Alexander Rhodes
Welcome everyone. Thank you for joining us at this special event in which we will be exploring how, as we emerge from the lockdown, we should build back better. I’m Alexander Rhodes, head of Mishcon de Reya Sustainability Business, Mishcon Purpose and I will be hosting today’s event. We are delighted to be holding this event together with the Athens Democracy Forum to which Mishcon de Reya is the proud legal partner. We decided to hold today’s event because we are at this critical moment in time. The world and each of us individually, look to the future with uncertainty and trepidation. Covid-19 is a zoonotic Coronavirus. As of yesterday, it has killed 605,979 people worldwide. Hundreds and thousands are unemployed or are staring it in the face. Tens of millions of people are threatened with a pandemic of hunger. The disease and the consequences of the lockdown have not treated everybody fairly. Pre-existing inequalities and discrimination have been highlighted. The Black Lives Matter movement in the United States has served further to uncover the structural nature of inequality in society, it’s also true to say that the burden hasn’t been shared equally. Some Governments have provided unprecedented financial support to the private sector as well as directly to citizens. Some companies have pivoted to provide public services and have treated their employees differently from others. Keyworkers have emerged as heroes, from sectors which are amongst the lowest paid in society. Antonio Guterres, in his Earth Day speech highlighted that, while unquestionably Coronavirus has been the biggest shock since the second world war, it is fore-running the existential crisis that we face, which is climate change. We are exhorted, therefore, not merely to build back but to build back better. This concept comes from the United Nations Sendai Framework for disaster relief reduction. We must not begin with a review of what we have, but a vision of what we want. We are very, very fortunate to have some incredible speakers with us today and we will begin with Mete Coban MBE, the Labour Councillor for Tower Hamlets who will give our opening address, setting out his vision for better. Just before I introduce Mete I would like to thank particularly Patrick Chappatte, the multi-award winning Editorial Cartoonist. For 20 years he was cartoonist for the International Herald Tribune and the New York Times and his satirical work ‘Fighting the Covid-19’ opened the event. It is humbling for me to introduce Mete Coban to give our opening vision.
Mete Coban
Thank you very much Alex, for your very kind introduction. It’s such an honour to be here with you all to be setting the vision for how we could build back a better society and I guess I wanted to share with you my vision and how we can sort of build a socially inclusive economy which puts people at the heart of it rather than profits. At the height of the pandemic, on the 27 March this year, I came across a headline that read, ‘All rough sleepers in England to be housed’ an unthinkable and radical policy if mentioned just before the pandemic. This followed the UK Government’s announcement of the furlough scheme which paid businesses 80% of the salaries of their employees. The total support package totalled hundreds of billions of pounds in response to the Coronavirus pandemic. How could it be that such a deep-rooted societal issue that has known no solution and has existed for many decades, could be solved just in the click of a finger? One announcement from a Government minister and immediately thousands of people were housed in a matter of weeks. So, all this time it must have been an issue of political will rather than capability. So, this made me rethink about what our society could look like if we had the political will and urgency to address some of the very issues that a Coronavirus pandemic exposed and amplified. I imagined the society where our children and young people receive a good education, in good schools, one that’s not based on a lottery ticket of where they are born. I imagined the society where seven million people didn’t have to die every year due to air pollution and I imagined the society where opportunity wasn’t limited or held from you because of the colour of your skin or your background. And if we don’t use this as a wake-up call, then these problems will only worsen. So the question is, how do we get there? I want to pitch the idea of building a socially-inclusive economy partnership. One that puts people at the heart of growth, but also shares the task of responsibility between Governments, businesses and civil society. Technology companies have a particularly big responsibility towards creating a more equitable and inclusive society and this is likely due to the fact that digital businesses tend to have a wide geographic and social reach through the products and services that they provide. So, I believe when you look at places like Hackney for example, where I am from, we have a place named Shoreditch, Hackney Wick where it has huge numbers of tech and creative industries and some of the things that we’ve been able to do is work with those industries to make sure that we’re helping re-skill and improve the talent in Hackney. Because the last thing we want to see is for people like me who grew up in the area to not be able to access the opportunities that are being presented in our borough. You know, you see all these brilliant new houses that are being built, you see these amazing new jobs that are being created, but if we can’t access it what’s the point? I think it’s time that Governments and Local Authorities start to recognise that we cannot take this task alone and we have to make sure that businesses and civil society are also sharing the responsibility on how we can make sure that we create a much more inclusive society. So, that’s why I believe which is what Hackney’s doing around the inclusive economy partnership, and some of what’s happening in different pockets in England and the wider UK, is a model that we can all start to build off to help rebuild our society. Thank you all for our time. Thank you.
Steve Erlanger
Ladies and gentlemen, hello, I’m Steve Erlanger. I’m the Chief Diplomatic Correspondent in Europe for The New York Times, which is co-sponsoring this through the Athens Democracy Forum. This will be the first of two panels which will explore the implications, risks and opportunities of rebuilding following the pandemic. We have an extremely lively panel, I hope. So, first is Vian Sharif who is Head of Sustainability at the FNZ Investment Firm, then James Libson, who is the Managing Partner of Mishcon de Reya, a litigator with a bunch of high profile cases and Dhananjayan Sriskandarajah – excuse me – who is the Chief Executive of Oxfam in Great Britain and who has kindly allowed us to call him Danny for the purposes of this seminar. I’d like to start with a question, I’ll start with Vian if I may. As we think about equality and fairness, they’re not exactly the same thing and as we talk about trying to create a more just or more equal economy, how much responsibility does the private sector have in ensuring that the economy is restored in a way that might reduce inequality and what do you think the private sector might actually be prepared to do about it?
Vian Sharif
So at FNZ what we do is we are a financial technology company. What we do is we enable individuals to access their long-term savings and what’s interesting about that is that now very, very shortly, individual people will start to be able to connect with their long-term savings in a way that they never have done before. They’ll be able to see the environmental and societal footprint of every company in which they are invested and that’s what technology is enabling us to do. This is a result of things like the business round table where it’s been acknowledged that businesses have to become accountable to stakeholders as well as shareholders and that’s partly because it’s becoming more and more transparent in terms of how they are responding on an environmental and societal basis because data is everywhere.
Steve Erlanger
Let me just pose the same question to James.
James Libson
My sense in speaking to clients and speaking to colleagues, is that there has been a fundamental change. That people at the moment are committed to ‘building back better’, to borrow the phrase of the conference. But the question of course will be how long that commitment lasts and what it looks like and already as we emerge from the early stages of the crisis, the building back better agenda may fall back, even in the first stages of it, as people start to lose their jobs for example. That doesn’t feel like building back better, in particular for those people who are losing their jobs as they come off furlough support or whatever it is and so, I think it’s very complex and one needs to look at it both at the local level, the parochial level almost, and what you can do within your individual institutions and organisations and then what leverage you can pull as an institution, as a relatively sizeable institution in our case with our clients but with our colleagues as well and see what you can do to effect society in that way.
Steve Erlanger
Danny, what’s your sense of private capital’s willingness to get engaged in building something new as opposed to trying to restore what there has been?
Dhananjayan Sriskandarajah
One of the reasons why the economic crisis is being played out in the way that it is at the moment, is because of the sort of irresponsible, vulgar bits of practice that have fuelled recent economic development. I think a couple of things make me optimistic. I think one is that you know, we are recognising that some of these practices are unsustainable and I think more enlightened businesses were already working on addressing some of these. This is going to make that process faster and the other reason is that consumer behaviour seems to be changing and I think we are on the cusp of some fairly dramatic changes in the way that people will consume, the way that people will hold capital to account and that’s to me the big prize in terms of building back better. Can we come up with carrot and sticks that would make the most of this opportunity?
Steve Erlanger
We have this Covid crisis and it’s not over. At the same time we have this climate crisis, the problem of carbon and CO2 and the need to truly transform our economies. Do you think there’s a conflict between going green and giving people work now?
Vian Sharif
Clean energy infrastructure is much more labour intensive in the early stages of creating it. So for every £1 million in spending you get 7.5 full time jobs created as opposed to fossil fuel economies where you get about 2.5. This is just one example of how shifting to a de-carbonised economy can actually be economically, not just viable, but prosperous. Carbon emissions themselves, being emitted by companies, this is probably the one area which is most forward thinking in terms of how it’s being reported so, the likes of the task force for climate-related disclosures is making sure that if you are a subscriber to the UN principles for responsible investing, the companies in which you’re invested in have to report their carbon emissions and this will come through into reporting and institutional capital will start to understand that. Pension funds in the UK already have to report on what their climate strategy is and so if they’re looking at companies like this and they’re seeing the data then they may not want to go down the route of investing in a company which isn’t looking after these things so, it may be a balance and push and pull of all of these factors.
Steve Erlanger
James, I know one thing that interests you is the role of the state and how much larger that role seems to have become during this crisis. How do you restrain it, or are people grateful to it?
James Libson
I think people have tolerated it for the time being and they will tolerate it while that power is being used for the benefit of the societies in which we live but won’t tolerate it once it’s abused. And then it will be for people to challenge that appropriation of power and to see whether it will be rolled back and it will be let go. Governments don’t tend to like to let go of power once they’ve appropriated it to themselves.
Steve Erlanger
One of the other things Governments can do is change the tax structure. Do you think there’s an opportunity for something like that or does it just seem altogether too radical?
Dhananjayan Sriskandarajah
Even before Covid in Britain for example, the majority of people supported some rise in taxation because they recognised there needed to be some form of redistribution and we’re seeing polling already of great interest among the public for fundamental and radical shifts in the way that the economy works including the taxation system. At Oxfam we work with a group called the Patriotic Millionaires, which is a fantastic group of people who have already been very successful, millionaires and billionaires, who are themselves saying that it’s only right that society taxes people like them more fairly because they’ve had it good but they don’t think it's the right thing that wealth and income has been allowed to be accumulated at such eye-watering levels.
Steve Erlanger
One of the issues which you’ve now all raised is this debt mountain that’s being created. I mean, we’re kind of seeding this for the future. Is this a generational problem do you think? Can you build back better without harming people younger than ourselves?
James Libson
Certainly, the problems we’ve bequeathed the world with generational problems. Whether it’s that or climate change or anything else. The very nature of the problems that we have created, they are a generational problem and our responsibility obviously as the runners of business, or the policy makers or the influencers is to try and ameliorate the inheritance.
Steve Erlanger
I do want to just ask very quickly whether corporates should have a distinct public role in tackling inequality? What should corporates be doing or can corporates be doing that States are not doing to break this increasing inequality particularly in the Anglo-Saxon world?
Vian Sharif
This is a moment, a radical moment, for not just Governments to rethink what they’re doing but actually for business to rethink and perhaps this is a once in a generation moment for them too to say, ‘Well, okay. How do we start to address this? What are the practical measures that we can take partly because we are going to be held accountable? Whether we like it or not we will be held accountable for what we do here’.
Steve Erlanger
Yes. I think that’s actually quite a good thought to end on. I think we’re all going to feel accountable and the question is, what do we as individuals, what do we as corporate people, what do we as NGO’s, what are we actually going to do about it? So, with that rhetorical note let me think Vian, thank James, thank Danny for a very nice conversation and handover back to our organisers.
Liz Alderman
Hello everybody. I’m Liz Alderman. I’m the European Economics Correspondent for The New York Times based in Paris. I am really happy to be hosting this next panel. We are going to be focusing more on what are the bold actions needed to create a just transition and to build back better? Governments are more present than ever before to counter the economic hardships of the Covid crisis. I’m going to be asking our panellists to tease out concrete solutions and specific innovations that will be needed to build back better. Let me just refresh everybody’s memory about who we have joining us today. David Teece, very happy to welcome you. You are the Co-founder of the 1500-person Berkeley Research Group and obviously renowned economist and an authority on industrialisation, technological change and innovation. Mariana Mazzukato, you’re the Professor of… at University College London. Of course, a leading international economist and the author of the book ‘The Value of Everything’, a critique of modern capitalism focusing on the need for innovation to address these massive crises that we’re facing. And Valerie Keller, the Co-founder and CEO of Imagine and in your role you help global corporations become what you call purpose-led and future-fit. Mariana, let me start if I could with you. You have argued that the Covid crisis is a chance to do capitalism differently. So, can you just talk to us a little bit about how capitalism can be done differently and what concrete actions are needed to get there?
Mariana Mazzukato
Yeah. I mean, people like myself with kids at home not in school, are using this word like ‘lets go back to normal’ and I think we need to resist that because normality is what got us into the crisis that we’re in. It’s also what got us into the financial crisis. It’s also what’s given us the climate crisis. These kind of three impending crisis that are kind of intersecting. I just hope it’s a real wake-up call on how we need to kind of re-design our institutions and the relationships between them. I think this is the moment to really walk the talk of stakeholder capitalism. I was in Dallas this year, you know, that was the talk of the town, this notion of purpose, purpose driven corporate governance stakeholder capitalism and unfortunately we’re not seeing that. We’re seeing many companies for example, that talk the purpose talk that are still expecting just to get massive bail-outs without any conditionality. So, that’s kind of my big take away. Let’s really use this moment to work together to get a better form of capitalism that really is stakeholder driven and that means really changing the way that public and private sector interact. Whether it’s on the bailout, the vaccine, or Covid drug.
Liz Alderman
Well, Valerie that is actually a perfect opening for me to pivot to you. Can you respond to that concern that companies these days are still not walking that talk?
Valerie Keller
We realise now even more than ever that we can’t have healthy people on an unhealthy planet. So, the global solidarity of this kind of big ‘We’ that I say that we’re in, I think is ever more important and we’re seeing the inadequacy of our social constructs. Oxfam has shown that 5 million more people that are being put into poverty, 265 million more that are experiencing food shortages. We’re not unaware of that. What we are aware of is that global governance is broken and I think what we are seeing is that the private sector leaders are stepping up not as the heroes to help save the world but as human beings who are saying, ‘I’m living as part of this world. I can’t be healthy on an unhealthy planet’. We are seeing actually hearteningly and in some cases maybe even more surprisingly that responsible business models and people are actually focusing now on more the ‘S’ of ESG. So, we’re seeing that both companies are focusing on lives and livelihoods. Again, it’s not everybody but if you look at examples like Ikea, spending money on training or salesforce guaranteeing jobs. Unilever, so my Co-founder is a former CEO of Unilever, Paul Pullman but the current CEO of Unilever, Alan Jope, gets on the phone with me two weeks after and says, ‘Look, we’re going to be providing 500 million in loans to smaller suppliers. We’re taking care of our people and we’re thinking about the people, the ‘We’ of our company as being not just the talent that we have but actually the people who’s lives depend on us’.
Liz Alderman
Absolutely. Let me pivot to David. At this point is more state the answer to our problems and if not, where is the innovation going to come from that is going to be needed to get us out of this crisis?
David Teece
The best way to get out of this crisis is to favour the future. We’re being engaged overall in strategies which are all about the here and now and that is short change to the future and my view, yes, it might be a stakeholder view but the way to get there is to actually not confuse management by telling them their role is to fix everything in society but tell them their role is to be great stewards of their corporations and invest in growth for the long-term and if they do that they’re gonna have to take account of other constituencies. But to just tell them their job is to fix society, they don’t know what to do in the boardroom and in any case they are not the best people to fix society and they don’t know how to make the trade-offs. That’s where they can work together with Government but I think if we change our corporate governance and we get people on boards of directors who support managers that are investing in research and development investing in the projects that will bring forward the new technologies that will improve the environment, that will improve human health and invest for the long-term, don’t extract value from companies but continue to invest it. Then I think we’ve got a better chance of getting where everyone wants to go.
Liz Alderman
Mariana, on that point, I mean, you had recently actually written another piece for The Times that ran earlier this month, in which you noted that you know, when the economy is in crisis we often turn to Governments to fix the problems, but when things pick up it’s the companies that reap the rewards. Explain to us what is at the basis of your argument there? And why do you think that the cycle must be broken? Is Covid a chance to do that?
Mariana Mazzukato
Just look at the Solyndra and the Tesla investment by the US Government after the financial crisis. They both got more or less $500 million in a guaranteed loan. When Solyndra went bust, everyone knew about it you know, bad public sector investment, bad public, good private, so, Government stopped meddling. When the same amount of money went to Tesla, that was considered a private sector success. There was no talk even within the Obama administration, no narrative, no kind of storytelling about what this portfolio looked like but also there was no structuring of that portfolio in a way that any logical investor or venture capitalist would and in fact, they structured it the opposite. Obama told Tesla, ‘if you don’t pay back the loan, we get $3 million shares in your company’. Why you would want $3 million shares in a crappy company that doesn’t pay back the loan is beyond me. Had he said, ‘When you pay back the loan…’ which they did in 2013, ‘… we get $3 million shares in your company’ the price per share went up from something like 9 to 90 dollars per share. That difference multiplied by $3 million would have more than paid back the Solyndra loss in the next round. If we accept that value is created collectively, the kind of key point of my book on value, then we should make sure we have a pre-distribution strategy so the relationships between Government, business, civil society organisations including trade unions, kind of embed this notion of value creation also in terms of how it’s then distributed, right. So, it’s not just taxation that redistributes wealth, it’s the relationships like through a wealth fund, a citizen’s dividend, equity stakes by the public sector in certain types of investments that are downstream like the ones I mentioned. I think that’s the new kind of thinking and that means that the progressive agenda needs to think just as much about wealth creation as wealth distribution.
Liz Alderman
Should Governments stay out of the way or should we figure out a new way for Governments and businesses to work together to produce new innovations that ultimately could be new – provide new types of job creation? Because one of the other things that we’re seeing right now is obviously sort of massive job destruction.
David Teece
I actually think it is time for everybody to double-down in supporting science and technology and innovation. There are bills introduced in the United States Congress that would double the budget of the National Science Foundation and so forth, which I support. But Mariana is right, I mean the private sector often doesn’t realise or give enough credit for what Government does. I think there won’t be the political support for more investment in science and technology unless the co-investment piece picks up markedly. Now, there are some companies like Tesla of course, where they’re pouring billions into R&D as well. But there are many companies that are over-leveraged, there’s been value extraction, they’ve cut back on R&D and then they you know, seek Government support. I would not be in favour of that. I mean if companies are willing to de-leverage, if they stop the stock buy-back gain, if they reduce dividends and build for the future. That’s what’s going to create jobs. That’s what’s going to create new technologies.
Liz Alderman
Well, those are very interesting points. In Europe we have many Governments basically giving a huge amount of financial backing to businesses to keep them afloat and also paying businesses to keep employees on paid furlough in order to prevent mass unemployment from breaking out. The United States is also providing huge support but in a different way and there certainly seems to be a concern in Europe about what’s going to happen to all of these businesses? Are we going to see kind of a collapse coming?
David Teece
First of all, I think when you’re in a crisis and a recession, we’re all Keynesians in the sense that we do need Government stimulus. But I think we have to be working towards creating robust companies. And yes, we don’t want to prop up weak companies, but as we go through this crisis and come out the other end, I think we’ve got to build companies that are robust enough that they don’t need Government bailouts and I think part of the regulatory apparatus, part of the Government’s apparatus, part of the responsibility of boards of directors is to make sure that balance sheets are strong enough to not allow stock buy-backs unless the balance sheet really can warrant it.
Mariana Mazzukato
It’s not so much about becoming independent of Government otherwise actually there’d be no innovation. It’s about structuring these partnerships in a better way. Shaping the market, not just fixing the market, requires a much more attentive kind of lens on how to partner properly and it’s not about independence from the State, it’s about a much more interesting relationship.
Valerie Keller
What was fascinating and exciting to me in the wake of the crisis, was talking to fellow CEOs who were saying, ‘Yeah, we’ve got business continuity’. As David’s saying, of course we need to stay alive and keep our robustness but what was also exciting for me was the CEOs who were saying, ‘And this is an opportunity to do the innovation that we know that we needed, at speed and scale’. Not just private sector in the abstract but groups of CEOs, 30% or more of a value chain coming together to say, ‘How can we actually help transform a market and how can we work with the regulators to help lift the floor for everybody?’
Liz Alderman
That’ll be the big test going forward is you know, how successful is this all going to be? Governments working together with businesses and in general moving to construct a better post-Covid world. We’re going to have to leave it on that note. I want to thank all of you for a really robust discussion and one that has been incredibly thought-provoking I think to all of our viewers. Thanks to all of you.
Alexander Rhodes
I’m delighted to introduce Professor Anthony Julius, Deputy Chairman of Mishcon de Reya and Chair of Law and the Arts at UCL.
Professor Anthony Julius
Let me pose the question of Covid-19, has it changed everything? The parallel phenomenon of Black Lives Matter suggests to the contrary that the great structural inequalities are still with us and no real change there. Indeed, it seems to me a good test to determine our location in the global hierarchy to ask, ‘Has everything changed or just got a bit worse?’ But for sure, transformation or mere further deterioration, the virus has commanded our attention. Its immediate impact seems to me and arising from my reflections on this afternoon, to have been twofold. First of all a reminder and secondly a reintroduction. The reminder of both our individual, our human vulnerabilities, physical and economic. But also a reminder of the State’s capabilities as an active political economic agent. We have seen over the last couple of decades the State’s role as a war-making agent, but as an active political economic agent there is some novelty you know and our sense of both these vulnerabilities and capabilities has been mediated by what I think is a revived, maybe even revivified sense of global interdependence. The reintroduction is a reintroduction into the west at any rate of a political phenomenon, absent through the long 19th Century but defining of the short 20th Century, and that is catastrophe and many of us, those of us perhaps not immediately instead fending off mortal danger or economic disaster have found ourselves contemplating catastrophe. By which I mean, the near complete collapse in given systems however sub-optimal already, which we look at with a sense of our own powerlessness. So what is to be done? Reform doesn’t seem to be adequate too 19th Century and revolution is of course off the table which is perhaps we can take to 20th Century that the offered phrase instead is ‘Building Back Better’ which as an aspiration is both bolder than reform but no mere iterative improvement of an existing model and more realistic than revolution which of course risks mere intensification of catastrophe for many well-known reasons. But aspirations need programmes and agents to pursue them. Among the programmes identified what came out of this afternoon was that the radical recasting of tax regimes. This emerged as something approaching the pre-condition for much else, universal basic income, industry adjusting, climate change initiatives, intergenerational justice, reduced equality, inequality and so on. Among the agents of change identified in the conference, businesses, States, shareholders, consumers, NGOs, interstate and superstate entities and philanthropy. The panellists of course identified certain problems with each. Businesses are structurally, constitutively self-interested. Can capitalism be done differently? States are structurally constitutively power-hungry and many of them as we know run by pretty dangerous people. What’s more, States and businesses don’t always cooperate in the interest of their citizens or the wider world. Shareholders are also self-interested when they don’t actually have an institutional duty to maximise profits. Consumers are mostly too heterogeneous a bunch and too passive to act decisively over an extended period. If I sound a little glum it’s because the panellists did such a good job in mapping out the landscape and I want to add my own thanks to everyone of them. Allow me also to thank Alex Rhodes for his contribution to the conceiving of this event.
Alexander Rhodes
Thank you Anthony and thank you to all of our speakers for leading us in such a rich conversation this afternoon. It is, as they have surely made clear, our responsibility to determine which route we want to take and to determine who should lead on that journey. As a firm, we’re committed to playing our part in shaping that journey, with our clients, our partners and in society as a whole. In 10 years, we have to achieve the stable development goals, as a world and the next step I think on the journey of this conversation will be in the next three months at the Athens Democracy Forum where we’ll be considering the new abnormal. It seems to me that a clear, shared articulation of ‘Better’ is fundamental and that we have to address inequality and we have to address climate change and probably that we can’t address the second without the first. It’s also clear that we’re all in this together and that requires more responsibility and more accountability in our systems and our frameworks. Plainly, we haven’t adequately valued people or our planet in our economic system and we are now reaping these consequences. So, these things are there for us to discuss and there’s a lot to do in terms of bringing that into our day-to-day lives and businesses. Thank you very much for joining the conversation and we look forward to taking it forward with you.