Business under political pressure

The case of interest rates in the UK, cut by Bank of England (BoE) last week, invoked thoughts over the complex relationship between business and politics in today's world. Until two days before the monetary policy committee of BoE meeting, all indications were that the bank will hold the rates as they are for now. Then, a campaign by businesses in the media pressuring the bank to cut rates to loosen the credit market pushed the decision that way. I'm not an expert on the subject, but from basic knowledge one can assume that the main factors taken into consideration in that decision remain the same; like inflation figures and industrial output.

Since the American property sector deterioration in the summer, the world is undergoing a credit crisis. Central banks and financial authorities in leading developed countries poured money into the market to keep the banking sector afloat. Economic reasons for this might not be much questionable. But, the moral question was never asked: why do we all have to bail out those who spent more than they could afford, plunging in debts that the rest of the society is now obliged for writing them off? Cutting interest rates to help borrowers might be a macroeconomic necessity to vitalise an economy feared to slowdown, but those who are not investors or market dealers - making huge returns on their borrowed money - should wonder about how businesses are influencing official policy making. That applies of course in developed democracies, where accountability still stands a chance - in the underdeveloped world, it's a different story.

During the two world wars, in the first half of last century, politicians in the established democracies relied on business people to bankroll their military missions. That was a culmination of a relationship between businesses and politics laid out during the colonial era: business helps politics in return for guaranteed benefits arising from expansion and imperial strategies. So, in a way, politics led and businesses followed. That went beyond the known official apparatus of taxes and duties collected from business, and the rest of populace, by governments to run the system. Political leaders were to ask leading business figures for "war loans" in return for potential market opportunities arising from these wars.

Equal footing

By mid-century, the relationship between businesses and politics reached a stage of "equal footing". During this period, businesses managed to push through structural changes in the "State", giving them more share of the power. Privatisation, tax-reliefs and loosening central government controls balanced the relationship. This stage was unstable, or transitional to the current situation where businesses seem to be having the upper hand in the traditional business-politics alliance or power-sharing.

Towards the end of the century, with dramatic changes in the international political scene, businesses are now leading politics to a great extent. Examples are countless to prove such an argument, without resorting to conspiratorial thinking or "Illuminati" and "Masonic" plots behind major developments. Countries were isolated and punished by economic sanctions, wars were waged for economic and business reasons, and international relations were shaped on business and economic criteria. Russia, China, Iran, Iraq, Venezuela, Libya, and others are dealt with according to the economic interest of the playing powers. The North-South debate and other global issues ranging from climate change to human rights are approached in a business framework.

That doesn't mean the end of politics, or that the "State" is becoming irrelevant, but the shift in power-sharing between business and politics poses new challenges. Businesses would still need politicians - who're becoming more and more like PR managers and marketers - and politicians still have leverage, backed by populist groups and movements.

If the issue of business-politics relationship is something left only to academics and philosophers in the established democracies, it's of a more popular appeal in the Third World. Though most underdeveloped countries didn't go through the phases witnessed by the developed world, the debate is valid to be opened. We do have "critical mass of success" examples in the region to look at, and a lot of political stagnation can be swept by entrepreneurial activism.

Yet, the entrenched culture of corruption and bad governance has got its roots in the sociopolitical structure of the "State" in our region. Public scepticism of businesses and politics alike needs more than just the models of a "State" run or managed on sound business basis. A complete revamp seems essential, and unfortunately neither the political or business elites in the Arab World are capable of initiating it.

The writer is a London-based Arab writer.