The traditional capitalism model is broken. We must rise up and embrace a more conscious and equitable economy before it’s too late, writes Stephen Vasconcellos-Sharpe.
It’s no longer news to suggest that capitalism as we know it is in crisis. Understandably, we were all caught off guard by the events that unfolded eight years ago. The sheer scale of the losses borne by the markets since – estimated to be around US$15 trillion dollars – has hobbled the market’s efforts to regain its composure, regardless of the many additional trillions artificially pumped into the system by central banks the world over. We have bought ourselves an uneasy truce. The system limps on. But what if, out of all of the chaos and devastation of the last decade, we are sitting on the greatest opportunity of our age?
Of course, the numbers mask a much bigger human cost. The ILO and Red Cross suggest that up to 40 million jobs were lost by 2012 with one billion people left undernourished. At the same time the OECD recorded a fall of 20 per cent in the standard of living in Greece, with a 12 per cent fall in Spain and 10 per cent in Italy respectively. Not surprisingly, political instability has also increased, with the rise of the Podemos and Syriza government in Europe and the surprise success of UKIP and the SNP in the UK.
Capitalism as we know it has begun to enter into a dangerous new phase. But not everyone is suffering. Perversely, the rich are getting richer, which poses significant challenges to stability.
With one per cent of the world now owning more than all the rest combined, the head of the IMF, Christine Lagarde is under no illusions about the risks to the system: “One of the leading economic stories of our time is rising income inequality, and the dark shadow it casts across the global economy.”
This trend of concentrating wealth in the hands of the few continues unabated: 85 of the world’s richest men own more than the poorest half combined. But the elite now wants change as much as anyone else – even if it’s mainly driven by self-preservation.
Few critics have been more outspoken about the need for change than the activist Pope Francis, who went as far as labelling unbridled capitalism the “dung of the devil.” Addressing a recent rally in Bolivia the Pope did not mince his words : “Let us not be afraid to say it: we want change, real change, structural change.”
A critical juncture
Politics aside, now that the global economy is consuming 1.5 times the bio-capacity of our home planet, we are running out of time to find the kind of solutions necessary to guarantee our survival as a species on earth.You don’t have to be an accounting whizz or have a PhD in science to conclude that the current trajectory does not bode well for mankind or the environment. Ecological disaster looms.
It is important to recognise at this stage that the economic system we participate in is the result of human choices, and not one that is necessarily natural per se –it is merely a construct, or rather a series of constructs, built on assumptions and preferences.
A healthy economy should be judged on its ability to deliver wellbeing for all people, and respect for nature and the environment. That’s where we have gone awry. In a global economy worth US$65 trillion, a mere US$15bn is spent on corporate social responsibility (CSR). Yet the true cost of the environmental degradation visited on the planet by corporations is more than US$2.2tn according to a UN report published in 2012. Historically many companies have bolted on CSR strategies for public relations purposes. It’s clear, business has a lot to answer for.
Within this context, companies now face a stark choice; continue an unrelenting focus on profit at all costs without any concern for human and environmental impacts, or recognise that we have come to the end of this cycle of every man for himself capitalism, and commit to building institutions that can combine profit with delivering meaningful impact.
Businesses must take the lead
Some of the brightest and most innovative minds are employed in the private sector, which, in turn, manages much of the world’s greatest resources. The opportunities are immense. Entrepreneurs and the corporations they run can be part of the solution too. Indeed many are already taking a lead.
The view of this writer is that we are on the verge of a brave new world. This transition may be fraught with challenges which we will work out along the way, but I firmly believe that business can and will adapt.
Firstly, we need to take some big decisions. What sort of economy do we want to build? One based purely on profit and self-enrichment, that exploits labour, ravages and poisons the environment and is heavily geared towards the waging of perpetual or regular wars? Or one inspired by creating the highest possible good, where every institution is guided by a mission and values and its core focus is delivering the greatest possible impact?
In his book, ‘Postcapitalism: A Guide to Our Future’, Paul Mason argues that the post-capitalist era has already begun. Whether or not we are in the post capitalist era or not is a moot point but there is no doubt that there are new types of businesses emerging, responding to the overwhelming need for change.
Indeed technology, and the demo- cratisation of information in particular is already encouraging innovative new collaborative models such as Wikipedia which has consigned the encyclopedia business the way of the dodo. Alongside this a more socially aware millennial generation is ushering in a new wave of social enterprises, many of which look like traditional businesses, and are profit generating, but driven by a social or environmental mission.
Environmental considerations, and the drift towards a post-carbon future are big factors shaping buying decisions and renewed localism as the wider economy embarks on a journey to become fully circular and zero waste.
Clearly, we cannot all continue to consume 1.5 times the biocapacity of the planet for much longer and the new economics and next generation business must respect the limits of the planet. Economies such as the US, built largely on their own consumption must reform.
A few multinationals such as Unilever and fashion holding Kering (Puma and others) are undertaking wholesale root and branch transformations and pioneering on a grand scale, although these are notable for their rarity. The really big change is happening on a much smaller scale. Consumers are getting more savvy about buying locally and supporting community businesses. As a result a new offer is emerging to respond to this demand. Communities meanwhile are learning to work better together, as evidenced in the transition town movement, and local currencies such as the Brixton Pound.
These developments, while lacking in coordination, and at a very early stage, indicate the emergence of a new way of thinking. The last 200 years has brought tremendous growth and generated incredible wealth and opportunity. But capitalism as we know it, driven by the relentless pursuit of profit at all costs, has run its course.
In its place a new more enlightened, mission-led capitalism is gaining traction. I see this as a natural evolution. The next decade will usher in a new grown up and fully conscious capitalism. And with it will come a new generation of compassionate business. Companies with purpose and heart will be at the vanguard of our new economy.
Stephen Vasconcellos-Sharpe is the founder and publisher of Salt.
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