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Businesses have a responsibility towards the whole of society

Singapore celebrated our 56th National Day this month with a parade at Marina Bay.

Happy Birthday Singapore. Thank you for being a beautiful country – one that allows us to live, work and play in a safe, progressive and prospering environment. Thank you also for living up to your promise in the National Pledge: “Regardless of race, language or religion, to build a democratic society based on justice and equality”.

The year 2021 also marks the 100th anniversary of the Chinese Communist Party.

A cohesive and stable society cannot be built on inequality, because inequality is not sustainable. The foresight of Singapore’s early leaders was evident in the way they managed national resources to ensure citizens, including young people starting families, could live in homes that they owned. Maybe the situation in Hong Kong would have unfolded differently over the past three years if Hong Kong society was a more equal one.

The rise of the disillusioned youth and social instability in Hong Kong has, perhaps, alerted the Chinese government about the urgency of addressing the issue of inequality. China’s rapid economic growth since its opening up in 1978 has brought about starkly unequal outcomes, and the sustainability of that economic model could not be maintained. Sooner or later, the grow-at-all-cost paradigm had to be reined in. This earlier model had taken too significant a toll on two of China’s most vitally important resources: natural and human resources.

Investors are attracted to China for its growth. But this growth sometimes takes place alongside the depletion of natural resources at a worrying pace as well as the underpaying of workers – both of which have been unfortunate methods used by companies to keep profit margins high. Across the country, this model concentrates wealth while slowing down the expansion of consumption by the broadest segment of the population. When the increase in middle-income households and the upgrading of lower-wage workers are hindered, an unhealthy cycle might ensue: companies respond by continuing to suppress wages or by damaging the environment further. There could be a downward spiral. Exploitative social ills could become acceptable norms.

In recent months, the Chinese government has taken decisive action to right many wrongs. While the confronting of technology monopolies and market abuse has not been entirely problem-free, the straightforward and forceful approach does reflect China’s view of how urgent the situation is. Addressing the underlying issues will allow capital and resources to be allocated to the right sectors of the real economy, namely, enterprises that have built sustainable business models and profit margins not based on oppressing workers or the excessive use of natural resources.

To be sure, absolute equality of outcome will always be a pipe dream. But all respectable business leaders can and should endeavour to provide equality of opportunity. It has been shown in so many countries over recent decades that the mindless pursuit of profit is out-dated, unsustainable and ultimately self-defeating. What we need in the new economy are responsible enterprises that view the whole of society as stakeholders and that are therefore able to earn the trust and support of society in return.

Also published on addx.co/insights/