Category Archives: Europe

Unilever and the confused priorities of the Davos elite

If Angela Merkel epitomises the overrated in terms of international statesmanship, her equal in corporate terms must be Paul Polman of Unilever. As is true with the German Chancellor, it us unfathomable to me that the leader of a major corporation with a record this hapless should be lionised. For the larger point is that both are symbols of a world that has forgotten that, in healthy societies, recognition must coincide with a record of real accomplishment.

In Polman’s case, his peculiar talent is to perfectly talk the talk of Davos Man, the globe elite who–despite foreign policy disasters in Iraq and economically running the world into a ditch post-Lehman—somehow still thinks they are the repository of global governance wisdom. Since taking over Unilever in 2009, Polman specifically has talked sonorously about water conservation and the dangers of global warming, decreasing the Anglo-Dutch company’s carbon footprint, using more sustainable materials in making the Dove soap and Lipton tea that are two of Unilever’s core brands, and promoting global health.

All of these are worthy causes, and if I were looking for the new head of Oxfam I might well consider Polman for the job. The problem is that a fixation on these societal goods does not necessarily dovetail with a passionate commitment for maximising shareholder value that is the ultimate moral duty of any company chief.

In line with the general philosophical confusion of much of the Wilsonian centre-left, Polman ignores the fact that, in the real world, trade-offs amongst positive goals are merely a fact of life. When asked how much time he spends on specific Unilever business compared with cajoling politicians around the world to sign onto the Davos wish list, Polman tellingly has replied, ‘To me it is the same. I don’t separate that.’

But of course it is not the same. By refusing to prioritise between maximising shareholder value and saving the world, Polman is likely to do neither. For a man who loves everything loves nothing and helps nothing. Life is about priorities, about making choices, not ducking them.

Of course, setting the bar so morally high also leaves you open to endless charges of hypocrisy. In Unilever’s case its global reach has, under Polman’s watch, led it to reaching a settlement over allegations of mercury poisoning in India, while being accused of monopoly practices in South Africa, being slow to halt sexual harassment on its tea plantation in Kenya, and poor labour practices in Vietnam. While Unilever has moved to correct the abuses, in practical terms the company can never be as saintly as Polman’s rhetoric.

But it is Polman’s business record that is perhaps the greatest cause of concern, flowing as it does from his confused all-things-to-all-men Davos philosophy. Banishing reporting of quarterly returns (I would too if my record were as poor as his), Polman urges the world to take the long view. Let us take him at his word.

In the 12 months to 15 February 2017, just before Kraft Heinz announced a $143 billion takeover bid, Unilever’s share price rose some 10 percent. The wider FTSE 100, however, soared by some 28%. In the fourth quarter of 2016, Unilever’s sales missed expectations globally, while falling 2.3 percent in Europe, with many forecasters expecting even worse times ahead in 2017. Defending these poor recent results, Polman blamed both the ‘shock’ of Brexit, wherein the pound fell by 20% against both the euro and the dollar. He also pointed to Prime Minister Modi’s ‘surprise’ anti-corruption campaign, where the Indian government withdrew 500 and 1000 rupee notes, which undercut Unilever’s business there.

But, as regular readers of this column well know, neither of these events should have been surprising (as they have not been to me), and the possibility of both should at a minimum have been planned for. Instead of doing this, the lure of attending another development conference with the great and the good seems to have been to much of a temptation for Polman. For he has certainly taken his eye off the analytical ball.

There only so many hours in the day. And where you put your time in life, there also shall be your treasure. Polman–mindlessly lauded by the city elite—has made it unambiguously clear where his priorities lie. He has straightforwardly said, ‘I am really more interested in development.’ There is nothing at all wrong with this. But it is not overmuch to point out that a company as important as Unilever (with 168,000 employees in 2016) deserves a full time chief executive.

In the wake of the crash caused by many of his Davos colleagues, Polman has earnestly called for ‘a better form of capitalism.’ My gentle suggestion is that Unilever deserves a better form of capitalist.

Published in City AM, March 20, 2017

Italy’s dying elite is dragging the Eurozone ever closer towards the abyss

Venice—The great German novelist Thomas Mann once rightly described this bejewelled city as one of ‘flattering and suspect beauty, half fairy tale and half tourist trap’. The same can be said for the country of Italy as a whole, where things are rarely as they seem.

For the problem with political soap operas is when they become suddenly deadly serious, as is presently happening in a country where political schisms are as common as great food and peerless scenery. The wounded ruling Democratic Party (PD) has split, with the rebels forming a new party called (confusingly enough) the DP, The Progressive and Democratic Movement.

It seems as if we are all trapped in the unbeatable scene from the great Monty Python movie, Life of Brian, where the Pythons sketch out in hilarious detail the infinitesimal differences that have led the anti-Roman movement to splinter into a thousand pieces.

Yet lurking just beneath the obvious hilarity of the endless splits in the Italian left—founded at least as much on personal jealousies and vendettas as real political disagreements—something terribly serious is going on here. As this column predicted, the defeat of former Prime Minister (and present beleaguered head of the PD) Matteo Renzi leaves Italy just two moves away from bolting from the euro-zone, dooming the whole flawed project to its final reckoning.

If the radical populist Five Star movement of comedian Beppe Grillo were to win the next election (which must be called by February 2018 at the latest), that arch euro-sceptic has vowed to call a referendum on euro-membership itself. Present opinion polls place such a pivotal vote as too close to call.

Formerly staunch euro-federalists, Italians have grown ever more sceptical as their economy has moved backwards since the Lehman crisis of 2008. In February 2017, the European Commission warned Rome it must reduce its Everest-like debt mountain of 133% of GDP. Presently, youth unemployment hovers at 36%, a Depression-era level by any measure. Worse, Germany (and its EU henchmen) are seen increasingly by Italians as the villain of the piece, forcing the country into endless rounds of austerity without delivering the economic growth which is the only thing to make such a sacrifice politically palatable.

With Renzi’s PD split, an Ipsos poll of February 2017 had the Five Star movement pull into the lead for the first time, with 30.9% of the projected coming vote. The PD was down to 30.1%, with Silvio Berlusconi’s discredited Forza Italia movement at 13%, and the rising populist, anti-immigrant Northern League on 12.8%. As the PD is all that is left of the Italian political elite, its recent schism makes the odds on Five Star coming to power more and more favourable.

And there is no one waiting in the wings to save the Italian elite from itself. Renzi was discredited by his December 2016 overwhelming referendum defeat over electoral reform. Berlusconi was discredited by his many wasted years in power, where Italy failed to undertake the desperately needed structural reforms to make its economy fit for purpose in the post-Great Recession era. Both the established left and the right in Italy have taken to falling apart internally, making their failures seem both comical and contemptible.

It is as if we are in a late scene in Lampedusa’s grand, tragic masterpiece, The Leopard, where Don Fabrizio, the Prince of Salina, entirely comprehends both that his world is falling apart, and that he will do absolutely nothing to stop it. Last week, in a dinner with influential Italian friends of 20 years, the ghost of Don Fabrizio was explicitly conjured up, in order to explain to me what is presently going on in Italian politics.

For my wise and kind hosts were explaining that the Italian established order as it has been known here is dying, and more importantly why no one is doing much of anything to halt this slide into the abyss. But there are bigger beasts about to be slain here. For Italy–unlike its equally ailing fellow euro-zone member Greece—is simply too big to fail. Neither Brussels nor Berlin can hope to bail it out. As such, the coming populist rejection of the euro by Italy would definitively spell the currency’s end in its present form.

The organic political scene in Italy suits its nature, part comic, part tragic, and very human. However, this time the consequences of Italian political failure could well prove incalculable for Europe as a whole.

Published in City AM London, March 6, 2017.

Trump’s surprisingly positive foreign policy–and some unanswered questions

Despite a surprisingly upbeat and coherent first address to Congress on February 28th, given these polarised times it is highly unlikely Donald Trump changed anyone’s mind. Those who rather fanatically support him will have found nothing particularly objectionable with what he said. Those who rather fanatically oppose him will have heard nothing to alter their opinion, either. This is both the political strength and the weakness of the man who first sensed—and then supremely capitalised on—the canyon-like divisions lying submerged just beneath the surface of American life.

The speech isn’t the problem

The power of persuasion–already dying when the supposedly great orator Barack Obama failed to bring a single congressional Republican with him over his signature Health Care initiative—is dangerously just not a part of American politics anymore. Battle lines are drawn and compromise in any form is out, a dolorous development which would have horrified the country’s founders, wise men who crafted a wondrously enduring system based precisely on the notion of political give and take.

This is perhaps America’s great secret to success, constitutional stability (having one republic to France’s five) allowing for the great economic prosperity that has followed. Watching the Democrats studiously not clap for a trillion-dollar infrastructure initiative that the left of their party has been calling for over many years is a striking example of the death of policy discourse in American life, and the dangerous rise of tribalism. It simply does not matter what Trump says; the Democrats will fanatically oppose it (and vice-versa). This is the whirlwind Trump’s revolution is reaping.

People are foreign policy

However, contrary to all our fears, there has been a lot to commend the first moves of the Trump White House over foreign policy. As I know well from my many days in Washington, actual people make policy and to some extent are policy. In selecting the highly-capable General James Mattis to run the Defence Department and in picking the innovative General H.R. McMaster to run the National Security Council (after the brief, but disastrous General Michael Flynn detour), President Trump has put in place a creative, realist national security team that George H.W. Bush would be comfortable with. The huge question remains whether the highly mercurial and intellectually unformed president will actually heed their advice.

Worse, he might actually grow weary of the real-world restraints they make clear to him in conducting American foreign policy and fire them. There is no better analytical canary in the coal mine for the future of American foreign policy than this; what is the bureaucratic fate of the undeniably able national security team Trump has assembled? Following their personal fates will go a long way in tracing the new trajectory of American foreign policy itself.

So far, so good

Yet on his own over this past month, President Trump has managed to succeed in doing two seemingly contradictorily but useful big things; he has questioned the tired, old shibboleths of American foreign policy, even as he re-affirmed of number of their basic precepts. This has finally moved the intellectual clock, as it has been stuck for two decades, a desperately needed innovation, as the Cold War has long been over and it is well past time for intellectual thinking over foreign policy to catch up.

For whatever the policy conclusions, it is well past time both foreign policy opinion-formers and decision-makers treat their craft as more than a dreary recitation of a policy catechism that made great sense in the far-away Cold War, but—following the elite being discredited over both Iraq and the Lehman global recession—makes far less natural sense now.

Does the One-China policy actually serve American interests today? Is NATO obsolete, and what can possibly explain the European allies’ shameful strategic free riding to the detriment of the hard-pressed American public? Does the two-state solution, after all these many years of failure, actually stand any hope at all of success? I must admit (and I am no friend of the president) that before Donald Trump came on the scene, when I raised these very points I was rather arrogantly waived away by a sclerotic, discredited (though amazingly they don’t seem to know it) foreign policy elite in favour of the received wisdom of a bygone age. To put it mildly, that is no longer the case.

Yet the new foreign policy team also seems to have so far constrained the mercurial president from throwing the policy baby out with the bathwater. During his speech to Congress (and in earlier addresses to European leaders by Vice President Mike Pence and Secretary of Defence Mattis) Trump made it clear he still is committed to NATO, but it is past time the allies meet the long-agreed two percent of GDP spending target for the common defence.

Trump and Mattis are merely repeating the truism I have long argued for, that continued failure to do so is a European choice, which will ultimately signal the end of the most successful military alliance in history. Trump is not wrong to bring this up; it is the European allies who are wrong to continue to free-ride on the backs of the American people.

Likewise, in his call to Chinese leader Xi Jinping, President Trump reaffirmed the American commitment to the One China policy, which he had previously flirted with doing away with. But while the American horse is back in the stable, in questioning this long-held shibboleth, Trump has made it crystal clear to a surging Beijing that a tougher, less predictable America awaits it.

Given the advances in Chinese adventurism during the time of Barack Obama, in constructing and militarising islands in the South China Sea, such an approach has a lot to commend it, perhaps leading to Beijing’s resumption of its earlier, less reckless foreign policy, inaugurated by Deng Xiaoping.

And finally, if ever there was a policy that needed a creative update it must be efforts to successfully conclude the endless Palestinian-Israeli standoff. By calling the never-achieved two-state solution into question, the Trump White House makes is clear that in terms of geo-strategy this stalemate has eaten up vast amounts of American time and effort over the past decades, while frankly more important issues (such as the rise of China and India and the advent of the multipolar world itself) have been fecklessly neglected.

And yet….

And yet for all this good news, there remains deep unease for many of us who have been pleasantly surprised in terms of foreign policy by the first month of the new, startling era of Donald Trump. First, there is the grave damage he may still do domestically and to the American constitutional system more broadly. Second, as a man who seems to decide things more by untutored instinct than deep thought, even when President Trump is right, there should be deep concern about how set in stone his new foreign policy actually is.

It is this fear of the erratic behaviour of the United States, that the world’s ordering power will lapse into incoherence, that rightly worries all those of us who wish America well. In both his opening speech to Congress and in his first month in office over foreign policy, President Trump has surprised for the better. But there remains an awfully long way to go.

Published in Aspenia online, March 1, 2017.