Entrepreneurship, Innovation, And The State: An Interview With Alberto Mingardi • Austrian Economics Center

Shareholder vs. stakeholder capitalism – why is the latter becoming popular nowadays? Wouldn’t it dampen the entrepreneurial spirit and progress in the process?

Stakeholder capitalism is popular for a number of reason. One is that it is nowadays fashionable not to say that you don’t like capitalism, but to propose “reforms” of it which will basically keep some form of private property but will do away with most of the freedom of contract. This is because it is difficult to argue, after 1989, that capitalism “failed” and socialism is about to triumph. Hence a change in rhetoric was due.

Another is that stakeholder capitalism brings with itself a diagnosis of the evils of capitalism which is very appealing to people. It basically portrays capitalism as a social context in which relationships are highly conflictual (workers vs. capitalists, multinational enterprises vs. states, et cetera) and suggests a way to ‘solve’ those conflicts and produce a more pacified economic system. So, in a way, it updates the ideal of social conflict for a society in which there are no longer visible signs of a ‘class war.’

But another reason is that capitalism’s historical triumph suggested to many that capitalist enterprises are very efficient, hence why not asking them to do more? Why keeping their scope of activity limited to the pursuit of profit? Should not they also be able to save the planet, clear the environment, et cetera? In this sense, stakeholder capitalism requires a leap of faith in business enterprises. But it also undermines them, because it forces us all to move from the clear cut metrics associated with the pursuit of profit, to different, quite unclear ones, that at least in the short term create room for more discretionary power on the part of CEOs and managers.

A Yale economist superstar Mariana Mazzucato in her bestseller “The Value of Everything” claims that private sector “value creators” are not fully deserving of their gains. Therefore, we need to “ensure a capitalism that works for us all.” Why is this so and is this the whole truth? More so, even if true, how can we fix the system?