Equitable Capitalism is an economic system designed according to the moral value of equity which includes the values of fairness, Justice, and impartiality. And is operated in that way by the actors in the system, conscious of the need to maintain confidence in it.
It is a very different from any form of capitalism to that which has existed to date, and attaining it will be a challenge. I present it as an ideal to strive for in pursuit of sustainable widely shared prosperity, measured in terms of human flourishing and wellbeing, and as the true measure of a civilised society, the goal of the Enlightened Enterprise Academy.
Equity should be the moral value that informs the design and operation of any system over which we have influence, and which claims to create value for, and to serve, humanity. And it should be the moral value that guides the purpose of all the institutions we depend on to manage the systems we depend.
As a moral value equity, which includes the values of fairness, Justice, and impartiality, is the means by which we can ensure the inherent worth (i.e. dignity) of all people, other beings and other things - including the environment and our planet - is recognised. As such, Equitable Capitalism functions well when it is based on the "Dignity Theory of Value", which I have described in a previous article. But it does not function well based on a utility and "Market Price Theory Of Value", the foundation of today’s capitalism.
Price is a very poor proxy of value. It has little regard for the inherent worth of anything, nor any regard for the importance of the moral value of equity. It is the reason our systems, including the economic system, has been dehumanised.
Economists have argued the economy, and the market mechanisms in particular, are amoral – having no moral quality, being neither moral nor immoral. But economics is a social system, so this argument is nonsense.
Our current economic system is immoral given the fact it is not designed to achieve outcomes for society and the citizens it is supposed to serve, and to do so fairly. The outcomes are in fact unfair, unjust, and partial to those with the power to game and corrupt the system in their favour.
Striving for a form of Equitable Capitalism would inform policies designed to end abuses of power, and it would do so in an impartial way. It would also focus on the design and implementation of policies that bring about greater fairness and justice.
In the UK we recently saw the government impose higher rates of tax on earned income, and no increases on unearned income, a clear abuse of power. This intensifies exiting inequities, which are already extreme. It was an unfair and unjust step, a further corruption of an already failing form of capitalism.
As the Institute for Public Policy Research (IPPR) said in a report, long before this latest move......
“There is a fundamental injustice in the way that income from work is taxed more highly than income from wealth.” They add, “these differences significantly benefit those with wealth, and those who can organise their income to be paid in that form. This is plainly unfair.”
They also note, “much of the increase in wealth comes from unearned economic ‘rents’ which do not contribute to economic output or growth and can be taxed without significant economic impact.” And even before the new taxes on earned income the figures show the stark contrast.
The report also says, “While earned income is taxed at 20, 40 and 45 per cent, capital gains are taxed at 10 and 20 per cent (and 18 and 28 per cent on property, excluding first homes), while dividends attract rates of 7.5, 32.5 and 38.1 per cent.”
Unearned income, otherwise known as rents, led Martin Wolf the Chief Economics Correspondent to the Financial Times to call capitalism in its current form "Rentier Capitalism", and he warned of its consequences. We need to evolve from this corrupt form of capitalism to Equitable Capitalism as soon as possible.
The consequences come in the form of many social ills, including the breakdown of social cohesion, seen in the rise of political populism on the far right and far left, and the greatest threat to democracy that most countries have experienced in their living memory.
"The actors with a vested interest in the status quo seem to be unconscious of the problems, their causes, or the impact of maintaining the status quo. And they seem not to care about the massive decline in confidence in "The System". But there will be a great awakening at some point, and we already hear people saying "enough is enough"."
Previous awakenings, usually triggered by major crises such as wars or great depressions, resulted in policies to make economies more equitable. Policies such as the Marshall Plan or the New Deal.
The current crisis caused by the COVID pandemic could have been an opportunity to reduce inequality and increase equity. Instead, the UK government chose to announce policies that do precisely the opposite. Greater inequality and inequity will further undermine confidence in “the system” and intensify the associated problems.
Whilst, for a short time, it seemed the “class war” in the UK might be over, or the end might be in sight, it is now clear that idea was false. But, whilst it was said we had three classes (working class, middle class, and upper class), it could now be argued we have only two, the working class and the rent-seeking class.
"The current form of capitalism is not sustainable, but the death throws of it may be long and painful. It is to be hoped those with a vested interest come to realise the folly of taking capitalism and the economy over a cliff edge. They ought to recognise that reforms are needed to restore confidence in “The System.”"
We will need cohesive societies if they are to be strong enough to tackle the huge collective problems all countries face, now being referred to as the polycrisis and the permacrisis, which I recently write about in another article. The vested interests must urgently recognise they will not be able to enjoy the status quo much longer and Equitable Capitalism is the only option.