The basic ideasBefore we start our discussion on this oft-discussed topic, it might be helpful to remind ourselves once again the meaning of capitalism and inclusive growth, the two keywords contained in the title of this article. Capitalism refers to a system where all property is owned and controlled by private individuals. The government may be involved in providing infrastructure facilities and in framing rules for fair business and consumer protection (apart from its common functions), but it takes no further part in the economic sphere. By its very nature, capitalism runs on the incentive of profit-making.
Inclusive growth, on the other hand, refers to a kind of growth which provides for a common minimum for everyone. It is generally agreed that there are differences in the economic standard of people. But in case of inclusive growth, it is generally agreed that all must secure food security, health facilities, as well as accessible education, at least at the primary level. Poverty must be reduced as far as possible. Thus although the concept of inclusive growth does not promise that it would bring each and everyone on the same level, it does include giving equal opportunities to everyone to achieve what they are capable of.
An inherent contradictionRead the two preceding paragraphs carefully. There seems to be an inherent contradiction between the two concepts. Capitalism is invariably concerned with profit maximization. On the other hand, inclusive growth implies a welfare-oriented economy. Capitalists, by themselves, will never be willing to set up schools or hospitals in poor villages, simply because there is no 'market' in these areas. They will only set up enterprises if the population is able to buy their products.
In fact, this contradiction was noticed way back in the nineteenth century. In 'The Manifesto of the Communist Party', the early generation of Marxist ideologues had blamed the existence of economic disparities in contemporary Europe on the Industrial Revolution. The development of industries through the initiative of private capitalists led to two classes of people – the 'proletariat' (the working classes who lived sub-human lives) and the 'bourgeoisie' (the industry-owners who appropriated massive amounts of profit through the exploitation of workers). In a way, their accusation seems to be correct. Back then, profit-hungry industrialists who tried to increase their profits by reducing their labor costs inflicted massive amounts of exploitation on the workers. They had to work for long hours on abnormally low wages, simply because of the peculiar position of the 'demand and supply' in the labor market (in other words, the number of workers available for work was much more than the employment opportunities available to them).
Thinking of ideasWhile all of this is true, one thing cannot be countered, whether you are on the left or on the right – capitalism today is as inevitable as the rising morning sun. All over the world, socialism seems to have failed its objectives of providing equitable growth. Private capital, as well as liberalized trade and investment policies, are inevitable to ensure faster growth. But the massive amount of poverty is another thing we cannot afford to negate, especially in countries like ours. There are still people who do not have access to health and education and sometimes even to proper and nutritious food. What do we do then? Can we go back to the 'socialist' policies of Indira's day? Or should we go for a different kind of capitalism, one that would provide for a strategy of poverty reduction, while at the same time ensuring fast growth? Is it even possible to find that kind of capitalism at all?
CSR and all thatThe best thing we can do is to find a sort of 'benevolent capitalism'. What does it mean exactly? Basically, it means that while private businesses and industries would still be profit-oriented, they would still be encouraged to spend a part of their profits on social welfare projects. The emphasis on compulsory spending on CSR is a good example of this (although it would have been even better had the big businesses moved forward on their own). Businesses, especially the large ones, are encouraged to spend a part of their profits on promoting education, healthcare as well as numerous other welfare activities. This ensures that while they continue to chase after high growth and everything, they still work for people's welfare (some part of CSR is, of course, meant as a promotional gimmick, but well, that's a story for another day).
Privatisation plus welfareThe other technique that can be adopted here is to provide enough space for government-sponsored welfare activities while at the same time not impeding the work of the private businesses. For example, let the government withdraw from managing schools. Let all schools (in urban areas) be privatized. But at the same time, let the government start a voucher-based scheme where the financially weak students will get assistance. This would also reduce corruption generally prevalent in government schemes.
Concluding remarks and creditsFinally, we can conclude that while it is somewhat tough to say 'capitalism' and 'inclusive development' in the same breath, it is not impossible to envision a system where we can have the best of both – the growth-oriented approach of capitalism and the welfare-oriented approach of inclusive development. In envisioning the ideas for writing this article, I received a great deal of help from Sanjeev Sabhlok's blog on The Times of India website. Although his ideas have plenty of freshness about them, his consistent criticism of socialism is something that I personally don't approve of. However, reading his articles gave me the much-needed spark that I needed. Do read a few of those.