Measuring the Success of Capitalism

Being back on blawgosphere after a brief hiatus, I noticed this interesting column by Arun Maira in today’s Times of India. By way of background, the recent events in the US and UK have cast a serious doubt on the efficacy of capitalism as a viable economic model. It has been subject to challenge in particular on the ground that it promotes greed, leading businesses to go overboard and that it also causes severe disparity in income and wealth in society. At the same time, a movement that connects business to society is also gaining momentum, as we have seen in some of the previous posts on this blog relating to social business (here and here).

Arun Maira poses some interesting questions and provides some perspectives on these matters. Here are some extracts:

“In his book Supercapitalism: The Transformation of Business, Democracy, and Everyday Life, Robert Reich, a member of former President Bill Clinton’s cabinet, observes that the wealth of the two richest Americans – Bill Gates and Warren Buffet – is equal to the combined wealth of 100 million poorer Americans.

He argues that this is a result of the capitalist process. He does not grudge the two their wealth. But he says a system that can result in such huge disparities cannot be completely right. In India, the wealth of the richest Indians now equals the wealth of the richest Americans. One may wonder how many hundreds of millions of poorer Indians’ wealth would equal one of these rich Indians’ wealth?

Bill Emmott, former editor-in-chief of The Economist, in his book 20:21 Vision: 20th Century Lessons for the 21st Century says, “Capitalism in its present form is unpopular, unstable, unequal, and unclean”. These critics of capitalism are not communists. They are capitalists. Yet, they are calling for a better way. Therefore, let us not be stuck in ideologies. Let us face realities. Why is it ‘socialist’ and wrong to forgive the loans of struggling farmers in India, while it is ‘capitalist’ and right to help Bear Stearns’ rich investment bankers on Wall Street pay off their loans?

When we consider how to transform capitalism to make it more inclusive and more sustainable, we must consider the role of business corporations in society. They are the engines of capitalism. Therefore, business leaders must consider the footprints of their corporation’s activities on the human community and on the environment.

We cannot remain stuck with the super capitalist notion that the business of business must be only business, and that corporate leaders are responsible only for creating shareholder value. We need a new framework for business management for the 21st century”

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

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