On “Inclusive Capitalism”..

Came across a new buzzword today – “inclusive capitalism“. Not surprised given the great concern in the minds of many about the unequal distribution of rewards/benefits of capitalism..Apparently even the IMF has jumped in the fray..So doubly refreshing (in this environment) to read the views of Dr Pirie (President, Adam Smith Institute). Excerpt from the website (emphasis added):

“When people forgo current pleasures and invest instead, hoping to gain by providing goods and services people might want in future, we call it capitalism. It has generated the wealth that has lifted large parts of humankind from subsistence and starvation, and has enabled us to fund life-saving medicine, education and the arts, as well as opportunities and material comforts.

Just as democracy can be corrupted by repressive populism, so can capitalism be perverted by “rent-seeking” – when people seek to gain more than the goods and services they produce are worth to others.

Sometimes they use political influence to sustain monopolies or to prevent new entrants and innovators from competing for custom. Sometimes they use governments to provide subsidies from taxpayers, or to prohibit cheaper imports.

Sometimes they do deals with governments that provide taxpayer funds to cushion losses derived from incompetence or recklessness. These forms of crony capitalism detract from capitalism’s real benefits and achievements.

What capitalism should now do is to free itself from these rent-seeking perversions and spread its benefits as widely as possible.

It should act against anti-competitive practices to give people instead the power of free choices between competing goods and services. It should spread ownership of capital and investment as widely as possible through such things as personal pensions and individual savings accounts.

It should lower the barriers to entry so that everyone can aspire to start up a business to bring goods and services to others. It should seek a tax system that rewards success rather than punishing it.

Capitalism should become inclusive, making it as easy and as attractive as possible for as many as possible to set aside some part of present consumption in order to invest some of their resources and their time in providing goods and services that others will want. It should become true capitalism.”

Related Posts: Unbridled Capitalism? Why Socialist economies always fail, Prof Bhagwati on inequality and why Karti Chidambaram should read Friedman.