Stakeholder capitalism may become a buzzword but can it deliver on its promise?
The World Economic Forum (WEF) is not the place to talk about poverty, social exclusion or the death of capitalism, at least that is the moral judgement. But those words are being debated more than anything else at its annual meeting that also coincides with the forum's 50th anniversary.
Another issue with a similar bandwidth is climate change, again, discussed and debated in terms of social and economic losses to the world's poor and marginalised.
By the time the WEF annual meeting ends on January 24, 2020, 'stakeholder capitalism' can become a buzzword. A bit of background is relevant here- WEF founder Klaus Schwab floated the term way back in 1971. 'Stakeholder capitalism' was defined by him as a form of capitalism where the corporations behave or conduct businesses as trustees of the society. After half a century, he again forcefully wrote and spoke about it as he feels this is the most suitable response to the contemporary world's "social and environmental challenges".
What are these social and environmental challenges being discussed by corporate honchos with unusual fervour?
Across the world, there are protests that have turned out to be massive and intense in nature. The youth and children are joining forces to express their grievances, starting from university fee hike to loss of resources and a better life in future.
Inequality in the distribution of income and resource has become a mainstream global issue. Climate change and environmental crisis have already emerged as the most crippling reason for the loss of livelihoods for the poor across the world. Children activists are trooping in at various forums, accusing leaderships and urging them forcefully to act to protect their future.
In Davos too, inequality looms over corporate representatives and the champions of capitalism as if it were Damocles' sword. In a way, the rising restlessness amongst the next generation is a threat to both business and profit.
How can political leadership in elected governments afford a large, unhappy constituency? How will chief executives justify their unimaginable annual salaries in face of high-income inequality, particularly in a free-market developed world? High salaries of corporate executives have been mentioned by Klaus as a point of concern in the context of inequality.
The new Davos Manifesto wants corporates to pay taxes, not to indulge in corruption and work towards "shared value creation". This means that the corporates should factor in social, environmental and governance issues into their profit-making practice.
While that proposal sounds grand, the question is who will ensure they do so? These are all moral principles that just got general approval. So, is this talk about 'stakeholder capitalism' a ploy to diffuse anger against capitalists?
If corporations are trustees of society, as according to this new form of capitalism and the teachings it propagates, what is the society's supervision over them? And who will form and help form this society?
This is a critical aspect. Reports released at the WEF summit show that significant parts of the population have been kept out of the society due to a variety of discriminations. They form the poor and it will likely take them generations to catch up to standards with a decent income.
In a country with a legitimate government, this can't be ensured with just voluntary adoption by corporate houses. Corporations use public resources that are also owned by the people indirectly through governments. Will the governments then enforce 'stakeholder capitalism' by making corporations just trustees with minimal individual profits?
Inequality has deepened because the 'trickle-down' effect of wealth has not happened as it was assumed. That was the argument for adopting wealth-creating capitalism. It has definitely failed. This means we need a new economic / development model but the dilemma is that we can't imagine any such new system without the participation or help of capitalists.
This means that this is a situation that needs a completely new way of rethinking our problems and the way we go about solving them.
Richard Mahapatra is Managing Editor, Down To Earth. Views expressed are strictly personal