Felistus Mbole a member of our Emerging Fellows program checks the possibility of resolving global inequality in her ninth blog post. The views expressed are those of the author and not necessarily those of the APF or its other members.
Global wealth has been increasing and is predicted to grow by 43% in the next 10 years. While global poverty has reduced in the last few decades, this wealth is mainly driven by markets and is held by a tiny proportion of the population. The current form of economic structure is defined by short-termism. It is focused on optimising returns to owners of capital at the expense of all else and the long-term good of the society. It is not sustainable. Can capitalism be transformed to solve global inequality? What could it transform to?
A good place to start in exploring the possibility of transforming capitalism for the prosperity of society is to first understand what is broken. Businesses have one key agenda: to optimise profits. Yet capitalism does not operate in isolation but within the broader society which has clear planetary boundaries. Businesses need to demonstrate this consciousness and should be held to account regarding serving the long-term good of society. Natural resources are limited and likely to be depleted in future unless deliberate action is taken to ensure sustainability. It cannot be profits at whatever cost to the environment. Measures such as green taxation for business could lead to a more sustainable economic system.
A heightened sense of industry self-regulation driven by an appreciation that, in the long-term, society together prospers or perishes could trigger the right change. Another pillar to sustainable capitalism is the need for economic inclusion. This can be realised through government policies aimed at taxing business resources and not labour which would lead to unemployment and further inequality. Businesses could also invest in upskilling their workers to fit within the new business environment.
The current wave of digital technology characterised by use of personal data and machine learning has fuelled unprecedented economic growth. The challenge is that this wealth is not shared equitably across society. The gap between the rich and the poor continues to widen. This situation is likely to get worse in the future as more low-skills jobs get taken over by machines and unemployment rates rise globally. It can be addressed through the effective use of taxes to equip the labour force with skills that would enable them to effectively engage in the emerging digital economy.
What can governments do to transform capitalism for the prosperity of society? Effective regulation of markets could transform the economic system of the future. This would include consumer and data protection. As the economy becomes more data driven, personal data should be made more public and portable across businesses. This could lead to greater benefit to the owners of data and reduce the current monopolies that have entrenched inequality.
The digital wave is sweeping through all sections of society. Many governments are transitioning to the use of digital platforms for delivery and payment for public services. Considering this and the growing use and importance of digital rails in the economy, digital infrastructure should be made a public good just like roads and other physical infrastructure. This might not necessarily mean nationalisation of the existing private investments. By assuming this responsibility, states could drive economic inclusion. Ensuring that the majority have access to the infrastructure and skills that are needed to gainfully engage with the emerging digital economy in the long-term will reduce the economic divergency.
Finally, a broader stakeholder representation in business ownership and governance could make capitalism more sustainable in future. The biggest aspect of capital in today’s data driven businesses is the knowledge and skills which is brought in by management and other employees in the business. This argues for an employees’ share in the profits and wealth of the businesses thus reducing inequality. Capitalism could transform itself by taking on cooperative characteristics to avoid potential future crises.
Capitalism has proven itself effective in delivering goods and services to the global society, but its long-term sustainability is threatened. It could transform itself to serve the collective good of the society and solve global inequality.
© Felistus Mbole, 2019