From UPSC perspective, the following things are important :
Prelims level : CSR norms in India
Mains level : Paper 3- Sustainability and capitalism
The article calls the corporates to adopt new capitalism in the aftermath of the pandemic which involves alongside the profit motives the commitment to giving back.
Capitalism in the aftermath of Covid-19
- The 2008 crisis was caused by the excesses of global finance, whereas the 2020 economic crisis was caused by a pandemic that spilled over to the economy.
- While the current pandemic is the first of its kind in nine decades, the dire economic consequences are very similar to that global financial crisis just a decade ago.
- What is also similar is the policy response that has followed both the 2008 and 2020 crises — the Keynesian prescription of the government stimulating a depressed economy by using monetary and fiscal instruments.
- Cheap liquidity preserves the wealth of the asset-owning classes even as the real economy stalls.
- However, over-stretched governments head towards a debt/fiscal crisis which eventually forces austerity, hitting those dependent on government handouts.
- It is this inequality in outcomes that is unlikely to happen this time.
- Already, the G-7 has pledged to maintain a minimum level of corporation tax.
- There have also been calls for additional taxation, particularly on the assets of the wealthy.
What corporates can do
- Instead of waiting for governments to react under popular pressure, corporates must themselves set out on a different path.
- Covid-19 has brought home the fragility of human life and the deeply interconnected fate of humanity.
- Outside of the pandemic, there is no better example of this than climate change which, if left uncontrolled, could devastate the world.
- While governments negotiate, corporates must respond with voluntary commitments to mitigate climate change.
- Climate change mitigation should be at the core of all business models going forward.
- In addition, promoters need to come forward to pledge more of their wealth towards philanthropy.
- India implemented the concept of corporate social responsibility as part of its legal framework a decade ago.
Investor pressure for action towards environment
- The ability of the private sector to work for the greater good seems implausible.
- But it is already happening — not because of government regulation, but because of investor pressure.
- Progressive actions towards the environment and society are being rewarded by investors.
- The absence of such progressive actions is being penalised.
- Market forces are, after all, embedded in society.
- They are perfectly capable of moving beyond profit.
Threat of new-age tech capitalism
- The real challenge for society, government and capitalists comes from the new-age tech capitalists.
- They are the new monopolists or oligopolists who don’t exercise their power over society by charging a supernormal price.
- In fact, a lot of them provide goods and services at hefty discounts.
- Instead, what they seek is to control information and influence choices.
- Many of the promoters of such enterprises are philanthropists but society and governments have a different set of concerns on how they exercise power.
An imperfect world is passing through a perfect storm. There will be big changes on the other side. Capitalism will survive. It could thrive by choosing its own pathway or it could stumble along under the hammer of big government fuelled by populist backlash.