“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness…it was the season of light, it was the season of darkness…”, so wrote Charles Dickens during Industrial Revolution. These lines describe the paradox of those times: incredible riches coexisting with unimaginable poverty. One would be inclined to form a similar opinion of modern day capitalism.
Advocates of capitalism claim that it has created immense global wealth for everyone and accelerated our economic progress. Yet, critics point out that it is deeply biased towards a privileged few. This poses a fundamental question: can capitalism be beneficial to everyone?
Is capitalism a rising tide that lifts all boats? Or is it a rigged system of the rich, by the rich and for the rich? The endeavour of this essay is to carefully examine these claims and provide an answer to the debate.
CAPITALISM: A RISING TIDE THAT LIFTS ALL BOATS
Capitalism is an economic system in which the means of production are primarily owned by the private sector with a minimal role for the government. On the other hand, inclusive growth means economic growth that encompasses all sections of society— especially the vulnerable and the marginalised.
Adam Smith in his book The Wealth of Nations states that the increase in profits of private entrepreneurs creates collective wealth and prosperity. Proponents of capitalism argue that such wealth eventually trickles down to the poorest, helping them get out out of poverty, thus promoting inclusive growth. To substantiate, in India, post liberalisation reforms of 1991 that unleashed the power of private sector, the proportion of the population below the poverty line fell from around 44% percent in 1990s to less than 22% today.
Capitalism creates businesses which in turn create jobs providing wide opportunities to traditionally neglected sections of society such as women, SC, ST and rural population. Today, a woman from Kalahandi can earn her living by teaching English on YouTube, a tribal from Bhadrachalam can sell his produce on Amazon and young entrepreneurs from small towns can launch billion dollar startups like Ola and Swiggy. e-NAM is another wonderful example of how free markets help in giving profitable incomes to farmers. This way Capitalism promotes inclusive growth of everyone.
Further, to run rural development schemes like MNREGA, government incurs huge expenditure. Private businesses help the government fund these welfare schemes indirectly through income and corporate taxes.
Capitalist enterprise even helps in efficiently delivering citizen services like public transport (Eg: L&T and Hyderabad Metro) and software (Eg: Infosys and GSTN). Thus it is argued that capitalism directly and indirectly benefits all sections of society.
Moreover, historically when the state ignored capitalism and took sole control of the economy, the results have been disastrous. The collapse of USSR and the Great Leap Forward of China are all failed experiments. State is not best suited to run businesses because it is prone to inefficiencies and corruption. It is through capitalism and a thriving private enterprise that we can produce wealth, create jobs, slash poverty and promote economic growth.
But if Capitalism is beneficial, why is there an extreme poverty in the world? Why is our country still a place of staggering inequality?
CAPITALISM: OF THE RICH, BY THE RICH, FOR THE RICH
Critics state that the wealth fostered by capitalism tends to concentrate in few, leading to a disparate society. As per Oxfam report, top 8% of the world own 85% of the global wealth. Closer home, 1% of richest Indians own 58% of country’s wealth.
Even though poverty came down after 1991 reforms, critics of capitalism point at the skewed nature of our economic growth, especially towards the service sector, ignoring agriculture and manufacturing. Also, globalisation resulted in dumping of cheap imports that led to destruction of our local handloom workers and farmers. How can we call such economic growth inclusive?
Unscrupulous capitalism can exclude citizens from their democratic rights. Opaque funding of political parties by powerful companies, lobbying for illegal favours can render people’s vote irrelevant. 2G scandal and Coal scandals showed how crony capitalists can rig the system. Cambridge Analytica controversy showed how a powerful company like Facebook can tilt public opinion for or against a particular political party. French Revolution, Arab Spring, Occupy Wall Street Movement warn us about the ill effects of such exclusion of the common citizen from having a say in governance.
The exclusive nature of Capitalism is also evident in its effect on environment and its impact on the poorer sections of the society. A tannery in Kanpur discharges effluents into Ganga but the cost is borne by the local public. Reckless mining in the name of development especially in tribal, forested areas harms both tribals and forests. Vedanta’s fiasco in Niyamgiri, Orissa is a case in point. How can we call such growth inclusive if it strips tribals of their rights?
In addition, Capitalism fails to direct investment in sectors that do not have immediate payoffs. Sectors like primary education, affordable health care, decent housing etc all cater to the disadvantaged sections of the society, yet are generally ignored by the markets.
Morally too, this desperate need to chase profits often blinds capitalism to horrible crimes. Corporations like East India Company that plundered India, Africa and maintained slaves show the depths to which capitalism can fall to.
Even today, unethical practices like illegal drug trials on tribals and women by Pharma companies are striking examples. Financial crisis of 2008 caused unspeakable suffering to millions of people— all because a few financial companies ignored their basic responsibilities in search of profits. What is the solution to this problem?
INCLUSIVE CAPITALISM: TOWARDS EQUITY & PUBLIC WELFARE
The conclusion is clear. Capitalism does help in creating wealth but, by itself cannot bring inclusive growth.
Capitalism is like a powerful energy. Undirected and unchecked, it can cause immense damage. What we need is a new kind of capitalism—an inclusive capitalism— that has equity and fairness at the heart of it.
First, companies should not see Corporate Social Responsibility (CSR) as charity, but as part of fulfilling they rightful duty towards society. CSR projects must be further improved to ensure that companies take up genuine projects that cater to the local needs and have long term benefits.
Second, as a society we must encourage philanthropy. Bill Gates contributed more than $1B of his earnings to alleviate suffering in Africa. Warren Buffet donated 85% of his savings to charity. Indian capitalist class must also take such initiatives and stand as role models for others.
Third, a carbon tax must be imposed on every polluting industry. Companies must bear the complete cost of rehabilitation and resettlement in a specified time limit for every development project that causes displacement of local people.
Fourth, government must further simplify process of setting up a business. Start up India, Stand Up India and MUDRA Yojana must be strengthened so that we nurture capitalist spirit among the disadvantaged sections of society.
Last, the government must play predominant role in sectors that are ignored by markets: health, education, rural livelihoods, poverty eradication and the like. This way we strike a balance between equity and efficiency, wealth and welfare.
As Amartya Sen remarked once, a country should be judged not by the efficiency of its richest, but by the well-being of its poorest. Toward that wellbeing, our economic policies must ensure that there is food for every mouth, work for every hand, spark in every eye and joy in every soul.