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Wednesday, November 14, 2012

Conflicting Narratives

@queenchristina_ writes an excellent article on Google, Starbucks, and Amazon, arguing that "for these multinationals immorality is now standard practice" (Independent 13 November 2012). See also Martin Hickman, Good Bean Counters (Independent 16 October 2012).

It is much too easy for British politicians, journalists and taxpayers to get a sense of moral outrage when they discover how little UK tax these American companies pay on their UK earnings. There may be nothing illegal about the fact that the coffee beans are purchased from a Starbucks subsidiary in Switzerland, or that the UK subsidiary pays a royalty for the use of the Starbucks brand to another Starbucks subsidiary in the Netherlands. By a strange coincidence, the Netherlands charges a very low tax rate on royalty payments. Of course there are many British companies that use similar devices to reduce their UK tax bill.

The word "account" essentially means "story". The Starbucks accountants have constructed a story in which Switzerland and the Netherlands are essential links in the Starbucks value chain. British politicians have constructed a different story in which Starbucks is ripping off its British hosts. The moral outrage comes from the clash between these two narratives.

When two narratives clash, it seems natural for us to want to impose our preferred narrative on the Other. Wouldn't it be grand if Starbucks saw the error of its ways and started to pay a fair rate of UK tax. Or wouldn't it be equally grand if the UK tax laws were changed to regulate against these tax avoidance schemes? Or from Starbuck's point of view, wouldn't it be grand if UK corporate tax rates were reduced, so it could simplify its value chain at no cost to its shareholders? (Obviously words like "grand" and "fair" depend on the narrative.)

Of course, what is more likely is that the politicians will issue some threat of tighter regulation, the companies will make some temporary gesture to alleviate public hostility, and that the media will move onto the next target. In the meantime, politicians and the media can make things uncomfortable for corporate executives in the public eye.

And here's a slightly older example - the attempts by the US Government to hold BP to account for the oil spill in the Gulf of Mexico. One BP executive complained that "The administration keeps pushing the boundaries on what we are responsible for." (Wall Street Journal 1 June 2010 via NakedCapitalism)

In any case, there are always going to be conflicting narratives. I was at a workshop in the City this morning discussing how externalities might affect the future of money and the future of commerce. We discussed a range of topics, from mega-cities to carbon trading. 

But what exactly are these externalities? Almost anything that one person thinks to be part of The System and another person thinks to be outside The System. As William P. Fisher, Jr points out, "If we have to articulate and communicate a message that people then have to act on, we remain a part of the problem and not part of the solution." (Reimagining Capitalism Again, Sept 2011).

Oliver Greenfield identifies the following challenge:

"The externalities created by companies - or, for that matter, nation states - in their pursuit of self-interest can seem rational at the local, country and even regional level.  But at a global level, in a closed system, externalities are costs. What is rational at a company or nation state level is irrational at a global level." (Green Economy Coalition, April 2012)

Thus we have conflicting narratives, which result from disagreement about system boundaries (including time horizon as a type of boundary). A true systems approach might give us a systematic way of playing contested narratives off against each other.

See also

William P. Fisher, Jr, Question Authority (Oct 2011)

José M. Ramos, Temporalities of the Commons: Toward Narrative Coherence and Strategic Vision (Nov 2012)

Linked-In discussion on Good Bean Counters

and my post on Regulation and Complexity (Oct 2012)

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