Foreward to Chinese edition of Putting Purpose Into Practice: the Economics of Mutuality

By Qin Suo
Observer of Humanities, Finance and Economics; Founder of Chin@Moments and China Business Civilization Research Center

Mutuality Model — A Reference to Move Towards Common Prosperity

Promoting common prosperity amid the high-quality development is a new direction that China is striving for.

Over the past 40 years, China has made outstanding achievements in poverty reduction. According to the World Bank’s poverty standard of $1.90 per person per day, China’s poverty incidence fell from 88.1 percent in 1981 to 0.3 percent in 2018, reducing the number of people in poverty by nearly 800 million, which account for nearly 75 percent of global poverty reduction over the same period.

However, the polarization between rich and poor in China is also increasing. The Gini coefficient for income in China is currently around 0.47, and the Gini coefficient for wealth is even higher. According to Credit Suisse’s Global Wealth Report 2021, the Gini coefficient of wealth in China in 2020 is 0.704. The “Matthew Effect” is very clear.

As a socialist country, China regards common prosperity as an essential requirement of socialism and an important feature of Chinese-style modernization. It is quite clear that after the adoption of “making some people and some regions rich first”, how to let the the early-rich drive the post-rich forward and move towards common prosperity has become a more important theme of the times.

According to the government’s plan, common prosperity should be promoted in stages. It should encourage hard work and innovation to get rich, insist on safeguarding and improving people’s livelihood in the course of development, create more inclusive and fair conditions for people to improve their education and development ability, smooth upward mobility channels, create opportunities for more people to get rich, and form a development environment in which everyone can participate. It should correctly handle the relationship between efficiency and fairness, build a basic institutional arrangement that coordinates and supports the primary, the secondary together with the tertiary distributions, and form an olive-shaped distribution structure, with the middle-income group accounting for the majority and the high and low-income groups the minority.

After the book The Economics of Mutuality—Corporate Mutuality and Achieving Common Prosperity was read against this context, it is obvious that the mutuality model can serve as a reference for moving towards common prosperity.

The mutuality model emphasizes the social purpose of business, stressing that companies should not just act as a tool to maximize shareholder profit, but should place themselves in a larger ecosystem. This ecosystem includes shareholders, consumers, suppliers, employees, retail and logistics partners, communities, governments, as well as all members of society. The mutuality model considers not how to make the most money in the moment, even at the expense of squeezing ecosystem members, but how to make the right and properly distributed money in the long run, so that the whole ecology can develop healthily and sustainably and thus maximize the balance and well-being of the entire ecosystem.

The mutuality model is naturally compassionate, but it is not about charity, but about how enterprises, a profit-making organization, can leverage and utilize society’s resources, especially the resources of disadvantaged groups and disadvantaged regions that were often neglected in the past, to provide them with constructive opportunities, so that they can create economic value and gain growth and dignity while receiving a decent income. Many cases of the mutuality model embody the idea that by combining with local social capital in an originally poor and backward places, we can import certain adaptive products and services while cultivating and enhancing human capital, and eventually form a recyclable business model.

The exploration of the mutuality model is very much in line with the Chinese government’s hope to “create more inclusive and equitable conditions for people to improve their education and development capabilities, and to create a development environment in which everyone can participate”. Rather than taking social resources or excluding members of society in order to maximize short-term capital gains, the mutuality model takes an inclusive stance, using social resources and members of society as the basis for long-term well-being. In other words, the mutuality model incorporates social development and the growth of social members into corporate philosophy, strategic positioning and practical exploration.

Over the past few decades, the global business community has explored various models of corporate social responsibility (CSR), social enterprise, co-benefits, impact investment, and shared value creation in response to environmental and social challenges. Compared with these models, the mutuality model is not a new set of things, but more based on the awakening, sublimation and transformation of existing businesses, and therefore has a broader corporate base. The fact that the mutuality model has been successfully explored around the world (including China) also demonstrates the transnational and transcultural value of this model.

The Chinese Tao Te Ching says, “The highest good is like water. Water benefits everythings by giving without taking or contending.” and “The sea can lord it over all the streams flowing from the vales, for it takes a lower position.” The mutuality model is also like water, because it has a more fundamental and long-term social purpose, so it is beneficial to all things in an endless way.

I hope and believe that more companies in China will follow the path of the mutuality model to better integrate corporate development and social development, and to promote the progress of business civilization and the sustainable and healthy development of society.