At a time of worldwide economic and political upheaval, the University of Chicago Booth School of Business continues to influence the conversation. Chicago Booth marked the inauguration of its Executive MBA Program in Hong Kong with a panel discussion on the future of capitalism—a topic highly relevant to the lightning and political storm that was flashing outside.
Hundreds of alumni, dignitaries, and incoming students gathered on August 31 at one of the grand hotels in Hong Kong, a city at the crossroads of the world’s economies. As a free-market bastion, Hong Kong has long been China's window to international markets. Yet China remains a planned economy with a high level of state enterprise ownership, and its leaders have sharply criticized Western-style capitalism in the wake of the 2008 global financial crisis.
Adding to the sense of contrast, this particular Sunday also was the inauguration of a protest movement that will "occupy" Hong Kong's central financial district following a decision by Beijing to set narrow parameters for Hong Kong popular elections planned for 2017.
"Hong Kong is a wonderful, thriving society to be part of. If you don't believe me, go outside today," Sunil Kumar, dean and George Pratt Shultz Professor of Operations Management, said in his opening remarks at the inaugural ceremony’s keynote panel discussion, “Which Capitalism for the 21st Century?” Geographically, it is six or seven flight hours from two-thirds of the world's population—not exactly a bad pool for prospective students, he added.
Kumar opened the discussion with David Booth, ’71, chairman and co-CEO of Dimensional Fund Advisors and a University of Chicago trustee; Kevin Murphy, George J. Stigler Distinguished Service Professor of Economics; and Luigi Zingales, Robert C. McCormack Distinguished Service Professor of Entrepreneurship and Finance; by asking the panelists to identify the biggest challenges for capitalism.
Murphy focused on the development of human capital as the key issue. Those without a strong education and skills set are falling behind, and the resulting income inequality could lead to a political backlash against capitalism, he said.
Economic growth is driven by improvements in technology, including management technology, physical capital, and human capital. “We've done well with the first two, but to have progress, you need all three,” Murphy said. "How do we build a system that allows it to be broad-based with the benefits going to everyone? There's no guarantees the capital system can do that, and that's one of things you have to worry about."
Zingales pointed out that the United States is feeling this pressure more keenly than Asia, because the US is losing its lead in human capital.
"In the US in the 1950s, if you were a high school graduate you were a rare commodity in the world,” Zingales said. “Today there are a lot of high school graduates in the world, and many are better trained [than US high school graduates]. This of course creates tension."
An obstacle to the development of human capital is that there is no marketplace in early education. “There’s a strong corporation of teachers that protect their turf,” Zingales said. “We don’t see the disruption and innovation that we see in other sectors.”
Booth added that he found it frustrating that in the wake of the 2008 financial crisis, critics said "the capital system created this mess."
Booth noted that the present is plagued by uncertainty, “but I’ve been in business for 40 years and can’t think of a time when there wasn’t a lot of uncertainty.” Capital markets, he noted, have improved dramatically in the past 30 to 40 years, particularly in emerging countries. “It used to be that the trading mechanics and distribution in emerging markets was pretty inefficient,” he said, “but now a lot of these emerging countries are better, particularly compared to a lot of the wealthy European markets."
Some audience members later said that the wealth gap between the skilled and unskilled is leading to intense competition to get into good universities. One audience member asked whether top universities such as the University of Chicago would be expanding "their supply" of education so that "our kids can get" the same education opportunities she enjoyed.
Kumar responded that Booth has expanded its programs and that the supply of good schools elsewhere also has grown.
The emphasis on human capital was not falling on deaf ears in this crowd. Students at the event had high praise for Chicago Booth’s Hong Kong program, which celebrated its ribbon cutting on August 18.
Jiang Yanping, an IT professional based in Beijing, said she joined the program to give a theoretical overlay to her practical experience, and to strengthen the quality of her strategic thinking. She chose Booth in Hong Kong because it offers an elite reputation without requiring monthly flights to the United States. The logistics of combining life, work, and study were made easier closer to home, she said.
Lu Youming, a mainland Chinese entrepreneur based in Hong Kong for the past several years, also chose the program because it offers global scope—with sessions in Chicago and London—but one that was primarily based closer to his business.
Lu values the program’s microeconomics—the leadership training, strategic thinking, and opportunities to meet other dynamic people from around the globe. As to the macroeconomic considerations of free market vs alternative systems, "That's different," Lu said. "That's political."
The formal program closed with a Chinese blessing offered by Kumar: "May we all live long and prosper."—Cathy Holcombe