Former British prime minister 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 recognize 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 billion poorest people on the planet account for just 1 percent of global consumption, while the billion richest are responsible for 72 percent. According to a recent study, the 85 richest people in the world have accumulated the same wealth as the bottom 3.5 billion. One in eight people go to bed hungry every night, while 1.4 billion 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 horse meat 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 convened key global leaders in London yesterday for a conference on inclusive capitalism. Top executives from institutions representing more than US$30 trillion in investable assets — one-third of the world’s total — were to be in attendance. Their aim was to be 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 prioritize 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 programs. 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 1 billion people go to bed hungry each night and 2.3 billion 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.
As Mahatma Gandhi once put it: “The future depends on what you do today.”
Paul Polman is chief excutive of Unilever. Lynn Forester de Rothschild is chief excutive of E.L. Rothschild and founder and co-host of the Conference on Inclusive Capitalism in London held yesterday.
Copyright: Project Syndicate
Could Asia be on the verge of a new wave of nuclear proliferation? A look back at the early history of the North Atlantic Treaty Organization (NATO), which recently celebrated its 75th anniversary, illuminates some reasons for concern in the Indo-Pacific today. US Secretary of Defense Lloyd Austin recently described NATO as “the most powerful and successful alliance in history,” but the organization’s early years were not without challenges. At its inception, the signing of the North Atlantic Treaty marked a sea change in American strategic thinking. The United States had been intent on withdrawing from Europe in the years following
My wife and I spent the week in the interior of Taiwan where Shuyuan spent her childhood. In that town there is a street that functions as an open farmer’s market. Walk along that street, as Shuyuan did yesterday, and it is next to impossible to come home empty-handed. Some mangoes that looked vaguely like others we had seen around here ended up on our table. Shuyuan told how she had bought them from a little old farmer woman from the countryside who said the mangoes were from a very old tree she had on her property. The big surprise
The issue of China’s overcapacity has drawn greater global attention recently, with US Secretary of the Treasury Janet Yellen urging Beijing to address its excess production in key industries during her visit to China last week. Meanwhile in Brussels, European Commission President Ursula von der Leyen last week said that Europe must have a tough talk with China on its perceived overcapacity and unfair trade practices. The remarks by Yellen and Von der Leyen come as China’s economy is undergoing a painful transition. Beijing is trying to steer the world’s second-largest economy out of a COVID-19 slump, the property crisis and
Former president Ma Ying-jeou’s (馬英九) trip to China provides a pertinent reminder of why Taiwanese protested so vociferously against attempts to force through the cross-strait service trade agreement in 2014 and why, since Ma’s presidential election win in 2012, they have not voted in another Chinese Nationalist Party (KMT) candidate. While the nation narrowly avoided tragedy — the treaty would have put Taiwan on the path toward the demobilization of its democracy, which Courtney Donovan Smith wrote about in the Taipei Times in “With the Sunflower movement Taiwan dodged a bullet” — Ma’s political swansong in China, which included fawning dithyrambs