Fresh thinking on growth and development in Asia and the Pacific

Distinguished Speaker Seminar - Symposium: Toward A New Capitalism

Event | 25 July 2012 ADBI, Tokyo, Japan

Post course

In opening this symposium, ADBI Dean Masahiro Kawai told a packed audience that the world "stands at a critical juncture in the history of capitalism."

In the presentations that followed, speakers addressed a number of fundamental questions. What is the right system for the global economy? If it is capitalism, how can the current system be improved? What lessons can be taken from former and current economic systems to forge a more humane and people-centered capitalist model?

A broad sweep of economic history was provided by Dr. Shozaburo Jimi, (former Minister of State for Financial Services and Postal Reform of Japan). Dr. Jimi located the source of capitalism in the European Reformation. In Japan, it had originally manifested itself in the mercantile city of Osaka during the Edo period. He stressed that, although the Anglo-Saxon way of thinking practiced by Wall Street and the City of London currently exerted enormous influence over the global economy, it was not the only model for capitalism. In the Japanese context, for example, merchants from the area around Lake Biwa had traditionally taken the view that it was not sufficient for a transaction to be good for the seller; it must also benefit the purchaser and the wider community.

In particular, Dr. Jimi bemoaned the current focus on short-term profits; he argued that capitalism needed to evolve toward a much longer-term perspective on economic growth.

Professor Muhammad Yunus (Chairman, Yunus Centre, and founder, Grameen Bank) provided a short history of the world's most famous microfinance institution. He readily admitted that his first foray into very small-scale lending was not well thought out; rather, it was an instinctive response to the contrast between the theoretical economics he was teaching in his university classroom and the harsh practical reality for the people living in the adjoining settlement.

From his first loan for $27 to 42 families in 1976, Professor Yunus took the audience on an entertaining journey from the founding of Grameen Bank (Village Bank) in 1983 to the large financial institution it is today, lending $1.5 billion a year to 8.4 million people, 97% of whom are women.

Although Grameen Bank is most famous for nurturing very small businesses, Professor Yunus explained that it had also educated hundreds of thousands of young people through its education loans. It had also formed many partnerships with international companies, for example with Uniqlo to bring sanitary napkins to villages and with Danone to bring yoghurt to undernourished children.

Successful initiatives in New York, Glasgow, and San Francisco had shown that the Grameen model had something to offer excluded communities in developed countries as well, especially given the huge increase in inequalities in developed countries in recent years.

As for why loans were repaid, despite the bank's dismissal of collateral, he explained that "Closeness is the trick. They know us, and we know them."

Above all, Professor Yunus challenged his listeners not to be mesmerized by the system. Far too much attention was paid to short-term fixes that led at best to 2–3 year breathing periods. Instead, he urged the audience, especially its younger members, to try to create systems that were completely new and fresh.

ADBI Dean Masahiro Kawai, launched the panel discussion by posing a number of provocative questions to the panelists. Is capitalism fundamentally bad? How can an economic system reconcile public and private interests? What is wrong with the current market system?

Picking up on a theme raised earlier by Dr. Jimi, George Hara (Group Chairman and CEO, DEFTA Partners, and Chairman of the Board, Alliance Forum Foundation) was critical of the current capitalist system, which emphasized the maximization of shareholder value in the shortest period of time. In the United States, he felt that this had led to a migration from investment to speculation, which was the main cause of the current crisis. Instead, he urged a broader view, taking in the rights of all stakeholders—workers, suppliers, customers, and the broader community. In his view, a new structure was needed, one that embraced all these players.

Yasuchika Hasegawa (President & CEO, Takeda Pharmaceutical Company Limited, and Chairman of Keizai Doyukai) sought some of the answers to capitalism's current problems in the past. He argued that there was a strong traditional of ethical entrepreneurship in Japan, in part because of the country's tradition as a closed country and the consequent need for traders and their customers to trust each other. Like Professor Yunus, he argued that proximity and a notion of a shared interest were key to establishing ethical business practices.

Masaharu Okada (Professor and Executive Director Yunus & Shiiki Social Business Research Center, Kyushu University) regarded the ownership of corporations as a critical element. Grameen Bank, for example, was 97% owned by its borrowers, with the other 3% owned by the Government of Bangladesh. In his view, such an ownership model was an essential part of establishing social businesses.

Picking up on some of the points raised by his fellow panelists, Professor Yunus explained that, although the world was facing a "bundle of crises"—financial, environmental, food security—when the crisis was deepest the opportunities were greatest. The huge opportunities offered by technology meant that the distance between the possible and the impossible was shrinking. He urged young people in the audience to "think the impossible"—only then could the world truly progress.

Wrapping up the session, Masahiro Kawai (Dean ADBI) said that one of the main conclusions from the symposium was that new capitalism in the form of social business had the power to solve social problems and improve social conditions. That was an important message to take on the path toward a new capitalism.

(left to right) Prof. Masaharu Okada, Professor and Executive Director Yunus & Shiiki Social Business Research Center, Kyushu University; Mr. Yasuchika Hasegawa, President & CEO, Takeda Pharmaceutical Company Limited, and Chairman of Keizai Doyukai; Ambassador George Hara, Group Chairman and CEO, DEFTA Partners, and Chairman of the Board, Alliance Forum Foundation; Prof. Muhammad Yunus, Chairman, Yunus Centre, and Founder, Grameen Bank; and ADBI Dean Masahiro Kawai.