Why Capitalism Needs a Reset Now
A number of global trends have converged to create an urgent need to recreate our economic system. What this new system will look like is still unclear.
In an earlier blog post we discussed the need to build back better as part of the Covid19 recovery plan. The process of building back better involves creating a new breed of capitalism, one that measures success not just through economic growth, but through other elements that improve well-being, such as job quality, housing, health and an overall improved sense of wellness for all.
The economic doctrine of Milton Freeman — which stated that businesses’ only responsibility was to use its resources and engage in activities designed to increase its profits — has led to the destruction and degradation of the earth’s resources, including perhaps its most precious resource of all — humans. This can no longer be the doctrine that Corporate America adheres to if we want to thrive and prosper as a species and survive as a planet.
There are currently a number of global trends converging to create urgency on the movement to reset capitalism, which include the following:
- Climate change : Left unaddressed, climate change will leave the world less sustainable and species (including humans) more in peril than ever before
- Harvard Business School (HBS) Impact Weighted Accounts: The HBS Impact-Weighted Accounts Project aims to drive the creation of financial accounts that reflect a company’s financial, social and environmental performance. Impact Weighted Accounts, and ESG ratings are becoming of increasing importance to investors who care about the long-term health of our planet and its people.
- The pandemic: COVID19 will have serious consequences for economic growth, public debt, unemployment, and human well-being. This will further impact the social and environmental crisis that is happening now.
- The widening poverty gap: In January 2020, a UN report found that inequality had reached unprecedented levels, with more than 70% of the global population living in countries where the wealth gap is growing. The income gap had been made worse by the climate crisis and the global pandemic only served to exacerbate the problem.
- Social justice movements: Movements like Black Lives Matter showed the world that systemic racism and the cycle of poverty are deeply intertwined. BIPOCs, and especially Blacks, experience greater incarceration rates, more housing problems, improper healthcare, inadequate schooling, and other socio-economic issues that result in a lower quality of life.
- The rise of tech companies that hold more GDP than most countries: The Big Five tech companies generate almost $900B annually, which rivals the GDP of countries like Saudi Arabia or the Netherlands. Many worry that along with too much money, they also wield too much power.
As we work on building a new breed of capitalism, we don’t pretend to currently know exactly how it will take shape or what it will look like. But we do know that it needs to be a system where other indicators of success, happiness, and well-being for all are valued just as much as the almighty dollar.
We’d love to hear your thoughts on how we can begin to reset capitalism. Share in the comments below.
Written by Jill Mersereau for Riddl