Nobody’s above politics’: Joe Zammit-Lucia on why the politicization of business is unstoppable
Originally Published in The Hub
From Disney’s political battle with Florida governor Ron Desantis to Steam Whistle distancing their company from Pierre Poilievre, the political world is increasingly being entangled with the business world. Today’s episode of Hub Dialogues examining this phenomenon features host Sean Speer in conversation with author, entrepreneur, and policy thinker Joe Zammit-Lucia who has written a thought-provoking new book on the topic, The New Political Capitalism: How Businesses and Societies Can Thrive in a Deeply Politicized World.
They discuss the new era of political capitalism, why staying above the fray is no longer a viable strategy for companies, and why globalized companies will give way to localized ones.
You can listen to this episode of Hub Dialogues on Acast, Amazon, Apple, Google, Spotify, or YouTube.
Transcripts of our podcast episodes are not fully edited for grammar or spelling.
SEAN SPEER: Welcome to Hub Dialogues. I’m your host, Sean Speer, editor-at-large at The Hub. I’m honoured today to be joined by Joe Zammit-Lucia, an entrepreneur, investor, leadership consultant, co-founder of the think tank Radix, and, most importantly, the author of a new book, The New Political Capitalism: How Businesses and Societies Can Thrive in a Deeply Politicized World. Thank you for joining us, Joe, and congratulations on the book.
JOE ZAMMIT-LUCIA: Thank you. Nice to be here.
SEAN SPEER: A major theme in the book is that there’s a political logic and a commercial logic, and for most of history, these two logics have coexisted in isolation. But in this era of what you call political capitalism, you argue that businesses won’t be able to escape the political logic. As a starting point, how would you define political logic compared to the commercial logic? How are they different?
JOE ZAMMIT-LUCIA: So, commercial logic is relatively simple, in that businesses are there to provide something useful and to make a profit while doing it. So you have a product, you try and find your customers, and you sell to them, and you try and do that profitably. Political logic is very different in that politics is about trying to navigate the multiple different opinions that exist in our society, and trying to find a way forward through a process of conciliation, or a process of trading one thing against the other.
So, to an extent politics has to cater for a much broader range of views. And it’s a situation where you can never please everybody because political dialogue and political debate and the dialectic around politics is never-ending. The other big difference is that businesses tend to look for kind of straight-line progress. You know, today we’re in place A, we want to get to place B—what’s the quickest and most efficient way to get there?
But societies don’t progress in that way. Societies are a complex system and progress is halting. It’s messy. As I describe it, it’s not like a powerboat that goes from place A to place B in a straight line. It’s more like a sailing boat that has to attack in this way and that, depending on the political winds, and then it hits a storm and takes on water and maybe gets pushed backwards a little bit. It’s a much messier process. So, it’s quite hard if you’re brought up and are used to the commercial way of thinking to empathize even with the messiness, inefficiency, and a kind of almost semi-chaotic nature of the political process.
SEAN SPEER: We’ll come back to some of the points that you raised there, Joe, including the role of politics in trying to accommodate and reconcile differences in society. But let’s just focus for a bit on what this means for business. Let me start by asking who is the primary catalyst for companies to increasingly take on political postures and positions? Is it employees or management or investors or some combination of the three?
JOE ZAMMIT-LUCIA: It’s all of the above. What we’re seeing is that people in general are becoming more politicized. Through the period of the 80s and 90s, the window of political debate was very narrow. The kind of Washington consensus, Washington neoliberal consensus, laissez-faire government etc., had sort of won the day, and political debate was essentially around the margins of that accepted political norm. But now, we have a much wider window of political debate at the geopolitical level from the idea that we had after the Cold War, that kind of liberal democracy had won, and there was nothing else left to discuss.
But at that time, who would have imagined that we’d be in a position where the second-largest economy in the world would be an authoritarian government, or even maybe a totalitarian government. And even within our Western democracies, issues of identity are coming up more. There’s a lot of political debate around environmental issues, about gender issues, about identity issues, about all sorts of things that had remained dormant for a large period. So suddenly, we have this breadth of political debate that simply didn’t exist, and that’s affecting everybody. It’s affecting us all as citizens, whatever we do. If we’re employees, then we have an interest in that in terms of what the stances our companies take, and who we want to work for.
If you’re an investment firm, you’re under pressure from all sorts of places, and you’re institutionalizing these questions. I mean, people call them—one way to describe them is this whole ESG focus, but that’s only one of them. Governments have to deal with them, and then, therefore, in terms of how they relate to business, they have to deal with them. Customers are increasingly purchasing or boycotting companies based on political issues, so the influences on corporations are coming from everywhere. And we’re also in a stage where with social media growing, mainstream media, like your own site—there are a lot more opinions out there, and a lot more ways to give people a voice. So, the kind of overwhelming power of business to influence the market has is waning. Lots more people have a voice.
SEAN SPEER: Joe, if it’s okay, I’d like to ask a couple of questions about the potential risks and pitfalls for businesses navigating this new, deeply politicized world. There’s been an argument from mainly conservative politicians that to the extent to which companies are adopting political positions, they’re predominantly what you might describe as left-wing or progressive causes. But I’m reminded of Michael Jordan’s famous adage, “Republicans buy sneakers too.” Are there risks that the increasing politicization of businesses caused them to alienate customers and possibly lose market share?
JOE ZAMMIT-LUCIA: Yes. I think we need to draw a distinction between addressing political issues and taking partisan positions. So, there’s a difference between a business saying, “I have this particular position on racial equality”, a business saying, “I support the Republican Party.” So, my argument is that businesses are having to take more explicit political positions, but not necessarily partisan ones, in that they might take a political position that’s supported by one party on one thing, and supported by a different party on another thing. So, I think we shouldn’t confuse politics with party political issues. That’s the party politics are simply the mechanism by which we do the political process.
Now, you’re right, of course, that whenever you take a political position, you will please some and infuriate others. When Nike you mentioned—you mentioned sneakers, so let’s go to Nike—when Nike took a position on Black Lives Matter, it garnered a lot of support from some people, and others were burning Nike shoes in the streets. And businesses have traditionally believed that they shouldn’t upset anybody. So, when you take political positions, you will inevitably upset some people.
But I don’t think this should be in any way unusual for business in that when business produces a product or a service, they already know that it doesn’t appeal to the whole of the world. You know, they segment their market, they understand that it will appeal to some people and not to others, and they market to those people. Businesses are quite used to understanding that markets are fragmented, and people have different views and different needs, and may or may not want to buy their product on the basis of their product, or what their brand means. It’s no different when they take political positions. So, although a lot of businesses, you rightly say, seem to be scared about upsetting people, the reality is that every business only targets a sector or a segment of the market. This is no different.
SEAN SPEER: How will businesses in this new world come to understand the political preferences of their stakeholders broadly defined? Will they use polls or other tools to avoid the mistake of misinterpreting those political preferences and precipitating the kind of backlash that you’re talking about?
JOE ZAMMIT-LUCIA: I think that the first step is for businesses to deploy a political way of thinking, which, as we covered earlier, is very different from a commercial way of thinking. The first question is, how do you introduce and embed a political way of thinking in your corporation, alongside your commercial way of thinking? And that, for some businesses and some business leaders, that will be a learning process because they’re not necessarily used to it. But as we said, the political way of thinking is very different. So, the first step is how do you embed that political way of thinking into your purpose, your strategy development, and your operational decisions? The second thing is to start seeing your company for what it is, which is it’s an organization embedded in a society. It doesn’t live somewhere out there, separate from all our social discussions.
Given that you are an organization, an institution, that’s political simply because it’s embedded in a society, the first question that needs to be asked is, “What is my role in that society? What is my purpose? What am I doing through my business to create, if you like, to help be part of creating a better society?” And we’ve all know about this, all this talk about business purpose, etc., etc. So, that’s the first question.
And then you build your organization inwards from that. “If that’s the value I’m delivering to my society, how do I do that and how do I reflect that? And how do I make money at doing that?” Whereas throughout the period of financialized capitalism that we’re just emerging from, people have looked, a lot of businesses have looked, at the world the other way round.
You start with, “How am I going to make money?” And then you go on to say, “You know, okay, so what organization do I need in order to make money?” And then you go on to say, “And how do I sort of fit that into the general cultural milieu that I’m working in?” Now, I think one has to look from the outside in, “How does the world see me? What am I adding to our social development? And therefore, how do I run my organizations? What positions do I take? What products do I deliver? What services do I deliver and how?”
SEAN SPEER: Let me just ask one final question about risk and then and then we can move on. In recent years, Amazon has blocked selling books on certain topics, including, for instance, transgender issues because of its market power. Those types of decisions can have significant market influence, including causing publishers not even to publish these types of books in the first place.
Is there a risk that the growing assumption of political positions by companies with significant market power actually causes policymakers to enact policy changes that reduce their market power? In other words, once a company becomes political, isn’t there a risk that it invites a political reaction?
JOE ZAMMIT-LUCIA: Yes, but I’ll take that in three sections, if I may. First of all, corporate behavior always results in political action. When we had the great financial crash, because of the risks that financial services companies took, that generated a political reaction and more regulation, different regulation, different capital requirements, etc. So, there’s nothing abnormal about the fact that what business does, eventually, over time, either quickly or over a period of time, generates a political reaction. That’s normal. Your case about Amazon: I think we need to split into two. One is that Amazon, as a corporation, has every right to take whatever political position it wants, and has every right to decide what to sell and what not to sell. But there’s a further issue, which is the issue of competition policy.
The issue with Amazon is not that it takes a position a political position, but that it has immense market power. Some would say almost monopolistic market power in certain areas. But that’s a question of competition policy, which has to be addressed through that. It doesn’t mean that corporations don’t have the right or shouldn’t take their own political position. But corporations should not be allowed to grow big enough where an individual company’s political position affects the whole market. But that’s a competition policy issue.
SEAN SPEER: That’s a really interesting answer, Joe. Let me put this to you: In a world in which companies are increasingly adopting political positions, and I think it’s fair to say generally progressive ones, is there a market opportunity for companies that bucked the trend in askew politics are those that actually adopt conservative or right-wing identities?
JOE ZAMMIT-LUCIA: Well, markets are competitive things. So, the beauty about markets, if they are competitive, not monopolistic or oligopolistic, is that different corporations will take different positions that they believe in, or because they believe there are market opportunities. So, as long as we have sufficient diversity in the market, the likelihood is that different companies will take different positions.
For instance, you mentioned progressive positions. Well, that’s not always the case. There’s an example in the book of a company the name of which I’m afraid I can’t remember, that runs prison services, and was complaining about a political position that was limiting the funding provided by banks and other financial institutions to companies running prison services. So, it took a very strong position on that, and said, “You know, that we have to run these things,” and whatever.
So, it wasn’t particularly a left or right position, but people will take, companies, because there’s diversity, will take different positions, and thereby appeal to different segments of their market, to different types of customers that they would appeal. There’s always space for diversity. And the other thing I would argue is that this division, this linear kind of scale that we’ve had between right and left is a little bit obsolete. Now the political issues are more complex; they’re more fragmented. Companies and individuals will have political views, some of which we used to label on the right, others of which we used to label on the left.
So, I think this kind of neat idea that you’re either on the right or you’re on the left, and/or towards the right or towards the left, you’re either progressive or conservative, I think this is becoming increasingly out of date because the issues are more enmeshed with one another.
SEAN SPEER: Let me come back to something you said earlier, Joe, about the role and purpose of politics. As you said, politics at its best is about accommodating and reconciling differences without resorting to violence. Democratic theory tells us that it aims to limit those differences to a particular political arena and not have them spill out into other parts of our lives, including in civil society. Is the politicization of business a bad thing? Is it going to make us more polarized, more angry, and contribute to a growing fracturing of modern society?
JOE ZAMMIT-LUCIA: So, in the book, I try not to make judgments of things being a good thing or a bad thing. The only thing I want to say is that businesses increasingly needing to take political positions is an inevitability. Whether we think it’s a good thing or a bad thing is maybe neither here nor there, because it’s here, it’s going to increase, and businesses need to prepare for it. Even if we were to believe that’s a bad thing, it’s still unstoppable. So, it’s kind of pointless getting stuck on whether it’s a good thing or a bad thing. The only reality is that it’s a thing, and it’s here, and it will increase.
Corporations need to learn how to deal with it because this is a relatively new development. My argument is that the start of it was in the last 20 years. 9/11 started to change the world, and since then, we’ve had Iraq, Afghanistan, we’ve had the great financial crash, we’ve had Georgia, we’ve had all sorts of things. And now of course, Russia-Ukraine, we’ve had the rise of China, and not only the rise of China but the fundamental change in China that happened when President Xi took over.
So, we’ve had a bunch of things over the last 20 years that largely went unnoticed, but the world has been changing for two decades. And maybe the Russia-Ukraine crisis is the slap in the face that we need for people to wake up and say, “You know, the world is changing; the world has changed. And we’re not going to go back to what we used to consider normal in the 80s and 90s.”
SEAN SPEER: You mentioned China, let me take you up on that point. How much of what you’re describing is fundamentally a liberal-democratic issue that these companies will adopt and project political positions in democratic markets, like the United States or Canada, but in China or elsewhere, they’ll continue to preference profits over principles? To the extent that’s true, how much of this is basically a smokescreen for the same old, profit-driven model that’s always been the key motivator for business?
JOE ZAMMIT-LUCIA: Well, let’s talk about the profit-driven model. Businesses have to be profitable, otherwise, they have no future. There’s no point in criticizing a profit- model. I think there’s a difference between a business being profitable, and making maximizing profits the be-all and end-all of what a business is about. We all used to believe, and it’s still the case, that business is there to do something useful. And if they do it well, they’ll be profitable. Now, the world is splitting.
So, in the 80s, 90s, early 2000s of a globalized world, big multinational corporations loved the idea of globalization and the homogeneous world, where they could do the same thing everywhere around the world and that was very profitable. Well, those days are gone, and they’re gone for many reasons, but politics is one of them. So, we know that Facebook does not operate in China: it’s been banned. We have corporations like HSBC, the bank, that is a British registered company, and yet makes most of its money and its biggest presence is in China. And that’s a very difficult position to be in these days. You know, there’s no easy answer to that. So, when the head of the Asian region signed up to the declaration that removed a lot of freedoms from Hong Kong, of course, the executives were questioned in the UK House of Commons as to why they were taking that political position? And it’s very difficult to reconcile the two.
So, politically, the world is splitting; the world is no longer—the idea that democracy and maybe liberal democracy was the sort of the end state for everybody is over. So now, companies will have to trade things off. As we’ve seen with Russia, a lot of companies are pulling out, sometimes under pressure from their governments, sometimes under pressure from their employees, sometimes under pressure from their customers, or all of this and all of the above. Others, like some French companies, for instance, of like Auchan, which is a French supermarket chain, said, “Well, if everybody’s pulling out, there’s an opportunity for us to make more money in Russia.”
So, you know, and again, I’m not here to be judgmental about any of this. All I’m saying is that different companies will take different positions. But what is no longer viable is not to take a position and to maintain this pretense that business is or can be apolitical, which is a very arrogant pretense because nobody’s above politics.
SEAN SPEER: Let me just ask a final question, Joe, that picks up on your last answer. In this new world, do you think that there will be greater value for companies that, in effect, pick sides? That if we’re entering something of a new cold war with China, or however one goes about describing it, countries that recommit themselves to particular jurisdictions, particular countries, and particular communities, will be well served relative to those that that continue to try to express this conception of themselves as global companies without a kind of fixed address?
JOE ZAMMIT-LUCIA: I think the world is moving away from the idea that globalization and this kind of global anonymity, if you like, is the way of the future. I think we’re seeing a lot more emphasis on place-based businesses; businesses embedded in their communities, all these sorts of things. Now, again, different companies will take different positions, and we mustn’t forget that most of business is not global. You know, most businesses are local businesses, and national businesses, although all the headlines are about the big companies.
Now, for the big companies, it’s a question of navigating this. So, I suspect that what many of them will do is that they will try to square this circle, as much as possible; try to maintain feet in all camps, if they can manage the politics of that. And the reality is that the politics of that is going to become increasingly challenging. So, that’s why they have to develop these political skills of how to manage that process, and not put themselves in a position where they become dependent on a business model that suddenly becomes obsolete and can no longer function for them.
I think it’s a question of navigating this, which requires political skills and political understanding, and building that into both your short-term and your long-term strategies. What you don’t want to do is to commit to a business model that allows you to get caught with your pants down, if I may say so, when when the world continues to change. But how to navigate that will be not straightforward.
SEAN SPEER: Well, were those executives trying to manage that world, they’d be well served by reading the book, The New Political Capitalism: How Businesses and Societies Can Thrive in a Deeply Politicized World. Joe Zammit-Lucia, thank you so much for joining us today at Hub Dialogues.