Inclusive capitalism is fundamentally about delivering a basic social contract comprised of relative equality of outcomes; equality of opportunity; and fairness across generations. Different societies will place different weights on these elements but few would omit any of them.
Societies aspire to this trinity of distributive justice, social equity and intergenerational equity for at least three reasons.
First, there is growing evidence that relative equality is good for growth. At a minimum, few would disagree that a society that provides opportunity to all of its citizens is more likely to thrive than one which favours an elite, however defined.
Second, research suggests that inequality is one of the most important determinants of relative happiness and that a sense of community – itself a form of inclusion – is a critical determinant of well-being.
Third, they appeal to a fundamental sense of justice. Who behind a Rawlsian veil of ignorance – not knowing their future talents and circumstances – wouldn’t want to maximise the welfare of the least well off?
The problem: the growing exclusivity of capitalism
This gathering and similar ones in recent years have been prompted by a sense that this basic social contract is breaking down. That unease is backed up by hard data. At a global level, there has been convergence of opportunities and outcomes, but this is only because the gap between advanced and emerging economies has narrowed. Within societies, virtually without exception, inequality of outcomes both within and across generations has demonstrably increased.
The big drivers of globalisation and technology are magnifying market distributions. Moreover, returns in a globalised world are amplifying the rewards of the superstar and, though few of them would be inclined to admit it, the lucky."
These are the words of Mark Carney, the Governor of the Bank of England, delivered at a conference titled "Inclusive Capitalism: creating a sense of systemic", London (27 May 2014). The whole speech is here. (Note that I have removed footnotes from citations above and below).
Critical to what Carney is arguing is a phrase not quite used in this introduction. We find it in the conclusion. The phrase is 'social capital':
"By encouraging enterprise and rewarding individual initiative, market-based economies provide the essential conditions for economic progress. But social capital must be maintained for that progress to be consistently delivered.
The combination of unbridled faith in financial markets prior to the crisis and the recent demonstrations of corruption in some of these markets has eroded social capital. When combined with the longer-term pressures of globalisation and technology on the basic social contract, an unstable dynamic of declining trust in the financial system and growing exclusivity of capitalism threatens.
To counter this, rebuilding social capital is paramount."
This raises the question of what is meant by 'social capital'. Carney addresses this on p.3:
"To maintain the balance of an inclusive social contract, it is necessary to recognise the importance of values and beliefs in economic life. Economic and political philosophers from Adam Smith (1759) to Hayek (1960) have long recognised that beliefs are part of inherited social capital, which provides the social framework for the free market.
Social capital refers to the links, shared values and beliefs in a society which encourage individuals not only to take responsibility for themselves and their families but also to trust each other and work collaboratively to support each other.
So what values and beliefs are the foundations of inclusive capitalism? Clearly to succeed in the global economy, dynamism is essential. To align incentives across generations, a long-term perspective is required. For markets to sustain their legitimacy, they need to be not only effective but also fair. Nowhere is that need more acute than in financial markets; finance has to be trusted. And to value others demands engaged citizens who recognise their obligations to each other. In short, there needs to be a sense of society."
Carney's presupposition and perspective concerns the role of banking in capitalism and he rightly recognises that decisions critical to the advancement of inclusive capitalism in relation to rebuilding social capital are political decisions.
What does this have to do with the politics of Jesus in an election year for Aotearoa New Zealand?
First, the concept of 'inclusive capitalism' is suggestive of a way forward in an era which is arguably confused between the unworkability of socialism and of (exclusive) capitalism, with rising anxiety about increased inequality and lack of clear thinking about the alternatives to unbridled free markets. Not least because 'free markets' have been found to be rigged in certain ways, mostly to do with maximising short term gains at the expense of long term goals for society.
Secondly, the Bible seems to support both capitalist and socialist goals, while always offering a vision for the inclusivity of all humanity in the pursuit of blessed life. Inclusive capitalism appears to be a happy combination of biblical concerns.
But our election is about our votes. Every participant - democracy is a contribution to 'inclusive' economic systems - contributes to determining ways forward for society. If we were agreed that inclusive capitalism is the overall shape of the economy we would like our political leaders to advance, who will do that best?