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When 'Inclusive' Capitalism Becomes Socialism
Peter Smith • 13 Mar, 2021 • 4 Min Read
Old whines, new bottles.
Capitalism is not the answer to human suffering. At the same time, it is the only economic system which allows individual freedom to flourish; it produces unrivalled prosperity; and, as Michael Novak perceptively says in the 1991 edition of The Spirit of Democratic Capitalism, “it is the most practical hope of the world’s poor: no magic wand, but the best hope.”
Not content, some very rich people, the Archbishop of Canterbury and the Pope, among others, want capitalism to do more. Enter “inclusive capitalism” and its more recent stablemate “stakeholder capitalism.”
It was May 2014. A conference called “Making Capitalism More Inclusive” was held in London. Inclusive capitalism is a concept developed in 2012 by the Henry Jackson Society - a British think tank of classical-liberal persuasion. It started well enough with the principal objective being to engender more ethical behaviour in business practices. The excesses surrounding the recession of 2009/10 were fresh in mind. Unfortunately, it has gone rapidly downhill since.
The aforementioned conference was opened by Prince Charles and featured Bill Clinton, Christine Lagarde, Mark Carney and Lawrence Summers. Hardly a conservative or classical liberal in sight. Three conferences have followed: in London in June 2015, in New York in October 2016 and back in London in March 2018. Presumably, Covid has prevented holding a more recent conference. No matter. Those behind inclusive capitalism co-opted the Pope to keep the pot simmering.
Money makes the world go 'round.
As the Union of Catholic Asian News (UCA News) puts it, Pope Francis has become the “moral guide to inclusive capitalism.” ‘The Council for Inclusive Capitalism (the Council), with the Vatican onboard, was launched on December 8 last year. Earlier in the year, in May, The Great Reset was unveiled at Davos. “Stakeholder capitalism” became the watchword; encompassing the same grand idea as inclusive capitalism.
So, to my theme: What’s it all about or, in other words, what do ‘they’ want; and why is the whole thing a crock or, more politely, misconceived?
This is Mark Carney, the then Governor of the Bank of England, at the 2014 conference to which I referred: “Inclusive capitalism is fundamentally about delivering a basic social contract comprised of relative equality of outcomes, equality of opportunity, and fairness across generations.” Hard to believe coming from a central banker? He’s Canadian.
This is easier to believe. Justin Welby, participating in the 2015 conference, outlining his aspirations for capitalism: “A generosity of spirit that doesn’t always seek the greatest return…that meets the needs of the poor and the excluded and the suffering.”
To add waffle to waffle, the Council’s mission is to “harness the private sector to create a more inclusive, sustainable and trusted economic system.” Understandably, sustainability is featured. After all, the Pope urges us to listen to “the cry of the earth.” Hmm? Smacking too much of paganism? Perish the thought.
Klaus Schwab, Executive Chairman of the World Economic Forum, expanded on the term stakeholder capitalism in February this year. He identified two primary stakeholders. One is the planet (no, not kidding); the other is everyone, wherever they live. The respective wellbeing of both stakeholders is the objective. Though, Schwab notes, “people are social animals and their absolute well-being is less important than their relative well-being.” Got that. You and your neighbour each having ten dollars is better than him having fifteen and you only twelve.
How the idea of levelling down translates to those participating at Davos and at inclusive capitalism forums is beyond me. Note this description in UCA News of those calling the shots at inclusive capitalism: “a group of individuals and institutions with more than $10.5 trillion in assets and companies with a combined market capitalization of more than $2 trillion.” They are the woke big end of town. A race apart from the small and medium-sized businesses which make up the bulk of market economies. Their self-appointed mission: to rescue the world by reimagining capitalism.
They are discomforted by the prevailing state of affairs. They want a world within which all existing species survive and thrive, the oceans cease rising, the earth cools and each and every person everywhere enjoys a liveable income and state of the art medical attention.
Leaving aside a slight qualm I have about the earth cooling; the aims are fine. I sometimes daydream about winning a lottery. That fantasy is fine too. To take saving the poor and saving planet earth in turn.
Capitalism makes much of the world prosperous. Part of that is entrepreneurs and businesses striving to earn profits by vigorously competing with each other. Part is prices guiding resources into their best commercial use while informing and rationing demand. Part is not ensuring fair outcomes. Capitalism cannot be moulded into a generous outreach to the poor and disadvantaged. It simply won’t work. It is an idea contradictory at its core.
It's easy if you try. Scary, too.
As for lifting those in poor countries out of poverty, how about advising them to adopt Judeo-Christian institutions and values; the institutions and values that have underpinned economic progress in western countries and in other countries which have tried them. Call them what you like, of course, to make them universally palatable.
I will guess. That advice will never come out of Davos or the Council. Yet, when all is said and done, parliamentary democracy, the rule of law, property rights, free speech and freedom from fear, the absence of systematic nepotism, cronyism and corruption and, vitally, mutual trust, tell the tale of progress; not pie-in-the-sky reimagining of capitalism.
From the unattainable to the unachievable describes the segue from saving the poor to saving the planet. Here’s a thought. What is the ideal state of the planet? Roaming ruminants, sans people, perhaps. Short of that green-dream nirvana wouldn’t it be nice, for example, to get CO2 down to pre-industrial levels? Or would it?
A friend of mine, Ivan Kennedy, emeritus professor of agriculture at Sydney University, tells me that we are now effectively addicted to higher levels of CO2. He estimates that if CO2 were to return to pre-industrial levels it would reduce the photosynthesis of cereal crops by more than 20 percent. This would likely cause famine, malnutrition and death, particularly among the world’s poorest. Something on which the Pope and Archbishop might cogitate.
After a career in economics, banking and payment-systems management, Peter Smith now blogs on the topics of the day. He writes for Quadrant, Australia’s leading conservative online site and magazine. He has written Bad Economics, of which, he notes, there is much.