Chalmers’ vision aligns with the younger generation

Federal Treasurer Jim Chalmers’ essay has proved to be divisive. Picture: Aaron Francis

Critics of Jim Chalmers’ essay on remaking capitalism may have missed an important point – the incredible shift in attitudes of younger people in the West.

Words like purpose, values, commitment, authenticity and society define the views of many of those who were not born when Thatcher, Reagan and Milton Friedman were remaking capitalism their way.

Swings and roundabouts perhaps, but the Treasurer understands as well as anyone of his generation that some are demanding more of a system that, at its heart, necessarily puts profit first, with faith that the benefits will trickle down in a fair and just manner.

So Chalmers’ essay in The Monthly resonates with those who have no interest in (and perhaps no knowledge of) communism or socialism, but who believe the market doesn’t always work well for everyone.

And here’s the thing: the market has worked well for these change advocates, who are often highly successful white-collar workers. But they argue that if there are too many left behind under capitalism, it’s a recipe for social problems. Think Alice Springs. Think gated communities.

None of this is to ignore the strides made by companies in the past 20 years since confronted with strange and challenging ideas such as “corporate social responsibility”.

Federal Treasurer Jim Chalmers addresses the media. Picture: Aaron Francis

Big employers now take it for granted they must pay attention to demands from employees who want their bosses to show they are doing good as well as making money. Or at the very least demonstrating that they are doing no harm.

You can label these ideas platitudes, cliches and woke but they are held with fervour by many younger people who are passionate about climate change, animal rights, gender equity, ending world poverty and more.

Sometimes this cohort is confused about the cause of economic problems and unrealistic about the solutions but they have already had a big impact on the way companies position themselves in the community,

Years ago, corporates began considering what “caring capitalism” might look like. And as my colleague, Eric Johnston, pointed out in these pages on Tuesday, they have done much to improve their operations in areas such as lowering emissions, better workplaces and employment conditions, and a general recognition of the push for purposeful work.

So, if business is already on point, does the Treasurer need to make such a song and dance about amending capitalism for a new age?

I think the answer is yes. Yes, because while it’s been important for free-marketers to review their operations and question their approach, any changes remain in their control. No matter how far companies go in reframing their mission and operations to take the harsh edge of a market economy, which is inevitably about losers as well as winners, it remains for them a commercial question.

At its heart, caring capitalism or purpose-driven companies, can only be seen by the boards and executives of companies as a means to an end – the shoring up of support from employees (who won’t work for “bad” companies; and other stakeholders like customers (who don’t want to buy from companies they deem as not doing the right thing).

It’s not about cutting profits and redistributing funds. That’s all fine, but what the Treasurer has done with his essay is to revive the “caring capitalism” debate as a political and economic question. That shifts the debate, a debate that at this point in world history is arguably too important to be left to even our nicest companies.

The late British prime minister Margaret Thatcher flanked by her husband, Denis. Picture: AFP

We’ve always known this, right? Unlike the Thatcher commentary about the lack of society and the privileging of the individual, Australians have long accepted that government – and yes, some degree of government intervention – is fundamental to the good life.

You can wish and hope it were otherwise but in the end a company must put profit before people when it comes to the crunch. The most recent example was last winter when Energy Minister Chris Bowen was forced to suspend the electricity market after power generators withdrew supply, claiming that the high cost of coal and gas made it impossible for them to operate profitably. It was during a cold snap and it went down badly with the public which saw first hand, companies putting their shareholders ahead of people. The incident was a reminder of the shortcoming of the market.

The Treasurer is not arguing in his essay for a reconstruction, but more a reboot, of capitalism. He offers few solutions, but suggests we need to think about some new models – not necessarily to replace the way we do things, but to enlarge our capacity to deliver “profits with purpose”. Admittedly, this is a niche issue, a sidebar to the big challenges but it has potential to deliver better outcomes to the “have nots”.

Paul Ramsay Foundation chair Michael Traill.

Chalmers references the work of Michael Traill, a leading Australian advocate of “impact investing” who chairs one of our biggest philanthropic outfits, the Paul Ramsay Foundation, and writes that this model is having an impact even in “the traditionally conservative circles of global finance”.

The Treasurer talks of Traill’s frustration that “a narrow definition of a successful economy is so obviously self-defeating even in its own limited terms”.

The Treasurer writes: “By failing to put values at the forefront of how our economies work, we also leave behind reams of wasted talent, a degraded environment and social dislocation – all of which threaten to diminish the productive capacity of our economies and ability to create ‘value’ in the first place.

“And equally frustrating is that it doesn’t have to be this way. There are ways to protect essential public goods and direct investment to areas where there are financial and social returns available.

“Traill has pioneered this idea of investing with purpose in Australia by using the discipline of market-based activity to transform the availability of capital, and by directing investment to organisations that are delivering genuine, measurable outcomes.

“While capital allocation in traditional markets is obviously not perfect, it is based on common metrics of performance. Traill shows this is rarely true for investment in social purpose projects, where philanthropy and – it must be said – government spending has too often been characterised by a ‘spray and pray’ approach.

“If we could redesign markets for investment in social purposes, based on common metrics of performance, many more well run for-purpose organisations could get much more of the growth capital they need.”