Debunking business “confidence.”

datePosted on 13:02, August 11th, 2018 by Pablo

One of the more suspect metrics used to evaluate a government’s economic program is so-called “business confidence.” The premise behind surveys of “business confidence” is that business is the motor force of capitalist economies and business leaders are the most accurate readers of their health. Business confidence in the state of economic affairs is therefore considered an accurate weathervane on prospects for growth and prosperity. The trouble is that the premise is false as well as one-sided.

That is because “business confidence” is a political rather than an economic indicator given by one collective actor in the process of production. In other words, politics frames the way in which economic policy is made and, given that, political context is what gives business “confidence” in economic policy. It simply reflects the attitude of capitalists towards different governments and their approaches to economic matters. This means that there is an inherent bias in any survey of “business confidence,” to wit, business confidence is always higher under right-leaning governments and lower under left-leaning governments, particularly during the early days of a government’s tenure when policy changes and legislative reform are being enacted.

Although business confidence may wax and wane under both government types, the starting point is always lower for left-leaning governments. Left-leaning governments are believed by capitalists to be interested in strengthening worker’s position in production at the expense of employers. Worse yet from a capitalist perspective, left-leaning governments also seek to alter the social relations of production via so-called social engineering projects that empower the working and disadvantaged classes at the expense of entrepreneurs. Business consequently sees the assumption of office by left-leaning governments as a zero-sum game: capitalists lose in the measure that workers gain (for example, by strengthening rights to organise and collectively bargain and pushing tax-funded redistribution schemes).

Conversely, the presumption is that under right-leaning governments business will gain at worker’s expense (say, via deregulation of  collective labour rights and health and safety standards). That is more a measure of expectation than confidence: business expects right-leaning governments to be favourable to their interests because they assume (often rightly so) that left-leaning governments will not be. The reverse is true for workers: they expect less of right-leaning governments than left-leaning ones. The issue for both sides is one of expectations being met. Confidence in government or the lack thereof derives from that.

Savvy business people will cloak their comments about confidence by citing larger macroeconomic factors such as interest rates, fiscal deficits, trade balances, currency market fluctuations, commodity booms and busts, taxation, skill shortages, foreign disruptions such as Brexit, etc. Although these clearly play a backdrop role, the relative confidence of business is often grounded in more mundane things. Consider New Zealand.

In the current NZ moment, business confidence is said to be low. Why is that? ? If the comments of the head of the NZ Employers and Manufacturers Association are anything to go by, not much. In televised remarks made a few days ago, the EMA boss said that the domestic violence leave and longer tea break legislation was an undue burden on businesses’ bottom lines. Think of that: granting short-term paid leave to employees who are the victims of domestic violence and giving workers slightly longer tea breaks somehow is injurious to business confidence. Apparently the notion of worker morale and welfare does not enter into the EMA equation, and therefore it is, in its own eyes, right for it to have less confidence in a government that seeks to address those issues.

The same goes for business complaints about minimum or living wage increases, paid parental leave, the right to organise and strike etc. None of these necessarily interfere with a company’s productivity or profitability.  What they do is make it harder to exploit the inherent vulnerability of workers in the labour process and/or degrade health, safety and environmental standards, thereby diminishing manager and ownership’s ability to secure gross material advantages as a result.

It is hard to believe that issues such as these are the real concerns that erode business confidence in the current government. In reality, business was always going to claim to be less confident once the Labour-led coalition formed a government, with that lack of confidence accentuated once labour market reform measures began to be implemented. It is quite possible that announcing a lack of business confidence in the Labour-led government’s policies is a capitalist way of punishing the coalition for its election victory. Nothing short of complete upholding of National-era labor laws and regulations would have kept business confidence stable, and even then uncertainty about future changes under the Labour-led coalition would likely have seen a drop in business confidence in anticipation of those changes. Here again, the issue is more about expectations than confidence per se.

In that light, the notion of “business confidence” being an indicator of anything other than capitalist hostility to or distrust of left-leaning governments is silly. A fairer measure would be to survey capitalist “expectations” of governments and compare business surveys with those measuring worker expectations. After all, workers are those who actually produce things and provide services, so even if they are not consulted in investment decisions and long-term planning, they are the (increasingly discardable,) human material upon which such (increasingly political) considerations are made. So their expectations are a necessary part of any honest discussion of “confidence” in government policy.

In other words, expectations are the basis upon which sectorial confidence is secured, and if expectations are negative or low, then confidence will follow accordingly.

It is likely that workers have a reverse image perception to business in that regard: they expect more benefits for workers from left-leaning governments than from right-leaning governments. Recent strike activity by public sector unions demonstrates a willingness of those workers to up the ante when dealing with a left-leaning government in a measure not seen under the previous right-leaning crowd. They simply expect more of the Labour-led coalition.

The true measure of confidence in a government is in the relationship between business and labour expectations. Matching up the expectations of business and workers allows determination of the relative confidence each group has in government. A tilt either way will lead to more or less confidence on the part of one or the other. It is in the balance between the satisfaction of expectations where the compromise on sectorial confidence is found.

It would be interesting to see what areas of common concern and agreement emerge from surveys of business and labour leaders. This could provide grounds for cooperative approaches to policy solutions involving those issue-areas.

All of which is to say that the confidence of those who ultimately produce wealth in society is as important as that of those who manage and own productive assets. This confidence is based on their respective expectations of government set against the economic backdrop of the moment. Only by comparing the two can an accurate picture be drawn of how productive groups view the performance of governments on matters of economic import.

Anything short of that is misleading and biased in favour of capital. But then again, perhaps that is the point of business confidence surveys as they are presented today.

5 Responses to “Debunking business “confidence.””

  1. Kumara Republic on August 11th, 2018 at 19:31

    There may be signs of slow but sure change in the air, if the business lobby has bothered to even read its own research. We all know money talks, but in the wake of Brexit & Trump, the left-behind have found out how to shout. (see page 6)

    “Are the economic and social conditions that have led to Brexit, Trump and the rise of the right in Europe becoming an increasing issue in New Zealand?

    1–5 where 1 is ‘absolutely’ and 5 is ‘not at all’

    1. 19%
    2. 34%
    3. 25%
    4. 18%
    5. 3%

    https://www.businessnz.org.nz/__data/assets/pdf_file/0006/129345/Deloitte-BusinessNZ-Election-Survey-2017.pdf

  2. peterlepaysan on August 11th, 2018 at 21:32

    The only people who value business confidence surveys are the surveyors, media and opportunistic politicians.

    The “results” of the “surveys” are less useful than the tips given on various gambling sites. When I had my own business I always threw confidence surveys into the wpb file. I would rather trust my own judgement and research than any opinion survey.

  3. AVR on August 13th, 2018 at 11:56

    As politics has got more partisan the value of these surveys has fallen. It can be useful to know what the business sector is thinking, but if all they’re thinking is ‘our guys should be in charge’, not so much.

  4. Pablo on August 13th, 2018 at 16:57

    I have limited space in a post to extend an argument, but two things I would add is that a) measuring business “confidence” assumes that those surveyed act in good faith when answering and have the overall state of the economy in mind. But if we think of those who led the charge into the global recession of 2008–the so-called “masters of the universe” who knew that the market in derivatives was bound to crash and hurt all but themselves–then we now that many business types act opportunistically, greedily and without regard to others. So taking their word on what inspires confidence is a flawed method at best.

    In my private sector dealings I have seen an emerging concern about sustainability and ethics. It is embryonic when compared to the general business cultures that I deal with it, but it is present when investment decisions are made in some fields. So there is hope that business will factor in fair labour practices, environmental sustainability and other issues that place longer-term horizons on their pursuit of (a more restrained) profit.

  5. Kumara Republic on August 13th, 2018 at 20:03

    There are hopeful signs that an increasing sector of NZ Inc has seen what Brexitrumpocalyptic populism looks like and how to prevent it happening here. At the same time, another part of NZ Inc remains in denial about it – they’re typically the ones who really do have an axe to grind.

    Throw in the prospect of advancing technology upending the job market faster than the system can respond to it, and the issue becomes all the more urgent.

Leave a Reply

Name: (required)
Email: (required) (will not be published)
Website:
Comment: