political influence – Escondido Framework

First lessons from the war in Ukraine

It’s a bold step to claim to draw lessons from a war is that is not yet a month old, where the outcome is very far from clear, and the impact on the world in terms of economic disruption and political destabilisation way beyond the immediate geographic scope of the conflict.

This Russian invasion of Ukraine has so far been consistent with two of the great aphorisms about war. The failure of the Russian army in its assault on Kiev perfectly demonstrates that “no plan survives contact with the enemy”[1]. And the information coming from all sides, some understandable propaganda and disinformation, some amounting to exceptional self-deception, demonstrating the point originally made by Samuel Johnson in 1758[2] but later attributed in more pithy form to US politician Hiram Johnson in 1917 “the first casualty of war is truth”.

This war also demonstrates as well any other that existence of the three sanctions and the complex web of how they apply and interact. This is a war about the application of force and arms. It is also a war about the application of politics and persuasion. It is also a war where economic pressures are at work, where calculations about financial transactions and trade-offs are already having a huge impact.

The question is very reasonably asked how the European customers for Russian gas allow themselves to be propping up a Russian economy that Ukraine’s allies are trying to hobble through a trade embargo. Correspondingly, the world is being thrown into crisis by the impact of a shortage of Russian gas, whether held back by Russia to apply pressure on European countries or from a curtailing of imports driven by an act of policy. The impact on large parts of the world of restrictions of exports of grain from the Ukraine is likely to cause prices to rise in the affluent world and threaten famine in the less affluent.

At this stage, it is far too early even to speculate on the outcome. Will the wave of political sympathy in the West and suspicion of Russia’s motives among the former colonies of both Soviet and Tsarist empires outweigh the economic pressures that may undermine the popular support for the Ukrainians? Will the costs and potential duration of the “special military operation” undermine the political support for Putin’s irridentist claims? How does the Chinese claim on Taiwan play into the political and economic debate and super power balance?

Playing into the corporate world that is the home turf of the Escondido Framework, companies have to take into account the changes to the pressures that they work under. The virtual spaces between market interfaces within which they operate will change. This will reflect changing patterns of supply and demand for resources and for their outputs. It will also reflect changing patterns of government interference in the shape of the restrictions on where they source and where they sell. It will introduce uncertainties where previously there may have seemed a degree of foreseeability. And all this following on the heels of the pandemic and in the context of a climate crisis.

[1] “One cannot be at all sure that any operational plan will survive the contact with the main body of the enemy” Herman von Moltke in “On Strategy”

[2] “Among the calamities of war may be jointly numbered the diminution of the love of truth, by the falsehoods which interest dictates and credulity encourages” Samuel Johnson in “The Idler” 1758

Black Lives Matter: Three Currencies at work

The Black Lives Matter campaign, given the most enormous boost by the killing of George Floyd, provides a powerful example of the “three currencies” at work.

The roots of the movement illustrate the three currencies: in the cash employing commerce of the Triangular Trade of the late seventeenth and eighteenth centuries and the slavery plantations of the Caribbean and the American South, the brute force employed by tribal chiefs and British slavers in West Africa and subsequently by slave masters, and in the cultural norms that facilitated the establishment of companies by royal charter and act of Parliament and, in the United States until the Civil War, tolerated and legitimated continuing enslavement of uprooted black people for two hundred years.

The current movement illustrates the three currencies too.

Policing, principally but not exclusively in the United States, that relies on physical (in the case of George Floyd deadly) force is an application of power where the application of persuasion and influence have failed. Many observers argue that the overuse of force (including, in the United States, widespread resort to guns by police) ultimately frustrates the objective of achieving peaceful civil society, but that is generally not the belief of the shooters at the time. It is impossible to get into the mind of Derek Chauvin, the police office filmed with knee on Floyd’s neck. However, unless he mounts a defence in court of diminished responsibility as a consequence of a mental health disorder, we can only assume that his defence was that he believed that anything short of the force that he and his colleagues applied was insufficient.

Correspondingly, demonstrators who become rioters and throw missiles or charge a police line (albeit a police line is an application force) are deploying physical force reflecting the belief that the political expression of the demonstration is insufficient to achieve their purpose. Of course, it is possible to argue that rioting and throwing missiles may frustrate the purpose of the demonstration in the eyes of other demonstrators and the wider audience, but that is not the belief of the rioters themselves.

The toppling of statues, particularly that of Edward Colston, is an interesting case in terms of where the line is drawn between the application of physical force as a currency and the application of influence. It is indisputably criminal damage and the equally indisputable that the removal of the statue involved physical force. But the removal of the statue was an exercise of political expression designed to further a shift in a political and cultural norm in pursuit of a wider objective.

The expression of the mass demonstrations, particularly in the context of restrictions on public gathering as a result of the Covid-19 pandemic, has clearly been a very powerful application of power to influence an outcome through political means. There was already disgust felt widely across the world and within the American establishment without the demonstrations, but they have helped keep the story in the deadlines, have elicited positive responses from people in power (even if not from Donald Trump), and have generated accounts across mass media channels that probably both reflect a shift in public mood and reinforce it.

But what about Black Lives Matter as an expression of the third currency, cash? Just look at the way that corporate America has responded. What little I know of some of the corporate leaders who have spoken up to express their disgust at the conduct that result in the killing of George Floyd and others before him, satisfies me that most if not all of them instinctively oppose racism. However, most have spoken as clearly as they have in the knowledge that this will be good for their businesses. The messages coming out from the board room are not dog whistle statements designed to appeal to a “woke” audience without turning off an audience that is hostile to Black Lives Matter. Opposing racism is good for their businesses. Similarly, as a merchandise director with the UK’s largest retailer of stationery, in the 1980s I justified developing environmentally friendly (or at least environmentally less harmful) not just because I wanted to do my bit to help the save the planet, but because I was confident that it was going to be good for business – helping grow our sales and market share, enhance the standing of our brand, and attract the best and brightest young people to work for us. It hasn’t required a threat by the black community to boycott these US corporations, but the knowledge that wide swathes of the American population, black and white, will be influenced positively by the corporation taking a stand.

Lessons for capitalism from the East India Company

William Dalrymple has helped people who don’t have the time to wade through 576 pages (or perhaps already have backlog of doorstep sized items of reading matter on the bedside table already) by writing an extended article on the subject of his new book about the East India Company in the FT. However, it is a compelling article and means that I may add “The Anarchy: the Relentless Rise of the East India Company” to my list for Santa this Christmas.

This is a company of superlatives, starting out as a joint stock company operating under charter arising from a petition by entrepreneurs and investors to Elizabeth I, growing to become an empire with 60 million subjects, its own army of 200,000 men , accounting for half of the trade of the leading trading nation. It’s global impact was enormous, from the fears about its reach – as well as its role in the tea trade – that contributed to the revolution in the Thirteen Colonies, to the part it played in the Opium Wars. Microsoft, Amazon, Google, Apple and before them the oil majors – they were clearly nothing to this behemoth.

Dalrymple brings out in the his article the complex relationship of the Company to British state, from its original charter, through the continuing lobbying into government, the corruption in the relationships between the Company and the establishment (for example, in 1693 shelling out £1,200 a year to prominent MPs, described by Dalrymple as the first corporate lobbying scandal), and the final demise of the Company in the wake of the Indian Rebellion.

Dalrymple’s article has the effect of drawing attention to is the inadequacy of conventional theory, both “Microeconomics 101” and the Theory of the Firm, to describe one of the greatest commercial entities the world has ever known. Some of things at work are the complex interfaces with the British state and its politicians, and also its deployment of its own naval operations (envisaged in its original charter) and an army to deliver a return to its joint stock holders, as well creating an entity became transformed into the biggest single component of Britain’s empire.

As I write this, I think he has done the job with his teaser article to promote the book. Perhaps I should ignore the size of the unread pile by my bed and add “The Anarchy” to the letter to the bloke with the reindeer and sleigh.

HBR Case Study: Do Business and Politics Mix?

The case study feature in the November 2014 issue of Harvard Business Review is titled “Do Business and Politics Mix?” At the most basic level, this is a daft question. The fact that it has been worded like this illustrates some of the shortcomings in the way that business in general, and the nature of firm in particular, is discussed. It is not a matter of whether they mix, business operates within a political environment. Indeed , many businesses engage with least two “markets interfaces” that are essentially political in nature. The question should not be “do they mix”, but how does a firm position itself on each of the political market interfaces.

The case study describes a fictional US business called Natural Foods that has made donations to a “super PAC” (a peculiarly American artifice for getting round restrictions on the financing of candidates for political office) funding pro-business candidates, only to discover that one of the candidates backed by the super PAC takes an anti-gay stance. The characters in the case study debate whether or not they should be trying to engage with the political establishment, by funding candidates in order to secure influence with the legislative and executive branches of government, and how they should present themselves to their public and to their immediate stakeholders, who are socially liberal.

The value of this case study is not the specific conundrum faced by the management of the fictional business or the advice provided the pundits assembled by HBR to comment on it. Rather, it is elegant illustration of the significance of political aspects of market interfaces illustrated in the case: the interface with the branches of government as regulators and enablers, and the political dimensions of the market interfaces with employees and customers, for whom the political positions with which the company is identified are considerations in their dealings with the company.