Inclusive Capitalism is one new concept which covers the human equality and diversity alongside driving returns to the shareholders of a venture. Most of the Fortune 500 companies give stock options to their executives, shares to their staff in addition to annual bonus while also make heavy contribution toward corporate social responsibility by providing a proportion of their profits as grants to social impact causes.
The concept of building shareholders value has always been a driving force of a business especially for the listed companies. In a recent wave in the corporate world, businesses are not only viewed as a profitable ventures in terms of profit but also evaluated on the basis of their contribution towards the society.
There are only a few examples in Pakistan where we see Inclusive capitalism and shares were issued to the staff and to the community living at the site of their industrial facilities and fields. The premise behind inclusive capitalism is that Pakistan can’t succeed if it leaves its people behind. Government of Pakistan issued shares of big state owned enterprises to the staff and local community from 2008-13 and later Government of Sindh also issued shares to local community of Thar from the Sindh Government’s Thar coal mine business from 2013-18. Such high-profile success stories indicate that businesses founded on this model can be a great benefit to those who participate in them and to society at large. Some experts wonder how wide an impact of inclusive capitalism can be on the society, and how corporate Pakistan will have to change its traditional views on wealth ownership in the absence of any regulatory reform. The local villagers in Thar Coal area and employees of state owned entities have become entrepreneurs and are earning returns from the organizations.
Capitalism is all about optimal allocation of resources. Some say that the more it is allowed to thrive, the higher the number of people who will be impacted positively by its growth. So, in that sense, being inclusive is perhaps a natural process. But for this to happen, what is really needed in Pakistan is more liberalization and fundamental reforms in the country. For instance, until 2003-04, the fruits of telecom were not available to 95 percent of the country. Because of the reforms in this sector, it is now available to over 60 percent of the country. Therefore, it wouldn’t be wrong to say that, in this sector, capitalism has become a force for good. We could have the same thing happen over and over again in different sectors.
If regulatory reforms can be made in Pakistan then corporations can be forced to do inclusive capitalism. Otherwise, there will be social unrest. The issue then will be about the level of commitment of the corporates given that they always have to walk the thin line between their responsibilities toward the shareholders and the society at large. In order for inclusive capitalism to work, big corporations in Pakistan must start to realize that they are a part of a larger society, part of a complex network and that all the wealth that they produce is not their own. Unfortunately Pakistan doesn’t have much big corporations and private sector is not so keen in getting into such initiatives therefore the only option left with the society is the state own entities. Therefore, we need to move away from the centuries old model and start looking at other models like the Scandinavian models. The first step toward this is to generate public discourse and debate. We hardly see healthy debate on this in the media and in the corporate world.
On one side, inclusive capitalism means to share profits with lower income group and bringing them in the corporate world while on other, some say inclusive capitalism fundamentally means whether people have equal opportunities. Not all get equal opportunities in terms of health, education and social upbringing. Just see the education system of Pakistan, it is defiantly not balanced and equal. When one looks at inequality with regard to access to the quality education, Pakistan has greater disparity than almost any other country in the world. Therefore, if we talk about inclusive capitalism to be realized in Pakistan that is only possible, if the structure provides equal opportunities and not just isolated examples of few companies.
It is being viewed that organizations expect to see significant progress within the next decade towards aligning public and regulatory demands with inclusive economic aims. It is also anticipated that profitable entities will be operating in a context that is friendly to work towards inclusive economies.
In recent years, the mantra of inclusive growth is taking over the public policy debates addressing poverty alleviation and sustained development in the developing world. In the last decade, the Asian countries especially China and India have maintained a rapid and sustainable economic growth. The double digit growth of these economies on one hand surprised the world with overall increase in the GDP, and per capita income, but on the other hand there has been a persistent negative impact on the income distribution.
Today, policy-makers in Pakistan have once again geared the public policies towards growth which will be dependent on sectors and inclusive of majority of labor force of the country. The desired growth strategy should not only foster the private sector but should also protect the vulnerable segment of the society. There are certain limitations of inclusive growth paradigm. Economic growth is the sole driver of poverty reduction whereas growth has inbuilt process of creative destruction and can create poverty. If the growth is not sustained and there is insufficient growth in GDP as in case of Pakistan, this may lead to decline in welfare of large population.
While looking at the current situation of Pakistan, it seems that inclusive capitalism will not see immediate commercial and social returns. It will only be in at least 15 years from today that one will see returns and be able to confidently say that these examples are working. Inclusive capitalism requires long-term commitment from all stakeholders (employees, employers, investors, etc.). It may take time, but we have to be optimistic.