Page 20 - Forbes - Asia (April 2019)

THOUGHT LEADERS YUWA HEDRICK-WONG // ECONOMICS MATTERS

Market Capitalism

Under Attack

arket capitalism is
under attack, com-
ing from two sepa-
Mrate assaults. As an
economic system, it is criticized
for deepening inequality and en-
riching a small group of elites. Si-
multaneously, the corporate sector
is being accused of focusing only
on maximizing shareholder value
while ignoring social and envi-
ronmental challenges. The first attack charges market capital-
ism of a systemic bias favoring owners of capital, the elite, at the
expense of the masses, which Thomas Piketty advocated in his
2014 bestseller Capital in the Twenty-First Century.
The typical solution embedded in this critique is punitive taxes on sector means fewer startups can successfully
the rich to pay the poor. The second attack demands that corporations challenge incumbents, while consumers have
should serve not only their shareholders, but also a broader community of fewer choices and less influence on corporate
stakeholders, to meet challenges ranging from poverty to gender politics behavior. Current complaints against market
to climate change. If corporations are unwilling to serve these worthy capitalism, to the extent that they are valid,
causes, then they must be made to do so by interventionist regulations, stem from a weakening of competition in the
reports Rana Faroohar in her March 2018 Financial Times column The system, not the system itself. Punitive corporate
backlash against shareholder value. tax rates and intrusive regulations are not the
right solutions.
The solution is to reinvigorate market
Market capitalism can truly excel and be competition by enforcing antitrust legislation
superior to all other economic systems combined with innovative financing to level the

when there is intense competition. playing field, ease barriers to entry and exit, and
encourage risk-taking. Vigorous competition
will also address the shareholders versus
stakeholders divide. If consumers and investors
Market capitalism is clearly not perfect. To paraphrase Winston are indeed increasingly concerned with social,
Churchill, market capitalism is the worst economic system except for environmental and governance issues in a
all the others. The beating heart of market capitalism is competition, market economy driven by intense competition,
which empowers businesses that are the most efficient and innovative to entrepreneurs will be motivated to come up
succeed. Businesses are frequently accused of being profit-oriented. Yet with business models that can serve both
profit comes only after businesses have outcompeted their rivals. Market shareholders and stakeholders. Some will get
capitalism can truly excel and be superior to all other economic systems funded and the best of them will succeed. With
when there is intense competition. hotheads on the left clamoring for punitive
But there has indeed been a decline in competition in recent decades. taxes on the rich and conservatives on the right
A few big corporations are increasingly dominating industries as a mutely complacent, market capitalism is being
result of changing technology and misguided policies. The big techs’ challenged. Time to revitalize its beating heart
dominance is merely the tip of the iceberg. A more oligopolistic corporate and encourage more competition. F

Yuwa Hedrick-Wong is Chief Economics Commentator for Forbes Asia. He is also a visiting scholar at the Lee Kuan Yew School of Public Policy,
National University of Singapore. Having worked as an economist across the Asia-Pacific, Europe, Middle East and Africa in the past 25 years, GETTY IMAGES
he regularly writes columns about the global economy for Forbes Asia. Email: yuwa.hedrick.wong@gmail.com.

16 | FORBES ASIA APRIL 2019