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Forbes
6 days ago
- Business
- Forbes
What Is The San Francisco Consensus, Silicon Valley's AI Prophecy?
Eric Schmidt, billionaire and co-founder of Schmidt Futures, at the Raise summit in Paris, France, ... More on Tuesday, July 8, 2025. The annual conference gathers global leaders and key speakers in tech and AI. Photographer: Nathan Laine/Bloomberg © 2025 Bloomberg Finance LP Just as the Washington Consensus dictated economic orthodoxy for developing nations throughout the 1990s, a new doctrinal framework is crystallizing among the power brokers of Silicon Valley. They have coalesced around a staggering prediction: Artificial intelligence will fundamentally transform all aspects of human activity within a mere three to six years. This prophecy—dubbed the "San Francisco Consensus" by former Google CEO Eric Schmidt—transcends typical Silicon Valley hyperbole. It represents Silicon Valley's equivalent of Washington's economic rulebook, a shared conviction driving trillion-dollar investments and strategic priorities among those actively constructing our AI future. Unlike the Washington consensus, which mandated fiscal austerity and economic restraint, Silicon Valley's calls for unprecedented investment and acceleration. Tech leaders are not advocating belt-tightening. They are pouring billions into AI infrastructure at a breathtaking pace, with the conviction that they are financing humanity's next evolutionary leap. "I call it a consensus because it's true that we agree... but it's not necessarily true that the consensus is true," Schmidt said at the RAISE summit in Paris earlier this month. This paradox captures both the fervor of belief and the inherent uncertainty in technological prophecy. What makes this consensus consequential is not the belief itself, but who believes it. They are the architects constructing our digital future. When the people controlling trillions in capital and computing resources share a conviction, reality has a curious way of conforming to their expectations. Schmidt frames the San Francisco Consensus as three simultaneous technological revolutions amplifying each other: The Language Revolution Large language models like ChatGPT have inverted the traditional human-computer relationship. Instead of humans learning machine languages, machines now understand ours. Language has become the universal interface for human-AI interaction. This goes beyond AI mimicking human prose, although watching it compose Shakespearean sonnets about cryptocurrency is entertaining. It represents a fundamental shift in accessibility, democratizing technological power in ways previously unimaginable. The priesthood of programmers is giving way to a world where anyone who can articulate their needs can harness computational power. The Agentic Revolution If the Language Revolution concerns AI understanding us, the Agentic Revolution involves acting independently in our world. We are witnessing the transition from AI as glorified calculators to autonomous actors. They were tools. Now they are agents. Schmidt envisions a near future where entire business workflows—from purchasing real estate to resolving contractual disputes—are managed by interconnected AI systems. Imagine digital agents negotiating, collaborating, and executing complex tasks with the efficiency of a bureaucracy but without the delays or regulations. This shift from passive tools to active agents represents a profound reconceptualization of how computational systems integrate into human affairs. The question is no longer what computers can calculate, but what they can achieve. The Reasoning Revolution The centerpiece of this technological triptych is AI's metamorphosis from pattern-matcher to genuine reasoner. New models by Google as well as OpenAI outperform graduate students in mathematics. This development might alarm academic departments but delight undergraduates struggling with differential equations. This represents the leap from machines that can mimic human outputs to systems that genuinely cogitate—plotting, analyzing, and problem-solving with remarkable acuity. We are witnessing the transition from impressive mimicry to unsettlingly human-like thought. The consensus timeline is breathtakingly compressed: Within months: Programming jobs and skilled roles begin vanishing faster than Taylor Swift concert tickets, transforming labor markets overnight. Within 3-6 years: Widespread artificial general intelligence (AGI) emerges, with machines rivaling our brightest minds across intellectual domains. In a decade: Artificial superintelligence (ASI) arrives. AI systems make discoveries beyond human comprehension. Picture explaining quantum mechanics to your golden retriever. Now imagine you are the retriever! Reality Reckons However, not everyone is drinking the algorithmic Kool-Aid. Why? Silicon Valley's prophecy graveyard is crowded. Flying cars, ubiquitous VR, Web3. The list goes on. Detractors say the San Fran Consensus could be another case of technological exuberance outrunning reality. They have a point here. After all, the epistemic bubble is real. When surrounded by true believers in Palo Alto, reality distortion fields form. This consensus may reflect groupthink among tech elites accustomed to deference. So are the hurdles. Reliability issues make current AI resemble temperamental toddlers at times. Replit's CEO, Amjad Masad, publicly apologized after its autonomous agent erased a production database. ChatGPT is said to have caused multiple hospitalizations for Jacob Irwin, a 30-year-old on the autism spectrum, because it fueled his time-travel fantasy. Are these bugs to fix? Maybe. But these instances represent fundamental challenges to trustworthy AI that the Consensus promises. The Consequential Consensus Whether prophetic or destined for technology's unfulfilled promises museum, the San Francisco Consensus is already redirecting capital flows and strategic priorities. Look at the infrastructure gold rush. Specialized chips and data centers are proliferating at breakneck speed. The self-fulfilling power of the collective belief of Silicon Valley elites is at full display here. Perhaps we will read about the San Francisco Consensus in textbooks someday.
Mint
07-07-2025
- Business
- Mint
Arun Maira: Dedication to the state's purpose is the key lesson we must learn from China
India is at a crossroads. Both the political Left and Right agree that the economy needs substantial reform, but disagree on the direction. The progressive Left wants more socialism with more liberal democracy; the conservative Right wants more free-market capitalism and seems willing to tolerate curbs on liberty. The Middle seems muddled. The 20th century was a test of competing economic ideologies—socialism versus capitalism; and competing forms of governance—liberal democracy versus authoritarianism. When the Soviet Union collapsed in 1991, victory was declared for the Washington Consensus of free market capitalism and liberal democracy. India's reformers adopted the Washington formula in 1991. By and large, they gave up on socialism, abandoned industrial policies aimed at growing domestic industries and opened the Indian market for foreign companies without technology-transfer requirements. China did not yield. It stayed its socialist course with single-party governance and continued to build domestic industries. Also Read: Ajit Ranade: The success of 'Made in China 2025' alarmed the West The growth of China's economy is a miracle, economists say. In the 1980s, China and India's economies were comparable in size and per capita income. Now, China's per capita income and GDP are about five times India's. China's high-tech manufacturing sector has grown 48 times larger. The US, meanwhile, has grown alarmed with China's remarkable economic growth and industrial strength despite Beijing not following Washington's economic formula. That consensus has ended even in Washington, where ideological cracks have appeared with increasing inequality and unrest among workers in the US. The US is pressing India to come closer to it. India is wary. China shares a border with India that has seen the two armies skirmish. India must become self-reliant and stronger much faster than it has so far. Reforms must result in faster income growth among the Indian masses and stronger domestic industries. India's leaders should study China for lessons before pushing harder with economic reforms based on the West's failing model. Also Read: China began de-risking its economy well before Trump's trade fury US capitalism and Chinese socialism: Three recent books offer insights into how socialism and capitalism have been combined to achieve China's inclusive and fast growth. China's leaders are good learners, says German political economist Isabella M. Weber in How China Escaped Shock Therapy: The Market Reform Debate. Like Mahatma Gandhi, they kept their minds open, allowing ideas to come in from all directions without being blown off their feet. They listened to Western economists but applied only what suited China. Weber says, 'The famous Harvard development economist Dani Rodrik represents the economics profession more broadly when he answers his own question of whether 'anyone (can) name the (Western) economists or the piece of research that played an instrumental role in China's reforms" by claiming that 'economic research, at least as conventionally understood" did not play 'a significant role." Chinese economist Keyu Jin, a professor at the London School of Economics who grew up in China and experienced the Chinese system from within, explains how the Chinese socio-economic-political system works in The New China Playbook: Beyond Socialism and Capitalism. She explains why Western economic models, which strip out cultural and social forces from economics, cannot comprehend how China works—or even how Western economies work. She makes visible the 'invisible hand' that free-market economists cannot explain. She explains why the Chinese government keeps financial markets and the private sector reined in to ensure the market produces welfare for all, especially poorer and least powerful citizens. She says, 'The number of financial crises in China is exactly zero. It is also an oddity (from a Western perspective) that despite the nation's preternatural economic growth, its stock market has been one of the worst performing in the world." Also Read: Chinese history shows how a closed economy could squander a nation's greatness The Chinese government has added citizen satisfaction and environmental sustainability to GDP as a measure of its own performance (and of local governments). Though private firms grew nine-fold in China from 2000 to 2019 (their number now exceeds the US's by far), 'A more striking fact," says Lin, 'is that private owners with state connections owned about a third of the capital registered by these companies, showing how pervasive equity linkages between state and private businesses have become in China's corporate sector." While the government has reduced the number of state-owned enterprises and pushed the remainder to add profits to their social objectives, it also demands that private firms comply with societal needs. Large, private, property and tech firms that strayed from the socialist path have been cut down. Three distinctive features of China's governance: The purpose of the state, throughout China's long history from imperial times to the Communist era, has been the welfare of citizens. The best emperor was seen as one who provides the most welfare to all citizens, not one who wins the most wars. The leadership of the Communist Party has continued this role, says Chinese political scientist Zheng Yongnian in The Chinese Communist Party as Organizational Emperor: Culture, Reproduction, and Transformation. Jin explains further (in The New China Playbook) how the ruling party's commitment to this role has shaped Beijing's socio-economic policies, resulting in widespread support for the party even among the young. Also Read: Rahul Jacob: Manufacturing is crying out for a reality check The governance of China is highly decentralized. Local communities are given freedom to craft solutions suited to their needs; the performance of local party officials is measured by the satisfaction of their communities with progress. Chinese leaders and economists are 'systems thinkers.' They see the economy as only a component of a complex social system. For them, the purpose of economic growth is the production of societal well-being, especially for less powerful people. Whenever the economy begins to fail this purpose, reforms are made to bring it back to its socialist moorings. India must not slavishly follow Western models. Nor can India be China. India must find its own way to create a more equitable society. The author is a former member of the erstwhile Planning Commission and the author of 'Reimagining India's Economy: The Road to a More Equitable Society'.
Economic Times
04-07-2025
- Business
- Economic Times
Zohran Mamdani's win challenges CEO-style governance, urging empathy over metrics in leadership
The unexpected victory of 33-yr-old political rookie Zohran Mamdani over 67-yr-old seasoned political leader Andrew M Cuomo in NYC's Democratic mayoral primary has opened the debate on whether younger leaders with enthusiasm are better than older leaders with has examined the effects of ageing leadership on a company's performance and vitality. Comparing the performance of 1,000 publicly listed companies, the research concluded that the older the average age of leadership is, the lower the firm's vitality. The problem with statistical research is that correlations between two variables in one context cannot be applied to another. For example, performance and age are related in physical sports because they require physical ability. Skills specific to the sport are also required. Whereas skills and judgement improve with experience, physical ability decreases with age. Therefore, older sports stars must concede to younger players even before they are 40. However, leaders in business and government have less need for physical strength than sports stars. Their leadership tasks and the skills they require are different. Ronald Reagan said, 'Government is not the solution; it is the problem.' US economists and corporate CEOs adopted this slogan. Corporate CEOs were celebrated as the models to follow in the heady days of corporate capitalism and the Washington Consensus. Even some heads of government and CMs of Indian states were called CEOs of their states and feted at WEF in Davos. Differences between responsibilities of corporate CEOs and governmental leaders, and inappropriateness of the CEO model for government, were not understood. In those days, Jack Welch was among the most celebrated CEOs in the world. He had created enormous value for GE's shareholders. He had a reputation for toughness, insisting that every year, the poorest performers must be removed from GE. He downsized the workforce when hard times came and acquired and sold companies to increase GE's shareholder value. His methods became 'best practices' taught in business schools and propagated by management consultants. Imagine the head of a country - even an unelected one. When times are tough, can he ship out people from the country to reduce the burden on finances? Can he buy and sell other countries to increase his country's GDP when economists express concern about its decline? Yet, this is what Donald Trump tried to do - chasing immigrants out of the US, offering to buy Greenland, and threatening to convert Canada into a US state. 'Socialism' is taboo in the US. Mamdani's empathy got him branded one by both Republicans and Democrats A country is not a business corporation and should not be run like one. The instruments that leaders of governments and leaders in the corporate world can use to produce results for their stakeholders are different - and they must be so.A business corporation is an economic institution. A nation is a socio-political owners of a business corporation are its investors. The legal owners of a country are 'We, the People' - all its of investors in a business corporation are proportional to their ownership. Those who own more have a greater say in how the corporation is run. In a true democracy, however, all citizens - whether billionaire or pauper - have equal of business corporations are limited by law. They are not legally accountable for the impacts of their profit-making activities on the environment and society. Thus, corporations are selfish citizens created by law but given the same rights as human citizens to protect their property and sue others. Leaders of governments are responsible for welfare of all citizens. They must discipline all - including large business corporations - who cause harm to others. Therefore, government leaders must give precedence to the 'ease of living' of common citizens over the 'ease of doing business' of corporations and their investors. Mamdani has not yet been elected mayor. He is only the candidate for the Democrats - a political party that lost touch with the needs of poorer, working-class people. Donald Trump, a billionaire, tapped into this need and beat the Democrats. The Democratic establishment - including billionaires Michael Bloomberg and Bill Ackman, and Bill Clinton, who revived the Democratic Party's fortunes in the 1990s by raising more money from Wall Street than Ronald Reagan could - supported Cuomo. 'Socialism' is a verboten word in the US. Mamdani, with his concern for common people, has been branded a 'socialist' by Republicans and the Democratic establishment. NYC's businesses have become alarmed that Mamdani, if elected, will push through his agenda of public welfare - reducing bus fares and rents for poorer citizens, and taxing businesses to balance the of all governments must be socialist in their hearts, by 'putting the last first' in their policies - Gandhiji's principle of Antyodaya. He hoped that even business leaders would follow this principle as 'trustees' of a society's resources and wealth - not its owners. Human values must guide their business decisions, not stock market valuations of their wealth.
Scroll.in
03-07-2025
- Business
- Scroll.in
What India can learn from China: Dictatorship, democracy and the road not taken
The Indian economy has grown fast and poverty has reduced considerably since the 'opening up' of the economy and the International Monetary Fund 's bailout in 1991. Could India have done better? More importantly, should it do better? These were questions Manmohan Singh posed to me when I joined the Planning Commission in 2009. I was surprised by his invitation to become a member of the Planning Commission and asked him if he might have made a mistake. I pointed out that I was not an economist, nor an academic and I had no experience of working in government – qualifications which seemed necessary for a country's apex policy-making body. On the contrary that was why he wanted me, he said. The country already had eminent economists in the Planning Commission and other advisory roles. Moreover, he himself was considered a good economist, he admitted shyly. Yet, the country's economic policies were failing to create enough employment though its gross domestic product was increasing fast. My perch in India's governance cockpit gave me a perspective of India's complex socio-economic system. I had been a consultant to organisations in many countries on how they could accelerate their learning to reach their aspirational goals. The special task the prime minister assigned to me required learning how other countries governed their economies. With the World Bank's support, I was able to consult with the best economists in industrial policy. They also provided me with insights into the economic development processes of other countries, including the United States, China, Japan and other developing countries. Experts in these countries explained the histories of their progress and the evolution of their planning processes. 'Development' and 'progress' are processes of learning. Countries, organisations in them, and teams and individuals within those organisations must learn to do what they could not do before. In a competitive world, those individuals, organisations, and countries who learn fast can catch up with others ahead of them, and if they keep up their pace of learning and progress, even overtake them. I asked the World Bank's experts who assisted me to compare pairs of countries who were in similar positions in 1991 and whose paths of progress had diverged since then. An obvious pair was India and China – both their economies were comparable in size and per capita incomes in the 1980s. By 2009, per capita income and GDP was five times higher in China, its manufacturing sector eight times, and its high-tech sector 50 times larger than India's. American capitalism, Chinese socialism The 20th century was a historical test of competing economic ideologies – socialism and capitalism; and competing forms of governance – liberal democracy and authoritarianism. When the Soviet Union collapsed in 1991, victory was declared for the Washington Consensus of free market capitalism and liberal democracy. Washington's ideology was forced onto socialist Russia with a 'big bang', with disastrous consequences for its economy and society. China did not yield. It stayed its socialist course with single-party governance. India's reformers adopted the Washington formula in 1991. They abandoned industrial policies for growing domestic industries, which China continued with, and opened the market for foreign companies without requirements to transfer technology. The growth of China's economy is a miracle, economists say. The US has been alarmed by China's remarkable economic growth and industrial strength, despite China not following Washington's economic formula. The Washington Consensus is cracking within Washington: ideological divisions have appeared within the US where inequalities have increased and working people have become restive. The US is threatened by China's rise. China straddles India's northern borders where their armies continue to skirmish. The US is pressing India to come closer to it. India is wary. It must become self-reliant and stronger much faster than it has so far. Reforms must increase incomes faster for India's masses and build stronger domestic industries. India is at a crossroads. Both, political Left and Right agree the economy needs substantial reform but disagree on what direction it should take. The progressive Left wants more socialism and more liberal democracy; the conservative Right, more free-market capitalism and is willing to tolerate curbs on liberty. The Middle is muddled. India's leaders should study China for lessons before pushing harder with economic policies based on the West's failing free market model. Three recent books offer insights into how socialism and capitalism have been combined to achieve China's inclusive fast growth. China's leaders are good learners, says German political economist Isabella M Weber, in How China Escaped Shock Therapy: The Market Reform Debate. Like Mohandas Gandhi, they kept their minds open, allowing ideas to come in from all directions without being blown off their feet. They listened to Western economists but applied only what suited China. She says, 'The famous Harvard development economist Dani Rodrik represents the economics profession more broadly when he answers his own question of whether 'anyone [can] name the (Western) economists or the piece of research that played an instrumental role in China's reforms' by claiming that 'economic research, at least as conventionally understood' did not play 'a significant role'. Chinese economist Keyu Jin, a professor at the London School of Economics, who grew up in China and experienced the Chinese system from inside, explains how the socio-economic-political system works in The New China Playbook: Beyond Socialism and Capitalism. She outlines why Western economic models, which strip out cultural and social forces from economics, cannot comprehend how China works – or even how Western economies work. She makes visible the 'invisible hand' that free market economists cannot explain. She explains why the Chinese government keeps financial markets and the private sector reined in to ensure the market produces welfare for all, especially the poorer and least powerful citizens. 'The number of financial crises in China is exactly zero. It is also an oddity (from a Western perspective) that despite the nation's prenatural economic growth, its stock market has been one of the worst performing in the world,' she says. The Chinese government has added citizen satisfaction and environmental sustainability to GDP to measure its own performance, and as measures of performance of all local governments. Though private firms grew nine-fold in China from 2000 to 2019 (their number now exceeds the US by far), 'A more striking fact', says Jin, 'is that private owners with state connections owned about a third of the capital registered by these companies showing how pervasive equity linkages between state and private businesses has become in China's corporate sector'. While the government has reduced the numbers of state-owned enterprises and pushed the remainder to add profits to their social objectives, it also demands that private firms comply with societal needs. Large, private, property and technology firms that have strayed from the socialist path have been cut down. Power to the people Three distinctive features of China's governance are: 1. The purpose of the state, throughout China's long history from Imperial times to the Communist era, has been the provision of welfare to citizens. The best Emperor is the one who provides the most welfare to all citizens, not the one who wins the most wars. The leadership of the Communist Party has continued this role, says Chinese political scientist Zheng Yongnian, in The Chinese Communist Party as Organizational Emperor: Culture, Reproduction, and Transformation. Jin explains (in The New China Playbook) how commitment to this role has shaped the Communist Party's socio-economic policies, resulting in widespread support for the Communist Party, even from young people born in the 21st century. 2. The governance of China is highly decentralised. Local communities are given freedom to create solutions suited to their needs; the performance of local party officials is measured by the satisfaction of their communities with progress. The Party-government structure is meritocratic, continuing a centuries long Confucian tradition. All who rise to the top of the Communist Party and government must first prove their mettle by managing a large city or state successfully. There are no 'professional politicians' in China, unlike other multi-party democracies where citizens are becoming increasingly disenchanted with their political systems and even with liberal democracy. 3. China's leaders and its economists are 'systems thinkers'. They see the economy as only a component of a complex social system. For them the purpose of economic growth is the production of societal well-being, especially for less powerful people. Whenever the economy begins to fail this purpose, reforms are made to bring it back to its socialist moorings. India is a remarkable country. It took an unusual path at its birth in 1947. It chose to follow a democratic path for its development. There were concerns inside and outside India whether so diverse a country, formed of peoples with many religions, many languages and many ethnicities, would be able to hold itself together. Independent India was a very poor country at its birth. The Indian economy, which was the richest in the world in the 18th century, had been exploited by its imperial coloniser to provide resources for its own economic growth and to fight its wars. India had become one of the poorest countries in the world when the British finally left India to Indians to govern themselves. Some economists believe that development must precede democracy. Poor countries must be managed autocratically initially to build their economic infrastructure, they imply. They also think that when income levels have increased to a higher level (though economists are no longer sure what that level is) democracy will emerge automatically. History tells another story. China was equally poor as India 70 years ago. Now, China's economy is five times larger. This may prove the theory that dictatorship should precede development. But it does not support the thesis that democracy, in the Western version, will follow development. On the contrary, there is increasing concern that rich Western countries are becoming undemocratic. India's own path to its destiny When I joined the Planning Commission, my brief was to suggest ways to accelerate the growth of industry and employment. China's planners had done much better than India's. Starting at similar levels 50 years ago, China's GDP and per capita incomes are now five times higher. I was invited by a Western economic journal to debate a Chinese economist. The subject was, 'Should dictatorship precede democracy for economic development?' The host of the debate contrasted China's and India's economic progress. His first question was to me. Did I think India had made a mistake in setting out to be a multi-party democracy when it became independent, and should it have followed the Chinese one-party, authoritarian model instead? Before I could reply, my Chinese counterpart intervened and told our host he was asking the wrong question. China and India's journeys could never be the same and should not be compared, he said. He explained Chinese statesman Deng Xiaoping's metaphor of economic development as a process of crossing a turbulent stream by feeling the stones underfoot. There is no map to follow. A path must be found step by step. Each step should enable one to take the next. Sometimes one will wobble and may have to pause. Development, he said, is a process of experimenting and learning in action. He contrasted India's and China's journeys. Both India and China had entered the same turbulent stream, on the same side, and at the same time. Both wanted to reach the same place on the other side of the stream, to become nations in which the welfare of all citizens is improved, and to become self-confident nations. They had entered the stream from different places on the bank, therefore they would have to find their own paths by feeling the stones their feet will encounter as they step forward. China and India had acquired their freedoms to chart their own courses in different ways, he explained. China's independence came with a violent revolution with the power of the gun. He even quoted Mao Zedong – 'power springs from the barrel of a gun'. India's independence was obtained by a non-violent revolution, and with aspirations to progress democratically. If India wants to follow China's path, it will have to turn back mid-stream to return to shore and start again from the place China started. He would not recommend such a dangerous manoeuvre mid-stream. India and China must evolve in their own ways. India's leaders are at a crossroads. India must not slavishly follow Western models any longer. Nor can India be China. The time has come for India to find its own way, a more Mahatma Gandhian way than Western or Chinese way, to create a more equitable society. Arun Maira is a former Management Consultant and member of the Planning Commission of India. He has written several books including Transforming Systems: Why the World Needs a New Ethical Toolkit and Transforming Capitalism: Improving the World for Everyone.
Mint
14-06-2025
- Politics
- Mint
Why the Indian government needs to redefine the idea of reform
When the Soviet Union collapsed in 1991, political scientist Francis Fukuyama prematurely declared the 'end of history'. He believed that capitalism and democracy—the Washington Consensus—had finally prevailed over socialism and totalitarianism. History has returned. Ideological conflict between democracy and capitalism has not ended. In fact the two ideologies are conflicting within the Western victors of the old Cold War. Civil society movements are speaking in the West on behalf of people left behind by the 'free market' of private enterprise. Other voices on 'the Left' demand a larger role for governments in providing public services and social security. And others speak for protection of the natural environment. Meanwhile the Right advocates for lower taxes, less regulation, and more freedom for capital to roam the world. The fundamental conflict between the core principles of capitalism and democracy—i.e. between the rights of owners of capital on one hand, and the rights of all humans on the other—continues. It is a conflict between political conservatives and political progressives. Between conservatives, who want to retain their power to fix the rules of the game from which they have benefitted, and progressives who want to change the rules for the benefit of those left behind. Also read: How John Matthai became a leading light of economic policy Democracy and capitalism are founded on different conceptions of fundamental rights. Capitalism's foundation is property rights. Democracy's is human rights. Capitalist institutions run on the principle that whosoever owns something has the right to use it as he wishes, and also that whosoever owns more of a shared resource must have a greater say in how that resource is used. Therefore, whoever owns more shares in a corporation has a larger vote than those who own fewer shares. On the other hand, ownership of property does not matter while assigning voting rights in democratic institutions. Because, in democracy, every living person, whether she has a billion dollars of wealth, or no dollars at all, has an equal vote in the governance of the collective human enterprise. The clash between capitalism and democracy is a clash of fundamental principles for good governance of societies. When appliances designed to run on AC power are plugged into sockets providing DC power, there will be blow-outs. Similarly, when institutions of governance designed to run on fundamentally different principles are plugged into each other, something will blow up. Fundamental contradictions between the principles of capitalism and democracy are causing violent conflicts amongst nations and within nations. To create an equitable, sustainable, and more harmonious world in the 21st century, institutions of democracy and capitalism must evolve, from the shape in which they have been locked in with the so-called 'Washington Consensus'. Humanity must find new solutions to many societal, economic, and environmental challenges in a hurry. They are listed in the 17 Sustainable Development Goals all governments have signed up for. Institutions are vehicles designed by humans to realize their collective aspirations. Institutions of capitalism, as well as institutions of democracy, must be reformed to solve the existential crises of increasing inequalities and rapid climate change that are threatening all humanity. Reforming Capitalism [Lawyer and Deputy Chairman of the Tata Engineering and Locomotive Company (Telco)] Nani Palkhivala supported private enterprise for economic growth. He was also a great defender of the democratic rights of citizens. When Indira Gandhi declared an Emergency and suspended political freedoms, he withdrew from a case in which he was representing her. This caused consternation in the Tata companies. J.R.D. Tata was naturally concerned about the effect Palkhivala's uprightness would have on Tata's businesses. But he supported Palkihivala nevertheless. Designs of new forms of capitalist institutions, such as the limited liability company invented in the 17th century enabled capitalism to expand. With the evolution of institutions for governing international finance and international trade in the twentieth century, capitalist corporations have been able to spread across national borders. Capitalist institutions have enabled global and national GPDs to increase and have lifted millions of people out of economic poverty. Also read: Fitzgerald's critique of capitalism in 'The Great Gatsby' remains valid 100 years later Economists promoting free markets gained more power within Anglo-Saxon governments from the 1970s onwards. Milton Friedman, who became famous for his dictum that 'the business of business must be only business', and Frederik Hayek, known for his thesis that more governance was 'the road to serfdom', persuaded Margaret Thatcher in the UK and Ronald Reagan in the US to push back against governments in their countries and to privatize public services. Reagan even said that Government is not the solution; rather, Government is the problem. This turn of ideology gave big capital greater power. Democratic governments, as mentioned before, must represent the interests of all people, rich and poor equally. Though the richest people within any society will always be numerically less than the numbers of poorer people (it is a mathematical distribution as the Italian economist Vilfred Pareto had pointed out in the nineteenth century). However, the rich few will acquire greater power in the governance of societies than the poorer many whenever the principle of property rights dominates. The shift in the balance between democracy and capitalism towards capitalism in the last thirty years is made vivid by the creation of international tribunals who adjudicate in disputes between foreign investors in countries and the governments of those countries. Governments of countries represent the interests of millions, even billions, of people in their countries. On the other side in the dispute are a few investors of capital. Global institutions have come to pander too much to financial investors, making it easier for them to enter and exit countries at will, while stopping human migrants searching for better opportunities across national borders. The rules of globalization have made life much easier for capitalists than for workers. The word 'reform' has taken on a one-sided connotation: reforms seem to imply removal of constraints on investors and businesses. This was starkly revealed in India, and other countries too, during the Covid pandemic. The poor lost incomes and homes while stock markets broke records making investors even richer. The Indian government's move at that time, to 'reform' labour laws to attract more foreign investments, making it easier for employers to fire workers and curbing unions too, made clear that large investors had more political power than common people. Excerpted with permission from Speaking Tiger Books. Also read: This women farmers' network envisions a feminist future for agriculture
