The Oxford English Dictionary defines capitalism as “an economic and political system in which a country’s trade and industry are controlled by private owners for profit, rather than by the state.” Similarly, Webster’s Dictionary refers to capitalism as “an economic system where there is private or corporate ownership of capital goods, investments are determined by private decision, and prices, production, and the distribution of goods are determined mainly by competition in a free market.”
Three key factors characterize a capitalistic society: Private, profit-oriented, and openness.
Proponents of the capitalist system cite its virtues, such as its ability to lift millions from poverty and improve their lives, the choices and conveniences it provides at competitive prices, and its ability to provide access to quality goods for all. However, capitalism has also been criticized for a number of reasons throughout history. Most notably for, 1) Inequality: The benefits of capitalism are rarely equitably distributed as wealth tends to accrue to a small percentage of the population. And, 2) It encourages greed/materialism: Since profit is inherent to capitalism, the system creates incentives for capitalists to pursue profit over decisions which would maximize social welfare.
These criticisms on capitalism have given rise to a clamor for more inclusivity in enterprises and capitalist activities. Nigel Wilson, a British business leader, wrote in his July 2018 Forbes article, “We must make capitalism more inclusive by giving everyone a stake in its success. Better capitalism – more responsible and inclusive, with better shareholder stewardship and a more long-term focus – goes hand-in-hand with investing more, not less, capital.” He continues to say that “It is smart investment that benefits a broad range of people, including of course the providers of the said capital. But it also benefits users of the asset it is invested in and ripples further out into the economy.”
Coalition for Inclusive Capitalism
In response to this call for inclusion, businesses have come together and launched the “Coalition for Inclusive Capitalism” in December 2020. It is a movement of the world’s business and public sector leaders who are working to build a more inclusive, sustainable, and trusted economic system. These leaders believe that we all have a role to play in addressing society’s challenges. We can all do better and together, our actions can improve the lives of people around the world.
Quoting from their website “We consider that inclusive capitalism is fundamentally about creating long-term value for all stakeholders – businesses, investors, employees, customers, governments and communities – guided by an approach that provides: Equality of opportunity, equitable outcomes, fairness across generations, and fairness in society.”
Its members were inspired by the teachings of Pope Francis, who has challenged leaders to bring concrete ideas and take decisive action to extend the benefits of the economic system to all people while protecting the planet. The Ayala Group recently became the first Filipino business group to join this council.
SharePHIL had the privilege of having Ayala Group chairman and CEO Jaime Augusto Zobel de Ayala as keynote speaker during the 2021 inaugural meeting of members. He spoke of the need to “reframe the orientation of the capitalist system towards greater sustainability and inclusion, and that we in the private sector face the huge task of reorienting our institutions towards sustained and inclusive economic growth.”
At the outbreak of the pandemic, the Ayala Group put inclusive business into practice following its three-pronged approach of employee protection, support to the business ecosystem of suppliers, locators, customers and MSMEs, and support to the community and members of society. Further, the Ayala Group, together with other conglomerates and businesses, came together to work with the government in providing facilities, equipment, and other resources to respond to the impact of the pandemic. He also lauded how the private sector was very engaged and collaborative, and as united in a crisis, taking an “all-of-society approach.”
JAZA went on to say that SharePHIL can contribute to this movement by increasing the base of socially conscious and responsible investors by integrating these principles in its investor education and outreach programs and also partnering with academic institutions to analyze the tangible impact that inclusive capitalism has contributed and can further add to the Philippine economy.
Reshaping the economy through inclusive business
We at SharePHIL also believe that businesses need to be inclusive for a successful economic recovery, hence our 2021 theme of “Inclusive recovery through smart investing.” Following the challenge posed to SharePHIL, we are launching this year’s two-part online summit series on Reshaping the Economy Through Inclusive Business, where industries who are poised to lead our country’s economic recovery will speak about how we can sustainably foster inclusive economic growth through businesses that place an importance to stakeholder value.
Part 1 in April – From bricks to clicks: Thriving in the digital world. We will look at how connectivity and access have bolstered consumer spending which is a major contributor to our economy, accelerated the pace of digital finance, and how e-commerce and on-demand services served as a lifeline for minimum wage earners and small business owners.
Part 2 in August – Business unusual: From shareholder to stakeholder centricity will explore the value of inclusivity and sustainability in leading businesses and how these can make them more attractive investments.
I would like to close this article with some inspiring words from Pope Francis when he spoke about the Coalition for Inclusive Capitalism: “Authentic development cannot be restricted to economic growth alone, but must foster the growth of each person and of the whole person – it involves a renewal, purification and strengthening of solid economic models based on our own personal conversion and generosity to those in need.”
The author, Ma. Aurora “Boots” Geotina-Garcia is vice president of the Shareholders’ Association of the Philippines (SharePHIL) and a trustee of the Institute of Corporate Directors. She is president of Mageo Consulting, a corporate finance advisory services firm.
To learn more about SharePHIL and the Online Summit Series, visit http://sharephil.org.