This well written critique of western capitalism is perhaps most notable for its author.
Daniel Pinto is co-founder and CEO of Stanhope Capital, one of Europe's largest investment firms, so you don't immediately expect him to call the CEOs of "...our largest corporations ... public relations officers, more concerned with pleasing fund managers who never set foot in the real business world than with preparing their groups for the challenges of the future".
He says that these same CEOs are rewarded for failure, that emerging nations do things better (BRICS generally) and too much of our GDP goes on public spending (in the UK, public spending accounted for 45 per cent of GDP in 2012. In France that year, the figure was 56 per cent).
As Pinto rightly says: "At these levels, the State is no longer simply an enabler of the economy, it is the economy."
There's more — the West is cripplingly in debt, financial institutions take gambles where if they win they keep the rewards, and if they lose the taxpayer pays, effectively socialising the losses, and a rise in unemployment and a redistribution of wealth is resulting in greater inequality each year.
Pinto knows there are no simple solutions to all of this, but points out that the family companies of developing nations have a longer term view than CEO's watching their quarterly reports to their big investors, and so spend more on R&D, for instance, and succeed in the long-term.
In general, family firms, and small firms are a good thing, Pinto believes. They employ people, and people work hard in them.
He uses the example of the German family firms – Mittelstand – to show what can be achieved in Europe. There's a good article about them from The Economist back in 2011 making the same point.
It's a strange sort of criticism of a book to say that you agree with every word of it, but while reading this I wondered why any of it needed writing, and who it was for.
The man in the street, and anyone who runs their own company would be nodding in agreement from page one. Yes, we think large companies are badly run and short-termist. Yes, we think the government does too little for hard working people and too much for those who can't be bothered to work at all. Yes, bankers are unbelievably arrogant and play by the "heads I win, tails I lose" rule. But then, all this has been known for years — certainly long before 2008. Does Pinto mean it as a wake-up call for his colleagues in finance? Good luck with that - why would they worry while they are getting rich?
After all, are things getting worse? Well, they certainly aren't getting better. Wealth redistribution is continuing in the wrong direction, and it's as tough as it ever was to start a new company with borrowed money.
Part Two of the book covers the rise of the BRIC nations and others — "Their conquests, our recipes: how emerging powers made our entrepreneurial capitalism their own" — which has been covered in many books before, but is well-summarised here. It certainly would make worrying reading for anyone coming to the subject for the first time – the dangers of protectionism and currency wars included. Again though, I'm not sure there's anything new here.
Then there is Part Three, "Rebuilding upon the ruins of Western Capitalism". Again, what is there to disagree with in the following solutions?
- Reconcile our listed companies with the long term
- Make CEOs think like business owners
- Re-energise corporate boards and rebuild bridges with shareholders.
