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Virtue economics is vital for capitalism: Jeffrey Sachs, American economist

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Virtues play a role in life, because without virtue, we have misery. Thus, virtues must play a role in economics as well. Unfortunately, the idea of virtue was barred from economic science in the 20th century. We now need to restore a virtue economics, emphasising moderation, friendship, trustworthiness and social justice. Without this, capitalism is not sustainable. There are many variants of capitalism itself – social democracy, as in the Nordic countries, is a sustainable variant. The free market variety of the US and UK is not because it leads to huge inequalities of income and environmental destruction. In contrast, capitalism as it is practised in Denmark, Finland, Iceland, Norway and Sweden is positive and sustainable.

Capitalism has certainly contributed to economic growth, and to a long-term reduction of poverty – but capitalism has also contributed to a certain contempt for the poor, which is morally unacceptable. Further, capitalism has contributed to the climate crisis by allowing the environment to be treated as a free dumping ground. Yet, there are two important caveats here. First, remember that there are different kinds of capitalism. The environmentally destructive kind is free market capitalism. Second, Soviet central planning also wrecked the Soviet environment with mega-pollution. So, this is not exclusive to capitalism alone.

Therefore, what economies truly need are human values, intelligent objectives for the common good (including a safe climate, the conservation of biodiversity, clean air, water, oceans and healthy soils), and the technical engineering system to support them. However, this first needs an acknowledgement of capitalism’s purpose and its responsibility. By negating the idea of capitalism having a social responsibility, thinkers like Milton Friedman missed the main point. Instead of denying their responsibility, corporations need to follow the maxim, ‘Do No Harm’. They need to disclose their practices, including the safety of their products, the environmental consequences of their production practices, the behaviour of their supply chains and their responsibility to the law.

Further, corporations need to prove that they are aligned with the Sustainable Development Goals (SDGs) and the Paris Climate Agreement, not just here and there, but at the very core of their operations. We have to meet several objectives simultaneously, including prosperity, social justice and environmental sustainability.

And we need to measure each of these dimensions directly, for example, through the SDG Index that I help to produce each year. India ranks 117th this year. The US ranks 31st while the Nordic economies rank at the top of 166 countries – Sweden (1), Denmark (2) and Finland (3). We also need to measure human well-being directly, as in the World Happiness Report that I co-edit. In this too, the Nordic nations are at the top, comprising five of the leading seven countries. Nordic capitalism, with a strong purpose, strengthens sustainability – and makes our current world a much better place.

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