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Can Capitalism Bring Inclusive Growth?

Given that the richest 1% of the world's population now own more than the rest of us put together, the recent Oxfam Report, 2016, has re-ignited the conversation on global inequality. The discussion of current global inequality also calls into question capitalism's ability to produce equitable growth, notwithstanding a few notable exceptions, which is the primary economic system used worldwide.

According to popular belief, the capitalist economic system emerged in Europe in the eighteenth century as a result of the industrial revolution. Unlike the socialist economic system, which, on the opposite end of the spectrum, favours public or governmental ownership of production resources, it is built on private entrepreneurship and private ownership of such resources, such as land, labour, and capital. Profit is the only motivation for producers who are members of the elite capitalist class. But from its beginning, the capitalist system has come under fire for exploiting the working class with appalling working conditions and inadequate pay, as well as for dividing society into "haves" and "have-nots."

The concept of inclusive growth focuses on equitable growth for all sections of society. This involves ensuring that fruits of growth and development reach the poor and marginalized sections as well. Capitalism, with profit as sole motive, at times fails to reach areas that require prioritization of social welfare i.e. working on a non-profit basis. For e.g. running of schools and hospitals in rural and underdeveloped areas, building of public infrastructure like roads, rails etc. in rural areas etc. This leads to concentration of development works and industrialization led growth only in urban areas and hence creates regional inequality. Such regional inequality slowly turns into socio-economic inequality as well due to lack of meaningful employment opportunities in areas left out of the Capitalist development model and strikes at the very root of inclusive growth. Moreover this increases urban migration leading to overcrowding and straining of public resources which in turn results in people living in miserable conditions.

Capitalist producers of goods and services make concessions on the payment of reasonable salaries and safe working conditions in the drive to deliver larger profits to owners. For instance, news reports about workers in specific economic sectors, such as construction, textile, etc., not receiving even the minimum wage are regular in India. Private companies that are solely committed to their shareholders do not feel inclined to distribute riches to their workforce. Even among middle class workers, resentment over their excessive working hours and low pay is quite common. For instance, many educated youth are considering switching to government positions in light of the sixth and seventh pay commissions' reports, even though doing so would mean forgoing the opportunity to advance their careers.

The concept of free and effective markets is also very important to capitalism in order to promote growth and development. But it has often been seen that markets are rather skewed as a result of monopolistic or anti-competitive actions, their short-sighted perspectives on growth, and their inability to allocate resources and the fruits of growth in an effective manner. For instance, the day the Indian government unveiled its plan for public food security, the Bombay Stock Exchange dropped a lot of points. Thus, the markets failed to adopt a long-term perspective on growth by failing to understand that only a population that is properly fed can result in comprehensive and sustainable growth for all. Instead, proponents of the free market opted to put pressure on the government to retake control of its social-welfare programme.

Furthermore, because markets are only motivated by profit, they frequently cause economic crises around the world, which are accompanied by declines in employment rates and growth rates. These crises disproportionately affect the least developed and developing economies' marginalised populations because of their greater vulnerability. The divide between the "haves" and "have-nots" and global inequality will only get wider as a result of this. For instance, the 2007–2008 subprime crisis, which started in the United States owing to unbridled greed and unethical business practises of investment banks, quickly spread to the entire world economy and caused growth rates to decline everywhere.

Therefore the malaise of wealth in only a few hands in capitalism can be corrected by the government stepping in to have a system of taxation that promotes economic equality, encouraging entrepreneurship and setting up venture capital funds to support entrepreneurs from the lower socio-economic strata; running social welfare programs that ensure substantive equality of opportunity by providing affordable quality education and health services. For e.g. Government of India recognizes this responsibility and hence to encourage entrepreneurship among marginalized sections of society and enhance socio-economic equality, it has started ‘Start-Up India’. Enhancing equality of opportunity in order to counter the capitalism induced inequality also requires the government to ensure access to quality infrastructure necessary for running business – both public infrastructure as well as digital infrastructure which is increasingly becoming lifeline of today’s economy.

Therefore, capitalism as an economic system has a number of problems that have resulted in growing global socio-economic inequality. Issues like low wages, poor working conditions, regionally concentrated development, enrichment of only a particular class and blind faith in efficiency of markets result in a skewed growth model that goes against the concept of inclusive growth.

However while the system of capitalism has its flaws, regulated by a government that works on social welfare model, capitalism can lead to improved efficiency in enterprise, enhance private investments and can boost economic production while at the same time raising the capital necessary for a government to run its social schemes for the betterment of the poor and the marginalized. For e.g. the Scandinavian countries have followed the capitalist mode with a strong regulatory regime and social welfare which led to praiseworthy results. Inequality adjusted HDI regularly rank Scandinavian Countries like Norway, Denmark, Sweden and Finland among the top ten countries. This shows that the model of capitalism can be made to deliver inclusive growth provided the governments and civil societies across the world know how to tame the beast!

Multinational Corporations: Savior or Saboteur

News of hepatitis C patients protesting outside India's patent office in New Delhi was widely reported in all major national publications in India during the last week of February 2016. The hepatitis C patients were protesting against American multinational pharmaceutical giant Gilead Sciences and the US government for pressuring the Indian government "to blindly and speedily grant patents" to Gilead's exorbitantly priced drug Sovaldi, whose generic versions are produced by Indian pharmaceutical companies and used by millions of hepatitis C patients worldwide.

Multinational Corporations (MNCs) or Transnational Corporation (TNC), or Multinational Enterprise (MNE) is a business unit which operates simultaneously in different countries of the world. In some cases the manufacturing unit may be in one country, while the marketing and investment may be in other country. MNCs are huge business organisations which extend their business operations beyond the country of origin through a network of industries and marketing operations.

In today’s globalised and increasingly interconnected world such companies are only increasing their tribe. Exchange of goods, services, ideas, labor etc. are being encouraged worldwide; specialization is being touted as the need of the hour and increasingly more and more companies are spreading their influence outside their country of origin.

While one nation might specialise in producing specific commodities utilising copyrighted technology, other nations might have a surplus of skilled workers or affordable labour as well as a market for selling the final goods. As a result of these disparities in the accessibility of resources, talents, and markets, which are created not only by geopolitical factors but also by historical factors like imperialism and colonialism, businesses today are increasingly aiming for a global presence. Today's largest multinational corporations have their headquarters in industrialised or developed nations. 

Multinational corporations bring with them capital to invest in developing countries. Such capital can be of utmost use in developing economies where capital is scarce and where tremendous growth opportunities exists. Therefore it becomes a win-win situation for both the MNCs and the developing countries as MNCs can deploy their surplus capital for good returns, whereas, the receiving country can expect a boost to its economic growth. 

According to the United Nations Conference on Trade and Development (UNCTAD), the share of reinvested earnings is reported to have accounted for as much as four-fifths of total outflows in 2014 for select developed countries. UNCTAD also underlined the large amount of losses to the exchequer of developing countries ($100 billion a year) due to the routing of FDI through tax havens.

Another way in which these MNCs can boost the economy of developing countries is via the introduction of state-of-the-art technology that can increase productivity and efficiency while making available better and cost effective products to the customers. However, at the same time, danger persists of some companies bringing in obsolete technology and flooding the market with low quality and potentially harmful goods. If proper care is not taken to enforce modern regulatory standards, poor technology can even lead to industrial accidents, environmental degradation etc. causing severe loss of lives while impacting future generations. India has been on the receiving end of such a disaster in the form of the Bhopal gas tragedy of 1984 where leakage of methyl isocyanate from a pesticide plant of Union Carbide, an MNC, caused tremendous loss of lives, and scarring even the future unborn generations of Bhopal.

Most of the developing economies also have relatively higher unemployment ratios as compared to the first world. MNCs can help by providing employment as they hire the comparatively cheaper labor in emerging economies to produce the required goods and services at low prices. However, an unregulated labor market can only mean exploitation via low paid manual work in harmful conditions.

Multinational Corporations can also harm sovereign interests of a developing country by dragging its government to international arbitration over policies that the MNC perceives harmful to its own interest. In most of these cases, it is a case of the domestic government protecting its poor population over the contractual rights of an MNC. Also, by forming lobbies and associations in the first world countries and then by pressurizing the developing nations to allow concessions; is another way in which MNCs can employ their arm twisting tactics. For e.g. the pharmacy association of the United States has been pressurizing India via the offices of the United States Trade Representative (USTR) to have softer or more lenient IP regime for foreign pharmacy companies.

Therefore, clearly, MNCs have their merits as well as demerits, especially for a developing nation. On one hand with their surplus capital, cutting edge technology, management expertise etc. leads to increased production, productivity, efficiency, employment and better living standards, whereas on the other hand they can also harm by quick flight of money leading to volatility, obsolete technology, exploiting poor regulatory environment, killing indigenous industries etc. However the demerits can be restricted or avoided altogether by having tough yet encouraging regulatory environment in the field of finance, intellectual property, competition laws, labor laws, framing of contracts etc. and by ensuring speedy and just reddressal of grievances and disputes. India has been reasonably successful in its liberalization attempts since 1991 mainly due to carefully opening up only specific sectors to foreign investments on a case-by-case basis and in a phased manner and not allowing full Capital Account Convertibility. India has been able to benefit from the dynamicity of MNCs while at the same time allowing enough space for its domestic firms to grow. This is the reason why India today boasts some of its very own home grown MNCs in the form of Tata, Infosys, Reliance, Wipro etc. who are now operating not only in the emerging countries of Africa and South Asia but also in the First World countries of North America and Western Europe.

“He who has never learned to obey cannot be a good commander.” Aristotle.

Obedience is behavior that’s respectful and mindful of rules and laws. Obedience is highly admired ,appreciated and valued everywhere. It is not an obligation ,it is a choice .Being obedient is not giving up one’s choice or opinion ,it is humbling yourself to your superior figure .Obedience differs from compliance, which is behavior influenced by peers, and from conformity, which is behavior intended to match that of the majority. The satisfaction from obeying a superior’s orders can be self fulfilling and self disciplining; both of which make for a mature adult. And only a mature person can be a good leader because maturity helps in making good decisions , comprehend issues rightly and dealing with difficult situations effectively, all of which a good leader or commander must be able to do.

Importance of Obedience in Leadership

If there is anything common to every great leader in the world is that they all have been obedient in their life .Aristotle said “He who has never learned to obey cannot be a good commander”. The statement means to highlight the importance of being obedient in order to become a good leader. No great leader in the world has become great without being punctual, honest, disciplined and dutiful ,all of which are the inseparable characteristic of obedience .The best of leaders are those who have learned to lead by taking on the strengths and characteristics of other great leaders. Obedience bring discipline in life which in turn makes a person dutiful towards his job .And dutifulness and discipline are the two key characteristics of a leader . The morale of the group led by a leader depend upon the leader it is led by. The decisiveness and dutifulness of a leader toward his job are the strength of his army or group. A leader can’t lead his group or army without the submission of his supporters or people under him to his command and directions .A movement can’t be successful without a good leadership provided by an individual , emboldened by the active support of his followers who restore their unquestioned faith and allegiance to him.

And for that to happen, the leader must have a good connect with the men under him and must be able to instill in them the values of obedience to the supreme command. A rogue general or commander is likely to have a equally rogue army under him because his men would inherit the same trait of disobedience of their master. A soldier can never be a good commander if he has not followed the order of his commander while he was just a mere soldier .For an army to be strong, it’s soldiers have to be submissive to their higher ranked commander and generals .There must be an unanimity among all of them in order to get the task completed and emerge victorious. Much of the fate of an army in the battlefield depend upon the kind of men it is led by. A indiscipline and disobedient soldier would become an abrupt, unpredictable and weak leader in future. He will be subdued by his own men ,who will work on their individual discretion 

How Obedience Helps in Developing Leadership

Consider an example of a very talented basketball player who is the leader and match winner of his team .But, he would not have been so good at playing basketball if he hadn’t followed and restored faith in the advice and instructions of his coach/trainer who would force him to adhere to strict diet, daily routine practice and intense workout ,all of which were quite tiring and painful and sometime, his coach also used to go harsh on him for his mistakes during the practice or game for forgetting or not following things instructed to him . All the time while he was being trained , he showed deep allegiance to his coach that helped him become disciplined, punctual and dutiful, the three characteristic of obedience . Eventually, he became a very talented and renowned basketball player.

What if there is No ' Obedience' ?

Imagine if nobody follows rules or if rules never existed or nobody cares even for a second to what their superior or the supreme authority says, one could only envision a world of riot, complete lawlessness , unrest and chaos. Nobody will value or respect any relationship or anybody, parents, teachers, great leaders, god none. The precious advice of parents and respected figures will fall to deaf ears of everybody. The rule of law will cease to exist as no body will be abiding by it .The soldiers will be on mutiny and rampage as they would no longer be under the command on their generals .Their roguishness would lead to their defeat in the battlefield even though they would be high in number. The allegiance to one’s nation , organization or cause will be lost in air .People will no longer be governed by any law or authority and hence not intimidated by consequences of any wrongdoing. Everybody will become his own master and be guided by his own wills and regulations.

Obedience is No Slavery or Submission

Obedience might look to some as a facilitator of slavery or submission but it is actually not so. Obedience and slavery are poles apart .The former seeks to instill discipline, punctuality, dutifulness in others while the latter is a means of exploitation that demand complete submission to personal authority. The latter is motivated by personal greed, benefits, and gratifications of social, economic and physical nature. It seek to derive pleasure and benefits at the cost of others good. It is forceful, exploitative and inhumanly .The former is based on choice. A choice between good or bad, to be a good, strong, decisive, disciplined or dutiful person in life or to be indiscipline, weak, rogue, unpredictable or master of own’s will with no duty towards others .Obedience is driven by motivation to instill good values in a person so that he can be a good and caring family member, citizen and a good leader of a organization, army or nation if needed. Disagreement is welcomed by it and that disagreement is sorted out through consensus and mutual consultation so as to arrive at an unanimous decision or opinion.

Conclusion

Therefore, the Aristotle words , “He who has never learned to obey cannot be a good commander.” is aptly true with regard to the characteristics of a good leader and the importance of obedience in professional, personnel and public life.

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