Photo: iStock
Photo: iStock

Opinion | New suspicions of the same old capitalism

Many still think this economic system does more harm than good, with Indians among the most sceptical. But today’s criticism seems to be over climate change more than inequality

That capitalism has enriched the West is not contested. Nor do too many people dispute the power of the profit motive. But for all its success, the image of this economic system has taken a battering, of late. Consider the findings of a survey done among 34,000 people across 28 countries by public relations firm Edelman. If it has captured global opinion adequately, most of the world believes that capitalism in its current form is doing “more harm than good". Even in the US and UK, those champions of the free market, only half the people seem to have faith in it as a positive force. India emerged as the globe’s second most sceptical country, with 74% seeing it as more harmful than good, next only to Thailand’s 75%. The system in question has always had its critics, and the main charge levelled against it has been that it makes the rich richer, leaving only the odd scraps for the rest. In recent times, this inequality critique has been articulated most forcefully by French economist Thomas Piketty, who argued that so long as the rate of economic growth is lower than the average return on capital in an economy, the salaried cannot hope to catch up with owners of capital. But glaring gaps between haves and have-nots in the lives they lead may not be all that bothers millennials about capitalism. With climate change a huge concern, a large number of youngsters seem upset with what they think the pursuit of self-interest is doing to our planet. Whatever the cause of their discontent, capitalists need to respond—for their own sake.

It’s not as if businesses have made little effort to get across as good corporate citizens, even as social do-gooders. A business no longer exists just to maximize shareholder value, some say. In the US last August, The Business Roundtable, a group of chief executive officers from major American companies, drew global attention and applause for saying that the purpose of a business was not merely to hand out bigger dividends and raise what its shares were worth on a stock market, but to serve the interests of a wide set of stakeholders. From employees and customers to suppliers and external communities, all these were now to be the focus of corporate performance. Many companies have social responsibility initiatives that go far beyond what regulatory norms call for. “Sustainability" takes up large portions of corporate websites and annual reports today, and some even publish “carbon balance sheets" to publicize their efforts against global warming.

The problem is that no matter what companies do to aid good causes, it is still seen by sceptics as either tokenism or a side show. Since the design of a market economy relies on the theory that every entity chasing its own interest would eventually yield what’s best for everyone, critics contend, businesses have no incentive to curtail carbon emissions other than looking good in public. Such groans often go along with dismay over a market for emission permits having failed to emerge, a trading system that could have capped overall pollution and priced the burden. Perceptions that profit seekers are ranged against such caps have grown. In such circumstances, it would be best if all those invested in capitalism were to work out a comprehensive plan to address climate change, and convince people that doing business need not endanger anybody’s future. Done sensibly and equitably, it can deliver more good than harm.

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