Stakeholder Capitalism | Professor Dr.-Ing. Klaus Schwab

Summary of: Stakeholder Capitalism: A Global Economy that Works for Progress, People and Planet
By: Professor Dr.-Ing. Klaus Schwab


In ‘Stakeholder Capitalism: A Global Economy that Works for Progress, People and Planet,’ Professor Dr.-Ing. Klaus Schwab discusses the shortcomings of current economic systems, especially concerning wealth inequality and environmental degradation. The book explores Kuznets’s theory, the rapid development of China and India, climate change, disruptive technologies, and the notion of stakeholder capitalism. The author provides valuable insights on how an inclusive, balanced global economy can be achieved by incorporating the perspectives of stakeholders from all walks of life in decision-making processes.

The Paradox of Thriving Economies

Despite historical economic growth, high debt levels and deepened inequality present a challenge to the modern world.

Luxuries and conveniences once considered impossible are now commonplace in today’s thriving and developed economies. However, inequality has deepened, and the consequences of insufficiently rigorous analyses or dogmatic beliefs are felt today. While global economic growth averaged more than 4% since the 1970s, recent growth has been muted, and high borrowing combined with little inflation leads to heavy debt burdens. Governments’ stimulus packages during tumultuous times such as the COVID-19 pandemic heighten these debt levels. Despite historical economic growth, the modern world now faces the paradox of both prosperity and financial challenges.

Kuznets’s Legacy on GDP and Income Inequality

Simon Kuznets, the man behind GDP, noted the limitations of this economic measurement in reflecting society’s well-being. Despite earning the Nobel Prize for his work, new data reveals that his theory of income inequality decreasing with economic growth has not held up. In the US, wealth concentration among the top earners has drastically increased while the share of income for the bottom 50% has declined. This disparity has led to a widening gap in healthcare and education accessibility for those with less financial means. These trends, which the Occupy Wall Street movement protested, have been further exacerbated by the COVID-19 pandemic, revealing the “festering wound” of rising income inequality.

China’s Prosperity and Environmental Challenges

The stunning transformation of China’s economy into a global powerhouse is unmistakable. Shenzhen, which once struggled with extreme poverty, is now a wealthy city with Huawei and Tencent leading the way. However, rapid development comes with significant challenges. Climate change has taken a toll on the city with soaring temperatures and recurring flash floods. Moreover, income inequality is widespread, and China’s public debt has ballooned. In order to sustain its building spree, China has to import most materials, which has fueled growth in other emerging markets of the world. But, this economic success has come at a cost. China’s ecological footprint has increased massively, putting the future of future generations in peril. Although both China and India have enjoyed remarkable growth, it is untenable in the long run. As author Zhouying Jin argues, appreciating the wider picture beyond the Chinese prosperity story is crucial.

Fourth Industrial Revolution

A new phase of the industrial revolution is combining machine learning, AI, robotics, quantum computing, 3D printing, and precision medicine. With the promise of generating wealth, the concern remains whether it will widen or diminish the wealth gap. The book discusses the impact and possibilities of this new era, delving into the rise of past industrial revolutions and their effects on society, while implicitly asking the reader to consider the future of the Fourth Industrial Revolution.

Rethinking Retraining: A Case Study of Denmark

The US economy’s failed retraining efforts have become evident to displaced factory workers, particularly those who have not been upskilled in their careers. Washington Post reporter Heather Long found that no amount of well-funded shock therapy could help them re-enter the workforce. In Denmark, however, the approach adopted by employers and unions encourages constant retraining and skills upgrading. Dansk Metal, a blue-collar worker union, focuses on retraining its members and preparing them for new jobs in the event of layoffs. The result is less apprehension towards technology. While Denmark’s labor market, tax system, and union participation are different from those of the US and the UK, its approach to retraining could provide useful insights into how to deal with job displacement issues.

Want to read the full book summary?

Leave a Reply

Your email address will not be published. Required fields are marked *

Fill out this field
Fill out this field
Please enter a valid email address.
You need to agree with the terms to proceed