Is the economy stuck in analogue?

I have much sympathy with John Major’s famous decision to run away from the circus and join a firm of accountants. After more than a decade working as a noisy NGO campaigner, I ran off to business school.

As the credit crunch took hold, it became clear that anyone interested in meeting the social challenges of our day was going to have to understand what was going on ‘under the bonnet’ of our society. Things had fallen apart spectacularly, with consequences for every NGO, public body, faith group and community organisation, and with a profound effect on the people they serve.

It was the economy, Stupid. And a new understanding was needed for those who wanted to be anywhere near the frontline for the most profound social change in a generation.

The financial crisis was not just a crisis of banks and of private business. It reached everywhere; all our sectors and regions were interconnected in their vulnerability, and therefore, sometimes, in their complicity. Because that's how economics works. And fixing the problem is everyone’s business. The divorce between money and mission – ergo the divorce between financial and social value right across our economy needs to be reversed.

The 20+ socially-driven organisations that have formed the Social Economy Alliance are working together to meet the challenge. We are investing in our belief that social and economic policy can and must be mutually reinforcing. Our organisations are living proof that a triple bottom line works.

Despite a proliferation of e-campaigning and hyper-local activity in recent years, the mainstream organisations campaigning for social change remain– faith-groups, charities and social enterprises, universities, the charitable trusts and foundations, public bodies, community and housing organisations. What has changed is their approach to business decisions and policy-making. The two are coming together.

A few weeks ago we visited senior staff at the UK’s biggest university, to discuss their joining our Alliance. The discussion didn’t touch on mobilising student populations or engaging faculty expertise in our policy-making. Instead we were treated to a fiercely intelligent analysis of the effect the University and its enormous spending power has on the economy, infrastructure and people, and the way it is now viewing its corresponding responsibilities and potential social impact. And we heard about its ambition to mobilise its social science departments to create the sort of innovations and money-making ventures with which it’s had spectacular success in physical sciences.

The following week we visited the Church of England. Since the Archbishop of Canterbury said he wants to compete the likes of Wonga out of existence, the CofE has been overrun with campaigners wanting to meet. Our delegation bypassed the social action teams and went straight to the finance floor, seeing the man who is responsible for the billions of pounds at the Church’s disposal in assets, pensions and investments. Rather than mission and ministry, we talked investment, procurement, and even the church’s role in community renewables.

There was a time in socially-driven organisations when the FDs, the commissioners and procurement people, the fund and investment managers, lived separately from those pursuing the social mission. Apart from occasional checks that the investment portfolio was still arms-free, there was little time or reason for serious debate between the money people and the mission people. But the growing realisation that financial and business actions have ever more profound social consequences in today’s economy has turned this around.

Across the social sector there are billions and billions at stake. Our power to influence the economy lies here. And it lies in the ability of our people who are fluent in finance and investment as well as social impact, to take a lead.

‘Make the economic argument’ is what we are often begged to do by our colleagues and allies. Because they know that an economy where business and finance nurture, rather than pollute the markets and environment, makes long-term business sense too. In fact, a more socially-driven economy is the only imaginable solution when the World Economic Forum puts water supply crisis and severe income disparity right at the top of its list of risks to global stability. Not least because we all depend on global markets for our own economic stability.

There are still a lot of people, especially among the highest echelons of business and government, who hold with Milton Friedman’s view, that ‘the Social responsibility of business is to increase its profits’ (or, more commonly uttered, ‘the business of business is business’). He wrote this in 1970. Economists are coming under increasing criticism for teaching pre-crash theories that are now discredited. But the idea that business should only be concerned with profit is not even of this century. It pre-dates not only the crash, but the melting of the polar ice-caps and the technological revolution.

I remember when a phone was just a phone, a camera was just a camera, and a notebook was a just a notebook. Now all our communications, information and tech needs can be served by one small device. And I wasn’t born in 1970 when Friedman was interpreting his world.

So here’s the big question: when the world has benefited so much from the digital revolution, why are we still living with an analogue economy? Why can’t a business be driven by a social mission? Why can’t a charity be massively productive economically? Why can’t the public sector be trusted to take risks and unlock major innovation? Our economy must run on the twin tracks of social and financial value.

The Social Economy Alliance’s aim is to use the expertise of social sector organisations to radically influence the policies of all three main parties in the run-up to the 2015 General Election. And it’s not happening a moment too soon. Last week I had a rather depressing conversation with a politician. While saying he personally supports our approach, his overall feeling is that never the twain shall meet, because: “Labour has to be seen to be economically responsible while the Conservatives have to be seen to be socially responsible.” 

Luckily, his view is not too typical. We have allies in all three political parties, and are gaining more all the time. If the Social Economy Alliance is successful, this analogue attitude to business and society will be consigned to history.

Today the Alliance has launched a new website. Join the campaign at www.socialeconomyalliance.org.uk and you can share your thoughts on Twitter: @ricotheyounger #socialeconomy