Political economy and business in the new century: challenges and outcomes

Present global and European challenges, as well as post-pandemic turbulences and military conflicts around the world, have dramatically altered both existing national political economies’ patterns and functioning of businesses and corporate management. National governance has to tackle both: dealing with modern challenges and stimulating new business models’ development. Factors accompanying modern business transformation are numerous and often out of usual corporate approaches: some of them businesses never encountered: digital and circular economy, climate change actions, sustainability, “smart growth”, etc. 

Business is almost always about profit, however for some it also being involved in making something interesting, about satisfying personal curiosity and/or striving to reach “unknown” dimensions, and among other things to pursue for happiness. Of course, it is also about the “spirit of entrepreneurship” that can be often found in some society’s strata, or even in a whole nation; it definitely provides more reasons for people “getting into business”, as there are no limits to innovation, discovery, pursuit for satisfaction and perfection.
Bur there is more in modern business: entrepreneurship is becoming a vital and integral part of both the social agenda and national political economy priorities: i.e. more than often business in modern society is often regarded as a “social enterprise”, in the sense that it has to assist the citizens in a country along the “life-journey” to happiness and wellbeing.
Revealing some ideas on new facets in political economy, as well as on business and entrepreneurship’s perspectives in tackling present challenges with possible solutions are highly desirable; here are some “hints” for the best governance.

First of all, it is important to understand main factors that have in reality penetrated corporate activity and quite definitely “challenging business”; among them are a number of items that – even with a quick enumeration – can show the issues’ complexity: these are, e.g. those of digital society and economy, sustainability and “green growth” patterns, pressing climate issues and circular economy, city planning and quality of life, just to name a few.
It is evident that a kind of traditional approach (i.e. “business-as-usual” tradition) is not any more feasible: society’s survival, as well as resilient economy needs corporate structures and activities adequate to these challenges. Examples could be numerous and they reflect business initiatives in almost all (traditional so far) activities: waste management and energy efficiency, clean transport and new construction materials, eco-food and environmental quality, changing peoples’ consumption patterns and eco-travel, etc.
Dynamic global and European changes in all walks of life, in particular during and after recent pandemic crisis, have already dramatically “re-charged” traditional and emerging contemporary approaches to economics and entrepreneurship. In order to get in line with the new trends, both startups and already existing companies have to be very sensitive to these changes. The latter include not only modern changes in business technology and management but also affecting their future work and governments’ ideas on sustainable and circular economy, on digital transformation, corporate social responsibility, etc. Therefore, all corporate entities and the entrepreneurship in general have to watch closely the main global and European trends and their consequences for business survival and efficiency.

Besides, or secondly, business has become a vital component of implementing national socio-economic priorities, which are also changing affected by the modern challenges. Thus, national governance is taking in its agenda new developmental aspects: most serious alteration (among several others) is subject to global sustainable development goals (SDGs), the strategy that is becoming an integral part of national governance in almost all countries in the world. Another serious challenge is coming from the so-called global “climate agenda”, i.e. the countries obligation to reduce harmful emissions, various forms of contamination and pollution to reach “climate-neutrality”; never before these issue entered the national governance. Still more is the challenges of the 4th industrial revolution that grasped global development in the 21st century and which dramatically “digitalised” social activity, governance’s structures and the whole economic development patterns. All these factors (presently called “challenges”) are consequently, “shaking” old-fashioned corporate activity, forcing business to adapt to new national priorities and already altering traditional political economy.
As a rule, the entrepreneurship’s activity and businesses – in a great extent – are being dependent on a country’s governance system and the elites’ approaches to the inherent connections between politics and economics, where the politics represent a scientific discipline defining national political priorities, and economics is a “sphere” of national socio-economic strategy’s implementation. Hence, analysis of modern approaches to political economy at different times and in various countries can assist progressive decision-makers in formulating a modern-type political economy that could be favorable to new facets in entrepreneurship.

Then, probably thirdly, the European integration process is also subject to alteration following global challenges: for example, more and more specific “unions” have been created during last decade reflecting the EU’s general way towards socio-economic and political “unity”. Among these “unions” are, for example such as digital and health, energy and transport, innovation and “climate deal”; all these “sub-unions” add new facets in more efficient cooperation among the states in sectoral issues providing for a careful attention to national priorities and business facilities in the member states’ governance.
As to integration perspectives (this what, generally, the EU is about), suffice it to say, that the EU’s development model is based on a slightly different version of traditional “western-type-capitalism”: it explores the so-called “social market economy” concept, which underlines the “social background” of all economic policies.
This approach turns the corporate strategies away from “strive for profit concept” and paves the way for “social guarantees” for businesses, stimulating good governance and sound political decision-making in peoples’ interest. As a recent trend, the notions to wellbeing and happiness are becoming attractive messages regarded politicians slogans as a driving force for growth. Hence, it is becoming a “European novice” to introduce “social enterprises” and social market companies that –besides a pursuit for profit – also keep servicing local communities and regional interests; there are already about ten percent of such companies in the EU.
Presently, there are 2.8 million social economy enterprises, representing 10 percent of all businesses in the EU, employing over 13.6 million people; thus, over 6 percent of the EU’s employees are engaged in social economy enterprises. Besides the paid workforce, social economy companies mobilise volunteers, which is equivalent to 5.5 million full-time workers at present.

Another important aspect in national governance and business perspectives is an increasing role of latest achievements in science, technology and innovation to be used in both the optimal national governance and “making business fit for the future”. In this sense, science and research is an assisting tool in reshaping national economies and instigating corporate competitiveness. In this regard, the national science and research communities have to be more active in advising the governance structures in planning optimal priorities.
As part of global technological revolution, the digital transformation occupies a specifically vital place in national governance (through, e.g. e-governance), in business (such as, e.g. e-trade and e-payment) and in citizens’ social connections through numerous internet applications. Digital transformation as a cross-sectoral theme has already entered national socio-economic development and entrepreneurship: the latter through for example, so-called “future and emerging technologies”. Among most important directions are graphene, human brain project and quantum technologies, which both identify and develop practical applications to make a positive impact on people’s lives and socio-economic progress. There is already a big interest for graphene properties in business, e.g. in graphene-based detention sensors combining visible and infrared light to avoid collisions even in fog; sensors fixed around the arm can detect electrical signals from muscles in order to move a robotic hand.
Particularly important is a new trend in corporate agenda: i.e. entrepreneurship is getting a strong “helping hand” from modern achievements in science and technology through the so-called “business technology”, which incorporates all modern achievements in science for an optimal business management.

And finally, the national political economy has to remember one “simple thing”: i.e. the better taxation regime for business, the better for economy. This is why, probably, that corporate taxation is not strictly regulated on the EU-wide level; actually, it is up to the states to define the level of taxation, in sharp contrast to for example the VAT level.
Taxation in corporate management plays an important role too; among most important are the following issues: misuse of shell companies, taxation of the digitalised economy, BEPS 2.0, transfer pricing, sustainability and taxation, etc. Besides, recent case law of the Court of Justice of the European Union in the area of direct taxation and state aid provides some hints to perspectives in this vital part of business accountability.
International discussions are now progressing towards a global solution to reform the outdated international corporate tax system, with action on the re-allocation of taxing rights and minimum effective taxation. The substance of these discussions will influence the shape of the EU business tax agenda going forward, regardless of whether a concrete global agreement is reached.

Global challenges have affected the EU political guidance in general and the states industrial policies, in particular (which also included agro-sector and manufacturing), in at least two vital directions: first, in search for “strategic independence” from global suppliers; and second, in facilitating reforms in the member states. The latter are presently directed towards recovery and resilience strategies in the member states: a package worth €540 billion has been already available by June-2020, and the European Council President assured that it would provide for an “even economic recovery among the EU-27”, with population of about 500 billion to become a crucial “instrument” for the functioning of the single market and European stability. This line of activity represents one of the key aspects of the EU’s policy in relation to industry and enterprise, in particular for SMEs.
More on European industrial competitiveness in: https://ec.europa.eu/growth/industry_en#competitiveness;
On general start-up information in: https://startupeuropeclub.eu/guide/?box=startup;
On innovation in: https://ec.europa.eu/growth/industry/policy/innovation_en

There are a couple of EU’s special programs dealing with member states recovery and resilience plans (RRPs): e.g. a) on Investment for jobs and growth (IJG, with €381 bn), which includes: the European Regional Development Fund (ERDF), the European Social Fund+ (ESF+); the Cohesion Fund, and the Just Transition Fund (JTF, with about €19.2 bn); and b) the Union’s long-term NextGenerationEU program (NGEUP) and the InvestEU Fund, which represent vital supporting instruments in the states’ recovery and resilience process (quite close to these two is the EU Program for Employment and Social Innovation, EaSI)
The REACT-EU (Recovery Assistance for Cohesion and the Territories of Europe) package is one of the largest programs under new Next Generation EU financial instrument in the amount of € 47.5 billion. The package is additional to the EU’s cohesion allocations for 2021-27, making the EU Structural and Investment Funds the highest single-policy grant instrument in the EU budget. The member states can have additional support for the digital-sustainability’s transformations fully covered by the EU; two first examples were mentioned in the book.
Probably, the main difficulties in keeping in line with these programs are problems associated with the national RRPs needed to fulfill two important Commission’s conditions, e.g. investments for green and climate changes should be up to 37 percent of national budgets, and digital transitions with 20 percent; these two “conditions” have been compulsory for the national commitments to sufficient structural reforms (Commission strictly monitors a correct process of public expenditures and the states’ budget structures).
The EU socio-economic and political guidelines, as well as the governance structures in the member states, consider SMEs (and entrepreneurship, in general) as a key to ensuring economic growth, innovation, job creation, and social stability.
However, several global and European challenges have been constantly breaking the spirit of certainty, necessary trust and hope among entrepreneurs; e.g. in post-pandemic period, the urgency of tackling these issues has been a vital obligation for national governance.

 

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