Political and business leaders have gathered in London for the Conference on Inclusive Capitalism, which seeks to find practical ways to turn the capitalist system into an inclusive one, where more people share in the opportunities and prosperity brought about by economic growth.
- H.R.H. The Prince of Wales.
- Ex-US President, Bill Clinton.
- IMF chief, Christine Lagarde.
- Governor of the Bank of England, Mark Carney.
- Harvard University economist, Lawrence. H. Summers.
- CEO of Unilever, Paul Polman,
- Chairman of the John Lewis Partnership, Sir Charlie Mayfield.
- Chairman of China Investment Corporation, Jin Liqun.
- Executive chairman of Google, Eric Schmidt.
- Ex-chairman of Sainsbury’s supermarket chain, Lord David Sainsbury.
The 250 delegates come from 37 nations and include politicians, institutional investors, and leaders from 35 different business sectors. They represent assets under management worth about one third of the world’s investable income, approximately $30 trillion.
Financial crisis triggered debate on inequality
The global financial crisis and the Great Recession that followed triggered debate on the role and purpose of business. “Will the general public support a system that encourages growing inequality, allows and sometimes rewards unethical behavior, places the importance of next quarter’s results at the cost of social purposes?” leaders wonder.
Key note Speakers: 1. Mark Carney. 2. Christine Lagarde. 3. Lord David Sainsbury. 4. Lawrence H. Summers. 5. Paul Polman. 6. Sir Charlie Mayfield. 7. Jin Liqun. 8. Eric Schmidt. 9. Bill Clinton. 10. Prince of Wales.
People with the power to make capitalism and free markets more inclusive of society as a whole need to work together and make this a priority, say the Conference organizers.
As technological innovation and the globalization of business ideas surge forward, and resources become increasingly constrained, cooperation is more imperative than ever.
The stature of the speakers and delegates at the Conference on Inclusive Capitalism could represent a turning point for business to “step up to commit to collaborative action that transforms the status quo,” say the organizers.
Three areas businesses can impact
The aim of the Conference is to encourage “all efforts to increase the social and economic benefits of all areas of commercial activity.” There are three areas where business can really have a considerable impact:
- Promoting and encouraging responsible behavior that reinforces the integrity and fairness of the system and defends the interests of the companies and people working within it.
- Promoting enhanced education and skills training, employment opportunities and innovation. What the organizers call “building ladders of opportunity.”
- Rather than focusing just on shareholders’ returns in the next quarter, investing for the long term so that all stakeholders in capitalism’s stability benefit.
CEO of EL Rothschild and Co Host and Founder of the Conference on Inclusive Capitalism, Lynn Forester de Rothschild, said:
“The Conference on Inclusive Capitalism seeks to respond to the serious dislocations caused by developments in capitalism over the last 30 years: the fraying of public trust in business, worldwide increases in income inequality, increasing **short-termism in capital markets, and a crisis in the integrity and values of the system.”
“At its core, the Conference on Inclusive Capitalism is concerned with restoring capitalism’s role as an engine of opportunity for all, through the Conference on Inclusive Capitalism we will fight against the inequality of hope that exists in the system today.”
** Short-termism refers to business leaders, investors and analysts who focus too much on short-term gains, often at the expense of a company’s long-term economic health.
Key note speaker, Christine Lagarde, said:
“In the past, economists have underestimated the importance of inequality. They have focused on economic growth, on the size of the pie rather than its distribution. Today, we are more keenly aware of the damage done by inequality.”
“Put simply, a severely skewed income distribution harms the pace and sustainability of growth over the longer term. It leads to an economy of exclusion, and a wasteland of discarded potential. The recognition of this fact by the conference on inclusive capitalism is incredibly important for the long term prosperous future of all.”
The greater good versus self-interest
Paul Polman, Unilever’s CEO believes that the very essence of capitalism is being threatened. The greater good needs to be placed ahead of self-interest. “We have to bring this world back to sanity,” he said.
Lord Mayor of London and Conference co-host, Fiona Woolf, emphasized that inclusive capitalism, apart from being simply a nice idea, is a crucial path to follow if we want capitalism to survive. “You don’t have to be an economist to be worried by the direction of travel that inequality is taking. If capitalism is to retain its moral claim to serve humankind then it must find ways of including more people, in more ways, in its returns. This is our challenge – and we must accept it,” she said.
30 years of worsening wealth inequality
For the last thirty years, wealth inequality has been getting worse, according to an analysis carried out by the OECD (Organization for Economic Cooperation and Development).
The 1% richest people worldwide continue to capture a progressively more disproportionate slice of overall income growth.
In the US, the wealthiest 1% have captured 47% of total income growth since 1981. Even in Scandinavia, which is thought to be more egalitarian, the richest 1% grew by 70% to about 7% to 8%.
In a separate report, the OECD warned that worldwide income inequality could worsen, as well as social divisions. Unless governments take action swiftly, the authors wrote that the problems could become entrenched.
The OECD urges governments to consider very carefully whether to implement any further expenditure cuts. If support for the most vulnerable people in society is withdrawn, governments could be undermining future social cohesion, the authors added.
A Harris Poll carried out in April found that 54% of Americans feel that inequality is a major problem in their country. Sixty-six percent believe the government should address inequality by introducing new policies nationwide, compared to 62% two years ago. Two years ago, 34% saw the issue as a very important one, compared to 44% today.
In a capitalist system, capital (means of production) is owned privately and products and services are bought and sold in a public free market.