The cap­i­tal­ist threat to cap­i­tal­ism

Financial Mirror (Cyprus) - - FRONT PAGE -

Win­ston Churchill fa­mously ob­served that democ­racy is the worst form of govern­ment – apart from all the oth­ers that have been tried. Were he alive to­day, he might think the same of cap­i­tal­ism as a ve­hi­cle for eco­nomic and so­cial progress.

Cap­i­tal­ism has guided the world econ­omy to un­prece­dented pros­per­ity. Yet it has also proved dys­func­tional in im­por­tant ways. It of­ten en­cour­ages short­sight­ed­ness, con­trib­utes to wide dis­par­i­ties be­tween the rich and the poor, and tol­er­ates the reck­less treat­ment of en­vi­ron­men­tal cap­i­tal.

If these costs can­not be con­trolled, sup­port for cap­i­tal­ism may dis­ap­pear – and with it, hu­man­ity’s best hope for eco­nomic growth and pros­per­ity. It is there­fore time to con­sider new mod­els for cap­i­tal­ism that are emerg­ing around the world – specif­i­cally, con­scious cap­i­tal­ism, moral cap­i­tal­ism, and in­clu­sive cap­i­tal­ism.

Such ef­forts at re­defin­ing cap­i­tal­ism recog­nise that busi­ness must look be­yond profit and loss to main­tain pub­lic sup­port for a mar­ket econ­omy. All of them share the as­sump­tion that com­pa­nies must be mind­ful of their role in so­ci­ety and work to en­sure that the ben­e­fits of growth are broadly shared and do not im­pose un­ac­cept­able en­vi­ron­men­tal and so­cial costs.

As it stands, de­spite re­cent emerg­ing-mar­ket growth, the world econ­omy is a place of stag­ger­ing ex­tremes. The 1.2 bln poor­est people on the planet ac­count for just 1% of global con­sump­tion, while the bil­lion rich­est are re­spon­si­ble for 72%. Ac­cord­ing to a re­cent study, the 85 rich­est people in the world have ac­cu­mu­lated the same wealth as the bot­tom 3.5 bln. One in eight people go to bed hun­gry ev­ery night, while 1.4 bln adults are over­weight.

Any sys­tem that gen­er­ates such ex­cesses and ex­cludes so many faces a risk of pub­lic re­jec­tion. Trou­blingly, cap­i­tal­ism’s neg­a­tive side ef­fects are in­ten­si­fy­ing while con­fi­dence in pub­lic in­sti­tu­tions has fallen to an his­toric low. Ac­cord­ing to the lat­est Edel­man Trust Barom­e­ter, less than half of the global pop­u­la­tion trusts govern­ment. Busi­ness fares bet­ter but not much. Scan­dals – from con­spir­a­cies to fix key fi­nan­cial rates to the dis­cov­ery of horse­meat in the food sup­ply – un­der­mine people’s faith in busi­ness as an agent of the greater good.

Dis­il­lu­sioned with both state and mar­ket, people in­creas­ingly ask whether cap­i­tal­ism, as we prac­tice it, is worth the costs. We see this in move­ments such as Earth Day and Oc­cupy Wall Street. In many parts of the world – from the Arab Spring coun­tries to Brazil, Turkey, Venezuela, and Ukraine, frus­trated publics are tak­ing to the streets.

Ad­dress­ing the fail­ures of mod­ern cap­i­tal­ism will re­quire strong lead­er­ship and ex­ten­sive co­op­er­a­tion be­tween businesses, gov­ern­ments, and NGOs. To be­gin cre­at­ing a path for­ward, we have con­vened key global lead­ers in Lon­don for a con­fer­ence on in­clu­sive cap­i­tal­ism with top ex­ec­u­tives from in­sti­tu­tions rep­re­sent­ing more than $30 trln in in­vestable as­sets – one-third of the world’s to­tal – in at­ten­dance. The aim is to es­tab­lish tan­gi­ble steps that firms can take to be­gin chang­ing the way busi­ness is done – and re­build­ing pub­lic con­fi­dence in cap­i­tal­ism.

Such an ef­fort can bear fruit, as Unilever’s own ac­tions demon­strate. Since aban­don­ing guid­ance and quar­terly profit reporting, the com­pany has worked hard to pri­ori­tise long-term think­ing. It has adopted plans to boost the com­pany’s growth while re­duc­ing its en­vi­ron­men­tal foot­print and in­creas­ing its pos­i­tive so­ci­etal im­pact.

Many of its brands now have so­cial mis­sions – for ex­am­ple, Dove prod­ucts are mar­keted with an ac­com­pa­ny­ing women’s self-es­teem cam­paign, and Lifebuoy soap tar­gets com­mu­ni­ca­ble dis­eases through its global hand-wash­ing pro­grammes. Not sur­pris­ingly per­haps, these are among the com­pany’s fastest-grow­ing brands.

Yet there is a limit to what any one com­pany can achieve. Trans­for­ma­tional change will come only from businesses and oth­ers act­ing to­gether. Again, we are hope­ful, be­cause mo­men­tum is build­ing. Coali­tions are be­ing formed to tackle is­sues rang­ing from il­le­gal de­for­esta­tion to food se­cu­rity. Bod­ies like the World Busi­ness Coun­cil for Sus­tain­able De­vel­op­ment and the global Con­sumer Goods Fo­rum are unit­ing key in­dus­try play­ers and putting pres­sure on gov­ern­ments to join forces in the search for sus­tain­able cap­i­tal­ism.

As the cost of in­ac­tion rises, gov­ern­ments and businesses must con­tinue to re­spond. None of us can thrive in a world where one bil­lion people go to bed hun­gry each night and 2.3 bln lack ac­cess to ba­sic san­i­ta­tion. Nor can busi­ness thrive where pub­lic op­ti­mism about the fu­ture and trust in in­sti­tu­tions are at his­toric lows.

We have a long way to go, but we be­lieve the nec­es­sary trans­for­ma­tion is be­gin­ning. A grow­ing body of ev­i­dence sug­gests that new busi­ness mod­els can deliver re­spon­si­ble growth. The Con­fer­ence on In­clu­sive Cap­i­tal­ism rep­re­sents an­other step for­ward. Though our work has only just started, we are con­vinced that within a gen­er­a­tion we can re­de­fine cap­i­tal­ism and build a sus­tain­able and eq­ui­table global econ­omy.

We have no time to lose. As Ma­hatma Gandhi once put it: “The fu­ture de­pends on what you do to­day.”

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