Image Credit: Jacob Botter

Everyone of importance around the world – leaders of almost every country, social activists, religious figures, and business leaders- had to say something about  Obama’s victory in the US Presidential elections. Some of the views were congratulatory, some poignant (like Nelson Mandela’s), some cautious, some skeptical and some euphoric. But to me, the most thought provoking comment came from, guess who?

Infosys chairman N.R. Narayana Murthy. Here is what NRN had to say

“Today is an extraordinary day. The US has voted for compassionate capitalism over laissez faire capitalism. Besides, this election has shown that meritocracy matters most.”  Read more here

There are three key concepts here – compassionate capitalism, laissez faire capitalism and meritocracy. The concept of meritocracy is the foundation of US and enough has already been said about it. The same can be said of “laissez faire capitalism”. Laissez faire capitalism has been debated among economists for close to 300 years. Simply put, “Laissez faire” supports free markets, minimal intervention of government in businesses and hence low taxes.

But what exactly is Compassionate Capitalism?

Aren’t “compassion” and “capitalism” mutually exclusive?  Capitalism as it is practiced in the western economies today is about least government regulation, companies making the most profits, improving share price and increasing shareholder’s wealth.  The positive side of this is that there is always competition, which in turn promotes innovation and ultimately the customer benefits from the competition. But on the negative side, to achieve the ever increasing “profit” targets, companies adopt the most effective and efficient way of doing business and if that means laying off people, so be it. Sorry about the job loss of a subordinate or colleague, but hey, that is the way it is. Life has to go on.

Compassion is considered a weakness in the brutal marketplace and also a competitive disadvantage. Compassion is associated with “collectivism” or socialism and is a strongly despised word among many US citizens. The mere mention of “socialism” can spook many of them. Individualism, which finds expression in capitalism, is what characterizes US and the Western European cultures and has tremendous appeal in these nations. It is no wonder that the novels extolling the virtues of individualism like “Fountainhead” and “Atlas Shrugged” written around 60 years back by Ayn Rand, the ultimate advocate of individualism, are still best-sellers.

So what happens when “compassion” and “capitalism” are combined? Business leaders will become more sensitive towards stakeholders. They will try to increase shareholder value without sacrificing the interests of the employees. If every firm in the marketplace practices “compassionate capitalism”, this world will be a better place to live in.  But is “compassionate capitalism” self-sustaining and work without external influence ? It could, if only there was no greed in this world.  That is where the role of the government comes in.

Narayana Murthy’s comments should be seen in the context of the current economic turmoil across the world. Nobody will object to the fact that this economic mess is a result of years of non-regulation of market that started during the Reagan-Thatcher days of the early 1980s. There is a widespread desire among the common people in the US for an end to the non-regulatory era and more government interference in business.

Obama understood this mood for change and made “Change” as his campaign theme. Needless to say, this “Change” strategy paid rich dividends and has made him the 44^th US President. It is expected that under Obama, US will continue to practice capitalism but with more checks and balances. We can expect to see CEO salaries capped, corporate taxes modified, Wall Street regulated, employee rights protected and free trade restricted.  This will be a big shift in the way international business is conducted for the next few years.

So, where does India stand on this issue? India already practices “compassionate capitalism” by default primarily because of the influence of the Communist parties. There is some amount of restriction on free trade, rights of stakeholders are protected to a great extent and employees get a fair chance before laid off. Even though this means a lot of bureaucracy leading to frustratingly slow decision making, there are no sudden disruptions in business. The groundswell of support for the laid off Jet Airways employees illustrates the fact that India is practicing “compassionate capitalism” without anyone really noticing it.

India is considered to be one of the countries less affected by the global turmoil and that can be partially attributed to the regulations on businesses by the government.

So, as usual, NR Narayana Murthy is spot on in his observation about “compassionate capitalism” and proved once again why he is a thought leader. I sincerely hope that the next government involves people like NRN and other visionary business leaders in the public policy making.

PS: While doing the research for this article, I came across the book “Compassionate Capitalism: How Corporations Can Make Doing Good an Integral Part of Doing Well” by Marc Benioff and Karen Southwick. I look forward to reading the book in the future. If anyone else is interested in this book, you can find the details at Amazon

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