A move to inclusive capitalism in times of uncertainty
The recent confluence of health, economic and social crises around the world has led to an outpouring of anger and anxiety about the levels of inequalities in many societies today.
Credit Suisse's Supertrends, six long-term investment themes, look to how investors can and will play an increasing role in enabling solutions that address the key concerns of citizens around the world, and how inclusive capitalism could pave the way to recovery.
In Credit Suisse's inaugural podcast devoted to the these Supertrends, senior advisor Brian Blackstone chats with Sony Kapoor, Managing Director of the international think tank Re-Define, about Anxious Societies, the Supertrend that is particularly relevant to the coronavirus outbreak and recent protests in the US and across the globe.
The foundations for inclusive growth
Addressing concerns over income inequality, poverty, education and health care are key to creating a foundation for global, inclusive growth. The coronavirus pandemic has amplified many of these worries, as it led to deep recessions and soaring unemployment across rich and poor countries while putting strains on health care and costs, which have already risen faster than the global economy.
The ultra-low interest rate environment – which is likely to continue after central banks lowered rates and took other easing steps – is putting pressure on already strained pension systems in many countries. That could raise the financial burden of younger generations. Rising joblessness coupled with rising housing costs may put homeownership out of reach for many households.
"All of these issues which were prominent in both the domestic and international discussions across a number of countries have now been turbocharged by the pandemic and the related economic crisis," Kapoor said. "To continue to enjoy the benefits that globalization can bestow, countries will have to reset the social contract with their citizens."
Resetting the social contract - belief in a better tomorrow
Resetting the social contract with workers and the public is a central topic for governments and corporations. Investors have a key role to play too in providing the financing to the types of business that will generate more inclusive, sustainable growth. The Anxious Societies Supertrend identifies companies to watch as those providing ways to lower costs for basic needs such as health care and housing, reskilling and upskilling workers and improving safety and security, including cyber security.
"The biggest challenge is how to restore that belief in a better tomorrow. Without that belief people will not be able to act in a way that will deliver prosperity," Kapoor said.
Resetting the sense of confidence between workers, companies and governments will be bumpy, Kapoor said, and checkered by a "one step forward two steps back, two steps forward, one step back" process.
"What I am entirely convinced of is that it is inevitable. And it will hopefully serve as an attractor given that no other policy mix can get us out of the deep, deep hole that we are in."
Long-term thinking driving short-term results
These issues can no longer be seen as separate from broader economic trends. Lockdowns have been eased or lifted in many parts of the world, and many economies have shown early signs of stabilization, aided largely by large-scale stimulus from governments and central banks. However, without confidence in safety and an improved outlook for jobs and incomes, households and businesses are unlikely to rev up the spending, investment and hiring needed to propel rapid recoveries from the crisis.
"Between the captains of industry and national politicians, if they rise up to the challenge the tools they have at their disposal are pretty obvious and clear: the resetting of the corporate contract; a resetting of the social contract. That is at a minimum what needs to be done," Kapoor said.
For that reason, long-term thinking drives short-term results.