The Declining Melancholy

by Glen

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IT IS BECOMING AN EVER MORE PUBLISHED theme that capitalism and inequality appear to be walking down the same path. Worse is the growing suspicion that the glaring global challenges facing this generation – climate change, unemployment, debt, widening gap between the rich and poor – are occurring because of modern capitalism, not in spite of it. The more data and economic insight that emerges, the more this hunch is bearing itself out.

World Bank executives recently held a discussion in which they wondered if the modern capitalist states have actually blown it – irrevocably. They spoke of how major economic powers like China and India, while investing heavily in Western opportunities, have made virtually nothing since the year 2000. Gone are the days when the affluent West would teach the rest of the world how to do business. Those global partners that once believed that are now seeing precious little return on investment these days.

So, yes, the modern free market is having its troubles, with many questioning its very foundations. We are in a kind of stasis – unable to get ourselves off the mat as affluent societies, though some have become fabulously wealthy in the process. It is this very inability to rise that Adam Smith, often claimed as capitalism’s initial architect, worried about. Peruse this insight he wrote some 300 years ago:

Though the wealth of a country should be very great, yet if it has been long stationary, we must not expect to find the wages of labour very high in it. It is in the progressive state, while the society is advancing to the further acquisition, rather than when it has acquired its full complement of riches, that the condition of the laboring poor, of the great body of the people, seems to be the happiest and most comfortable. It is hard in the stationary, and miserable in the declining state. The progressive state is in reality the cheerful and the hearty state to all the different order of the society. The stationary is dull, the declining melancholy.”

The “declining melancholy.” Don’t most of us feel this way, almost exactly? We used to more or less blindly accept that capitalism was the unparalleled vehicle for meeting human needs, improving lives, creating jobs, and building sustained wealth. Few vouch for such a view today. In fact, the modern makeover of capitalism has focused on a narrow conception of how to do business separate from the betterment of societies overall. Citizens have already worked themselves into a position of opposition to a largely out-of-touch political estate. Now they are rounding on the corporate community as their next opponent.

London, Ontario is like any other community, where large corporate entities negotiate significant breaks from municipalities in order to remain in place, while small and medium-sized operations (which make up some 80% of all employment opportunities) must endure endless loops of red tape in order to give their businesses a chance to grow. It gets downright dispiriting when the corporate giants decide they see better opportunities elsewhere, leaving communities reeling from the absence. If the corporate network feels it is in an endangered position, it is because they greatly underestimated the effects of such on-the-ground realities for local communities.

An increasing number of corporate leaders are acknowledging that, by maintain such operational practices, they eventually run the risk of losing their customer base, either through the lack of disposable income for customers or their decision to switch their loyalty to other firms that seem to “get it” about investing in community. Yet, just as with politicians, corporate executives continually ignore a citizenry that says the competitiveness of a company and the health of the community in which it operates are closely intertwined. Successful businesses require successful communities that can afford to purchase products and provide the public infrastructure required to do house, design, manufacture, and move products out to the market.

And successful communities must have businesses that can excel – there’s no other way around it. But there’s no point in giving away the farm to help large corporations if its means depleting the resources of the community itself, and endangering its future. If the formula is, successful company = declining community, then both sides of that equation will eventually lose. One cannot endless pilfer from the other if both wealth and social good are to be sustained.

We used to believe that there was a direct link between the profits a company made and the community in which it functioned. But it’s a new and globalized world, in which profits can increase exponentially, even as a community fades in potential. That only works for so long, until the community fights back and demands that at least some of the profits made in its confines be given back to social and equitable improvement. At present, both politicians and corporate elites hope that such a day will never arrive. They hope in vain. Communities are on the verge of fighting back for themselves and their children, and the businesses of the future that will prosper will be those that help them build that future.