COVID-19 offers us a major opportunity to reform capitalism

Article by World Economic Forum

Image by Ryoji Iwata on Unsplash

With multilateralism in peril, so, too, is financial capitalism. Populist political movements and the pandemic-induced global economic catastrophe have shown that both, rather than being pillars of stability, are levers of political and economic power.

As the world struggles to overcome from the COVID-19 crisis, recasting multilateralism and reforming capitalism have become crucial tasks. Both need to become force multipliers in a new system of dynamic value creation. But the fundamental purpose and underlying principles of each will first need to be redefined.

Today’s multilateralism, conceived by the victors of World War II, was geared toward preventing global conflicts (through the United Nations), organizing collective defense (through NATO, and the now-defunct Warsaw Pact, for example), and supporting economic reconstruction and development (through the Marshall Plan, the International Monetary Fund, and the World Bank). Globally, it established common economic rules of the game.

But this bounded, regulated form of capitalism soon came under attack, not least by Chicago school economists espousing a free-market agenda favorable to financial capitalism. Businesses and educators alike embraced the new orthodoxy, which by the 1970s had come to dominate the commanding heights of the global economy. One of its central pillars – corporate governance based solely on “maximization of shareholder value” – became an unquestioned assumption.