Widespread Economics of Mutuality Press Coverage in China
Published October 2019
The Economics of Mutuality has recently featured in three leading Chinese national newspapers. Selected extracts have been translated and transcribed below.
The Economic Observer
As one of the top three business newspapers in China, The Economic Observer is often referred to as the Chinese equivalent of The Financial Times. It published an article reviewing the Chinese translation of Completing Capitalism by Bruno Roche and Jay Jakub, People, Power, and Profits by Joseph Stiglitz and Winners Take All by Anand Giridharadas. The review was written by Wu Chen, Managing Director at The Economist Global Business Review.
‘An important driver for the development of capitalism in the western world in the past 30 years is the maximisation of shareholder value. However, excessively focusing on the accumulating and grabbing financial capital may result in the ignorance or even loss of other stakeholders of the enterprise: such as labourers (also named as human capital), upstream and downstream enterprises of the supply chain, the community that the enterprise locates in, or the natural environment.
What should enterprises do? Completing Capitalism changes its view and raises the equally important question from the enterprises' perspective: what are the targets beyond making a profit? Or even further questions that should making profit be the only or the primary target for enterprises?
The concept of “Jubilee” suggested by Bruno Roche, Mars Chief Economist and author of Completing Capitalism, is worth rediscovering since it reminds us with an ancient method that thinks about human, environment, wealth and their respective status in the world.
As man needs to rest one out of seven days to recover physical strength and land needs to lie fallow one out of seven years to restore fertility, more than two thousand years ago, the Jews had proposed that a jubilee year should be set one out of fifty years, during which all debts between debtors and creditors should be canceled, all pledged lands should be returned to the original owners (or their heirs), and all slaves should be released. The reason is easy to understand, which is to provide an opportunity for each generation to restart. The jubilee year releases people from overwork and excess debt, earth from excess use and overexploitation, and wealth from over-accumulation of a few people.
We should respect the multiple supporting pillars for economic development, instead of the unitary financial capital. Earth, together with the rest, regeneration, and circulation of human and capital, is the driver of sustainable development. Capitalism is only a way of organising the market economy in several thousand years of human history, and the finance capitalism, which only pursues shareholder value, has gone wrong. On one hand, capitalism led by financial capital may not be the most efficient if including the evaluation of use of other capitals (i.e. human capital, social capital, and natural capital), and may intensify the disorder; on another, the profit-seeking financial capital enlarged the economic inequality and caused the uprising of populism.
The propose of the Economics of Mutuality is to explore the effective reform of organising forms for the market economy. Roche thinks that such reform should first extend the boundary of capitals that enterprises should focus on, not only financial capital, but also human capital, social capital, and more importantly, natural capital (since we only have one earth). All these capitals should be evaluated like financial capital, and form a unified standard for accounting.
The change of scarcities of various capital is the characterisation of economic transformation and the change of times. As of the 18th century, land is with the most scarcity; after the industrial revolution in the 19th century, production means including machinery and tools become vital; the 20th century marks the aggressive expansion of financial capital; and massive transformation is seen in the 21st century, in which knowledge is the most important capital in the era of digital economy, whose values come from the ability of enhancing products and services by means of knowledge, technology, big data analysis, etc.
The change and transformation of capital will inevitably bring in new situations. Finance capital was a scarce resource after World War II, yet with no scarcity in the current times, when scarcity is attached to other capitals, in particular to natural capital. Therefore, new economic organising forms require to comprehensively measure the input and output of other capitals, to create a way with more vitality and efficiency.
Roche, therefore, suggests that enterprises should establish a high aim, which must not limit to the maximisation of profit. A business should hold an aim, and making money is only an approach, which could ensure the sustainability of business and better achievement of the aim.’
China Economic Times
‘Bruno Roche points out that, within a complete value chain, a fragile link is vital to the prosperity of a company. If the link breaks, the company will not survive and this can be explained as the scarcity of management from an economic perspective.
In the current world, financial capital is no longer scarce. However, natural resources are becoming increasingly scarce and economic inequality in society is intensifying. This means that our economic model needs to be adjusted and that business methods need to be transformed to cope with the new scarcities emerging in the context of the new era in order to achieve sustainable development. This transformation is a change in the way of thinking and governments should support companies in making such a change.
Bruno Roche highlights that both the East and the West are facing the same problem currently – that business models are facing change. Compared with the traditional business model, which seeks the maximisation of profit, the mutuality approach advocated by the Economics of Mutuality is better. It recommends that companies not only pursue profits, but also focus on the entire ecosystem in order to maintain their health and sustainable development.’
The Global Times has a significant reach in China with a circulation of over 2 million – mostly among government officials, business executives and professionals. An interview by Special Correspondent Zeng Shi with Bruno Roche was published under the title ‘Bottom of the Pyramid Results in a Larger Market’. Bruno shared key ideas behind the Economics of Mutuality and discussed China’s role in the global economy.
‘The USA’s Friedman economic model claims that the ultimate aim of business is to maximise returns on shareholder investment. However, the Economics of Mutuality proposes that companies should take on social responsibilities in addition to pursuing profit.
“Compared with entrepreneurs in Europe and the United States, Chinese entrepreneurs are more receptive to the Economics of Mutuality”, Bruno Roche tells the reporter, because it shares similarities with Chinese Confucianism. “When I spoke about the Economics of Mutuality in the United States and Europe, many people were unsure, whereas Chinese business leaders accept it much faster.”
In his book Completing Capitalism: Heal Business to Heal the World, Bruno Roche claims that the influence of western economics is decreasing, whilst, at the same time, a new middle class is arising from the bottom of the pyramid in other parts of the world. Therefore, investing in the bottom of the pyramid now will help companies win larger markets in the future.
Bruno believes that, currently, China is leading the world in the digital economy revolution and that, in the future, it will progress in a leap without needing to repeat outdated western ways of making money.’
Please note that the extracts have been edited for space and clarity.