Home / Opinion / Views /  It’s time for the world to reform capitalism from within

We witnessed capitalism in all its colours during the pandemic. It was able to incentivize science to develop and produce vaccines for the entire world in record time. The same capitalism has disincentivized appropriate allocation and availability of vaccines to the world’s poorest and most vulnerable. This has led to both hope and despair. Market-based economies clearly have a lot of shortcomings, but we must not overlook their benefits. It’s time to reform capitalism from within.

Jerry Z. Muller, in The Tyranny of Metrics, highlights how the seemingly-irresistible obsession to quantify and accordingly incentivize human performance is the bane of capitalism. Despite being beneficial, this often results in the measurement of things which are not always relevant and ignoring unmeasurable issues that matter. Consequently, we find ourselves in situations like our climate crisis, wherein, despite wide recognition of the problem, without appropriate metrics and incentives, capitalism can decelerate the world’s fight against it. Similar is the case with issues like inequitable distribution of wealth that have long been considered the mere side effects of capitalism. The World Inequality Report of 2022 highlights this.

The first step to reform capitalism from within would be to acknowledge a problem. In their book, Six Faces of Globalization: Who Wins, Who Loses, and Why It Matters, Anthea Roberts and Nicolas Lamp discuss six competing narratives. They show that in between the ‘everybody loses’ and ‘nobody loses’ narratives of capitalism- induced globalization, there are narratives of select stakeholder groups who claim to have lost out in different ways. These include citizens, workers, enterprises and nations. Acknowledging and listening to these narratives is a necessary (but not sufficient) condition for reform. We have disregarded naysayers for too long. The benefits of capitalism need to be democratized.

The second step to reform capitalism from within would be to undertake a genuinely unbiased assessment of what has not worked and what has. For years, frameworks such as capitalism with safety nets, comprising measures like trade-adjusted programmes, special and differential treatment, among others, have been experimented with. Unfortunately, these measures haven’t realized their potential. While it’s tempting to pin the blame on inefficient execution, insincere design, poor prioritization and a weak focus on enabling conditions must share responsibility.

Too much focus on capitalism and too little on safety nets has resulted in a failure to clearly articulate what these nets mean, how people can benefit from them, and what mechanisms can ensure their efficient and inclusive application. To do this, systems thinking can come to the rescue. Inter-linkages between different components of a society will need to be sufficiently understood. We must recognize that distribution of the economic pie is as important as increasing its size. We can begin by setting objectives of inclusion, sustainability and resilience as central to capitalism and not as goals to eventually be achieved someday.

Learning from local success stories will be also important. For instance, the concept of managed competition, coined by economist Alain C. Enthoven, aims at maximizing value for consumers as well as employers, using rules for competition derived from microeconomic principles and leveraging the potential of cooperatives and collectives. It aims to give power back to people, communities (and their representatives), through clearly-defined principles and the prioritization of equity over classical efficiency arguments.

Variants of managed competition can be found in different countries and in diverse shapes and sizes, such as India’s community owned-and-managed enterprise models. These consider productivity and worker welfare as equally important objectives that can co-exist. These need to be studied in detail to identify scale-up opportunities, while acknowledging that one size does not fits all and differences need to be managed. Similarly, people-first public-private partnerships aim to prioritize the interests of people (such as those who may be adversely impacted by projects) while considering the long-term gains of infrastructure investment for the economy and society.

The third step to reform capitalism from within would be to stay ever-ready to re-evaluate and improve. Some models could be susceptible to capture by particular interest groups, and so we run the risk of facing the same challenges that we set out to resolve. For long, we have let elites make decisions for the world. Many decisions take place behind closed doors and aim to retain power within the same group. Without democratizing these decision-making processes and making them transparent, it will be difficult to move away from adventure capitalism and make it work for all. After all, it is political democracy that can lead to economic democracy. The coveted group of intermediaries entrusted with the task of making decisions needs to be busted to reform capitalism from within.

Innovations in the realm of technology such as blockchain could help us turn such intermediaries irrelevant, transfer decision- making and monitoring powers back to our people and communities, reclaim trust, and ensure better accountability. There is a need to foster innovations that can enable society, markets and governments to work together, and help make capitalism work for everyone. At the end, markets are still our best bet to make the world a better place to live in.

Amol Kulkarni, director of research at CUTS, contributed to this article.

Pradeep S. Mehta is secretary general of CUTS International.

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