A Makeover for Capitalism
Capitalism’s great triumph over socialism has been followed by a series of humbling setbacks since.
–New York Times columnist David Brooks
Capitalism is unquestionably the dominant socio-economic model in the world today. But since the financial crisis of 2008-2009 it has become clear that for decades we may have enjoyed a false sense of growth and prosperity founded on what bond guru Bill Gross calls “the sandy loam” of financial leverage.
Perhaps that’s why we’re hearing and reading today about concepts like Social Capitalism. Inclusive Capitalism. Fiduciary Capitalism. Sustainable Capitalism. Regenerative Capitalism.
These are attempts by the likes of New York Times columnist David Brooks; or Governor of the Bank of England, Mark Carney; or former CFA Institute CEO John Rogers; or socially responsible investing pioneer David Blood; or Capital Institute founder John Fullerton to articulate new models of capitalism. Their ideas include capitalism in the service of social goals; capitalism that balances growth with stability; capitalism that improves our collective well being as measured by metrics other than GDP.
Thought leaders around the world are trying to go beyond describing what we don’t want from capitalism – namely, a repeat of the financial crisis – to start a conversation about what we do want from capitalism in the decades ahead.
I was struck by a speech given last year on Inclusive Capitalism by Mark Carney, Governor of the Bank of England (and former Governor of the Bank of Canada).
Carney defined “Inclusive Capitalism” as “delivering a basic social contract comprised of relative equality of outcomes; equality of opportunity; and fairness across generations.”
Arguing that “unchecked market fundamentalism “can devour the social capital essential for the long-term dynamism of capitalism itself,” Carney called for individuals and firms to “have a sense of their responsibilities for [the] broader system.”
“…[M]arket participants need to become true stakeholders. That is, they must recognize that their actions do not merely affect their personal rewards, but also the legitimacy of the system in which they operate.”
In other words: If you’re part of the system of financial capitalism, you have a responsibility to that system.
Carney is not alone in calling for a redefinition of capitalism. A new age of Fiduciary Capitalism is envisioned by John Rogers in which “universal owners” – super-large asset owners, like sovereign wealth funds in Norway, Singapore China or Abu Dhabi – exert influence on leaders of corporations and governments. Once awakened, these giants can produce positive, long-term outcomes for society, creating a better system of finance “measured and managed to the needs of people today and for as long as we survive as a species.”
David Blood’s model of Sustainable Capitalism recognizes that in the Anthropocene (The Economist’s term for the current era in which human activity is altering the Earth’s ecosystem), many kinds of economic activity are “driving our planet into liquidation” and “do not incorporate sufficient regard for [their] impact on people or the planet”.
The model of Regenerative Capitalism developed by John Fullerton goes so far as to question whether capitalism’s axiomatic assumption of continued compound economic growth is even possible, given planetary limits of various kinds.
As we debate, and before we select, the best model for capitalism in the 21st century, we have to ask: What are the social goals, the positive outcomes, that capitalism should support?
While certainly not the definitive answer, the United Nations’ proposed Sustainable Development Goals -- to be presented for adoption by the General Assembly this coming September 2015 -- represent at least one starting point for discussion.
Steve Young, Executive Director of the Caux Roundtable, a global think tank, believes it is critical, for the moral legitimacy of any new model of capitalism, that business leaders in finance and other industries focus on, have input into, and ultimately align their enterprises with societal goals like these.
“The adoption of Sustainable Development Goals will be a milestone in the evolution of moral capitalism,” writes Young, “as it faces the challenges of inequalities in income and wealth distribution, growing populations and changes in our planet’s environment.”
Capitalism is at an inflection point. While its next iteration is a work in progress, what is clear is that capitalism will need to evolve and change to retain its status as the world’s dominant socio-economic model. And it will need to do a better job of delivering what society really wants.
The ideas of John Rogers, David Blood, John Fullerton and Steve Young are outlined in essays they contributed to my forthcoming book, A Force for Good: How Enlightened Finance Can Restore Faith in Capitalism (Palgrave Macmillan), to be released on March 17.
John G. Taft is CEO of RBC Wealth Management - U.S., and author of Stewardship: Lessons Learned from the Lost Culture of Wall Street (Wiley, 2012). RBC Wealth Management-U.S. is a division of RBC Capital Markets, LLC, a member of NYSE/FINRA/SIPC.
LinkedIn Marketing Insider | Positive Change Ambassador
10 年Often people forget history. Capitalism is based on anglo saxon economic theories, while the Germans till the end of last world practized for more than 100 years the economy of productive powers based on Friedrich List. Unlike capitalism and ideas of comparative advantages of trade, this theory focuses on production of national goods and resulting inovations of healthy economies which allow trade circles. Perhaps in the future it would be wise to combine both theories. Obviously the world does not produce enough, eg. food and medical drugs. Right now every 2.4 seconds a human starves to death, mainly children. At the same time, especially in the western world, there are plenty millions unhappy being unemployed. They just simple could produce for the existing demand, they would have a job and the others would survive. Later on most of the survivors would have a job, and could pay for what they got. Moreover also would demand several consumer goods and services, and by time they might even create innovations that are demanded in other countries, a trade circle would begin. Well and even capitalists would have to understand that such a system would be beneficial, because population growth means growth in demand. Seriously this could be big business for banks by providing food loans for poor families all around the world. Today per person often only $3-5 Dollar per month are required to survive in poor countries, so 36-60 Dollar per year, from birth till the age of 21 $756-1260, lets say with inflation $2000-2500. Even if 50% never can pay this back, then interest rates should be calculated in a way that the total debt would be around $ 4000-5000. But wouldn′t the survivors be very loyal to the bank that saved their life, wouldn′t they maybe stay for the rest of their life with this bank and use several other services once they have grown up and work? How much could a bank earn on the long run, if it would start to save nearly a billion humans to survive? What is also with all the unemployed people in the western world who finally would have a job? Wouldn′t they not also be thankful? How many other people in the western world would support such a CSR bank? Combining capitalism with productive powers, probably is not only very profitable, but also could be very social and could solve, what politic has failed to solve.
Technical Specialist @ Robinson Supply | Radiant Hydronics
10 年Capitalism works its just not nice. The problem is when the government tries to stop the natural corrections of capitalism. Why were bankers not jumping out windows like in 1929. Because they knew they could make a play to the government and be saved from the consequences of unbalancing the system. Corrections are messy and disruptive and necessary! The problem is when the capitalist are allowed to keep ever expanding their money pots without the money being tied to real tangible things. We need inflation so that we can all keep saying we made more money or our sales are increasing so our share price can increase but eventually the materials true value does not match its stated economic value. It is an amazing exercise to use house prices and wages from 1950, 1980 and now as comparisons when they are adjusted for inflation. Inflation and monetary policy is the antidepressant that the governments have been selling the general public for 70 years. Just like being addicted to uppers, our economies are going to crash hard when the banks and governments can no longer maintain the addiction to constant growth.
Disruptive Technology Specialist - SaaS | PropTech | Asset Management | Web3 | Digital Assets | Marketplace's
10 年Steal a pizza.....PRISON for LIFE! Steal a billion! A POSITION on the board of directors!
Founder & Senior Consultant
10 年My view is that one cannot look at a new shape / form of capitalism without looking at the political realities. For those in power, democracy is about winning elections... and elections, in many democracies, is about citizens "promise-shopping" without always understanding what those promises will cost. If winning elections becomes more important that serving the country, politicians and those in power will keep making unrealistic promises that leads to money-printing and, in many ways, telling people who are capable of economic contribution that it is ok to rely on the state and social welfare systems. We cannot look at the economic solution without considering it's close ties with the political system.