Inclusive capitalism: searching for a purpose beyond profit
It is hard to say if capitalism has ever been less popular than it is this decade. Banker-bashing remains fashionable and politicians vie to decry big business as a way of scoring points. One might be tempted to think that capitalism was hopeless. And maybe the predatory, profit maximising capitalism that was evident in some financial institutions in the mid-2000s is hopeless.
But this is not, and has never been, the heart of capitalism – and thinking of it as such is to take a reductive view of capitalism’s rich and varied history. It also ignores the rising tide of capitalist enterprises that aim to do more than just make a profit, through corporate social responsibility (CSR) programmes, community engagement, an effective culture and a focus on social enterprise and investment.
These various approaches fall loosely under the banner of inclusive capitalism, which is the idea that those with the power and the means have a responsibility to help make society stronger and more inclusive for those who don’t. This can be through better access to education, improved public transport and local facilities or town planning that prioritises the livability of cities.
On Tuesday, the City of London Corporation will co-host a conference on the topic at which many of the world’s most influential philanthropists and business leaders including Bill Clinton, Christine Lagarde, Mark Carney, Larry Summers and Eric Schmidt will come together to talk about how this form of capitalism can posit a way forward as the economy continues to recover from the financial crisis.
The City’s involvement in philanthropy has a long history stretching all the way back to Dick Whittington and beyond. However, inclusive capitalism is about more than just wealthy individuals donating to a charity – it’s about a concept of business as more than simply a profit-seeking enterprise that goes right to the heart of how it is run.
It’s not a new idea – the City of London Corporation, along with the Bank of England, set up Heart of the City in 2000 to act as an advocate of CSR and to help businesses set up their own CSR programmes. It has grown rapidly over the last five years as companies have responded to the need to demonstrate responsibility and positive contributions to society. The businesses involved in Heart of the City vary from IT companies to design agencies and international banks, but the message is the same – there is more to being a successful capitalist enterprise than making a profit.
However, a focus on CSR is not enough in itself. The idea of inclusive capitalism, and one of the focuses of this conference, is the ways in which we as an industry can work together to promote responsible behaviour to underpin the fairness and integrity of the system, and safeguard the interests of the people and companies working in it.
This is something we can all admit was lost within some sectors of the financial services industry in the last decade. Mistakes were made, and the fallout was painful. Changes to laws and regulation were made to ensure the same mistakes are not made again – but to ensure that new and different mistakes are not made, we must influence the culture to adhere to the priorities of inclusive capitalism.
The recently released Banking Standards Review by Sir Richard Lambert, for example, puts the onus for change on the banks themselves, challenges them on what they say and aims to change the industry mind-set. This is the perfect opportunity to bring inclusive capitalism into the mix, while we search for new priorities within capitalism and encourage more companies to think more broadly about the meaning of capitalism and where their focus should lie. If more businesses practice social impact investment they could not only discover the next Google or Facebook, but help to transform a community at the same time, leading to social and financial profit.
Capitalism has been through something of an existential crisis these past five years, but this difficult time, while challenging, has given us the opportunity to reshape it into a stronger, more sustainable form. Business flourishes best in a society which builds a sustainable future that is inclusive of all.
The last of the conference’s three priorities is to bring a new focus to long-term investment, focusing on the greatest return for all those with a stake in capitalism’s stability – instead of the quickest return for shareholders. This cuts to the heart of inclusive capitalism; the idea that capitalism is a strong mechanism for building a society that is not only the most efficient at generating profits, but that is also the most efficient at creating an environment in which all of its citizens have the opportunity to share in those profits and benefit from capitalism’s success.
by Mark Boleat
(Mark Boleat is the chairman of the City of London policy and resources committee)
Source : The Guardian