Capitalism and its unfolding prospects

Capitalism has been a bedrock of our economy, society and development and advancements. But the fruits of this have not been distributed evenly among the masses since it gained prominence after the second world war.

The advancements in technology should be enabling the dissemination of wealth to a wide number of people. The wealth generated by capitalism remains in the hands of elite few and is getting skewed in their favour  even more. FANGs (Facebook, Apple, Google and Netflix) are creating an oligopoly in the field and not letting the rise of newer firms. In recent testimony in the US senate threw the light on how Facebook coerced Instagram CEO to sell its firm to them. 

The resulting anxieties among the people have left our political system in a state of crisis. People are getting polarized between left and right ideologies. Populist politicians are are gaining ground around the globe like  rise of Donald trump in US, Erdogan in Turkey, Duterte in Phillipines, Netenyahu in Israel, Boris in UK etc. Without some urgent changes capitalism is heading for a downward spiral.

The erosion of social democracy and moral bankruptcy of capitalism

After second world war capitalism created a time of extraordinary economic growth that was enjoyed across class boundaries. Following the allied war efforts, people felt a new sense of solidarity and a shared national identity that resulted in a commitment to helping each other and a general sense of social democracy and its communitarian ethics.

In US the New Deal Legislation that provided benefits to everyone from young to elderly was embraced and rich paid over 80 percent income taxes with little complaint. In UK the liberal National Health Service-free for all at the point of use- was devised and implemented by a collaboration between Labour and Conservative powers.

Due to the new economic stability, a growing number of people pursued increasingly higher ranks of education, and over time, a new class of highly educated people emerged  and their specialized skills made them get remunerations accordingly. Despite the minimal conflict between political parties, the pillars upholding social democracy began to fracture. After 1970's, these intellectuals achieved their sense of pride in their work rather than their national identity, while a growing number also began supporting left- and right-wing ideologies that emphasized individualism. 

 During this time Utilitarianism seized the political consciousness. It argued that it was state responsibility to redistribute the advantages to the least fortunate. Utilitarianism changed the communitarianism ideology of the post second world war era into social paternalism in which state claims moral authority over its citizens

In the meantime the widening wage gap between unskilled workers and professional class caused class divide and the unskilled workers were granted a lesser respect for their labor than the professional classes. Over the decades people continued to embrace national identity while increasingly feeling the anxiety of marginalization.

As a result of these political and economic transformations, social democracy today is in a state of crisis. In the past decade, Donald Trump’s populist message has won over the hearts of the marginalized masses, the social democratic parties in countries including Germany, Spain and Italy have all seen a collapse in votes, and in the United Kingdom, the Labour party has become arguably Marxist. 

 In all these conflicts, the capitalism today is only benefiting the few at the top. Rather than perpetuating hateful nationalist sentiments, we need to cultivate a sense of patriotism, or a willingness to support one’s country felt by all citizens. In short, to create a system that works, we’re going to need to find our way back toward communitarianism.

 

"Populism offers headless heart, ideology offers heartless head"

  

Ethical capitalism through pragmatic policies that foster social maternalism

According to Marxists, capitalism blocks mass prosperity. Yet the record shows that communism hasn’t actually lifted workforces out of poverty. North Korea for example, shows that communist regimes can be more corrupt than capitalist societies.There’s no question  that decentralized, market-based competition is the need of the hour for society to prosper. But we also need a capitalist system that isn’t guided by greed. 

Rather than the top-down paternalism of recent decades, we need a state which puts forth pragmatic policy choices rather than ideologies and fosters a true patriotic community. Such a state would ensure that citizens of all economic situations can obtain social respect. Social maternalism takes moral responsibility out of the hands of the few and gives it to the many, encouraging a communitarian society. Instead of telling citizens what is best for them, it enables other actors such as families to promote moral values, creating a seamless chain of moral support for citizens from childhood to productive young adulthood. 

Part of the problem with various ideologies such as Marxism or Libertarianism is that they can often privilege reason over values.Also, the values that ideologies do have tend to be irreconcilable. For example, one would be hard-pressed to find any common values between the left-wing politics of Bernie Sanders and the populist ideas put forth by President Donald Trump. If we want to create a moral capitalism that works for everyone, we need to eschew our support for ideologies. Instead, we need to create policies based on pragmatism.

When Lee Kwan Yew, Singapore's first prime minister came to power, poverty and corruption abounded in the south-east Asian city-state. But by pragmatically taking on corruption and refusing to engage in nepotism, Lee was able to turn Singapore into one of the world’s most prosperous societies. 

By focusing on their specific context rather than applying far-fetched ideologies that seldom meet the needs of specific problems, leaders today will also be able to find solutions upon which everyone can agree.

  

Ethical firms can be created through targeted public policy changes

In the 1970s, the Nobel laureate Milton Friedman said that a company’s only purpose is to maximize profits, suggesting that successful companies forgo any responsibility to their employees or customers. Since then, this idea has only grown stronger, and today most employees have neither representation on company boards nor any direct benefit from a company’s success, regardless of their contributions.

But this wasn’t always the case. In the United Kingdom up until the 1980s, many businesses called mutual companies were collectively owned by employees or customers rather than shareholders. Then, in 1986, regulation changes combined with cultural changes made it less ethically frowned upon to tear ownership away from the employees, in what was known as demutualization. 

While many British companies demutualized, some took the ethical high ground. The John Lewis Partnership, one of Britain’s most successful and respected companies, is owned by a trust organized in the interests of its employees through various local, regional and national councils. What’s more, not only do workers receive a share of profits as an annual bonus, but they also each receive the same cut as the CEO!

As the success of John Lewis demonstrates, communitarian companies can still thrive in a capitalist society. Today, with privately owned companies such as Facebook, Amazon and Google increasingly monopolizing the market as well as playing a central role in society, it's clear that we need public policy that encourages more firms to behave like John Lewis. 

One way to do this is, of course, taxation. Currently, global companies such as Amazon have made exponential profits by finding loopholes in the tax system. Holding companies accountable for contributing to society is a clear step in creating an ethical capitalism. 

Mandating public policy that companies incorporate public interests into their boards can be another way to create  ethical firms. In US Public Interest Companies with boards that consider both public and commercial interests. Though representing just a fraction of economy this system can serve as a good testing ground before implementing in larger scale. 

Inevitably, companies will lobby against taxation and find loopholes in public policy. This is where the general public’s participation will be crucial. We can only expect ethical capitalism to be adopted by firms if it is first embraced by individuals who hold firms accountable for ethical behavior.

An ethical world requires global solidarity and small, focused global organizations

Today, over 65 million people around the world have abandoned their homes on account of famine or violence. In an ethical world, affluent nations with comparative advantages such as the United States would extend their solidarity to nations that border crisis states. This might be done not only by channeling money into these countries to supplement the costs of assisting refugees in rebuilding their lives, but also by international firms bringing jobs to those locations.

Though individual nations can set an example for what ethical actions might look like, one country alone cannot create a truly ethical world. To bridge the global divide, we’ll need international groups to set standards and hold each other accountable. 

This was something that was recognized in the years following World War Two – a time when world leaders saw the need for mutual cooperation. Among the various global organizations founded in the postwar years, the North Atlantic Treaty Organization (NATO) was created in 1949 to ensure the security of its 12 members.

Unfortunately, today these groups have become too large and diffuse to be effective. In the case of NATO, five of its current 29 members meet their pledge on defense spending. At the same time, organizations such as the IMF and the EU have become quasi-imperial bodies in which a handful of powerful countries dictate the economic agendas of less powerful member nations.

To rebuild the vision for an ethical world, we might be better off creating new bodies that address critical global issues. The G7 is a good example, but the fact that China and India are not included is a severe limitation. A small body that accounts for world powers today might include the United States, the EU, India, Russia, Japan and China. 

Though these countries have little in common, their conflicts of interest will prevent any regulations they create from benefiting them unfairly at the expense of the rest of the world. What’s more, in the coming years, they will increasingly share goals as climate change brings on more crises such as the depletion of water supplies. We should create “clubs” like these with a shared ethical foundation now as they will be the only way to face the problems of tomorrow.

 

Bridging class and geographic divides will require the redistribution of wealth and purpose

Sheffield, Lille and Detroit were once reputable cities known for their industrial production, but by the 1980's, each began to crumble as they were outcompeted by markets in faraway lands fueled by cheap labor. The same forces of globalization that transformed cities such as London or New York into centers of capital and culture have made provincial cities obsolete in today’s economic system. 

But is there any way we can fix the broken provincial cities and bridge the geographical divide? One option might be to tax the gains accrued by skilled workers in metropolitan cities. In the capitalist system, just being in a certain place means that you accumulate more wealth known as the gains of agglomeration. For example, a high-earning lawyer in London has greater access to wealthy clients and would therefore accumulate more wealth. As such, it would be both ethical and efficient to tax this lawyer higher than a lawyer in countryside or a tier 2 city who lacks the same geographical advantages. 

Though taxing highly skilled workers in urban centers will level the geographical playing field, wealth distribution is not the only aspect of the class divide. If we really want to forge a kind of capitalism that enables everyone to prosper, we’re going to have to look at the underlying root of class satisfaction. That means getting creative in bringing working class people a sense of purpose. One way to do this is through providing more vocational training. And unlike taxing the benefits of agglomeration, there is a precedent for how this can be done. 

 There are specialist vocational training schools across Germany. Students hone their craftsmanship in their chosen field while receiving mentor-ship from professionals. They also take required placements within the workforce during their studies, making the transition from student life to professional life much smoother. The result is a society with a highly productive workforce that is both dignified and well paid.

 Even if we were to create more vocational schools today, this won’t happen overnight. But it would be one important step in implementing pragmatic policy that cultivates capitalism in which everyone is cared for.

 

So in conclusion a world where capitalism increasingly favors the few at the cost of the many, we need to leave behind the limitations of ideologies and create policy rooted in pragmatism. We need to create an ethical capitalism that benefits everyone through the means of modest but ethically grounded state activity. Such activity would include the taxation of globalized firms and the beneficiaries of agglomeration in metropolitan cities, combined with measures that cultivate a sense of purpose in the national workforce, as well as increased efforts to reach ethical international agreements.