Economists arguing about the UK and US (non)growth rates are like mediaeval scholastics disputing the number of angels that can dance on a pinhead. The reason there is no recovery, or at least no meaningful one, is that this isn’t an economic crisis but an organisational one: the final collapse of a worm-eaten corporate order that is entirely unfit for the purpose of dragging us out of the crisis that it has created.

The 2008 crunch was the moment the corporate express hit the buffers – but in retrospect it was the end of the line for a runaway train that had been careering out of control for years. As the smoke clears, we are facing the second part of this double-dip crisis: slow realisation that since it was business as usual that caused the crisis, expecting it to be the engine that pulls us out again is an ecapsulation of Einstein’s definition of insanity: doing the same thing over and over and anticipating different results. Hence the unreality of the debate.

Let’s be clear: the destination that the runaway corporate express has been thundering towards for the last 20 years is the bottom.

This is true for every one of its stakeholders.

First, employees. On the day I wrote this, there were two business headlines. HSBC announced first-half profits 36 per cent up on a year ago – and that it was cutting 30,000 jobs, or 10 per cent of the total, to prune costs. And the Workplace Retirement Income Commission said that one-third of UK adults faced ‘a bleak retirement’ future because of inadequate and hopelessly inefficient pension provision.

As the first indicates, with honourable exceptions the private sector no longer sees an obligation to provide real jobs. Job cuts are a measure of first resort, not last. Those it does provide increasingly take the form of McJobs, with low pay, no prospects and the expectation of constant churn. Meanwhile, working conditions are getting worse – and it’s a one-way trip. ‘Recession work practices are “here to stay”’, a self-explanatorily entitled FT news story told us last year. ‘The harsh reality,’ sums up LBS’ Prof Julian Birkinshaw, ‘is that today’s large business organisations are … miserable places to spend our working lives (1).’

Companies have also surrendered their role as the engine of middle-class prosperity. Since the 1970s, pay for those on middle incomes have barely moved in the US and UK, a fact only disguised by huge increases in middle-class debt. Only those at the very top have benefited. As for pensions, the abjection of companies’ flight from proper provision is doubled by their determination to drag the public sector down to their own miserable level. In a list of broken employee commitments over recent years, another business school professor, Stanford’s Jeff Pfeffer, includes pension plans terminated or changed, health insurance abandoned (sometimes using bankruptcy to shed obligations), work outsourced or routinely ‘restructured’ not for reasons of financial stress but to increase profits or copy rivals, the psychological contract simply torn up. ‘In ways big and small, both implicitly and explicitly, employers have told their employees that they themselves are responsible for their own careers and, in many instances, their own healthcare and retirement,’ Pfeffer writes (2).

Customers have done scarcely better. Quite apart from the thousand minor ways they are daily short-changed and misled, two recent episodes stand out. Persistent mis–selling reached its apogee, or nadir, when Goldman Sachs’ CEO Lloyd Blankfein appeared before Congress to tell senators it was OK for the bank to screw its own customers because they were sophisticated investors. The phone-hacking by the News of the World is just as bad. And hacking is just the tip of the iceberg. The tabloids – and indeed the press in general – are a perfect microcosm of the generalised race to the bottom pursued by many consumer industries justified by ‘we’re just giving the market what it wants’.

But whether in the media, finance or any other industry, pandering to the lowest common denominator has a cost, in the shape of declining trust, thinning value and a loss of legitimacy which eventually becomes catastrophic (think of the fate of News of the World and Enron’s auditor, Arthur Andersen, both going concerns wiped out overnight by the evaporation of trust). And, sorry, but these companies have have given up ther right to survive. As Umair Haque, author of The New Capitalist Manifesto, points out, their products haven’t made people healthier, smarter and better able to make informed decisions, but the reverse. (‘We All Work at Enron Now‘, he wrote in one striking blog.) More generally, the loss of moral compass that News Corp and Goldman embody in extreme form simply disqualify the corporate sector in its current shape from giving anyone else lessons about financial discipline, or accountability, or the means needed to get out of the crisis.

The crowning irony is that shareholders, the first-class passengers on the doomed express in whose name all the baggage of employee and customer commitment has been so ruthlessly jettisoned, are actually worse off than in the era when corporate managers were supposedly ripping them off. When Roger Martin did the sums for his excellent demolition of the myths of shareholder capitalism, Fixing the Game, he discovered that in the three postwar decades to the end of the 1970s, shareholders in the S&P 500 enjoyed compound returns of 7.5 per cent a year. In the period from the 1980s to the 2000s, however, that dropped to 6.5 per cent. In other words, even in terms of its own chosen performance indicator the corporation has failed. Not surprisingly, companies that fail all these tests, fail that of the general economy too. No wonder there’s no recovery.

Let’s recap. Not all companies are corrupt and broken. But the ones that obey the dominant theories are. With deep irony, companies that believe they have an obligation to employees, suppliers and society as a whole are currently treated as exceptions that prove the rule of the economists’ ‘bleak realism’ of greed and fear. And it is to the latter than politicians are looking not only for economic revival, but to reform the public sector too. We’ll spell it out. There can be no lasting recovery without reform of the instruments of that recovery, that does not turn today’s corporate exceptions into the rule, and that fails to reassert another example of what is bleeding obvious to everyone except economists: in the long term no company can thrive in isolation from the society of which it is a part.

1. Reventing Management, Julian Birkinshaw, Jossey-Bass (San Francisco), 2010, p 8-9

2. Power – Why Some People Have It – And Others Don’t, Jeffrey Pfeffer, Harper Collins (New York), 2010, p 217