The drum roll of capitalism-gone-wrong is sounding louder and louder. Thrice, in the last week alone, I have been reminded of just how wrong. The first was in a book I picked up at the airport on a recent trip. Saving Capitalism by Robert Reich could have ended up being the usual rant against the excesses of capitalism and capitalists. It isn’t because Reich is Chancellor’s Professor of Public Policy at the University of California at Berkeley and Senior Fellow at the Blum Center for Developing Economies. His argument that large companies in collusion with regulators and government officials have exploited the free market system for massive personal gains comes with the force of his personal experience as secretary of labour in the Clinton administration, as well as reams of relevant data.
The second occasion was at a recent event in Delhi during a conversation with one of the most unusual business leaders I have come across. Osvald Bjelland founded and runs Xynteo, an Oslo-based consulting firm that advises companies on how doing good for society can be good for their bottom lines as well. When I asked him what prompted such thinking, he pointed to what he called “the broken system" staring us in the face. As a serial entrepreneur who sold an earlier start-up to Citibank, it does sound strange for him to be critical of the capitalist system.
Finally, over the weekend, N.R. Narayana Murthy, co-founder of Infosys, one of India’s most influential entrepreneurs and a poster boy for how capitalism can spawn a thousand millionaires, led some of the company’s founders in abstaining from voting in favour of a board proposal to hike the salary of the company’s chief operating officer U.B. Pravin Rao by 35% to Rs12.5 crore. Murthy later clarified that the decision stemmed from their belief in compassionate capitalism and his remarks may well serve as a caution for companies not just in India but beyond as well: “I have always felt that every senior management person of an Indian corporation has to show self-restraint in his or her compensation and perquisites. This is necessary if we have to make compassionate capitalism acceptable to a majority of Indians who are poor. Without compassionate capitalism, this country cannot create jobs and solve the problem of poverty."
It is hard to disagree with Murthy, not when a hundred years of chasing the holy grail has led to a society where the gaps between the richest 1% and the rest is back to what it was in the 19th century. Reich is even more critical of the system that served the US and most of Western society for well over a century. “The threat to capitalism is no longer communism or fascism but a steady undermining of the trust modern societies need for growth and stability," he writes.
Before the current round of hand-wringing against capitalism took wing, the system did deliver incredible growth to all those countries that adopted Adam Smith’s laissez faire doctrine. For a while it also served the crucial objective of lifting the world’s poorest out of their economic vulnerabilities. Against 42% of the world’s population that was classified as extremely poor in 1981, the World Bank estimates that number to have fallen to 9.1% in 2016.
Yet as times have changed so have people’s aspirations. In a country like India where for centuries, two meals a day was the ambition of millions, today people demand a share of the wealth they are helping create for the companies they work in. The problem isn’t just restricted to the huge salaries that top managers gift themselves. The virtual defanging of unions, the unholy nexus between government and big business, and above all the limitless greed of a select few for more power, have all contributed to the prevailing angst about the existing rules of business.
Capitalism’s many ills have been oft-lamented. Many believe it is way past its sell-by date. Yet twice in the last 100 years, it has come back stronger though sadly unreformed. Unfortunately, on each occasion, the so-called “recovery", post-1929 and then again following the crash of 2008, it is the richest 1% that have grabbed 95% of the gains. Now as more and more of those who may have been its biggest beneficiaries declare that it is broken, the need to fix it, is acquiring urgency.
Perhaps it is too much to expect compassion from a system that is inherently Darwinian. We will settle for a fairer and more just arrangement.
Sundeep Khanna is a consulting editor at Mint and oversees the newsroom’s corporate coverage. The Corporate Outsider will look at current issues and trends in the corporate sector every week.
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