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Sinking Societies, Shrinking Markets

Last Saturday night, between some lovely blues pieces, one feisty activist from Amnesty suggests to me that the Tatas are not as holy as one thinks. I thought about it and asked her if, in her view, the Catholic Church was defined by the number of pedophiles in its ranks. The argument soon faded away in the bars of the next BB King masterpiece. It set me thinking for the rest of the weekend. There’s an old English expression about how everything looks like a nail to someone with a hammer. Perfectly well-meaning folk with a mission may just be blindsided to the large amount of good sitting behind some explicable (though not justified) anomalies.   

Both institutions, like others you could come up with, have undoubtedly had their share of questionable decisions and some rather dodgy leadership too. But it is equally true that these entities over a period of history have done more to reduce inequities than most. I have to disclose that at heart I am a capitalist and not anywhere close to being converted to socialism. This is not about the wealthy versus the rest, but about an environment in which the “rest” is sinking further. The macroeconomic question here is whether this makes for sustainable marketplaces. 

Thomas Piketty, in his book Capital in the Twenty-First Century, makes a compelling case for re-examining our apathy to the current contours of wealth distribution. Through his brilliant expression R > g, he argues that if return on cornered capital (R) is going to be perennially greater than the growth (g) of the market, there is little hope for the little people. So in the end, just who will the rich sell to? 

Just like climate change or any other disasters of instability that we relentlessly continue to build, unsustainable economic environments are a reality we are creating through a cockeyed approach to wealth creation. My driver, on way to Kolkata airport this morning, makes this childlike attempt to explain the earthquake, suggesting that it’s all this digging we are doing to build flyovers and underpasses that’s causing dangerous shifts under the earth. A naive oversimplification perhaps, but you get his drift. 

I recall a thought-provoking documentary from last month entitled Born Rich. An amateur attempt by the Johnson & Johnson heir to give us an insight into the attitudes of those (not so meek) who have inherited the earth. It is a telling commentary on how there is a concerted effort, assisted by lawyers, trustees, wealth advisers and the lot, to keep it all in the family. Nothing wrong with wealth preservation, but if it means that the benefits of Piketty’s “R” will be restricted to the small club of capital owners, then we must be prepared for the long-term effects on the economic climate. Unfortunately, like climate change itself, it happens in inches and we won’t quite get it until a tsunami like the Wall Street crash is upon us. Immediately thereafter, some barricades like Sox and Dodd Frank will come up, after which life goes on as if nothing ever happened. 

Now, it is in this context that my young activist friend’s angst must be examined. Entities like the Tatas and the Church have undoubtedly generated vast quantities of wealth and managed much of it well. But equally, consider their approach to redeploying it. Not only have they been abundant in targeting their billions, but have ensured that large swathes of those communities have been educated, healthy and thereby prospered (Howard Schulz openly declares his intent to create in Starbucks a microcosm of the US he dreams of). In the bargain, these organisations are creating massive, thriving markets that have kept them alive and well through generations. Is there a lesson in this for all of us, individuals, business leaders and policymakers?   

(This story was published in BW | Businessworld Issue Dated 18-05-2015)