Viewpoints: What should capitalism do?

Handshake How can capitalism become more inclusive?

Related Stories

Men and women who hold some $30 trillion (£17.8 trillion) of assets under management - that's one third of the world's investable assets - will gather in London on Tuesday.

Their purpose? To discuss practical ways to "renew the capitalist system".

The Prince of Wales, former US President Bill Clinton, International Monetary Fund chief Christine Lagarde, and Bank of England governor Mark Carney are among the speakers at the Conference on Inclusive Capitalism.

So what should capitalism actually do?

The BBC has gathered a range of viewpoints on the subject.

Start Quote

Lady Rothschild

If investors say we are only going to put our money in companies that have a long term view towards society then, surprise surprise, the corporations will behave that way”

End Quote
Lynn Forester, Lady de Rothschild, EL Rothschild

Capitalism has to prove to society at large that it is a forest for general prosperity and dynamic growth. Because of the scandals of the last five years and because of the growing inequality, it is up to business to prove that what is good for society is good for business.

The onus is on us now in the business and investing community.

Inclusive capitalism is really no different from conscious capitalism or progressive capitalism. It is an effort to convey that capitalism is part of a broad-based improvement for all of society, that it doesn't stand alone. Inclusive capitalism is good capitalism.

Bad capitalism is rigging Libor rates, it's selling instruments that are improper investments for your investor, it's taking advantage of workers, it's not caring about the sustainability of your supply chain. There are lots of things that are bad capitalism.

Lynn Forester, Lady de Rothschild

  • Chief executive of private investment company EL Rothschild
  • Founder of the Conference on Inclusive Capitalism

That's why we have such low confidence from the public at large in capitalism, because for too long we who are in business allowed bad behaviour. We have to acknowledge we have done some things wrong.

One of my main objectives in being the founder and co-host of the Conference on Inclusive Capitalism was to bring investors into a room, so that investors can decide that they're going to go to management and ask for more than just return on equity.

They're going to ask management how are you making sure that your supply chain will last? How are you engaging with your community so that you are still admired and valued by your community?

If investors say we are only going to put our money in companies that have a long-term view towards society then, surprise surprise, the corporations will behave that way. So our time horizon is 20 years not 12 weeks. That's the immediate objective.

Start Quote

Dr Malcolm Brown

Capitalism should start to believe in grandchildren”

End Quote
Rev Dr Malcolm Brown, Church of England

Only an economic culture which has ceased to care about future generations could sacrifice so lightly the interests of people far away in geography or in time, and the long-term flourishing of the earth.

If capitalism is about value, not just cost, it would factor in the interests of our grandchildren and their grandchildren, who will rely on what we research, invest in and commit to now. Earlier capitalists invested and built for a future they would not themselves see.

We are that future - but capitalism has become careless about handing enough on for those after us.

But, replies the capitalist, "Capitalism only reflects its surrounding culture. Don't blame me if a short-term culture begets short-term capitalism."

Capitalism is usually too modest about its impact - and too quick to disclaim responsibility. We have lived so long with capitalism that it has taught us who we are and how to behave - but its anthropology is too thin to teach us to live well.

Rev Dr Malcolm Brown

  • Church of England's director of Mission and Public Affairs
  • He carries specific responsibility for work on economic issues
  • Has been ordained for over 30 years and has worked as a parish priest, an industrial missioner, and as director of a theological think tank

Capitalism is a complex of ideas and practices in tension with each other. The creativity of that tension has given the world innumerable good things. But the tension is inherently unstable and today's global capitalism has traded creative tension for unstable short termism.

For instance, Adam Smith knew that market capitalism relies on a shared social morality (to secure things like trust) which capitalism does nothing to create or sustain.

Capitalism actually benefits from externals which it devalues. Similarly, free competition is a basic condition for functioning markets - yet without external constraint, legal or moral, capitalism tends toward monopolies and cartels (as we have seen in banking).

So maintaining the tensions means valuing things which capitalism does not value - like moral communities, legal restraints and the interests of people now outside the marketplace. Only by holding those tensions can capitalism realise its promise and not degenerate into a threat.

The most urgent need is for capitalism to recover the idea of intergenerational justice - believing that your great great grandchildren are worth investing in today.

Start Quote

Madsen Pirie

Capitalism should act against anti-competitive practices to give people instead the power of free choices between competing goods and services”

End Quote
Dr Madsen Pirie, the Adam Smith Institute

When people forgo current pleasures and invest instead, hoping to gain by providing goods and services people might want in future, we call it capitalism.

It has generated the wealth that has lifted large parts of humankind from subsistence and starvation, and has enabled us to fund life-saving medicine, education and the arts, as well as opportunities and material comforts.

Just as democracy can be corrupted by repressive populism, so can capitalism be perverted by "rent-seeking" - when people seek to gain more than the goods and services they produce are worth to others.

Sometimes they use political influence to sustain monopolies or to prevent new entrants and innovators from competing for custom. Sometimes they use governments to provide subsidies from taxpayers, or to prohibit cheaper imports.

Dr Madsen Pirie

  • President and co-founder of the Adam Smith Institute, a free market think tank
  • He was part of the team which pioneered privatisation and the extension of market choices and incentives

Sometimes they do deals with governments that provide taxpayer funds to cushion losses derived from incompetence or recklessness. These forms of crony capitalism detract from capitalism's real benefits and achievements.

What capitalism should now do is to free itself from these rent-seeking perversions and spread its benefits as widely as possible.

It should act against anti-competitive practices to give people instead the power of free choices between competing goods and services. It should spread ownership of capital and investment as widely as possible through such things as personal pensions and individual savings accounts.

It should lower the barriers to entry so that everyone can aspire to start up a business to bring goods and services to others. It should seek a tax system that rewards success rather than punishing it.

Capitalism should become inclusive, making it as easy and as attractive as possible for as many as possible to set aside some part of present consumption in order to invest some of their resources and their time in providing goods and services that others will want. It should become true capitalism.

Start Quote

Clive Menzies

The means to life cannot be conditional on paid employment but is a right for all and must be provided in the form of an unconditional citizens dividend”

End Quote
Clive Menzies, Critical Thinking

A 2011 study in the New Scientist revealed that 147 "super entities" control 40% of 43,060 transnational corporations and 60% of their revenues. The study was based on shareholders and directors but doesn't reveal beneficial ownership and control hidden behind nominee companies, trusts and foundations. Evidence suggests power is even more concentrated than the study indicates.

This stateless power dominates politics, media and education. Financial capitalism seeks to monetise and control everything, influencing legislation and regulation in its favour.

Stateless power is drawn from three fundamental flaws in the economic system, evolved to benefit the ruling class over centuries, but these flaws have been expunged from economic discourse:

Clive Menzies

  • Political economist with a background in business and investment management
  • Founded the Critical Thinking research project at the Free University and is a member of the Occupy London Economics Working Group

Flaw 1. Private capture of the value of land, resources and other commons (such as water, the radio spectrum, genes, nature and knowledge), gifts from nature (or God), the value of which is communally created. The value of these must be shared for the good of all to fund public services and an unconditional citizens dividend.

Flaw 2. Interest on money creates no wealth but systemically drives inequality, environmental destruction, conflict and exponential, unsustainable debt growth. Debt must be unenforceable in law and usury (lending money at interest) illegal. Debt must revert to a social construct rather than its current role of facilitating wealth extraction, exploitation and oppression.

Flaw 3. Increased mechanisation and technology has rendered full employment unachievable, unnecessary and undesirable. The means to life cannot be conditional on paid employment but is a right for all and must be provided in the form of an unconditional citizens dividend sufficient for a decent life.

More on This Story

Related Stories

More Business stories


Business Live

    09:16: Economy CBI Radio 5 live

    John Cridland the CBI chief got in a couple of requests for George Osborne via Wake Up to Money: "Lower taxes on business because if you give business money they can create more jobs. But we need to invest in childcare support for low paid families. The cost of childcare is holding them back from taking jobs."

    09:02: Household incomes BBC Radio 4

    Chancellor George Osborne, has been talking to the BBC: "The picture you hear, particularly from my political opponents, of the British economy, is not one reflected in this independent report. Indeed quite the opposite - what they show is that Britain is growing, that incomes are rising, that the richest have made the biggest contribution, that inequality has fallen."

    08:48: Standard Chartered
    Standard Chartered

    No great surprise, perhaps, that outgoing Standard Chartered chief executive Peter Sands - and three other directors - have decided not to take a bonus for last year considering that the bank's pre-tax profits fell by a quarter to $5.1bn (£3.3bn). With a touch of understatement, chairman Sir John Peace says: "2014 was a challenging year and our performance was disappointing."

    08:35: Household incomes

    More on that research suggesting living standards in the UK have now returned to levels last seen before the financial crash. The IFS says incomes are now rising at more than 1% a year. Its director, Paul Johnson, says there is not much to trumpet about: "It's astonishing actually that seven years later incomes are still no higher than they were pre-recession and indeed for working-age households they're still a bit below where they were pre-recession."

    08:23: BlackBerry World Service

    Technology correspondent Rory Cellan-Jones has been speaking to John Chen, the boss of BlackBerry, on World Business Report. Rory asks him if he can imagine company no longer making handsets: "It's a little bit of speculation at the moment. I would say this: for our shareholders, nothing is sacred." Perhaps sales volumes speak louder than words.

    Via Twitter Adam Parsons Business Correspondent

    So what does @jimmy_wales consider "an abomination"? And what does @CBItweets want from the Chancellor? Click here to listen to today's Wake Up to Money. @AdamParsons1

    08:07: Eurostar sale BBC Radio 4

    Sim Harris, managing editor of Rail News, tells Today that Britain's 40% stake in Eurostar went for a higher than expected £757m because there was a lack of high quality assets available to investors. He adds: "Whether it's the right thing to do is a question for George Osborne."

    07:55: Legal and General results

    The insurer Legal & General said operating profits rose 10% last year to a lower than expected £1.28bn. Company pension deals helped sales of annuities to jump 28% to £44bn.

    07:44: Greggs results

    Greggs has been freshening up its stores over the past year. It refitted 213 shops, opened 50 new outlets and closed 71 to bring the total to 1,650 shops as of 3 January.

    Via Twitter Kamal Ahmed BBC Business editor

    Forget the IFS, the Pasty Index is in - Greggs sales up 4.5%, always a good barometer of consumer confidence. @bbckamal

    Via Twitter Robert Peston Economics editor

    tweets: "Living standards back to where they were in 2007-8, but mainly for those over 60. & are rising strongly now, says IFS "

    07:17: ITV results

    ITV plans to return £250m to shareholders with a special dividend of 6.25p a share after a bumper 2014, with adjusted pre-tax profits up 23% to £712m and 39% higher at £605m on the pure pre-tax measure. Revenue rose 7% to a shade under £3bn. "ITV is now a high-growth business," says chief executive Adam Crozier.

    07:06: Eurostar sale BBC Radio 4

    Gemma Godfrey, head of investment strategy at Brooks Macdonald Asset Management, tells Today that the £757m the Government got for the Eurostar stake was higher than expected, but questions what the proceeds be used to fund. She believes the cash should be used to fund the next generation of infrastructure that will in turn create profits for the public purse.

    07:00: Greggs results
    Greggs shop

    Greggs results hit the desk. Total sales rose 5.5% to £804m, while like-for-like sales up 4.5% - much better than the 0.8% fall in 2013.

    06:49: ITV results BBC Radio 4
    Downton cast

    ITV reports annual results very soon. Toby Syfret of Enders Analysis has told Today that while channel brands have become less important than they were in the past, the decline is gradual. Programming - such as Downton Abbey - remains the crucial factor. "Good content is going to be the core of whoever is successful in the future," he says.

    Via Twitter Sally Bundock Presenter, World Business Report

    tweets: "Morning. #Ukraine hikes interest rates to 30%. Plus GDP slows in #Australia and an i/v with the boss of #Blackberry. See you soon." That's on World Business Report.

    06:26: Household incomes

    Big discussion about the Institute for Fiscal Studies (IFS) report on household incomes. Whether the average household income is back to levels they were at before the financial downturn struck. One measure, for the over 60s, it is. But for most of the rest of us, it hasn't got there yet. Our story here.

    06:15: India rates

    India has cut its main lending rate by a quarter of a point to 7.5% in a bid to boost economic growth. It is the second time this year that the Reserve Bank of India has cut rates as inflation is running at 5.1% - well under the 8% target - on the back of cheaper oil.

    06:12: Sandwiches Radio 5 live
    UK map of bread names

    Greggs figures are out in an hour or so. The market is looking for 4% growth, earnings are expected to be up 9%. The UK is estimated to spend £9bn a year on sandwiches. Wake Up to Money has been discussing what these are variously called around the country. There's a map illustrating this.

    06:07: Eurostar sale

    The stake is being bought by a Canadian pension fund and a UK asset manager will buy shares for £585m and Eurostar will also hand over £170m to redeem shares which guarantee a dividend. The stake was officially valued last year at £325m.

    06:02: Eurostar sale Radio 5 live

    The sale by the Government of its shares in Eurostar for £750m is under discussion on Wake Up to Money. Gemma Godfrey head of investment strategy at wealth manager Brooks MacDonald tells the programme: "After the debacle we saw when they were selling Royal Mail they had to get it right and the value has come in above expectations."

    06:00: Rebecca Marston Business reporter, BBC News

    Good morning. Strap in and sit back. Today's Business Live page will have all the news, all day. Greggs and ITV results are expected to be early highlights.



  • Elderly manSuicide decline

    The number of old people killing themselves has fallen. Why?

  • Petrol pumpPumping up

    Why are petrol prices rising again?

  • Image of George from Tube CrushTube crush

    How London's male commuters set Chinese hearts racing

  • TricycleTreasure trove

    The lost property shop stuffed with diamonds, bikes... and a leg

Try our new site and tell us what you think. Learn more
Take me there

Copyright © 2015 BBC. The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.