Arun Maira: Mistrust Of Capitalism
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Image: Amit Verma
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Arun Maira,member of the Planning Commission chaired by Prime Minister Manmohan Singh
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here comes a tide in the affairs of men,” Shakespeare cautioned. Tsunami warnings are now ringing about the global economy. The global financial system is under stress. Economic growth is stumbling. Confidence in governments is decreasing everywhere. Multilateral institutions like the WTO (World Trade Organization) and IMF (International Monetary Fund), created to promote global integration and stability, are ineffective. Communism was declared dead with the fall of the Berlin Wall. Now, there is less faith in the concept of the free market, even amongst Western economists. Why has liberal, free market capitalism, the victor of the Cold War of ideologies, also stumbled?
The confluence of three mega trends has increased mistrust in capitalist institutions. The first is the triumphal and arrogant advance of liberal capitalist ideas of economic management led by the US, which grew after the ideological opposition to them collapsed 20 years ago with the unravelling of socialist regimes behind the Iron Curtain.
The Indian economy’s boat also rose with this tide when government controls on industry were dismantled in 1991. With this advance of capitalism, CEOs of multinational companies became the chiefs of the world, whose court assembled in Davos in January each year, and to which heads of government flocked for attention. Thomas Friedman described this mega trend as the flattening of the world by the spread of global finance, global corporations, global brands and global ideas (mostly American), aided by the Internet.
The explosion of access to information through the Internet and social media, proliferation of mobile phones, and 24x7 news media, is the second mega trend. Like a rising tide that cares not whose boat it lifts, technology enables all ideas to spread. Not only the advertisements of global brands, but also voices of protest against them. Not only do 21st century communication technologies enable security forces to snoop, they also equip terrorists to co-ordinate, and non-violent protestors to organise. The Jasmine Revolutions in Arab countries and Anna Hazare’s campaign against corruption in India were accelerated by ubiquitous communication technologies.
The third mega trend is the deepening recognition of human rights: The equal rights of women and men, of all races, and of all people whether rich or poor. The concept of rights is expanding too: From political rights to vote, to social rights for respect and equal treatment, and onto fundamental rights to education, health, and equal opportunity, which people are charging their governments to ensure. The concern for human rights, which grew larger in the latter half of the 20th century, has expanded and become deeper in the opening decade of the 21st century with the proliferation of civil society advocacy groups enabled by the reach of communication technologies.
Image: Stefan Wermuth_Reuters
FIGHT FOR RIGHT Demonstrators, including a pair dressed as characters from the film Avatar, protest Vedanta Resources’ mining activities in Orissa during the company’s AGM in London
Like the beleaguered boat in Sebastian Junger’s The Perfect Storm, that sailed into an unprecedented confluence of three storm systems in the North Atlantic, the coming together with great force of these three mega trends is putting to test the institutions, i.e. the ships and navigation systems of capitalism that were not designed for such conditions.
A principal institution of capitalism is the limited liability corporation, a vehicle that has enabled investors to increase their wealth and has also enabled ideas to be turned into products and services for people. However, the damage caused by the activities of some corporations to the environment and lives of people in many parts of the world, and the conduct of highly paid CEOs and corporate boards in the global financial crisis, has damaged public trust in corporations and their leaders.
There is public demand for more regulation of corporations and public resistance to giving them permissions for expansion of their operations, as in the tribal areas of India, unless they behave more responsibly.
The only consolation for corporations who fear government regulation is that the public trusts governments even less than corporations! In fact, surveys reveal that people trust civil society organisations more than both corporations and governments.
Corporations fear civil society, with its diversity of interests, even more than they dislike governments, because it is more difficult for corporations to make contracts with civil society with its myriad organisations and no designated overlord. For the same reason, governments too have a difficult relationship with civil society. At the same time, civil society mistrusts both governments and business corporations. Mistrust all around!
The breakdown of trust is the root cause of the uncertainty about the global economy. Investors nervously watch the gyrations and downward slide in stock markets and economic indicators. Stock market analysts explain that market ‘sentiments’ are not good.
Economists worry that growth is not picking up. They say that consumer (and investor) ‘confidence’ must be restored. People are losing confidence in institutions and their leaders. Until trust is built, sentiments improved, and confidence restored, good times will not come. Therefore, we must understand the following:
- What are the conditions for trust within society?
- How can trust be proactively built?
- With the mega trends shaping the world at this time, what would be the steps that business leaders may take to rebuild trust in business?
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This is a fundamental humanitarian issue and not a left vs. right issue. Does a society want millions of low paid and unemployed, with their children having little hope of making it in life? To be sure, such a society will also have high crime rates, which means that that society will end up hiring a larger police force and higher spending on fighting criminals. The end result? Such a society will be highly criminalized despite ending up with a large police force.
Or, do we want a society where people feel closer to each other economically and socially? A society that has all the incentives of hard work and enterprise but without the criminalizing influences and without having to maintain a large police force fighting to prevent gang wars (like Japan)?
The choice is ours to make. Those who swear by Jesus and God should ask themselves this simple question: If we want to build heaven on earth, do we want to see the kind of wide gaps in incomes and opportunities in our society that we have fostered for centuries through sheer callousness, foolishness, and arrogance?
