Capitalism recoupled

Social Macroeconomics working paper
Colm Kelly
Abstract

This paper examines major forces that have decoupled economic and business prosperity from social prosperity and explores how recoupling can be promoted. Economists have specified well-known conditions under which free market enterprise with shareholder value maximisation is efficient. These conditions are systematically violated by three forces – globalisation, technological advance and financialisation (GTF) – that have weakened the connections between economies and societies over the past four decades. Consequently, the recoupling process requires abandoning the default premise of economic decision making that social progress follows financial performance. For business, it calls for a move from shareholder to stakeholder value. For government, it calls for setting legal obligations, targets and incentives to ensure that stakeholder value is compatible with a rigorously defined concept of 'societal and planetary value'.