Business Prosperity Depends Upon Shared Prosperity

The Prosperity Dependency Model explores a simple but often overlooked business reality: businesses cannot prosper indefinitely in societies that are not themselves prospering.

Extreme concentrations of income and wealth are usually discussed through the lenses of politics, taxation or social justice. The Prosperity Dependency Model takes a different approach. It asks what businesses themselves need from society in order to succeed.

Businesses need customers with sufficient disposable income to buy their products and services. They need healthy, educated and skilled people. They depend upon functioning healthcare, education, infrastructure and institutions. They need communities in which people can participate, and sufficient trust, legitimacy and social cohesion to support stable markets and long-term investment.

The model identifies six interdependent foundations of business prosperity:

From Living Wage to Living Income

The model also distinguishes between a Living Wage and a Living Income.

A fair hourly wage is important, but it does not necessarily tell us whether a household has sufficient resources to live securely. Hours worked, housing, childcare, energy, transport, taxation, benefits and household circumstances all influence the final outcome.

This leads to one of the central propositions of the model:

Where people are technically included in the economy but lack the resources, security, time or opportunity to participate fully, I describe this as the Participation Deficit.

The Social Dividend of Shared Prosperity

Greater participation can create benefits beyond additional consumer spending.

Economic security can enable participation. Participation can strengthen relationships and agency. These can support belonging, wellbeing and trust, which in turn can contribute to greater social cohesion and stability.

I describe this potential wider benefit as the Social Dividend of Shared Prosperity.

The relationship is not automatic, and economic inequality is not the sole cause of social division. But businesses have a legitimate interest in understanding the economic conditions that help create healthy, participative and cohesive societies.

From Trickle-Down to Prosperity Circulation

The model challenges the simplistic assumption that prosperity created at the top will inevitably “trickle down” through an economy.

Instead, it proposes Prosperity Circulation.

Prosperity moves continuously between businesses, employees, consumers, investors, suppliers, government, public services and communities.

Businesses create employment and wages. Households consume and save. Consumption becomes business revenue. Savings can become investment. Businesses and individuals pay taxes. Taxation supports education, healthcare, infrastructure and institutions. These help create the people, markets and conditions businesses require to create the next generation of prosperity.

The Prosperity Paradox

This creates what I call the Prosperity Paradox:

An economy can become wealthier in aggregate while purchasing power, opportunity, public infrastructure, participation or trust weaken for significant parts of society.

Individually rational decisions can therefore collectively produce a weaker system. I describe this as the Concentration Trap: the difference between optimising an individual organisation or outcome and optimising the economic ecosystem upon which everyone ultimately depends.

Enlightened Self-Interest

The Prosperity Dependency Model is not an argument against wealth creation, entrepreneurship, investment or appropriate reward.

Nor does it advocate equality of outcome.

It argues for broad participation in prosperity.

For business leaders, supporting fair wages and Living Income, investing in skills, sharing productivity gains appropriately, paying fair tax, treating suppliers responsibly, supporting the Business Commons and considering the legitimacy of executive reward need not simply be acts of corporate responsibility.

They can represent Enlightened Self-Interest.

A healthy economy needs prosperous businesses.

But prosperous businesses also need healthy economies.

The Prosperity Dependency Test

The model can be translated into six practical questions for boards and leadership teams:

These questions can be complemented by a Shared Prosperity Stress Test, asking what would happen to the business if household discretionary income fell, skills shortages increased, public infrastructure deteriorated, employee financial insecurity rose, consumer confidence weakened or social trust declined.

The model therefore reframes inequality from being somebody else’s social problem into a potential strategic business dependency.

Would Our Business Be Stronger If Prosperity Were More Broadly Shared?

If the answer is yes, then greater shared prosperity is not simply philanthropy.

It is not anti-business.

It is not anti-wealth.

It is strategy.

It is Enlightened Self-Interest.

Connected Thinking Across the Framework

The Prosperity Dependency Model was developed by Professor Chris Harrop OBE as part of his wider work exploring the relationships between people, trust, social cohesion, sustainability, resilience, prosperity and sustainable competitive advantage.

The model forms part of the wider Harrop Framework, reflecting the principle that long-term business success ultimately depends upon creating outcomes that are good for People, Planet and Prosperity.

Truth Well Told → Trust Well Earned → Impact Delivered

Professor Chris Harrop OBE