Is the Private Sector More Capable of Addressing Transnational Issues Than the Public Sector?
For us as a global society, the last hundreds of years were years of great progress in technology and other innovations which caused economies to grow substantially. Global wealth increased and led to higher living standards across most of the countries worldwide. Extreme poverty, defined by the World Bank Group as people who live on less than $ 1.90 a day, has been reduced by half over the past 20 years. This is a phenomenal achievement! Nevertheless, almost half the world’s population — 3.4 billion people — still struggles to meet the basic needs, the World Bank Group reports. However, in 2017, equities listed on the stock markets were booming and reached new all-time highs across the great majority of industries. Yet, even in the richest countries of the world, popular frustration and apprehension about the future simultaneously reached new heights too. In other words, many of us are experiencing a paradox of both high returns and high anxiety.
Many individuals across the world are facing a combination of low-interest rates, low wage growth, and inadequate or even non-existent retirement systems. Let’s keep in mind that Albert Einstein once declared compounding interest to be the most powerful force in the universe! So what are the implications of long term periods of low-level interest rates? Some of these things I just mentioned are most likely stimulated by interventions of governmental as well as non-governmental institutions in order to try to solve accumulated economic problems, most of them self-induced. As a result, money, which is the underlying and empowering abstract concept of today’s economies is slowly but surely taken away from the masses with low levels of power and influence, resulting in the well known distorted wealth distribution that rose in most countries over the course of the last 40 years.
Many people all over the globe do not have the resources nor the right tools to save more effectively. What makes things even worse is human behavior driven by biases. And yes… We all are biased to some extent. This simply because of our social nature that makes us rather group thinkers than individual thinkers. Hence, we are either consciously or unconsciously ignorant of things we do not encounter within our groups. Consequently, consistent rationality is merely a fancy phantasy. And we haven’t yet considered the simple fact that we are emotional beings which implies a vulnerability to act rather irrational than rational. One of the most powerful biases is eventually the so-called present bias. According to the present bias, in line with the generally shared philosophy of the discount of future cash flows in finance, humans tend to value rewards that are closer to the present moment much more than those that lie in distant future.
For millions, the prospect of a potential secure retirement is slipping further and further away. Especially among workers with lower education, whose job security is increasingly tenuous. These and many other not identified and mentioned trends are a major source of the anxiety and polarization that we can observe across the world. As an illustration, think about the most recent developments in politics… Having said that, most if not every government is failing to really prepare for the future. But now would be the time to define a concrete plan for a future world in economic and social terms and to take on responsibility for future retirement, infrastructure, healthcare, and worker retraining as well as to address many other issues. Nonetheless, we can not see any really constructive long term positioning of governments yet. Therefore, society is increasingly turning to other forces of support which can potentially be found in the private sector. But why might private companies be a better match for addressing not only local but specifically worldwide issues? Might it be due to the fact that they are trying to facilitate a global and more inclusive debate about how we can eventually solve certain problems? From a purely conceptual perspective, this would clearly make sense. Because major existential threats like climate change, the undermining of democracy, and the technological disruption can’t be addressed solely on a national level.
So is it fair to say that private companies are asked to take on responsibility for the broader social challenges? I really don’t know. But I think it’s better to start somewhere than just waiting until it’s too late. In my view, such a transition of responsibilities and execution might be an interesting and good thing. It takes away the centralized aspect of governance and duty to a more decentralized structure which might potentially have greater effectiveness and as a consequence, much more impact in the long term. We need our local, national, and global economies to be more caring about our collective future perspective and well-being. We as individuals, who might be part of an organization or even be in a leading position of a business, have to adapt to new purposes which are crucial for future outcomes.
Leaders of institutions must ask themselves: What do we want to stand up for? What role do we play in the community? What’s our purpose? How can we contribute in a more meaningful way? How are we managing our impact on stakeholders and our environment? Are we creating a framework for a more diverse and inclusive workforce that allows for empowerment? Are we adapting to technological disruption? Are we providing the retraining and opportunities that our employees and our business will need to adjust to an increasingly automated world? Are we using behavioral finance and other tools to prepare our workers for retirement, so that they can invest in a way that will help them achieve their personal goals? But also the much more fundamental question of how we want us as regional, national, and global communities to live together? Needless to say that also everybody else within an organization or other context is invited to think about questions like these too.
To sum up, now is the time to gain clarity about where we wanna go, not only individually, but as a more mindful global community…
