Comment: Why politics matter

The two subjects people are most commonly advised to avoid talking about at work are politics and religion.  Yet for multinational organisations both subjects cannot be totally ignored – especially the political situation in countries where they operate.

The conventional view of politics is to see it as a play between the left and right, with better outcomes for business coming from the ascendancy of the right. Yet from an operational perspective it is not that clear where the advantage always lies. In reality, the most significant dimension is not the left-right axis, but between democracy and totalitarianism (total dominance by the state). Both right and left extremes are inevitably totalitarian, that is why Hitler’s party was called “national socialism” even though it was as right wing as it would be possible to get.

In fact, business thrives most within liberal regimes and these are usually highly democratic. In the USA Republican policies are generally classified as “right wing”, but actually seek to minimise state interference, although state controls tend to be tight whoever is in power. It is just the edges of state control that move – and not its core.

In Europe there is currently a move towards totalitarianism, especially one dimension of it – greater intolerance of views that are opposed to the state. This has long been the situation in Russia, but now it is reappearing in Austria, Hungary and Poland. The clamp down in Poland is well illustrated by the decision of the media regulator to fine a U.S.-owned news broadcaster $415,000 recently over its coverage of opposition protests in parliament last year. Now the Polish government is legislating to take direct control over the judiciary and ignoring environmental protests over widescale deforestation. Poland could even eventually lose its EU voting rights if its judicial reforms go ahead.

One reason to care about the emergence of greater authoritarianism is that it undermines the principles enshrined in international law and, in the case of Poland, the EU Treaty. The EU, for instance, is significantly weakened by Brexit, but the collapse of democracy in central and eastern Europe will weaken it more. Multinational enterprises rely on stability and certain fundamental freedoms. Not so much humanitarian principles, but freedom of establishment and freedom to move capital and people across national borders. They also thrive on rising living standards and independent judiciary to deal fairly when things go wrong.

Another reason why HR should keep one eye fixed on political developments is because employees engage in political activities, the power of trades unions ebb and flow in relation to political events and the policies of political parties generate new laws and tax amendments. Although personal political affiliations are best kept close to the chest, political developments do clearly have either a positive or negative impact upon the business and can seriously alter employment costs, as well as inform future investments.

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