In the sector press

Inequality and the failings of economic theory

22/01/2018

Kate Rogers

Kate Rogers

Head of Policy

Kate Rogers, Portfolio Director and Head of Policy at Cazenove Charities shares her thoughts on issues faced by the charity sector in Third Sector Magazine every other month.  

I had the pleasure of listening to Darren Walker the President of the Ford Foundation at an event at the LSE in the Autumn. The Foundation, with an endowment of $12 billion, spends over $0.5 billion a year fighting inequality in the belief that this is the defining challenge of our time.

They identify five underlying drivers of inequality; persistent prejudice and discrimination based on gender, race or disability; entrenched cultural narratives that undermine fairness, tolerance, and inclusion; failure to invest in and protect vital public goods such as education and natural resources; unequal access to government decision making and resources and unfair rules of the economy that magnify unequal opportunity and outcomes.

It is the last of these that as investors we may be able to influence. The Ford Foundation certainly believe they can. Their ‘inclusive economies’ programme seeks to encourage business, government and civil society to work together to reduce inequality and promote growth and prosperity for everyone.

There is plenty of evidence to support the fact that economic inequality is unhelpful for economic prosperity over the long term. In the UK, the Equality Trust highlight research showing that high levels of income inequality are associated with economic instability – with more equal societies able to support longer periods of sustainable growth.

Darren Walker would label us, the asset owners and charity investors, as the ‘privileged’. Our generosity is not enough; we must seek justice, interrogating our own behaviours to see how we can bring about change. In his view, capitalism served the privileged well but failed many. For a sustainable future we need our economies to work for more people.

This is a theme picked up by Kate Raworth in her recent book ‘Doughnut Economics’ (and TED talk of the same name). Described as a ‘renegade economist’ she explains how current economic theory has failed us. That the focus on economic growth has led to the destruction of the environment, and favoured the few, amplifying inequality without improving wellbeing.

Instead, she argues that we should be trying to meet the needs of all, within the means of the planet; without valuing growth above all else. The ‘doughnut’ represents the delicate balance between achieving too little for society (the hole in the middle) and achieving too much so that ecological resources are threatened (beyond the outer ring of the doughnut). Economies that achieve this balance would be less likely to be as unequal.

So what can you do, to seek justice, to encourage an inclusive economy? As charity investors you are part-owners of companies and your share holdings give you influence. You can use this position to change the narrative, to encourage businesses to place less value on short term profit metrics and to focus instead on long term sustainability. It might mean that short term financial returns are less attractive as businesses invest for the future but it should enhance the longer term rewards, for you and for the rest of society.

Author

Kate Rogers

Kate Rogers

Head of Policy

Kate specialises in investment on behalf of charities, endowments and foundations and joined Schroders Charities in 2005 after four years with Kleinwort Benson Private Bank Charity team.

Kate is chair of the Charity Investors' Group, which is a membership organisation providing a forum for investment debate. In this role she has collaborated with CFG to launch a guide to written investment policies and 'For Good and Not For Keeps' published by the Association of Charitable Foundations in 2013. Kate also regularly writes on charity investment in the charity sector press.

Kate is also Portfolio Director at Cazenove Charities. She is a CFA charterholder and has a BSc (Hons) in natural sciences from the University of Durham, is Chair of her local community foundation, and governor of her local primary school.

The opinions contained herein are those of the author and do not necessarily represent the house view. This document is intended to be for information purposes only. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Cazenove Capital does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Cazenove Capital has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Cazenove Capital is part of the Schroder Group and a trading name of Schroder & Co. Limited 12 Moorgate, London, EC2R 6DA. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. For your security, communications may be taped and monitored. 

Contact Cazenove Charities

Achieving your charity's investment objectives takes time and thought. To find out how we can help you please contact:

Giles Neville

Giles Neville

Head of Charities giles.neville@cazenovecapital.com
John Clifton

John Clifton

Business Development Manager john.clifton@cazenovecapital.com