In this chapter, I explain how fear of a public backlash shapes how companies engage in the political system. I outline a probabilistic chain of events that can lead from a company engaging in advocacy to being noticed and criticized by activists, to that criticism spurring a larger public response, to eventual damage to a company’s brand and reputation. Certain attributes of companies and advocacy strategies change the probability of each of these events happening, which means that (a) some companies are inherently more vulnerable than others and (b) companies can take intentional steps to reduce these probabilities in order to engage in advocacy while skirting damage. This chapter produces a set of expectations I test in the remainder of the book – that public backlash to corporate advocacy is a form of political speech and signaling rather than a statement about consumer behavior; that companies fear this backlash and “boycotts” primarily because of fear of brand damage, not necessarily sales; and that companies engage in particular strategies to either hide their political advocacy or defuse the public anger over it.

The appropriate choice between business and public enterprise is determined by the interaction between a financial time horizon and the product or project’s economic life. The prevailing interest rate defines a precise credit time horizon which is a temporal outer bound for commercial enterprise. Projects which need longer to break even cannot be funded by business alone. Long-term projects face uncertainty and attempts to control it by means of rigid contracts lead to inferior outcomes. A ‘franchise’ overcomes the temporal boundary. Protection from uncertainty is provided by social and government agencies. Investment ‘manias’ set aside time horizons and can leave a legacy of real assets. Public–private partnerships for infrastructure development are a franchise intended to overcome credit time horizons. They were embraced by New Labour, but have given rise to inefficiency and corruption and are currently in decline. The time-horizon model undermines the standard argument for market superiority. It turns Hayek on his head: it is financial markets that require certainty, whereas social and public agencies manage in its absence.

Petty corruption breaks the rules, grand corruption writes the rules, cronyism basks in virtue. 1980s globalisation incited a corruption eruption in the periphery which spilled over back into the core in the 1990s. The United States narrowed its notion of corruption, which now engulfs politics, finance, law enforcement, and the Supreme Court. In Europe, an integrity revolution in the nineteenth century established impartial governance. It began under the ancien régime, and replaced patronage with expertise. Its ideal type of a Weberian bureaucracy, an elite corps of expert and honest administrators, was established in north-western Europe by 1870, and underpinned the capacity for war and constructive state action. Its efficiency was based on expert, impartial, and trustworthy competence. Official elites came into conflict with the forces of modernity, with democracy and the market. Their success led to over-extension, and the dilution of bureaucracy exposed it to its enemies.

Of several ways to provide for old age, the best is to be rich. Pay-as-you-go (PAYGO) pensions are funded by taxation and do not need to lock in the future. British and American safety net pensions remain very low. American economists (Friedman, Feldstein) pushed to privatise pensions, disregarding risk and high costs. Deindustrialisation undermined solid corporate and public sector pensions. Pre-invested private pensions only work for the better off. Popular resistance has preserved PAYGO. Pre-funded pensions, touted as best, fail because pension consumption cannot be hoarded. Headline yields are halved by transaction costs. Stock markets are too small to support social transfers, and PAYGO is an order of magnitude cheaper. Its real return is often higher than stockmarkets. Financialisation of old age is an exploitative deceit. PAYGO is informal, flexible, and robust.

Homes last for a century but have to be paid for sooner. Nineteenth-century buy-to-let rental was pervasive and depended on rolling credit. Interest rates and local taxes push it into a terminal slump even before 1914. Socially responsible and philanthropic housing was not affordable. After WW1 government policies, and not-for-profit finance extended both public housing and homeownership. German-speaking Europe and Scandinavia achieved secure rental and stable house prices. US government saved borrowers during Great Depression with guaranteed mortgage finance and continues to support house purchase. Home ownership is a privileged asset, but one-third remain excluded. Easy credit post-1980 inflated house prices caused financial collapse, widespread evictions, and unaffordable housing. Is prosperity an illusion? Housing is the largest consumer expenditure and its cost rises faster than incomes. Rising land values initially reduced inequality and then increased it. Home ownership underpinned democracy, and both are now in crisis.

Government’s task is to achieve the common good. If it takes a long time markets will not do it: banks do not lend beyond the payback time horizon. For better and worse, government acts as the risk taker of last resort. Laissez-faire arose out of the Victorian fossil fuel windfall. But rich societies see beyond the private horizons of business. After WW1 they set to safeguard security by means of infrastructure, healthcare, education, housing, and social insurance. Government authority, alone or in partnership with business, is prone to corruption. The antidote is an independent, expert, and honest civil service. In 1980 politics moved in the opposite direction, imposing business norms and seeking to impose a corporate model on government activity. An opportunistic public–private partnership is no match for pressing social challenges, nor is the academic delusion of self-sufficient free markets. In the face of private impatience, government acts as a commitment agent for society.

Climate change is a time horizon problem. Economics proposes a carbon tax and leaving the rest to the market. Tax levels are calculated by combining an economic growth model with climate projections. Such models predict very little economic impact, at odds with the alarmist projections of climate science. Economic methodology and selective evidence combine to induce complacency. This was endorsed by a Nobel Prize for William Nordhaus, its leading exponent. Complacency was challenged within economics for not being predicted by extrapolation, disregarding future generations, and modelling the risks incorrectly. Economics bears some responsibility for the problem it tries to solve. It ignores non-rational forms of denial, and falls victim to them itself. With no guidance from economics on how to address climate change, the actual approach chosen is central government precommitment, in line with our own time-horizon model.