Stakeholder Capitalism and the Soft Coup d’Etat: a “Golden Opportunity,” Part I

Stakeholder Capitalism and the Soft Coup d’Etat: a “Golden Opportunity,” Part I

The World Economic Forum
declares that it is time for a
‘great reset.’

The declaration of the Covid-19 pandemic in the spring of 2020 brought the world’s economic systems to a near-standstill, decimating small and independent businesses and creating catastrophic hardships on working people everywhere.  In June of 2020, the World Economic Forum (WEF)—an elite think tank representing global corporations, government officials, academia, the media, and social policy influencers—in partnership with the United Nations, announced a plan to address the systemic economic and social injustices that the pandemic revealed or magnified—things like “gaps” in access to goods and services, the fragility of supply chains, and the environmental impact of daily activities such as driving to work, for example.

Covid 19 presents “a golden
opportunity” for inaugurating
the transition to stakeholder
capitalism.

“The Great Reset,” as the plan is called, aspires to “seize something good” from the crisis by using it as the “golden opportunity” to implement “stakeholder capitalism” on a global scale.  Executive chairman and CEO of the WEF, Klaus Schwab, has long argued for a new global socio-economic order that is equitable, inclusive, resilient, and sustainable — “a new social contract that honours the dignity of every human being.” In order to accomplish this,Schwab argues,businesses and corporations across the globe must adopt the governance principle (i.e. a framework establishing a corporation’s strategic operations toward a mission or purpose) known as Stakeholder Capitalism.

Schwab claims that the realities of life in the twenty-first century—especially the constellation of technological, societal, and economic factors associated with The Fourth Industrial Revolution, or 4IR, such as automation, robotics, digital technologies, globalization, nanotechnology, bioengineering, etc.)—reveal the fundamental interconnectedness of people and planet and, as a corollary, the need to move beyond the outdated paradigm of prioritizing the self over the community.  Harmony among people and with the planet that we share is possible if we can set aside our attachment to individualism / individual rights. These must be tempered by reference to the common good, which looks toward the needs and preferences of the global public. Schwab’s reflection on the mentality guiding Germany’s post-WWII recovery captures the heart of Stakeholder Capitalism, viz. that “one person or entity could only do well if the whole community and economy functioned.”

Klaus Schwab describes the contours of 21st
century Stakeholder Capitalism

Schwab’s vision is a Communitarian one. Noted
researcher, author, and founder of the
Anti-Communitarian League, Niki Rapaana,
unpacks Communitarian theory in her
extensive blog and books, which are available  here. 

Stakeholder Capitalism is distinguished from two familiar economic models, both of which have a narrow vision of whose interest corporations are to serve:

1) Shareholder Capitalism, the standard model for most Western businesses, which sets profit maximization for corporate shareholders (i.e. equity investors) as its primary criterion of economic success, as well as

2) State Capitalism, a system in which the state dictates the structure and direction of the economy as a whole and requires individual corporations to conform to it. The primary example of this model is China.  

Where shareholder capitalism prioritizes the economic success of individual corporations and their investors – oftentimes at the expense of the economic success of the community as a whole, state capitalism seeks to maximize the economic benefits to the community as a whole – even if that leads to diminished returns for the corporate entities that drive the economy. 

By contrast, Stakeholder Capitalism seeks to harmonize the interests of the individual and the interests of the community. This “third way” is accomplished by evaluating competing interests through a forward-looking or long-term moral perspective that envisions people and planetary balance as the ultimate economic goal.  Or, in other words, sustainable development.  

That is the core of stakeholder capitalism: it is a form of capitalism in which companies do not only optimize short-term profits for shareholders, but seek long term value creation, by taking into account the needs of all their stakeholders, and society at large.           

– Klaus Schwab, “What Is Stakeholder Capitalism?”

In an article in TIME Magazine Schwab explains that as “stakeholders of our global future,” government, business, and civil society all “have a shared responsibility to shape the world in collaborative ways.” For Schwab, who has written about the intersection of economics, management, and mechanical engineering, shared responsibility and collaborative approaches are not ends in themselves. Rather, they must still promote the optimization of the pursuit of the well-being of all.  And this is where we begin to see the threat that Stakeholder Capitalism poses to traditional political institutions and, indeed, to the stability of constitutional order itself.  For representative government as established by the U.S. Constitution is designed not to optimize the pursuit of some new proposal claiming to promote the health and safety of the people.  The system of checks and balances at the heart of the Constitution is a mechanism for de-optimizing the process of innovation in order to deter the passage of unjust laws by encumbering the legislative process with multiple opportunities for deliberation and many requirements for consensus-building.

Report: “Measuring Stakeholder
Capitalism Towards Common Metrics
and Consistent Reporting of
Sustainable Value Creation,” WEF, 2020.

The “golden opportunity” presented by the declared Covid-19 pandemic consists in the revelation of the sub-optimal ability of representative governments to respond effectively to a traumatic and disruptive global crisis.  Governments were slow and ineffective in their efforts to contain the spread of the disease and to make timely public health recommendations.  By contrast, the private sector – especially technology and pharmaceutical companies – proved its ability to innovate, adapt, and collaborate to deliver a quick and effective solution to an immediate need.*  Just a few months prior to the pandemic declaration, Schwab wrote , that “Stakeholder capitalism … positions private corporations as trustees of society, and is clearly the best response to today’s social and environmental challenges.”  In this model, private corporations, which are able to optimize operations in response to pressing global problems, assume the place and powers heretofore assigned to representative government.

The Great Reset plan attempts to reconfigure almost every feature of society.  Its launch of Stakeholder Capitalism, which positions private corporations to assume responsibility for the programs and powers of governments that (in principle, at least) were designed to be accountable to the electorate, is one of the most radical and consequential of its innovations. The governmental functions to be privatized under Stakeholder Capitalism include the administration and oversight of public services such as health and education services, housing, safety, transportation, and cultural events; and they also include executive, legislative, judicial, and regulatory powers.  In the stakeholder model, these functions are delegated to private or quasi-governmental corporations, often through a public-private partnership, or “P3.” 

Absent the unprecedented economic devastation caused by close to a year of lockdowns, the likelihood that the people of Western nations would readily adopt the WEF’s “new social contract”  is questionable.  But with rising unemployment and decreased consumer spending come lower tax revenues and, subsequently, severe budget deficits that will prevent public agencies from fulfilling their public service obligations – and at a time when more and more people find themselves in need of this assistance.  Covid 19 is just the sort of crisis that’s needed if one wishes to launch a “new social contract” quickly and without the hassle of consulting the public. It is indeed a “golden opportunity.”

As we saw earlier, Stakeholder Capitalism sets up private corporations as “trustees of the social good.”  How well a corporation lives up to that responsibility will become the basis of its reputation capital score – that is, its value as brand – and that will be the key to securing a competitive edge in the radically-altered 4IR post-Covid economy. What better way to earn a reputation for social responsibility than to partner with cash-strapped public agencies in order to support public relief efforts with a variety of grants, expert research and development services, and operational support?  Through these partnerships, private companies – in contrast to the people or their representative government – will acquire the means to drive social progress and to act as guardians of entire “ecosystems” of people, places, things, and ideas.  Government administration is, in effect, outsourced to some private corporation that made a deal that couldn’t be refused.

In my next post on this topic, I’ll explain how The Framework for Inclusive Capitalism, executes the Great Reset through a strategy of corporate management of workers.

*I’m simply glossing the optics of the response to the pandemic, not making a statement about quality of that response or suggesting that it was a spontaneous, uncalculated one.