “those crazy Republicans, God knows what else they’re going get up to”. But another way of thinking about this is that conservative Texans are calling out a bunch of liberal elites on their presumptuous effort to smuggle political choices into business practices without a democratic mandate. They’re saying: “I’ve looked at what you do, and I disagree with you about the salience of climate change and as a democratically legitimate representative of the proud state of Texas, I’m going to deny you the right to smuggle your agenda in. So if you want to bring that agenda, that’s fine, but you’d better win the vote in Texas before you do.” Like the China example, there’s an agenda here that’s implicit but then gets called in a really destabilising way.

4. A revolution of self-interest

In my opinion, the Inflation Reduction Act is the greatest act of environmental legislation that the United States and arguably any nation has ever passed. It has created an amazing powerhouse that is going to make America a champion of green energy. It’s changed the world. But how did it happen? Well, for one thing you have to squeeze it through the thinnest of all possible needle heads, which is the Joe Manchin set of preferences – he’s the senator for the coal state of West Virginia – which really limits what you can do. But the other thing that got us there was a huge mobilisation of progressive green energy lobbying by American business interests in the critical second and third weeks of July 2022. They spoke up and told American politics: “We’re going to challenge you.” So on the one hand, we cheer: “This is fantastic! It really has transformed the entire game.” But where that really came from was the self-interest of the lobbying parties. This is not ‘clean hands’ politics. And this is where we come back to Lenin because we’re not waiting for the real green revolution to arrive, we’re making a revolution out of American business interests.

5.  Just do it

One of the things I’ve learned from listening to Billy talk about the work that VISION does is that you need to look carefully inside your own organisation because this poly crisis is not just happening in your head and it’s not just happening at the macro level, it’s happening inside your organisation. It’s happening in the lives, careers and vision of the people that you employ. And if you think about the COVID crisis and how basic functions like cleaning suddenly became essential to the operation of all organisations, it’s a humbling lesson as to our assumptions about what matters in complex systems. So we can engage in these very complex, high-risk political gambles. Or we can try to go beneath the radar and avoid politics. But a better option is to simply look at our business and ask what can we do right here, right now, that will change the game? What can we actually move on? And the example I would give is the decision of Maersk to be a ‘first mover’ in pioneering low-carbon, long-range containerisation. There are difficult choices to be made here and in some ways they are making a contentious choice to go with methanol now and not wait for the even better ammonia options that may be down the line. But this is a good way for business to respond to the multiple crises that are out there. They are using their competence to make a difference. They have chosen to be a first mover and just do it. Thank you.

Adam’s lecture was followed by panel discussion held under Chatham House rules that featured Basil Scarsella (CEO of UK Power Networks), Catherine Sheridan ( Head of Strategy at Green Rebel), Fernando Flores (author and entrepreneur) and Richard Davies (CEO of Allica Bank).

The VISION Consulting Annual Leadership Forum was held in the Gladstone Library at the Royal Horseguards Hotel, London, on 25 April 2023. You can watch the video of Adam’s lecture here.