What seemed like a lifetime ago, former Prime Minister David Cameron used to talk about the “global race”.
When he spoke about getting fit for this race, his argument was that the state needed to shed a few pounds in order to free up businesses to drive growth. Like most politicians at the time, he had an optimistic view about business and its ability to deliver a better society.
Now as we race around the track, we find that the problem isn’t so much the state but business itself which is out of shape.
Business seems addicted to an unhealthy diet of short-termism, share buybacks and debt. In a hyper-competitive global economy, many companies would rather make a quick buck and sell out, rather than invest for the future – the Bank of England has found that just one in four businesses prioritised investment with internal funds.
This failure of business is why we have an economy with low levels of investment, stagnant productivity, and squeezed living standards. This is driving a lack of trust in business.
Against the backdrop of the climate crisis and high levels of social division, we simply don’t have the luxury of waiting to see whether the private sector can get its act together. We need business to step up.
Capitalism only has a future if we reform it. To reform capitalism, we have to reform business, promoting models which can combine dynamism with long-termism while respecting both people and planet. The inconvenient truth is that the profit motive, which once spurred the industrial revolution, is now a barrier to progress.
As a centre for global business, the UK has been at the forefront of developing new models that put purpose before profit. Social enterprises, businesses which have a legally binding social and environmental mission and reinvest their profits to achieve that goal, have been growing.
We now have 100,000 social enterprises in the UK, and the majority are reporting growth. They also reporting higher levels of innovation than traditional businesses, as well as paying their workers higher wages and having more women and BAME leaders.
The benefits are obvious. Innovation is essential for boosting productivity, higher pay will help reduce poverty, and more diverse leaders will not only produce better businesses but also help heal our divided society. Any economy heavily populated with social enterprises is likely to have a big competitive advantage over its rivals.
The rest of the world is now waking up to this, and social enterprise has become a global business movement. A new Thomson Reuters Foundation report released this week has highlighted the best countries in the world for social entrepreneurs.
Western countries such as Canada and France are in the top 10, but so too are Asian economies like Singapore and Indonesia. Mapping exercises have showed large numbers of social enterprises in India and China. All over the world, social enterprises are springing up as governments encourage entrepreneurs to use business for good.
The UK, which was the first to create a legal form for social enterprise and to set up the original social investment bank, is now not even in the top 10. While the UK government has applauded itself for its good work, global competitors have caught up.
Britain doesn’t even recognise these growing businesses as businesses, treating them as a novel variation of charity. The rest of the world is not making the same mistake.
The global race is not about reforming the state. It won’t be won by having the biggest research budget. Rather, it is a race to develop the next evolution of business. The countries that will succeed will be those that take the best of business, its creativity and innovation, and blend it with social purpose and environmental sustainability.
Who will win this race is now up for grabs. The time has come for the UK to pick up the pace.
Main image credit: Getty