Controlling big business in a post-Brexit world: Can the UK cope alone?

People walk through the London Stock Exchange lobby. Will the excesses of big business become more prominent in post-Brexit UK? Reuters/Suzanne Plunkett

Brexit has been framed in some quarters as the defeat of globalisation and a push back against the domination of big business in politics and public life. Framed as such, big business has become the ugly face of globalisation and the main enemy of ‘ordinary people’ – especially those who feel disadvantaged by the forces of globalisation.

But the idea that Brexit is a defeat of big business is partly a distortion. Big business is indispensable. It is also a lost opportunity to focus attention on how to curtail the excesses of big business on a global scale. There is a growing agenda in this area, which has been well articulated as the pursuit of responsible capitalism.

The world is confronted by global challenges such as climate change, poverty, inequality, terrorism and water scarcity. These issues will require big business to come to the party as well as collaboration across countries, industries, and actors to contain.

There is a growing recognition in the global community that the private sector has a role to play in meeting some of these challenges. The consistent call on businesses to contribute to the achievement of the Sustainable Development Goals (SDGs) through such initiatives as the newly created Business and Sustainable Development Commission and the much more established World Business Council on Sustainable Development is just one example of the important role they can play in society.

But will the pervasiveness and excesses of big business become more prominent in post-Brexit UK? The question arises because of the free market orientation of the UK economy and its strong tendency, if unchecked, towards short-termism and impatient capital, which may in turn have significant adverse effects on the economy in the long run. This stands in contrast to the mainland European variety of capitalism, which is more long term oriented and focuses on the interests of broader stakeholder groups than just shareholders.

The EU tends to strike a balance between the two versions of capitalism in Europe. On one hand it promotes free market, and on the other hand it safeguards workers rights, which are often taken for granted in extreme liberal market economies. This is one of the core strengths of the EU structure.

As such, concerted effort will need to be made in post-Brexit UK to ensure that big business is managed in a way that leverages on the advantages they bring while ensuring that they are well governed and managed.

Pros and cons of big business

While anti-business rhetoric has gained ground and become popular it seems to be built on the assumption that there are more credible alternatives. But big businesses are ubiquitous in our lives. It is therefore overly simplistic to envisage a world without them. This ranges from the basic human needs of food, shelter, and clothing to the exotic heights of human aspirations of walking the moon and touring the space. We now live and breathe the products and services of big business.

In addition, big corporations also do good. They create jobs. Most of them pay taxes. They contribute to economic development and social prosperity. This means that they are not inherently evil.

The prevalence of large businesses is arguably one of their strengths. The ability to efficiently coordinate across borders, for instance, can reduce transaction costs which can be passed on to consumers.

Nonetheless, this global reach is also their problem. Given the transnational nature of these organisations, it is possible for them to escape the clutches of national governance apparatus and play one country against the other. By doing this they can take advantage of what has become a conspicuous global governance void.

This can result in negative effects on the environment, bribery and corruption, regulatory capture, tax avoidance and evasion. All these are fundamental to the public distrust of big business.

Accepting the good, managing the bad

Those who complain about big business obviously want to enjoy the positive impact they have but not their negative effects. This is understandable.

The question is: how can the power, capability, and reach, of big business be used to contribute to the continued progress of humanity in the world? The possible misuse of power typical of big business leaves a nagging question of how to control and govern them in such a way that they contribute positively to society.

The governance of big businesses is a complex endeavour requiring enormous capacity. The EU’s ability to restrain Microsoft’s antitrust practices in the trading bloc is a good example of what it takes to control big business.

There was a lost opportunity in the seeming lack of focus, in the recent UK referendum on EU membership, on how to nudge big business to contribute to the realisation of a responsible capitalist system. As the post-Brexit discourse rages on it is worthwhile thinking of whether this task is better achieved in the EU structure or outside the EU.