Economics literatures explained shareholder capitalism as an economic system in which the dominant corporate form is legally independent companies that can pool capital from many shareholders with limited liability, complemented by an open stock market to trade these shares freely. Marshall Auerback of Asia Times recently wrote that American-style shareholder capitalism, with its incessant focus on maximising stock value, started gaining primacy over European and Japanese style stockholder capitalism in the 1980s.
It was premised on a notion best epitomised by Milton Friedman that the only social responsibility of a corporation is to encores its profit, laying the ground work for the idea that shareholders, being the owners and the main risk-bearing participants, ought therefore to receive the biggest rewards. Profits, therefore, should be generated first and foremost with the view toward maximising the interests of shareholders, not the executives or managers who were spending too much of their time, and the shareholders’ money, worrying about employees, customers, and the community at large.
George Tyler, an economist and the author of “What Went Wrong” and “Billionaire Democracy: The Hijacking of the American Political System.” stated that for all the decades-long effort to hype Anglo-American shareholder capitalism, one fact of life should have become abundantly clear to all honest observers by now is that low economic opportunity is the default setting of that brand of capitalism. George Tyler strongly argued that it is based on what’s technically called “codetermination,” a form of corporate governance that shapes key countries in northern Europe, particularly Germany. It is a mechanism to make the society-wide responsibility of capitalism matter on the shop floor as well as in the executive suite.
Codetermination literally meant cooperation between management and workers in decision-making, especially by the representation of workers on management boards. This model of distributing economic power in a balanced fashion stands in stark contrast to the Anglo-American variant of capitalism which false-headedly assumes that democratic capitalism can be delivered by having publicly listed corporations controlled solely by shareholder representatives.
According to Josh Bivens of the Economic Policy Institute, the Hijacking of the American Political System.” stated that those representatives grab any opportunity to offshore jobs and disdain higher wages, while at the same time seeking to divert funds from the given company’s investment budget to spike share value and executive compensation. Economic opportunity for others is diminished. The northern European upgrade of codetermination establishes a far better balance. It is based on a corporate governance structure that reflects the interests of employees, executives, investors and other stakeholders. Most importantly, it enhances opportunity by improving economic mobility.
Heidi Shierholz at the Economic Policy Institute stated that adamantly opposed to any changes, Republicans in the United States argue that economic opportunity should be judged solely by job creation figures, while Democrats insist that genuine opportunity requires rising real wages. The insistence on rising wages on the Democratic side of the political landscape is long overdue because economists document that opportunity in America is low. Economists at the Federal Reserve Bank of Chicago have concluded that the ability of United States youths to outdo parents which is their intergenerational earnings mobility, improved until 1980, but has deteriorated since.
Raj Chetty of the Stanford University determined that household incomes of 90% of American youths born in the post-WWII era (at age 30) bested their parents; only 50% of households headed by youths born in the 1980s did so. The difficulty of American youths to move beyond their birth endowment or parental income class is documented by Julie Isaacs in collaboration with the Brookings Institution and the PEW Economic Mobility Project. They find that the only odds greater than a poor youth in America remaining poor as an adult (39%) are the odds of a rich son remaining rich (42%). The United States thus is the worst rich democracy in which one can be born if either poor or middle class and the very best in which one can be born if rich.
George Tyler asserted that while Americans always like to consider themselves exceptional as a nation, in reality it is Northern Europe that is exceptional. Those nations provide the best opportunity on earth for youths by dint of grit, ability and pluck to determine their economic fate. Studies and OECD analyses document, for instance, that sons in Germany, the Netherlands and Scandinavia can far more easily bootstrap themselves above their parents than American or British boys. Their movement between socioeconomic classes is more fluid by a factor of two or three than in the United States and UK where odds of being stuck for life in their parents’ income class are considerably higher.
Raj Chetty asserted that public policies in both education and corporate governance are responsible for opportunity in Northern Europe being up to three times greater than in the United States or UK. First, European public policies in education and job training are more robust. OECD data affirm that the United States and the UK do the most inept job of rich democracies in providing youth with skill sets needed to seize opportunity. According to Raj Chetty, it is stunning that the share of their youths with poor numeric/literacy skills is 2-4 times larger than in Northern Europe.
A nation’s prowess in arming its youth to maximize career opportunities can also be judged by comparing their skill set to that of their parents’ generation. By that measure, the United States and the UK are exceptional only in the negative sense as they fail to provide opportunity for youths. The share of Americans age 16-24 with low numeracy or literacy skills (30%) is only three percentage points better than the cohort aged 55-65 (33%). And the share of British youth is only two percentage points better. It’s embarrassing. Heidi Shierholz stated that the tiny generational improvement in skills vital to realizing opportunity in the United States and UK is dwarfed by the much larger generational improvement accomplished by genuine opportunity nations such as the Netherlands (18 percentage points), Sweden (10 points) and Germany (8 points).
The second public policy central to creating opportunity is a codetermination corporate governance structure. George Tyler elaborated that little known by Americans, codetermination, where up to one-half of corporate board members are employees, is commonplace in Austria, Germany, the Netherlands and Scandinavia. Compared to United States boards beholden only to shareholders, corporate boards in these nations invest more, pay higher wages and increase the stock of skilled jobs at home. Rising real wages incentivize skill acquisition and work effort, all important to realizing opportunity.
According to George Tyler, investment decisions by codetermination firms produce a relative domestic abundance of high-skill, high-wage jobs. Sectors dominated by skilled jobs in the nations practicing codetermination are larger than they are in the United States. The skilled-job sector in the Netherlands for instance, which encompasses 47% of that nation’s jobs, is nearly one-third larger than the 36% in the United States.
The 18th century emergence of limited liability joint-stock enterprises was a seminal moment in economic history. Public policies were vital in creating this innovation, for example to permit the agglomeration of capital without exposing investors to undue risks. The goal was to benefit the many stakeholders and the public. Raj Chetty stated that the Anglo-American structure of corporate governance that followed has failed, with benefits unduly hoarded by just one group, shareholders. The alternative codetermination structure hews to the original expectations by benefitting all stakeholders while improving economic opportunity.
According to George Tyler, economics of corporate governance is a settled issue. The only question is whether the political will exists to toss the Anglo-American governance model in the trash bin of history.
Dimitra, a prominent AgTech enterprise system based on blockchain technology, is partnering closely with the Limu Inara Multipurpose Cooperatives Union in Ethiopia. This union consists of approximately 51,000 farmers and together they aim to enhance farmers’ livelihoods and revolutionize agricultural practices in the region.
Through this partnership, Ethiopian coffee farmers affiliated with the Limu Inara Cooperative Union will have access to Dimitra’s cutting-edge technology, enabling them to modernize and digitize various agricultural processes. Specifically, they will leverage Dimitra’s Connected Coffee Platform and Deforestation Compliance Module.
Recently European Union coffee importers are reducing purchases from small Ethiopian farmers in anticipation of a groundbreaking EU law that will prohibit the sale of goods associated with deforestation. Dimitra’s Connected Coffee Platform and Deforestation Compliance Module offer a solution to ease the challenges and costs of complying with the EU Deforestation Regulation (EUDR).
Jon Trask is CEO and Founder of Dimitra and has been working with blockchain since 2017. Prior to founding Dimitra, Jon had an extensive career building and developing enterprise software solutions to revolutionize supply chain processes and improve immutable traceability. A recognized expert in his field, Jon is also Founder and CEO of Blockchain Guru and a Partner with the Blockchain Training Alliance. His extensive career in the tech industry has seen him awarded a vast array of accreditations. Jon’s mission now is to increase farming connectivity, particularly with those disenfranchised across the globe, and to leverage the power of innovative technologies to bridge farming and technology.
Capital’s Groum Abate caught up with Jon Trask to talk about the new collaboration with Limu Inara and how his company’s technology help the small holder farmers in Ethiopia in regards to EUDR. Excerpts;
Capital: What is Dimitra, and what is its role in the AgTech industry?
Jon Trask: Dimitra is a blockchain-based enterprise system for AgTech driving productive, intelligent and inclusive farming. By removing data silos, we empower farmers to improve their farming processes through real-time insights. Each of Dimitra’s tailored platforms facilitate access to specific, affordable technology solutions to help increase crop outputs (across 50 crops), reduce their expenses, and mitigate any risks.
Dimitra has 5 market-leading platforms that empower farmers to implement better ways of working through real, tangible insights. These platforms include:
Connected Farmer – an app which allows farmers to track finances, manage crops, access weather predictions, and stay in compliance with local government regulations.
Livestock Guru – supplies data into insights about cattle and farm animals that help reduce record-keeping time and bolster data-driven decisions.
Connected Coffee – Actionable insights for coffee farmers to increase the quality and quantity of their coffee beans.
Deforestation platform – This platform produces deforestation certification for farmers, traders, operators and consumer packaged goods companies to ensure every shipment is compliant and meets the regulatory demands.
Connected Cacao – This application allows farmers to optimize each stage of the cacao farming process, from cultivation, harvesting, fermentation, drying, storage, and marketing, reducing resource waste and increasing productivity.
All of Dimitra’s tech is accessible on mobile, meaning farmers have complete functionality and insights on the go, all in real time. Using data collected from each farm, Dimitra builds a full picture for each farmer, presenting them with simple actions they can implement to truly improve their processes and maximize efficiency. Dimitra also builds custom software for features that farmers and customers require specific to their industries or farms. At Dimitra we believe, every farmer across the world should benefit from data-driven, effective farming technologies regardless of their economic standing, ensuring those that need it most have access.
Capital: What is the collaboration with Limu Inara Multipurpose Cooperatives Union?
Jon Trask: Through the collaboration, the Ethiopian coffee farmers affiliated with the Limu Inara Cooperative Union will gain access to Dimitra’s industry-leading technology, enabling farmers to modernize and digitize various agricultural processes. In particular, they will deploy Dimitra’s Connected Coffee Platform and Deforestation Compliance Module.
Capital: How many farmers are part of the Limu Inara Multipurpose Cooperatives Union?
Jon Trask: LIFMCU is an umbrella union for four district farmers namely Limu Kosa, Limu Seka, Chora Bottor and Nono Benja. The Union was established in 2006 by 11 primary cooperatives and 3083 member farmers with an initial capital of 158,000 Ethiopian Birr. The union is located in the western part of Ethiopia in Oromia Regional State. Currently, the number of member cooperatives has increased to 95 primary cooperatives and its members have reached 34,687 farmers. Out of the mentioned primary cooperatives 37 of them or 15,483 members are in the coffee production area. 5,360 coffee farmers from 10 primary cooperatives are Fairtrade certified and sell their product on Fairtrade terms.
Capital: What are the challenges faced by smallholder farmers in the region?
Jon Trask: Smallholder farmers are an invaluable asset to the global food economy. Despite their size, they produce more than a third (around 35 per cent) of the world’s food and contribute up to 80 per cent of the food supply in sub-Saharan Africa. These growers play a key role in providing nutritious food to their local communities, maintaining ecosystems, and promoting sustainable agriculture.
However, smallholder farmers in Ethiopia face significant challenges. They often lack sufficient funds, work with inadequate infrastructure, and are vulnerable to the whims of supply chains that tend to favor large-scale farmers. Climate change also plays a role in making it difficult for smallholder farmers to sustain their agricultural operations. Severe weather events and changes in weather patterns have damaged land, creating unpredictable conditions for harvesting crops.
In particular, insufficient finances are a major challenge. Most smallholders do not qualify for bank loans due to a lack of collateral assets like land titles and limited access to technology. Additionally, smallholder farmers often lack access to modern farming technologies, such as irrigation systems and smart fertilizing methods.
Capital: What is the EUDR law, and how does it impact the sale of goods linked to forest destruction?
Jon Trask: The EUDR law imposes a ban on the sale of products from deforested areas within its borders, set to take effect on December 30, 2024. This regulation implements a tiered system of inspections and penalties based on the perceived risk level of the country of origin. While designed to ensure compliance, this structure inadvertently places a burden on smaller farming entities.
The regulation encompasses timber, soy, coffee, cocoa, beef, palm oil, and related products, imposing obligatory due diligence responsibilities on both consumers and producers situated along the supply chain. This means that these products do not have access to the European market if they are not certified. Dimitra’s technology facilitates transparency and tracking throughout the supply chain, making it easier to comply with these regulations. Dimitra has developed blockchain-based solutions to assess deforestation and ensure compliance for producers, traders, and consumer goods firms.
Capital: What efforts has the Ethiopian government made to combat deforestation and promote sustainable coffee production?
Jon Trask: The Ethiopian government in collaboration with the UNDP and GEF, inaugurated the FOLUR project to combat deforestation and promote sustainable coffee practices. With a budget of USD 20.8 million, the initiative spans 22 regions, aiming to avoid 7 million tons of CO2 emissions, improve livelihoods for 440,000 people, and restore unproductive coffee gardens and Afromontane Forest. The project aligns with Ethiopia’s Green Legacy Initiative and climate strategies, emphasizing the need for effective collaboration among stakeholders for successful implementation.
Capital: What are the objectives of the project between Dimitra and the Limu Inara Multipurpose Cooperatives Union?
Jon Trask: Importers of coffee to the European Union are starting to scale back purchases from small farmers in Ethiopia – where some 5 million farming families rely on the crop — as they prepare for a landmark EU law that will ban the sale of goods linked to the destruction of forests.
Dimitra’s Connected Coffee Platform and Deforestation Compliance Module solution is poised to alleviate the cost and difficulty of complying with the EU Deforestation Regulation (EUDR).
Capital: How will the project improve the livelihoods of farmers in the region?
Jon Trask: The ability to supply traceability for products and prove compliance with regulations adds significant value to the coffee produced by Ethiopian farmers in the region. This not only safeguards their market access within the EU but also opens up opportunities to reach new markets that prioritize sustainably sourced products. By providing an efficient and technologically advanced way to trace and prove the origins of coffee beans, Dimitra’s technology not only supports compliance but also empowers farmers in the face of evolving market demands. The ability to safeguard local produce from market exclusion ensures that the livelihoods of these farmers will not be compromised due to regulatory decisions that lie out of their control.
Capital: How will the project help farmers remain competitive in the commodity market?
Jon Trask: Proving compliance with regulation with traceability and immutable data regarding the farming practices of these farmers adds significant value to the coffee produced by Ethiopian farmers. This not only safeguards their market access within the EU but also opens up opportunities to reach new markets that prioritize sustainably sourced products. By providing an efficient and technologically advanced way to trace and prove the origins of coffee beans, Dimitra’s technology not only supports compliance but also empowers farmers in the face of evolving market demands.
Capital: Will you partner with other Cooperatives?
Jon Trask: Yes, we have partnered with 3 other cooperatives and are in discussions with a few more.
Capital: Will your project be on time for application of the EUDR law?
Jon Trask: Dimitra’s application already delivers end-to-end functionality for coffee supply chain as well as deforestation assessment with two Ethiopian languages already added to the platform.
The biggest challenge will be training the farmers – Dimitra trains their trainers who then go to the field for onboarding. Initial training is taking place in January, training 50,000 farmers will take many rounds of training.
The global GDP growth is projected to slow from 2.7 per cent in 2023 to 2.4 per cent in 2024, according to the World Economic Situation and Prospects (WESP) 2024 launched by the Economic Commission for Africa (ECA) in Addis Ababa, Ethiopia.
Growth is forecast to improve moderately to 2.7 per cent in 2025 but will remain below the pre-pandemic trend growth rate of 3.0 per cent.
Adam Elhiraika, Director, Macroeconomics and Governance Division of ECA said, tight financial conditions, coupled with a growing risk of geopolitical fragmentation, pose increasing risks to global trade and industrial production.
He said while the world economy avoided the worst-case scenario of a recession in 2023, a protracted period of low growth looms large. Growth prospects for many developing countries, especially vulnerable and low-income countries, have remained weak, making a full recovery of pandemic losses ever more elusive.
“The global economic slowdown, tighter monetary and fiscal conditions, and high debt sustainability risks will remain a drag on the region’s growth prospects,” said Elhiraika.
“The unfolding climate crisis and extreme weather events will undermine agricultural output and tourism, while geopolitical instability will continue to adversely impact several subregions in Africa, especially the Sahel and North Africa.”
He noted that the world economy proved more resilient than expected in 2023 amid significant monetary tightening and lingering policy uncertainties worldwide, even as multiple shocks arising from conflict and climate change which will have an effect on the lives and livelihoods of millions, further jeopardizing progress towards sustainable development.
The report indicates that developing countries face divergent near-term growth prospects. The economic growth in Africa he said is projected to remain weak, increasing from an average of 3.3 per cent in 2023 to 3.5 per cent in 2024.
On inflation, the report says that after surging for two years, global inflation eased in 2023 but remained above the 2010-2019 average. Global headline inflation fell from 8.1 per cent in 2022, the highest value in almost three decades, to an estimated 5.7 per cent in 2023.
Hopestone Chavula, ECA Economic Affairs Officer who presented the report highlighted that although the global inflation is ebbing, food price inflation can exacerbate food insecurity and poverty. After surging for two years, global inflation eased in 2023 but remained above the 2010-2019 average.
“In addition to raising interest rates, the major developed country central banks started reducing the assets on their balance sheets, a process known as quantitative tightening, in 2022 and accelerated the pace in 2023 to reduce excess liquidity,” said Chavula adding that the higher borrowing costs will exacerbate debt sustainability risks for developing countries.
Monetary tightening by major developed country central banks will have significant spillover effects on developing countries.
The report says the global investment trends will remain weak. Global investment growth is likely to remain subdued. Real gross fixed capital formation grew by an estimated 1.9 per cent in 2023, down from 3.3 per cent in 2022 and far below the average growth rate of 4.0 per cent during the period 2011- 2019.
International trade is losing steam as a driver of growth. In 2023, global trade growth weakened significantly to an estimated 0.6 per cent, a sharp decline from 5.7 per cent in 2022. It is expected to recover to 2.4 per cent in 2024, remaining below the pre-pandemic trend of 3.2 per cent. This slowdown, notes the report, is attributed to a slump in merchandise trade. By contrast, trade in services, particularly tourism and transport, continued to recover.
According to Chavula, Central banks worldwide are expected to continue facing a delicate balancing act and difficult trade-offs in 2024 as they strive to manage inflation, revive growth, and ensure financial stability. Central banks in developing economies will face the additional challenges of growing balance-of payments concerns and debt sustainability risks. Central banks must navigate a delicate balance between inflation, growth and financial stability.
On fiscal space he said it is shrinking amid higher interest rates and tighter liquidity. Sharp increases in interest rates since the first quarter of 2022 and tighter liquidity conditions have adversely affected fiscal balances, renewing concerns about fiscal deficits and debt sustainability. Countries implemented bold and timely fiscal policy measures in response to the pandemic crisis and to stimulate recovery.
The report says that industrial policy, which is increasingly seen as crucial for fostering structural changes and supporting a green transition is being revived and transformed. This shift is aimed at fixing market failures and aligning innovation with broader development goals. Innovation policies are also changing, with more ambitious, systemic and strategic approaches being employed.
On meeting the SDGs by 2030, the report indicates that strengthening multilateralism will accelerate SDGs progress. “The world remains vulnerable to disruptive shocks, including a rapidly unfolding climate crisis and escalating conflicts. The urgency and imperative of achieving sustainable development underscore that strong global cooperation is needed now more than ever,” says the report.
