Report by the Henry Jackson Initiative for Inclusive Capitalism, 2012
At a time when capitalism is under siege, it remains the most powerful economic system we have for raising people out of poverty and building cohesive societies. The Henry Jackson Initiative for Inclusive Capitalism task force—a transatlantic non-partisan private-sector group of business, policy and academic practitioners—has published a report acknowledging that the recent financial crisis has highlighted a number of weaknesses in the system and arguing that business needs to take the lead in improving the overall environment for business and the economy.
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The report sets out the case for capitalism, arguing that for all its faults, it has made the world healthier, richer and freer than previous generations could have imagined. People in capitalist societies live longer than their forebears, earn more and are better educated. Yet developments in the capitalism of the last 30 years—developments exacerbated by the recent crisis—have caused and are causing serious dislocations.
Millions of manufacturing jobs have moved to developing countries where labour is cheaper, leaving many in the developed world jobless and unqualified for alternative jobs that are emerging. Youth unemployment is unacceptably high. Income inequality has increased radically over the past 30 years in both the UK and the US. Market pressure and compensation structures are leading managements to focus more sharply on short-term profits than on the long-term needs of their businesses.
So how should business respond? The report argues that the ideal response is for companies to ensure that everyone derives benefits from business—meaning all stakeholders, not just shareholders. It identifies three crucial areas in which companies and institutions can make positive progress: education for employment, support for start-ups and small and medium-sized enterprises, and improvements in basic standards of ethical behaviour, corporate management and governance for the long term.
McKinsey’s managing director, Dominic Barton, is co-chair of the task force of the Henry Jackson Initiative for Inclusive Capitalism. He is also the author of the recent Harvard Business Review article “Capitalism for the long term” (April 2011), in which he argues that business must address the failures of leadership and governance within companies that have contributed to the recent crisis if it is not to risk losing popular and political support for the global economic system.
For more on Dominic Barton’s call to action for long-term capitalism, visit our global site.