In an age of unprecedented economic slowdown and recession, it is perhaps surprising that there has been no real debate about economic fundamentals nor any big questions asked about the role of Capitalism today.
However at this year’s World Economic Forum in Davos there was reportedly an intense debate about the future of Capitalism. According to the media, many participants were asking whether Capitalism, with all its excesses, still has a place in today’s world. Some conference attendees worried that if the world’s leaders and bankers were raising doubts about Capitalism, then perhaps Capitalism’s days were numbered.
In his opening remarks, Founder and Executive chairman of the World Economic Forum, Klaus Schwab, kicked off the conference stating that the current system of Capitalism had failed to address the problems and risks facing the world today, and subsequently, could lead the world to “dystopia,” characterised by the downward global economy, social disruption, protectionism, nationalism and populism. As such, Schwab called for a reform of the old economic model to keep up with the transformation the world has been undergoing.
Similarly, in a recent article, Schwab argued that over the course of the past 200 years a range of different interpretations of Capitalism have emerged as a reaction to industrialisation. In historical terms, the transition from manual trades to machines required an ever increasing degree of investment, and therefore the provision of capital. Capitalism, therefore, is not an ideology but an applied theory of the creation and efficient deployment of capital as a factor of production.
According to Schwab, the old model of Capitalism is being replaced by the new model of ‘Talentism’. This new model centres on human talent that encourages creativity, entrepreneurship and innovation-driven economic development and social progress. He argues that capital is losing its status as the most important factor of production in our economic system and is being superseded by creativity and the ability to innovate. Just as capital replaced manual trades during the process of industrialisation, so capital is now giving way to human talent.
Schwab is not alone in his thinking. Manpower Group has also been pushing the notion of Talentism over the last couple of years. Manpower Group, a global leader in workforce solutions, believes that the world is now entering a Human Age, where employers will be awakened to the power of humans as future drivers of economic growth. While previous areas were defined by the materials that transformed them – stone, iron and bronze, then by ever-evolving technology – industry, space and information, in the Human Age access to key talent will become the key competitive differentiator. It will matter less if countries and companies can access capital, and more if they can attract and retain the talent they need to win. According to Jeffrey A Joerres, Manpower Group Chairman and CEO, in the past companies needed access to capital to move ahead and grow their businesses; as this process evolves, talent and human potential will replace available capital as the new dominant resource.
An increasing number of thinkers now believe that talent, not cash, is king and that we are witnessing a paradigmatic shift where human capital is more important than financial capital. For them, the world is entering a new era, one requiring the redesign of business models, a redefinition of value propositions and the reinvention of social systems, where it matters less if countries and companies can access the capital they need and more if they can attract the talent they need to win.
Schwab et al are right to say that talent and innovation are key to economic success but wrong to think that this could happen without capital. Without capital investment, no innovation or human talent can be actualised under our current society. Far from capital being superseded by talent and innovation, talent and innovation are being stunted by a severe lack of capital investment.
The dire economic situation facing mature economies does demand investment in talent and innovation. And businesses have piles of cash sitting on their balance sheets doing nothing useful. So why is there little or no investment in talent, creativity and innovation today? The reason comes back to the central role of capital in our economy. There is no shortage of capital in big company accounts, yet investment is stagnating. Bankers and businesses are not simply hoarding their resources out of personal greed, but because they can see few profitable outlets in which to invest. What we are experiencing is a crisis of capitalist profitability.
Schwab, Joerres and the growing supporters of the Talentism theory seem to be overlooking the fact that the principal function of Capitalism is to accumulate more capital – and you cannot have Capitalism without capital. Indeed the notion of Talentism explains little about the complex social connection between capital, labour and human creativity. One thing is clear though. Without capital investment in research and innovation, there can be no rise in productivity or economic growth.
The ability to attract and retain talent is obviously an important factor for growing businesses but the crisis facing the global economy runs much deeper than this. In fact the crises facing Capitalism today are threefold. First is the current global recession. Second is the crisis of production and the hollowing out of value-adding production of goods and services in most major economies. And third is a crisis of political leadership, where even capitalists have given up on the idea of Capitalism.
However, despite this lack of belief in the market system, the global economic crisis urgently requires businesses to be focused on growth and capital investment. Addressing these key issues would be a much more productive use of their time than confusing themselves with tautological notions of Talentism replacing Capitalism.