Stakeholder Capitalism Ch.1: Post WO2 growth and decline

— door Evert Mouw

In a series of blogpost, I’m reflecting on the book Stakeholder Capitalism, written by Klaus Schwab with Peter Vanham. I wrote on the preface and my approach to this series previously.

Growing inequality

The first chapter opens with optimism over all that was achieved during the 75 years after World War II. But the growth is stalling, and inequality is on the rise:

… not everyone gets the same chances in life. Those with more money, better connections, or more impressive ZIP codes were affected by COVID at far lower rates; they were more likely to work from home, leave densely populated areas …

This matches with what happened in my country, Holland, so I’ll give the reader my own reflections on this. The deplorables or somewheres, often more sympathetic to the conservative right and Trump, were more heavily affected by the crisis than the anywheres who got their salaries from big companies or the government. Interestingly though, these deplorables are first in line to distrust anything connected with the WEF, which is being associated with globalism. Distrust overrides logic.

Understanding such distrust calls for deeper cultural and psychological analysis and (IMHO) more appreciation for traditional communities, but such is outside the scope of the book. Still, the divide between rooted somewheres vs. the unrooted anywheres is globally becoming the main political cleavage, so let’s see whether the authors are rooted or not.

Is Stakeholder Capitalism only for anywheres?

Klaus recalls his personal history, when in 1945 his country, Germany, lay in ruins. They had to rebuild from “Zero Hour”, which reminds us of the “back build better” slogan. Interestingly, he talks about local companies connected to his local small town, Ravensburg.

The name of that town reminds me of very old roots, even pre-Christian roots, of Europe. The ravens of Wotan are still flying in the myths of this part of the world, scouting for danger and opportunity.

Small and midsized companies and average city dwellers, called the Mittelstand (Dutch: Middenstand), would play a critical role in taking new opportunities in the post-war world. A world in which technology and two superpowers would create global opportunities.

A pattern emerges: Klaus is rooted in his history, but unrooted by the war. Both are true. In order to rebuild, the rooted middle-class had to think and act in an uprooted global world. Still, while Klaus talks with CEOs of multinational companies and political leaders in a global setting, he shows concerns for his former home, the Mittelstand, who might become deplorables. The following citation from the book captures the core motivation:

Having worked during more than a year on the shop floor of companies, experiencing real blue-collar work, I have also developed a special respect for the contribution of workers in developing economic wealth. My belief was that business, like other stakeholders in society, had a role to play in creating and sustaining shared prosperit. The best way to do so, I came to think, was for companies to adopt a stakeholder model … I decided to turn that idea into action by organizing a management forum [WEF].

This line of thinking shows his roots in Germany, where this is called the Rhineland model. The pattern also holds true for Peter, the co-author. In the previously mentioned interview in Boovi (Dutch), Peter tells about his studies and career in New York. He loved to work and live in a globalized world. At the same time, he tells about his pride for Belgium, his home country. While in the US, he often got himself a lunch in Belgian restaurants. Eventually, the raven did fly back, closer to home.

75 years of growth is now ending

The history of the OECD, Marshall plan, EU, and so on is discusses and as those histories are widely known, I’ll skip these. Although first prosperity was for all, later some cracks appeared, and the Club of Rome warned about unsustainable growth. In the 1980s the social contract broke and Friedman-style “market fundamentalism and individualism” reigned. Deregulation and privatization added to that.

The fall of communism (Soviet Union) came and The end of history was proclaimed by Francis Fukuyama. Personally, I always regarded that as an idiotic statement. The authors strangely don’t mention The Clash of Civilizations by Samuel P. Huntington, whose realistic analysis proved to be closer to the events that would follow.

The end of communism brought increased globalization. However, anti-globalization took hold as multinational companies got more control over national economies. In late 2000, the dot-com crash came. I remember that quite well as I was working as a webdeveloper and sysadmin for Intapps (Internet Applications), an English-Dutch enterprise. The dot-com crash didn’t slow down the advancement of information technology. A Fourth Industrial Revolution is happening. Such technology will be the subject of chapter 6.

I’m not convinced that the authors have a good grasp on this new technology. In this first chapter, they write:

machine learning – now dubbed “artificial intelligence”

Anyone a little bit acquainted with the history of computer science (CS) knows that artificial intelligence (AI) started off as a subfield of CS, with some input from the cognitive sciences, philosophy of mind, and (yeah) science fiction, somewhere in the 1950s. Machine learning (ML) is just a subfield of AI, a younger phenomenon, and currently the most promising subfield, but that doesn’t mean that all AI is now ML.

Yet AI (including ML) could bring changes to workers. The authors cite their Davos declaration. In point 3, I recognize the shepherd principle as I like to call it. Management must serve employees by integrating their interests. Such a position naturally raises questions, as you can see in the screenshot below. Steve Denning’s tweet was already shown in the previous post in this series. New is the comment of Richard Straub.

questioning managment and stakeholdership
Steve Denning and Richard Straub raising legitimate questions in a tweet.

In 2007-2008, the banking system broke down. In 2020, public debt is again skyrocketing. The authors cite that “we use up more than 1.75 times the resources the world can replenish”. Maybe so. In the next chapter, the issues of the word economy today will be described. My next piece in this review series will reflect on that subject.


If you want to follow my adventure with this book, just follow this weblog or check my twitterfeed or Facebook timeline with the hashtag #wefbookclub or the mention @WEFBookClub for the next few weeks. You might also order the book, and maybe even join the WEF Book Club on Facebook, so you can make this a participatory experience for yourself.

Also check the index page of my review series that I will update as I add blogposts on this subject.

     

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