Social democracy, the best alternative

According to Financial Times writer Andrew Edgecliffe-Johnson in his article “The war on woke capitalism” in the paper’s May 29, 2022 Weekend issue, “Nearly half a century after the economist (i.e. Klaus Shwab) launched his Swiss gatherings for world leaders, executive and financiers, his belief that businesses should serve all their constituents equally seemed to have prevailed over the old notion that companies exist only to make profits for their owners.” Shwab is the founder of the World Economic Forum which meets regularly in Davos, Switzerland. He has been advocating stakeholder capitalism.

Its basic tenets have been termed as ESG, which are a “comprehensive measure of a company’s long-term commitment to socially responsible investments and Environmental, Social and Governance investment standards.” These prioritize a company’s positive contributions to its community, the environment and social impact – and not just the company’s stakeholders.

These tenets assume that business will take responsibility for assuming issues such as climate change without worrying about its profitability for the company. I believe that stakeholder capitalism has gained popularity especially in recent years when the gap between the rich and the poor has widened to the extent that less than a hundred persons own at least 50 percent or half of the wealth of the world.

This has of course led to the rise of populism and has triggered a wave of anti-elitism throughout the world. The result has been the rise of populist leaders or people who pretend to be populist in countries which have a tradition of liberal democracy. These are individuals who claim to represent the common people and use anti-elitism as their political battlecry. This has happened in countries like the United States, France, Hungary, the UK, even in the Philippines.

I admire the basic principles of stakeholder capitalism which I agree with. My concern for these tenets is that they are dependent on the personal advocacy of business leaders. The assumption is that business will, on their own, realize that their sole focus or ability leads to income inequality and the rise of populism. This dilemma assumes that business leaders would be willing to sacrifice profitability for the good of the community as a whole.

One example of this is the conflict between business leaders who advocate for a living wage and those whose goal is to minimize any increases in the wage with the excuse that higher wagers will make their companies less competitive. Even now, with the proposed minimum wage increase, we hear a cacophony of voices from certain business sectors complaining that these minimal wage increases are too high.

But many of these businessmen who are against the increased living wage are also the same people in public who believe that by donating to disaster relief and other charity projects, they have fulfilled their obligation to the community.

I accept the tenet that it is very difficult, but not impossible, for business leaders not to uphold the maxim of maximizing profitability. This was the main message of the economist Milton Friedman, who said that the sole purpose of business is to maximize profit. However, if the expectation is that business has obligations to the community, it will be difficult for major business holders to accept this principle. I have heard prominent business leaders say that this obligation of the business sector to the community should not be deemed an obligation but rather left to the conscience and good will of business leaders.

My answer is that business leaders will view any attempt to enforce stakeholder capitalism on a non-voluntary basis as undue interference in how they manage their business.  The very term “capitalism” implies that there should be no interference in how the owners of businesses manage their businesses.

Stakeholder capitalism with minimal interference from government is based on the assumption that as the capitalists become wealthier, they will share their profits with the people. This does not happen. Even Pope Francis has acknowledged that this “trickle down” principle has not worked and will never work. As the rich get richer, instead of allowing their wealth to “trickle down,” they will simply buy bigger yachts, more private planes, houses and apartments in other countries or put their money in secret bank accounts in money laundering financial institutions.

On the other hand, I do not favor communism or the ownership of all means of production by the government. Governments everywhere in the world have proven to be inefficient, so I think that the best alternative is to find a middle ground between capitalism and communism that will preserve the principles of a market economy but will be regulated by the government.

Populist leaders claim that they personally can manage a country’s economy and find the middle ground between free enterprise and advancing the material welfare of the common people. This does not work, either. For me, the best middle ground that will satisfy the preservation of a market economy and at the same time also advance the basic tenets of ESG is social democracy.

Social democracy is a system of government that has values similar to socialism but under a capitalist framework. The ideology has people having a say in government actions and supports “a competitive economy with money while also helping people whose jobs don’t pay a lot.” This has proven successful in Nordic countries.

This social democratic movement is gaining traction even in the United States, where it is led by prominent leaders like Bernie Sanders, Elizabeth Warren and Alexandria Ocasio-Cortez.

Stakeholder capitalism will not work on a voluntary basis in the same way that “trickle down” will not. However, we cannot allow populism to be the only alternative. The ideal alternative therefore is really social democracy.

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We continue to write with these June Zoom specials: Adult Series session with public historian and columnist Ambeth R. Ocampo on “Writing the Past, the Present, the Future” on June 18, 11:30 a.m.

Young Writers’ Hangout on June 25 with Alma Anonas Carpio, 2-3 p.m.

In answer to inquiries, Write Things’ six-day summer workshop “Writefest” will have a second run on June 27, 29, July 1, 4, 6 & 8 (MWF), 3-4:30 pm.

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