Working Paper: CEPR ID: DP16302
Authors: Dennis J. Snower
Abstract: This paper examines major forces that have decoupled economic and business prosperity from social prosperity and explores how recoupling can be promoted. Economists have specified well-known conditions under which free market enterprise with shareholder value maximization is efficient. These conditions are systematically violated by three forces – globalization, technological advance and financialization (GTF) – that have weakened the connections between economies and societies over the past four decades. Consequently, the recoupling process requires abandoning the default premise of economic decision making that social progress follows financial performance. For business, it calls for a move from shareholder to stakeholder value. For government, it calls for setting legal obligations, targets and incentives to ensure that stakeholder value is compatible with a rigorously defined concept of “societal and planetary value.”
Keywords: recoupling; shareholder value; stakeholder value; wellbeing; globalization; technological advance; financialization
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| GTF nexus (F12) | decoupling of economic and business prosperity from social prosperity (P17) |
| globalization, technological advances, and financialization (F65) | social disintegration and economic inequality (P39) |
| GTF nexus (F12) | concentrations of market power (L11) |
| GTF nexus (F12) | information asymmetries favoring producers over consumers (D43) |
| GTF nexus (F12) | technological unemployment (O33) |
| GTF nexus (F12) | rising social externalities (climate change, income inequality) (D62) |
| rising social externalities (D62) | deterioration of social welfare (I30) |
| shift from shareholder value maximization to stakeholder and societal value (O35) | recoupling of economic and social prosperity (P17) |