Is ‘Stakeholder Capitalism’ Newspeak for Economic Fascism?

Leaders of the World Economic Forum are seeking to implement a Great Reset of capitalism whereby “global stakeholders” cooperate to achieve “shared goals.” In the true spirit of not letting a crisis go to waste, they see the COVID-19 pandemic as presenting a unique opportunity to push their agenda.

“The level of cooperation and ambition this implies is unprecedented. But it is not some impossible dream,” World Economic Forum Executive Chairman Klaus Schwab recently observed. “In fact, one silver lining of the pandemic is that it has shown how quickly we can make radical changes to our lifestyles.”

Of course, when they say “our lifestyles” they mean your lifestyle, not their own. Their preferred vehicle for achieving their goals is other people’s businesses. In short, what they want is for private businesses to serve the interests of their own curated list of stakeholders rather than (as they see it) concentrating on returning profits to business owners. They want governments to pass laws and tax regimes to cajole businesses towards their favored ends. Since this arrangement still involves a modicum of private ownership of the means of production, they call it “Stakeholder Capitalism.”

It is important to recognize the subversive use of language here. Such a system is all about sidelining the true stakeholders, and undermining capitalism. This is Orwellian Newspeak at its best, since it misuses the word “stakeholder” and is actually closer to economic fascism than capitalism.

‘Stakeholder Capitalism’ Versus True Stakeholders

There is one reliable way to know if a business is serving the needs of stakeholders: profit and loss. Absent any government bailouts or monopoly privileges, the higher the level of profit, the greater the degree to which stakeholders’ needs have been balanced and served.

Profit means value has been created for all stakeholders, by turning resources into finished goods that people value more highly than the resources used to make them. Losses indicate that scarce resources have been wasted and value destroyed, turning out finished goods that are worth less than the resources that went into them.

In order to please customers and generate profits in a world of uncertainty, companies need entrepreneurial insight to decide what to produce and in what quantities and varieties. They also need to attract good employees, material suppliers, a management team, and financial resources, all on favorable terms. Any failure will result in losses. Under this arrangement – which could be called unhampered capitalism – a company does not need to be told by some outside expert who their “stakeholders” are.

The profit and loss system offers them the information they need and reveals any mistakes. As Ludwig von Mises explained:

Profits convey control of the factors of production into the hands of those who are employing them for the best possible satisfaction of the most urgent needs of the consumers, and losses withdraw them from the control of the inefficient businessmen. In a market economy not sabotaged by the government the owners of property are mandataries [servants] of the consumers.

When those who seek to modify capitalism speak of “stakeholders” they will often include customers, employees, suppliers and shareholders on their list, to at least give some context. But invariably the aim of these reformers is to extend the list to include nebulous collective entities like “societies” and “communities” or even “global” stakeholders. Since these collectives cannot speak with one voice, these social reformers are all too happy to speak on their behalf and lay out the demands.

Imagine a pizza restaurant, Joe’s Pizza. They exist in a society, which includes:

A: people who enjoy eating Joe’s pizzas

B: people responsible for supplying the pizzas (at all levels of the supply chain)

C: everybody else

It is easy to see who the stakeholders are. Group A profits in pizza, which they prefer over the money they offer for it; Group B profits through remuneration which they also prefer. The entrepreneur, being the residual claimant, profits only if they do. Meanwhile, Group C is unaffected, being left alone to do other things they prefer above eating or producing pizza at the prices offered.

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