Inclusive capitalism

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Inclusive capitalism is a theoretical concept and policy movement that seeks to address the growing income and wealth inequality within Western capitalism following the

financial crisis of 2007–2008.[citation needed
]

Philosophical origin

Inclusive capitalism originates with philosophical questions that predate modern day capitalism.[citation needed] These questions regard people's motivation. Are people motivated by what is best for their own self-interest, for the good of society or perhaps somewhere in between? Different philosophers have advanced their own ideas about these questions, including Thomas Hobbes. Hobbes thought "[m]an was motivated by his appetites, desires, fear and self-interest, seeking pleasure and avoiding pain. [...] His main desire, and the most important of natural laws, was self-preservation and the avoidance of death".[1] Hobbes’ assertion would become the foundation for capitalism, which espouses an exclusive rather than inclusive nature of people.[citation needed]

Hobbes' ideas influenced

martyrdom".[2] In the 17th and 18th centuries notions of morality (theology) and value (economics) separate, leading Smith to advance a new theory of value based on divisions of labor rather than value being defined in a religious context of working for God.[3] For Smith "value cannot be measured by money, because sometimes money is artificially scarce [...] because all labor is of equal value to the worker, labor is the best measure of value".[4] Thus the concept of capitalism is rooted in an idea of human nature being inherently self-interested and the value of goods and services are derived from labor.[citation needed
]

division of labor in Europe from an historical perspective. He argued that people's human nature, more specifically their ideas "were largely a product of class, economic structures and social positions. Ideas justified or rationalized the economic structure at any one time – they did not cause that structure".[5] Marx concluded that the division of labor contributes to perpetual inequality between the masses of low-income workers (proletariat) whose numbers are far greater and wealth far less than the minority and more powerful upper class (bourgeoisie) who are often politicians and business owners.[6]
Marx's historical perspective focused on the role of politics in contributing towards and legitimizing modes of production that created separate socioeconomic classes.

According to Marx, "[t]he division of labour inside a nation leads at first to the separation of industrial and commercial from agricultural labor, and hence to the separation of town and country and to conflict of their interests".[7] The term town in this sense can be understood as the centers of political power and economic decision-making and the people who live in towns possess comparatively more power than those working in the countryside. According to Marx, those with the most power are included in the benefits of capitalism and those with less power are excluded from such benefits.

redistribution and exchange have been conducted in different cultures across time.[9] Polanyi concluded that in some cultures economic transactions involve deep human relationships and rely on decision-making for environmental preservation and social cohesion. In others cultures, economies serve more of a function or utility of increasing capital where transactions are based less on the aim of social cohesion and environmental well-being.[citation needed] The contemporary use of the term “inclusive capitalism” arises from the historical understanding of the essence of human nature and its role in economic decision-making.[citation needed
]

Contemporary understanding

Robert Ashford argues that the concept of inclusive capitalism is rooted in the postulates of the binary economics.[10][11]

It is inconclusive who coined the term inclusive capitalism. Using different electronic databases to query this term, e.g. JSTOR, OCLC Academic, Web of Science, Google Scholar, etc., a Google Book search identified one of the oldest occurrences of the term appears in a 1943 Urban Land Institute publication, Urban Land (1943).[12][original research?] Two scholars popularized the term individually and through collaborative publications, C. K. Prahalad, the Paul and Ruth McCracken Distinguished University Professor of Strategy of the Ross School of Business at the University of Michigan—Ross, and Allen Hammond, a vice president of Special Projects and Innovation at the World Resources Institute.[citation needed]

Prahalad opens his 2005 book The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits by asking “Why can’t we create inclusive capitalism”.[13] He uses the term “inclusive capitalism” to invite readers to focus on underserved consumers and markets in order to create opportunity for all.[14]

Among Hammond's earliest publications that discusses the exclusiveness of capitalism is a 2001 article titled Digitally Empowered Development published in the journal

NGOs)”.[16]

Prahalad and Hammond co-published a 2002 article in the

household income of less than $6,000-is enormous. The 18 largest emerging and transition countries include 680 million such households, with a total annual income of $1.7 trillion-roughly equal to Germany's annual gross domestic product”.[19]

Implementation

In 2012, the Henry Jackson Society created a task force for Inclusive Capitalism Initiative project in order to start a transatlantic conversation about the growing income inequalities and their threat to the capitalist system.[20]

In 2014, Conference on Inclusive Capitalism, co-hosted by the City of London and E. L. Rothschild holding company, was held in London where the concept of inclusive capitalism was discussed as a practical measure.[21] At another conference in 2015 the "Pathway to Action" was brainstormed.[22] In the same 2015 year, the Coalition for Inclusive Capitalism was registered in the United States as a not-for-profit organization.[23] Lynn Forester de Rothschild became the founding CEO of the Coalition. At the 2016 Conference on Inclusive Capitalism in New York City, participants expressed commitment to promote inclusive economic growth.[24] Members of the Coalition expressed a belief that all stakeholders, including business and society, should be engaged in the enactment of an inclusive capitalism agenda[25][26]

In 2019, the Embankment Project for Inclusive Capitalism (EPIC) undertaken by the Coalition together with Ernst & Young reported its findings in a white paper. It was a pioneering effort to "develop a framework and identify meaningful metrics to report on long-term and inclusive value creation activities that heretofore have not been captured on traditional financial statements".[27]

In 2020, the Council for Inclusive Capitalism, a partnership of the Coalition with the Vatican, was created.[28][29][30]

Some pundits express optimism that it is possible to remake capitalism in a more inclusive and responsible way.[31]

Criticism

A critique of the ideas behind inclusive capitalism begins where Hammond and Prahalad end. Inclusive capitalism as used by Hammond and Prahalad divorces political power from economic empowerment. It is not concerned with improving poor people's political condition, allowing those in poverty to have greater political control and representation in government. It does not endorse

macroeconomic changes through government policies that ensure higher wages, equitable access to housing, education, nutrition and health care across socioeconomic classes, particularly for poor people. Inclusive capitalism maintains political accountability in contributing to poverty is limited to not doing enough to encourage private enterprise (1) to create more jobs for low-income people; (2) to allow poor people access to financial capital for entrepreneurialism, (3) to enable poor people the opportunity to purchase a variety of goods and services. No consideration is given to governments and companies that benefit from having low-income and poorly educated populations who provide necessary labor.[citation needed
]

In 2007, Hammond and a team of researchers from the

Visa International. This may suggest that crony capitalism
and inclusive capitalism may have overlapping interests.

An alternative understanding of capitalism and how to make it more inclusive is offered by

collude
to prevent low-income populations with access to affordable housing, health care, education and nutrition because they divert resources to maximizing profits from middle- and upper-income populations. Making capitalism more inclusive certainly includes Hammond's and Prahalad's suggestions of encouraging companies to sell goods to poor people at affordable prices. However, inclusive capitalism must address political considerations that maintain structural inequalities within any economy.

Hammond and Prahalad champion

measurably improve their livelihood and wealth.[33][34]
The research indicates that measurable improvement in poor people's lives is not likely to occur without comprehensive government policies that simultaneously encourage living wages, affordable housing, access to nutritious and low-cost food, high quality and inexpensive schooling, health care and public transportation. While these public policies may be delivered by businesses and NGOs, government oversight does not need to be removed for a more inclusive capitalist economy.

John Kay claims that most of the 21st-century businesses are already inclusive.[35]

Nafeez Ahmed describes the Inclusive Capitalism Initiative as a Trojan Horse assembled to pacify the coming global revolt against capitalism.[36]

See also

References

  1. ^ Curtis, Michael (1981) The Great Political Theories Volume 1: A Comprehensive Selection of the Crucial Ideas in Political Philosophy from Plato and Aristotle to Locke and Montesquieu. New York: Avon Books, p. 327
  2. ^ Buchholz, Todd G. (1989) New Ideas from Dead Economists: An Introduction to Modern Economic Thought. New York, NY: Penguin Group., p. 21
  3. ^ Wilk and Cliggett. Economies and Cultures: Foundations of Economic Anthropology, 2007:50-51
  4. ^ Wilk and Cliggett. Economies and Cultures: Foundations of Economic Anthropology, 2007:51-52
  5. ^ Wilk and Cliggett 2007:97
  6. ^ Marx, Karl and Frederick Engels (1970). The German Ideology: Part One. New York: NY. International Publishers.
  7. ^ Marx, Karl and Frederick Engels (1970). The German Ideology: Part One. New York: NY. International Publishers:43
  8. ^ Polanyi, Karl (1957). The Economy as an Instituted Process, in Trade and Markets in the Early Empires: Economies in History and Theory. C. M. Arensberg and H. W. Pearson, eds. Glenco, IL: The Free Press, p. 243
  9. ^ Polanyi (1957):250-256
  10. ^ Robert Ashford. Why Working but Poor: The Need for Inclusive Capitalism, 49 Akron L. Rev. 507 (2016)
  11. ^ Professor Robert Ashford’s ‘Inclusive Capitalism’ Gains International Support, Syracuse University News, September 27, 2017
  12. ^ Urban Land (1943). Urban Land Institute. Electronic document. Accessed April 30, 2008.
  13. ^ Prahalad 2005:xv
  14. ^ Prahalad 2005:xvii
  15. ^ Hammond, Allen L. (2001) Digitally empowered development, Foreign Affairs 80(2):96.
  16. ^ Hammond 2001:98
  17. ^ Prahalad and Hammond, 2002
  18. ^ Hammond and Prahalad 2004:32
  19. ^ Hammond and Prahalad 2004:32
  20. ^ Towards a More Inclusive Capitalism. By the Henry Jackson Initiative for Inclusive Capitalism
  21. ^ A movement to restore trust in capitalism, September 27, 2016
  22. ISBN 9780993379703
  23. ^ Coalition for Inclusive Capitalism
  24. ^ Global Private Sector Leaders Make Commitments to Investment and Business Practices That Stimulate Long-Term Value Creation at the 2016 Conference on Inclusive Capitalism in New York City, Business Wire, October 10, 2016
  25. ^ Paul Thanos. American Inclusive Capitalism: An Agenda for a New Business Activism, Wilson Center, April 26, 2017
  26. ^ Actions to Achieve Inclusive Capitalism Mark Weinberger, EY CEO
  27. ^ The Embankment Project for Inclusive Capitalism (“EPIC”): A Better Way to Value the American Worker, Coalition for Inclusive Capitalism, 2019.
  28. ^ Jack Kelly. Pope Francis Partners With Corporate Titans To Make Capitalism More Inclusive And Fair: Is This For Real Or Just Corporate Virtue Signaling?, Forbes, December 9, 2020
  29. ^ Council for Inclusive Capitalism launches partnership with Vatican, Angelusnews.com, December 9, 2020
  30. ^ Anne Quito. Pope Francis is backing a new movement to redefine capitalism as a force for good, Quartz Media, December 8, 2020
  31. ^ Nigel Wilson. Inclusive Capitalism: Oxymoron or The Perfect Balance?, Forbes, July 29, 2018
  32. ^ Davis (2006), Farmer 2003, Goode and Maskovsky 2001, O’Connor (2001), and Yelvington (1995)
  33. ^ Slater, Don and Jo Tacchi (2004). ICT Innovations for Poverty Alleviation. New Delhi: UNESCO.
  34. ^ Horst, Heather A., and Daniel Miller (2006). The Cell Phone: An Anthropology of Communication. Oxford: Berg.
  35. ^ Moving Beyond “Capitalism”, March 13, 2018
  36. ^ Nafeez Ahmed. Inclusive Capitalism Initiative is Trojan Horse to quell coming global revolt: Henry Jackson Society's pre-emptive PR offensive seeks to popularise parasitic economic growth for the few, The Guardian, 28 May 2014

Further reading

  • Farmer, Paul (2003). Pathologies of Power: Health, Human Rights, and the New War on the Poor. Berkeley, CA: University of California Press.
  • Goode, Judith, and Jeff Maskovsky (2001). The New Poverty Studies: The Ethnography of Power, Politics, and Impoverished People in the United States. New York: New York University Press.
  • Hammond, Allen L. and C. K. Prahalad (2004). Selling to the Poor, Foreign Policy, 142:30-37.
  • Hammond, Allen L., William J. Kramer, Robert S. Katz, Julia T. Tran, Courtland Walker (2007). The Next 4 Billion: Market Size and Business Strategy at the Base of the Pyramid Archived 2008-04-15 at the Wayback Machine. Accessed April 25, 2008.
  • O'Connor, Alice (2001). Poverty Knowledge: Social Science, Social Policy, and the Poor in Twentieth-Century U.S. History. Princeton, NJ: Princeton University Press.
  • Prahalad, C. K. and, Allen Hammond (2002). Serving the world's poor, profitably, Harvard Business Review, 80(9):48-58.
  • Yelvington, Kevin A. (1995). Producing Power: Ethnicity, Gender, and Class in a Caribbean Workplace. Philadelphia: Temple University Press.

External links


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