Change is coming for capitalism post-Covid-19

The pandemic has raised questions about who and what we value. EdenTree’s Jon Mowll discusses ‘inclusive capitalism<’, ‘knowledge commons’ and innovative solutions.

The global spread of Covid-19 has increased awareness of systemic issues that pre-date and have been exacerbated by the pandemic. The virus has raised questions of who and what we – or rather, our economic systems – value, as well as questions around the nature of work, our collective humanity and the role of business in society.

As ShareAction’s Simon Rawson remarked: “Covid-19 has shone a spotlight on the social (S) component of ESG in a way that we have never seen before.”

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Accentuating inequalities

In the UK and elsewhere, the narrative of public health crises being “great levellers” is patently false. Those people who form the bedrock of our societies – nurses and carers, shelf-stackers and cashiers, delivery drivers and fruit pickers – are at greater risk of contracting Covid-19 because they cannot work from home. Without them, society would slow to a halt, yet many are paid scarcely enough to make ends meet.

Air pollution – a problem that is felt most acutely by poor communities living in inner cities – has left many people with heart and lung conditions, making them more susceptible to the virus. An unhealthy diet among lower earners similarly contributes to underlying health conditions – such as obesity and weakened immune systems. Socio-economic status has a profound impact on physical health, quality of diet, life expectancy – and Covid-19 shows this all too clearly.

If we broaden our scope to the Global South, it becomes clear that “physical distancing” is a luxury of wealthy nations. For people living in refugee camps, slums or shanty towns with very high population densities, social distancing is impossible. Disease burdens are already high, and access to medical care is beyond the reach of millions of people. Covid-19 is throwing into sharp relief both the inequality withincountries and the inequality betweencountries.

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Rethinking capitalism

Deep injustices of globalised capitalism are also laid bare by Covid-19. How can it be that many apparel sector workers in the Global South rely on unsustainable consumption levels in the Global North to earn what amounts to a poverty wage? That when such consumption grinds to a halt – a necessity from an ecological perspective – millions in the Global South face unimaginable destitution? That people go without food while crops wilt in the fields? That airlines burn jet fuel to fly empty planes around the world just to keep airport slots?

Ultimately, this is the result of a system where financial profit is placed before the lives and livelihoods of so many – as well as before the integrity of our collective life support system, the ecosphere.

The role that investors and businesses can play in the immediate term is clear. Short-term profitability must be disregarded and the safety and well-being of everyone in a company’s sphere of influence, including in supply chains, prioritised. It may be difficult for us, looking back, to understand how anything else was considered acceptable.

In the longer term, we need to recognise that the economic systems and dynamics that have dominated since the 1970s – and, in some cases, date back to the 1500s – may not be fit for the 21st century. We have seen, in recent years, shifts towards the ideas of “stakeholder societies” and “inclusive capitalism”. Change is afoot.

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Innovative solutions needed

We are already seeing the seeds being sown for a new economy. EU finance ministers, alongside many other stakeholders, are pushing for a continent-wide “green recovery”. Meanwhile, 170 Dutch academics have put together a five-point plan for a post-Covid-19 economy, building on “degrowth” principles. 

At the city level, economist Kate Raworth’s “Doughnut” model has recently been adopted by Amsterdam, as the capital seeks to recover betterfrom the dislocation caused by Covid-19. The aim is to create a city meeting the needs of all, without putting undue pressure on the ecosystems supporting it.

At a company level, Medtronic has made low-grade ventilator specifications open source, allowing the ventilators used in less severe cases of Covid-19 to be manufactured by anyone. Such collaborative, knowledge-sharing initiatives or “knowledge commons” will be central to tackling global challenges at a local level.

From a social perspective, one of the most intriguing developments of the past few months has been the introduction across much of Europe of policies more or less described as universal basic income (UBI). UBI is a means of ensuring that everyone can meet their basic needs. The impacts of instating UBIs would be profound, not least in removing the coercive forces that “push” people into often socially useless work. This would fundamentally alter the power dynamic between labour and capital, allowing people to negotiate better working conditions, form new ways of working and ultimately refuse work if they choose to. Removing coercion to work also has the potential to stymie the overproduction placing unsustainable strain on the ecosphere.

The greatest challenge of our time is ensuring societal well-being across the globe, while regenerating the natural systems we have degraded. This will enable us to break free from the “iron cage of consumerism” and place our economies at the service of societal and planetary well-being. Our task at EdenTree is mapping the role of business and investment in a socially aware economy.

Jon Mowll is responsible investment analyst at EdenTree Investment Management.