If Coronavirus Has Highlighted One Thing, It’s That The Current Business Model Is Broken. But How Do We Fix It?

Calamities that shake a whole society, or a whole world, often offer the potential for pause in an otherwise relentless drive towards an end-point. They give us a moment – just one moment – like the apex of a ball thrown in the air, when time seems to stand still and any response is possible. How the world responds to that moment of stillness determines the direction of the world for decades, perhaps even centuries to come.

The Black Death had a peak of just seven years in the fourteenth century. It killed between 75-200 million people across Europe, and all those deaths were bright and dark and horrible tragedies to the people who knew and loved those who were killed. But the consequences of its impact on workers’ availability, and workers’ demandable rights, began to gradually up-end a system that had been dominated by the landowners, with skilled bodies and hands to work the land going from radically undervalued before the cataclysm to more reasonably valued after it. The whole system was broken by the plague, and economic necessity (rather than particular compassion on the part of the landowners) changed the nature of the system forever.


Cataclysmic Impacts And A Broken Consensus

But as the disclaimer always says, the value of shares can go down as well as up. The same is true with the impacts of cataclysms. Want to know a secret?

We were already living in the aftermath of a cataclysm before Coronavirus hit.

The Black Death killed millions, but forced the economics of its age towards a more worker-centric (which is to say human-centric, rather than ‘corporate’-centric) reality.

Much more recently, the energy crisis and screaming inflation of the 1970s was a less intensely fatal cataclysm, but it pushed our economics very much the other way. Before the crisis, there had been a broad post-war consensus on full employment, and on the importance of the interplay between governments, businesses and trade unions. Seen as the three more or less equal pillars of the economy, they operated under tension together, political fortunes determining whether business or labour would have the upper hand for any given period, but the idea that this was how an economy should work was a matter of general agreement.

The energy crisis broke that consensus, and led to governments in both the US and the UK that freed businesses from the constraints of caring about people, or about their competitors and colleagues in the business community. Greed became famously good in the 1980s, and it seeded cycles of corporate behaviour in which companies were still engaging when Coronavirus hit. Patterns of almost slavish, slavering profit-making, where only the dividend and the bones were king. Corporate instincts that would see an economic cataclysm as an opportunity to both cut jobs, to trim sail and weather the storm, and to asset-strip failed competitors, like an economic vulture, recycling elements of those who failed into potential successes under new ownership.


Tick. Tock

It was a model that was profit-driven but soul-broken.

But stop.

Stop everything for a second. The ball is in the air. The business world has a rare moment to breathe, to reflect, to consider. A moment when it’s not relentlessly pursuing the profits to survive and thrive. A moment of calm. And it should take the opportunity of that moment to ask whether, when the dust of Coronavirus clears, it wants to go back to that broken system, or if it does not.


A Brave New Caring World?

And if it does not, as Javad Marandi states, it has the chance right now to decide what sort of world, in business and in human terms, it wants to see in any theoretical post-Covid age.

Coronavirus has not, as yet, killed anywhere near as many people as the Black Death did. But the response to the pandemic has been global, and has already shown a desire to – and the practicality of – shifting great swathes of the economy onto a very different, less bricks-and-mortar footing. It has also interrupted the flow of commerce to such an extent that forecasters are predicting a Depression almost as deep – if not as deep or deeper – as the Great Depression of the 1930s post-Covid.

If we return to the soul-broken pre-Covid model, where the abuse of limited liability in companies had become the norm, we may well be doomed. The use of limited liability not only to generate dividends but to facilitate the looting of other companies, and to force workers to bear the hardest brunt of times of economic uncertainty, may not be tolerated in the world that Covid has left in the first of its wakes.

There was already the first swell of rebellion against the asset-stripper robber baron mode of limited liability in businesses before the Coronavirus. It was generally seen as a model heading unerringly towards the cliff-edge of another bust in the boom-bust cycle. But after Coronavirus, or even during the shift of the world to a more Coronavirus-coping era, the combination of economic power-shifts might well see companies that adjust their methodology thrive, while those who go back to some version of ‘business as usual’ find conditions more and more difficult to weather.


A Shift Of Priorities

Beyond the hardcore essentials of our societies, the key workers that keep the wheels of society greased and turning, the increased use of a work-from-home model frees more workers up to make their voices heard. They need to be in work, absolutely, but progression-trees may well be much more fluid in the coming depression. They may not need specific businesses to progress as much as they did in the pre-Covid years, which means they’ll be free to find work with employers who offer greater job security than any company prepared to trim them off their books at the first sign of trouble.

But more than that, if we’re to avoid the worst excesses of a 21st century Great Depression, the key is to keep workers in work. To keep them employed, and to keep them working for us, rather than sacrificing them to the good of the company as expressed through dividends and bonuses.


Stick, Carrot And Smile Economics

What’s more, while the economic stick of survival through maintained employment through a time of crisis can be matched with the carrot of compassion, a more human-facing adjustment to the way businesses operate which would actually make both companies and people feel good about their relationship. A readjustment to take account of the importance of people, as well as dividends.

While it wouldn’t be a return to the pre-Seventies three-pillar approach, the need to maintain as much employment as possible through the post-Covid world in order to avoid entirely tanking the economy on which we all depend could see a radical shift from a business first, last and at all costs mentality, to a more holistic business-human-government approach that will let us weather the oncoming storm.

Hush. The ball is in the air.

What happens next is up to us.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.