The Covid-19 crisis is a reminder that capitalism and the health of the planet are intrinsically connected. Beyond emergency measures necessary to revive and sustain economic activity, we need to move from unsustainable growth to a new reasoned prosperity. Companies and governments need to tackle the issue of negative externalities – from pollution, resource depletion and global warming to the spike in inequalities – to build more just and inclusive economies as well as environmentally-sustainable production systems. This session explored innovation, inclusion, and regulation as key words for change.
Author: Sciences Po student Irina Anghel summarizes the debate session of the third edition of the Paris Peace Forum
Debate title: Greener and fairer: Changing and reforming capitalism
Date: 13 November 2020
If there is one main point of agreement between an Indonesian World Bank Director, a Nobel Peace Prize laureate economist from Bangladesh, a Kenyan entrepreneur, and French Minister of the Economy, Finance and the Recovery Bruno Le Maire, it is that, in Le Maire’s words, “capitalism has reached its limits.” The four called for a redesign of the market economy to address inequality and climate change, speaking in a virtual panel at the Paris Peace Forum in November 2020. The more challenging questions are what – and who, comes next.
Answering these questions has never been more urgent than during a pandemic. “The pandemic exposed the underinvestment in sustainable development, highlighting who is vulnerable and why,” said Mari Pangestu, the World Bank Managing Director of Development Policy and Partnerships, during the panel discussion.
Pangestu warned of an imminent rise in inequality, stating that the pandemic hit hardest those already worst off: unskilled workers and people living in poverty.
Yet a reckoning has been long due. While acknowledging that “we owe capitalism almost two centuries of growth and prosperity”, rising inequality and global warming – even before Covid-19 – were proof of the system’s failure, according to Le Maire.
“Either we reinvent capitalism, or it will be replaced”, Le Maire said in a call to action to rethink today’s dominant economic system. He also argued that as flawed as it may be, capitalism remains the best we have.
Few have better CVs for the job of reforming capitalism than Pangestu, a former Indonesian Minister of Commerce, Le Maire, and their debate partners. Seated virtually next to them are Nobel laureate Muhammad Yunus, the Bangladeshi founder of Grameen Bank, the world’s first microcredit institution, and Dr. James Mwangi, the CEO of Kenya’s financial services conglomerate Equity Group, whom Forbes Africa called “the people’s banker.”
Their proposed solutions all share the goals of reducing inequality and fighting climate change to create a fairer global economy. It’s the prescribed components and their dosages that vary.
While Le Maire advanced a three-step plan based on tackling wealth and gender inequalities, fostering sustainability, and creating a fairer international tax system based on digital and minimum taxation, Yunus took a more radical approach with the three zeroes plan: “zero carbon emissions, zero inequality, zero unemployment.”
“Capitalism has made us the most endangered species. We don’t know how long we’ll exist because of global warming and wealth concentration”, Yunus said. “We have to reverse gears” and “take advantage of the Covid situation because now all the questions are on the table.”
Yunus argued people are motivated by both self-interest and a desire to solve the problems of their communities. According to him, a reformed system should encourage the existence of social businesses alongside profit-seeking ones.
Yunus warned against Artificial Intelligence as a vector of unemployment. “AI is telling us that machines can do better than human beings. There are projections that in the next 15 years, nearly half a billion people will be out of jobs because of automation,” he said. He argued for redefining the future of work to foster creativity and entrepreneurship.
Mass unemployment is one of the bleakest effects of the pandemic. In Africa, it is almost a “human catastrophe,” according to Mwangi. Even worse than that, he said, was the lack of a timely response from the private sector to address “human suffering” in the wake of joblessness.
This is only one of the ways in which Mwangi argues capitalism failed Africa in the Covid-19 crisis. He highlighted the lack of redistributive policies fostering excessive wealth concentration, supply chain disruptions, the appropriation of natural resources by private companies at the expense of their host communities, and climate change.
“One of the most devastating effects is climate change in Africa,” Mwangi said. Yet, according to him, the impact of climate change in Africa outweighs its “guilt,” i.e., its contribution to global warming.
The question of reforming capitalism is also about who takes the lead. “Given that capitalism is so interlinked globally, it is important to take it as a global issue,” Mwangi said. He argued reform should start from international bodies, pass through the hands of governments, and then reach the private sector, “the owners and drivers of capital.”
Pangestu made a case for national governments to create jobs and advance sustainability through green infrastructure projects, to decentralize electricity access with solar energy, or to subsidize the repurposing of polluting industries – and for financial institutions to help them in the process.
But leave it to Yunus to zoom in on the role of individuals. Since governments have an outsized role in the current failing system, any future model should see the individual as the “important player in the game,” he argued.
“If I want to create a corporate body to adjust a housing problem or a health problem… That’s us as individuals who do that. It’s not a government decision,” he said.
By Irina Anghel