Sunday, May 6, 2012

Political Turmoil in Europe: Time to Re-evaluate Business Strategies?



Surprising political outcomes from elections around the world, particularly in Europe, are in the news. In France, Francois Hollande’s victory brings a socialist government to power for the first time since 1988. But just as interesting is that right-wing Marine Le Pen scored 17.9 of the votes in the first round.

Is this really surprising, as many mainstream media commentators are noting?

Perhaps not really. Certainly, a crisis can polarize opinion and make extreme solutions more palatable to the general public. I believe election results will continue to show more gains for non-moderate parties on both the left and the right. Predictive candor is rare amongst academics; and yet I was compelled to make this ominous argument early on during the global financial crisis, (.pdf: Academy of International Business Insights, 2009):

“The range of voices on the pros and cons of various institutional arrangements is likely to widen on both sides of the existing neoliberal welfare-capitalism models, with Austrian economics and its arguments on minimal government roles gaining attention on one hand, and more socialist-leaning arguments on increased roles for government attracting new followers on the other.”

What do these upheavals in the political environment mean for business? While the electoral results are showing outcomes along the lines I argued, it seems business thought leaders and academics haven’t really taken on the challenge I tried to pose: 

“These increasing philosophical differences are likely to underpin debates in management on issues such as shareholder versus stakeholder management, corporate governance structures, the role of non-market strategies, business ethics, sustainability, responsible leadership, and so on.”

Where more extreme parties come into power, business will face a direct change in the political climate. However, even if extreme voices simply get more recognition, without actually coming to power (as is likely in the United States), business will have to face a more complex political environment than they have known for decades before the financial crisis.

Even as I write, Greece is next, where the mainstream political parties have thrown up inconclusive results, and gains by left-wing Syriza are an indicator of the public anger on issues such as the bailouts. Golden Dawn, a far-right party, is poised to make its first ever entrance into Parliament. The issue is not somewhere far-off in the future anymore. Election results are bringing it to the present.

One approach is to figure out how to function on a day to day basis in a reactive manner; another approach, is to proactively assess these forthcoming changes, re-evaluate the relationship between business and society, and play a role in building a more sustainable future. It remains to be seen which approach most businesses will choose. I would argue it is time to fundamentally re-evaluate business strategies for a more complex and changed political environment.