Surely we can we put the soul into capitalism?
Capitalism is the very root of the western economic system and its society. Yet Covid has laid bare its weaknesses, exposed its flaws. And research increasingly shows us that today's youth is falling out of love with capitalism and the style of government and big business that personifies it. As we build back we should ask ourselves whether we can develop a more compassionate form of capitalism.
For the purposes of this article we will define compassionate capitalism as a form of capitalism which ensures that natural market forces are not allowed to run completely unchecked. That capitalism can be utilised for the economic good while at the same time curbing its most unjust tendencies. These tendencies include the exertion of undue government influence, inequality in the workplace, gender and race discrimination, over-industrialisation, monopolistic behaviour and a lack of duty of care for the weakest in society and for our planet.
Capitalism has bred a dangerous cycle and that cycle is, of course, fed by money. Free market policies create powerful industrial forces that can become highly influential with consumers or business groups, enabling them to exert themselves on the government that gave them the power in the first place.
The arguments against certain free market leaning political parties is that they end up representing businesses above citizens. The elected officials become enslaved by the power of business when they should be supporting the people, particularly those most in need.
Coronavirus has exposed the fault lines. The US government has been accused of supporting business over the health of its citizens by keeping things open when the virus was running unchecked. Whereas China has been accused of abusing citizens rights by prioritising public health. The UK seems to get it both ways. Some argue that the furlough scheme and public/private tendering have supported larger businesses at the expense of individuals, while also pointing out that lockdowns have unfairly damaged poorer citizens and smaller businesses.
Indeed, some argue that western, democratic governments might have done better to have targeted the vast sums of money spent on fighting Coronavirus by giving it to its citizens, particularly lower income citizens, rather than focusing on saving jobs. The money could have been spent on supporting people directly with cash injections while at the same time improving lower cost housing, education, healthcare and nutrition. This argument will become even more important as cash strapped governments prioritise spending to exit the crisis.
And yet capitalism is not going away any time soon. It is too powerful and too efficient, while acceptable alternatives have been slow to materialise. But government and business have to face up to the reality that demographics are tilting toward a future that might require a more compassionate form of capitalism. If not, the electorate could be attracted towards something more extreme.
Political leaders have been forced to be more interventionist in 2020 and will continue as they complete the process of taming Covid-19 while investing to rebuild battered economies. The hope for a growing portion of the population is that the new found interventionism will be focused on reconstruction that softens the edges of capitalism by reducing income inequality (perhaps introducing a sizeable jump in the minimum wage), by improving infrastructure, developing better quality lower income housing, improving education for all citizens, providing better healthcare and dealing with climate change.
As if the above list were not long enough, it could be extended by adding in a requirement for government to become more active in dealing with competition and fair market rules, including making sure that businesses pay their fair share of taxes.
The internet era has matured and it seems to have bred a list of all too powerful monopolies. In the US the argument could be made for the break up of Apple, Google (Alphabet), Amazon and Facebook. It is not inconceivable that the positive economic and market forces unleashed by the break up of AT&T in 1984 to create seven regional ‘baby bells’ could be replicated. The baby bells of today would include iPhone, iMac, Apple Music, Apple TV, iWatch, Google Search, Google Apps, Chrome, YouTube, Amazon Books, Amazon Food, Amazon DIY, AWS, Facebook, Instagram, WhatsApp etc.
The very act of breaking up these US monopolies would, most likely, increase the value of the companies broken up, unlock competition, drive down prices and stimulate new business start ups and economic activity overall. It might provide a vital boost given that the rate of new business creation in the US has dramatically fallen. At the same time the UK could consider breaking up its main high street banks to unleash competition in its all essential financial services sector.
One of the options available to help accelerate the trend towards net zero could be for governments to break up agrochemical monopolies and the massive industrial farms. Today seventy percent of land is owned by one percent of farms. Huge industrial farms pollute the planet more than smaller, more diversified farms.
We could complete the circle by stating that one of the ways to help stimulate much needed innovation in healthcare provision and put ourselves in better shape to fight the next pandemic would be to break up monopolistic healthcare companies.
Mind you, if capitalism is all about business and the markets then, in the end, compassionate capitalism will have to be sold to business leaders. We will need to persuade them and their investors that businesses that support a basic income for all, climate friendly practices, more open recruitment approaches and more inclusive career development will enjoy higher returns. They will be rewarded with higher customer satisfaction and more loyal employees.
Compassionate capitalism may seem like a new trend, but businesses have been practising compassionate capitalism for nearly a thousand years.
Thanks to newly discovered historical documents on Cambridge’s sophisticated urban property market during the Commercial Revolution in the thirteenth century, we can see how successful entrepreneurs employed the wealth they had accumulated to the benefit of the community.
We just need to get to the point where compassionate capitalism becomes embedded in existing business practices and is not just something that wealthy business owners do, as a final act of attrition, with the fruits of their harsh, yet lucrative capitalistic pursuits.
The Coronavirus pandemic has made us more compassionate about life, loss and society as a whole. Surely we can extend this to business and economics by developing a truly compassionate form of capitalism.
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