Can Capitalism bring inclusive growth ?

Andrew Heanngam Pamei *

At the outset, before I get bogged down in details, let me acquaint you with the terms 'Capitalism' and 'Inclusive growth'. Capitalism is an economic system based on private ownership of the means of production and the production of goods and services for profit motive. On the other hand, inclusive growth is a notion that advances equitable opportunities for economic participants during economic growth with boon incurred by every section of society.

Taking a glimpse of economic development, there have been an incessant fracas between capitalism, socialism and communism. The supporters of each of these credos have been reminisced till date, yet, eventually after the ebbing of Soviet Union and proliferating globalization, capitalism has; to a certain extent, proved its superiority and can be dogmatized victorious.

But the constant questioning over the success of capitalism has taken a turn from rapid economic growth to inclusive growth. There have been an unremitting allegations on capitalism that its growth is not trickled down to everyone. Thus, there pops up the significance to avouch whether capitalism could result into inclusive growth?

In a 1776 book entitled "An inquiry into the nature and the causes of the wealth of Nations," Adam Smith propounded a theory of the invisible hand, where he used the term 'invisible hand' as a metaphor to delineate the unintended social benefits resulting from individual actions.

He contended for the individuals to work for their self-interest as every individual is a rational being, this would ultimately result into the overall societal development. And so he gives the idea of free market without any regulations i.e, the idea of Laissez Faire state, which subsumes individualism and liberalism. But there are certain preconditions for the capitalist model to achieve the desired objectives; i.e, man has to be rational in every decision which is not practical, and there can be many instances of market failure such as asymmetry of information among economic agents, presence of public goods, externalities in production, consumption and also uncertainty.

Through this extrapolation, it sounds like capitalist model instead of inclusive growth would rather result in the deeper inequalities between the rich and the poor.

To come to the point of whether capitalism can bring an inclusive growth in the economy or not, first we need to know the fact that for an inclusive growth, growth itself is mandatory. Thus any economic model that promotes inclusive growth should have the ability to promote fast growth for the country and generate equitable opportunities for every section of society.

One can't deny the fact that capitalism has achieved fast pace economic growth through multifarious ways in many nations of the world, thereupon resulting into unprecedented rise in income, albeit uneven, which led to a healthy standard of living and increased prosperity of an individual which at the ultimate raises even the life expectancy.

So, there is an all told remarkable progress of mankind through augmented acceptance of free market ideology in both rich and poor nations alike. Research says that, prior to industrial revolution, 80% of world's population lived in abject poverty but by 1980 it has receded to 34%. By 2000 less than 20% of population lives on less than $1 a day.

Despite vast income disparities as a result of capitalism, the idea of Trickle Down theory states that this income disparities is for a short while and the benefits of economic growth would trickle down to the bottom, i.e, to the marginalized sections of the society. But sadly enough, it was found that it doesn't. Capitalism maneuvered the world economy to an unprecedented prosperity.

Having said that it also led to an increased inequalities between the rich and the poor which extends far beyond income, and this would in turn affect the access to employment, health and educational opportunities. Growth is without doubt an inane aspiration if improvement in income is not accompanied by.

Observing the present day facts of disparities, I concur with Marx when he said that income inequalities are integral to capitalist development, because, there are 1.2 billion poorest people in the world that account for just 1% global consumption, while the billion richest are responsible for 72%.

Research says that 85 richest in the world have accumulated the same wealth as the bottom 3.5 billion. As per study, the wealth of the richest 1% of world's population will overtake that of the remaining 99% in few years, and one in eight people goes to bed hungry every night, while 1.4 billion adults are overweight.

To achieve an inclusive growth, there is a stark significance on the part of the state, since many economist have also emphasized that growth may raise inequality initially but sustained growth will consequently raise enough resources for the state to redistribute and mitigate the effects of initial inequality. To achieve inclusive growth there is an active role on the part of the state to be played.

Capitalism unchecked would eventuate the exploitation of the marginalized and increasing income inequality. In fact, at this present scenario, nowhere is the country where there is fully capitalist model of economy. Today 'state and market' replaced 'state vs market' for the economic development of any country.

As I conclude, let me get along with our country's economy succinctly, where economic growth, self-reliance, modernization and equity are the four major objectives since independence. To accomplish all these aspirations, India enclasped mixed economy model which subsumes capitalist and socialist economy.

Though the role of public and private sector has been altering incessantly, private sector started gaining prominence after the LPG reforms of 1991. Thus, our country's economy where growth rate was admonished as it never peaked to 5% before the reforms now started escalating positively. Today despite India being fastest growing economy in the world, still concerns are raised over growth not being evenly distributed.

So, policy makers argued for faster and more inclusive growth in 11th and 12th Five Year Plan (FYP). Schemes like MGNREGA, National Rural Health Mission, Right to Education, Janani Suraksha Yojana et al have been launched for the aforementioned inclusive growth. In our country, state is playing a significant role to ensure that economic growth is experienced by all sections of society.

But eventually capitalism remains as a necessary evil, an evil which needs to be eliminated by the state and policy makers. It is therefore commendable that new models for capitalism be considered – capitalism like conscious capitalism, moral capitalism and inclusive capitalism because what matters most is not the extent of growth but the nature and the quality of growth.