BOOKS: Not as Original as it Thinks

Thoughtful and interesting though its author seems, this volume is let down by distracting gimmickry. John Kay blames the publisher

Capitalism is Dead: Peoplism Rules

By Alec Reed

McGraw Hill pounds 19.99

This book would have benefited greatly from skilled professional editing. A good editor would have told its author not to begin with a glossary of made-up words, such as idea-lisation, 'the process by which creativity is brought about', and intuitive intelligence, 'the ability to think rapidly and decisively without relying on traditional methods of logic, demonstrating a preference for the unknown and unconventional...'.

There is already a good word for idea-lisation - imagination. There is also a good colloquial word for intuitive intelligence - bullshit. The English language has words to express most ideas, even new paradigms. Please spare us peoplism.

But a good editor would have done more than keep the language in check. He or she would have helped impose organisation and structure on the book. If capitalism is dead, then we need to be clear what that capitalism is, or was, which features of the environment have changed, and, if 'peoplism' has replaced it, what distinguishes peoplism from capitalism. I think I know what Reed has in mind when he says that 'capital is not the most important factor of success', but I'm not sure it ever was.

Tangible capital - plant and machinery per head - continues to rise steadily in advanced economies, lately as a consequence of information technology. Intangible capital per head may have gone up even faster. We don't know.

This divides into two main kinds: the knowledge and skills of individuals, which they can charge firms to access, and attributes and assets that are identified with the organisation - brands, the reputation of the firm, and the relationships within the organisation.

Defining terminology to clarify issues is useful; introducing novel terminology to exaggerate the originality of what is being said is not. The proper job of an editor is to encourage the author to mark clearly what is new and to ensure that both what is original and what is not are related to what others have said. It's not pedantry that obliges serious writers to provide references to established literature.

A good editor would also have suggested that the rambling asides - the case for investment in agricultural land and against allowing foreign students to attend our universities - be cut, along with the spurious facts, such as that by 2020 the stock of scientific knowledge will double every 73 days. How could one verify whether it was true?

If these comments seem harsh, they are addressed to the publisher, not the author. Reed is obviously an interesting and thoughtful person and it is the responsibility of a publisher to ensure that these characteristics are translated into a good book.

Still, Reed does raise important questions. Both our conceptual framework and the design of our institutions originate in a society in which the shareholders in large business organisations provided plant and machinery and the workers provided labour of a homogeneous, unskilled kind that responded to hierarchical direction.

Perhaps company law needs to reflect these changes. Perhaps the nature and role of the capital market has changed, or needs to change: the dot.com bubble was the consequence of an overestimation of the importance of the capital market in the formation of new businesses.

Perhaps the book's most significant argument is the insistence that companies should run their affairs by reference to a balanced scorecard (though Reed doesn't relate his discussion to the development of these concepts by Kaplan and his followers). Focusing exclusively on financial objectives distorts the structure of the complex organisations Reed describes and in ways that ultimately jeopardise the achievement of them.

This is the most important business lesson of the past decade. And it is encouraging that some successful businessmen have taken it on board. These are big questions and Reed has things to say about them. If only he had done so in a more disciplined way!