Quarterly capitalism: The pervasive effects of short-termism and austerity

Quarterly Capitalism

Instant gratification is usually associated with limited attention spans, temptations to eat unhealthily or the tech-enabled on-demand economy in which many of us live. Each of these behaviours has known side-effects which we have identified and tried to limit.

However, in the complex economic system which is capitalism, the problems associated with the tendency to prioritise short-term over longer-term gains has only recently started to gain traction. Part of this slow uptake is attributable to the gradual recognition of the problematic symptoms, including increased inequality, dissatisfaction towards government policies of austerity and a general distrust of corporations. The side-effects have taken time to become noticeable.

In this blog post, I’ll take a look at the consequences of short-termism, ranging from financial and economic dimensions to the social implications. The unfortunate irony is that short-term behaviours often have the longest lasting effects.

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Quarterly capitalism: The pervasive effects of short-termism and austerity

Pensions and inequality: Mind the gap?

Pensions and Inequality

The romanticised view of retirement is one of long walks on the beach and living happily ever after. Unfortunately, the changing structure of pensions systems may mean that this dream will become a reality only for the privileged few.

Pensions are becoming less secure. As these systems evolve away from employer-sponsored plans to individual savings schemes, risk is increasingly transferred from corporates to their employees. This is ultimately to the benefit of the shareholders of those corporates. Additionally, incentives to save for retirement are skewed towards higher income earners. Further still, pension investments often benefit directly or indirectly from structures that reinforce inequality, to the detriment of workers in developing countries.

Ultimately, pension systems are developing in a way which increases inequality, both within and between countries. Intentional or not, seemingly common sense policies enacted today may have some dramatic impacts on the future global distribution of income and wealth.

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Pensions and inequality: Mind the gap?

Anatomy of an “investor responsibility map”

Apple Map

Socially responsible investment (SRI) and corporate social responsibility (CSR) go hand-in-hand. Both practices have rightfully gained in prominence as investors have delved deeper into the environmental, social and governance (ESG) aspects of corporate behaviour.

However when considering an investor’s responsibilities, ownership goes beyond simply the direct exposure to the company itself. Investors are also ultimately responsible for the corporate’s supply chain practices, both directly and indirectly.

The aim of this blog post is to take a closer look at the characteristics of large investors, with a particular focus on how they interact with a company’s supply chain. This is done by introducing the concept of an “investor responsibility map” which summarises an investor’s direct and indirect exposures to a corporate’s supply chain.

To illustrate the concept, Apple’s investor base and their supply chain is used as an example, due to the company’s position as the world’s largest by market capitalisation. Interestingly, large investors such as fund managers and pension funds not only own significant stakes in Apple, they also own large portions of Apple’s suppliers. This puts these large investors in the prime position to engage and influence on ESG issues as part of their overall responsibilities.

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Anatomy of an “investor responsibility map”

Choice and effect: Review of “World Factory” and “The True Cost”

WorldFactory

Newton’s third law of motion states that “for every action, there is an equal and opposite reaction”. Two recent productions highlight how this is relevant in the world of fast fashion.

“World Factory” at London’s Young Vic theatre takes audience members on the journey of “operating” their own clothing factory in China for a year. The decisions and their implications create an eye-opening experience of how the seemingly innocuous can have far-reaching consequences.

In a similar vein, the recently released “The True Cost” film explores the way in which growing consumerism in developed countries has led to human suffering and environmental destruction, particularly in developing countries.

The productions raise uncomfortable and morally challenging questions. How can the actions of those in of us in developed countries be changed to prevent damaging reactions elsewhere in global supply chains?

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Choice and effect: Review of “World Factory” and “The True Cost”

Financing fairer trade

Financing Fairer Trade

Getting access to finance is difficult for small entrepreneurs in developing countries. Without reliable access to the financial system, many developing country producers are struggling to participate in global trade.

In this blog post*, I will take a closer look at attempts to provide easier access to finance for fair trade producers. Organisations such as Shared Interest and Triodos Bank offer schemes which aim to provide direct loans to smaller producers. Separately, other potential innovations involving fair trade intermediated bonds or fair trade certification for futures contracts is also discussed.

Innovation in trade finance shouldn’t only be about providing easier access to capital for producers. Rather it is important to consider how financial markets can be adapted to be more inclusive of smaller entrepreneurs in developing countries.

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Financing fairer trade

Cheap labour + government aid = corporate profits?

image

Recently published reports in the UK and US highlight how low wage employers are being subsidised by the social welfare system in what is effectively a transfer from taxpayers to shareholders. While this link is clear within developed countries, it is possible to argue that a similar, albeit less direct, effect is also occuring in developing countries.

This blog post will explore whether corporates headquartered in the developed countries effectively receive similar subsidies as a result of paying low wages in developing countries. Is foreign aid actually funding corporate profits?

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Cheap labour + government aid = corporate profits?

Lower commodity prices: Why Fairtrade really matters right now

Fairtrade

Much of the recent attention on falling commodity prices has focused on the impact of lower energy prices. However, crude oil and its refined products are not the only commodities to have seen recent price declines. Many agricultural products and precious metals – including those sold under Fairtrade certification – have experienced downward price pressure coupled with high volatility. Lower prices mean lower incomes for farmers and artisanal miners, creating a greater role for the Fairtrade premium.

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Lower commodity prices: Why Fairtrade really matters right now