“History suggests that capitalism is a necessary condition for political freedom” ~ Milton Friedman
“While the miser is merely a capitalist gone mad, the capitalist is a rational miser” ~Karl Marx
“Despite a voluminous and often fervent literature on “income distribution,” the cold fact is that most income is not distributed: It is earned.” ~ Thomas Sowell
In the article “Capitalism is Dead. Long Live Capitalism” by Gary Hamel, Management Expert, Cofounder of Strategos, Director of the ManagementLab, he writes: I’m a capitalist by conviction and profession. I believe the best economic system is one that rewards entrepreneurship and risk-taking, maximizes customer choice, uses markets to allocate scarce resources and minimizes the regulatory burden on business. If there’s a better recipe for creating prosperity I haven’t seen it.
So why do fewer than four out of ten consumers in the developed world believe that large corporations make a “somewhat” or “generally” positive contribution to society? (2007 study by McKinsey & Company.) Why is it that only 19% of Americans tell pollsters they have “quite a lot” or a “great deal” of confidence in big business? (2010 Gallup Survey; only Congress scored worse.) It seems that a majority of us expect big companies to behave badly—to ravish the environment, exploit employees and mislead customers. Some blame Wall Street for this state of affairs. In March 2009, the Financial Times claimed that the “credit crisis had destroyed faith in the free market ideology that has dominated Western thinking for a decade.” Around the world, hyperventilating pundits and grandstanding politicians argued that a new model of capitalism was needed—one that would make executives even more accountable to legislators and bureaucrats…
If individuals around the world have lost faith in business, it’s because business has, in many ways, abused that faith. In this sense, the threat to capitalism is both more prosaic and more profound than that posed by marauding bankers—more prosaic in that the danger comes not from the esoteric schemes of “rocket scientists” but from the slowly accreting frustrations and anxieties of “ordinary” folks; and more profound in that the problem is truly existential—it threatens to burden every large company with the sort of regulatory constraints that were once reserved for nuclear power plants…
Some may bemoan the fact that capitalism (broadly defined) has no credible challengers, but it doesn’t. Like democracy, it’s the worst sort of system except for all the others—and that’s why each of us has a stake in making it better. If we fail to do so, the growing discontent with business will embolden all those who believe CEOs should answer first and last to civil servants—to those who are eager to replace invisible hand of the market with the iron hand of the state…
We know the future cannot be an extrapolation of the past. As the great grandchildren of the industrial revolution, we have learned, at last, that the heedless pursuit of more is unsustainable and, ultimately, unfulfilling. Our planet, our security, our sense of equanimity and our very souls demand something better, something different.
So we long for a kinder, gentler sort of capitalism—one that views us as more than mere “consumers,” one that understands the difference between maximizing consumption and maximizing happiness, one that doesn’t sacrifice the future for the present and regards our planet as sacred…
Hamel continues; I am an ardent supporter of capitalism—but I also understand that while individuals have inalienable, God-given rights, corporations do not. Society can demand of corporations what it likes… Of course, as consumers and citizens, we must be acknowledge that companies can’t remedy every social ill or deliver every social benefit. We must also face up to our own schizophrenia. We can’t expect companies to behave responsibly if we blithely abandon our own principles to save a buck.
As for executives: If you feel your industry is still too lightly regulated, if you secretly long for the regulatory fetters to be tightened even further, if you think that Sarbanes-Oxley, the Patient Protection and Affordable Care Act, the Restoring American Financial Stability Act and Basel III don’t go far enough—then just keep on doing what you’re doing. If, on the other hand, you’ve had enough of sanctimonious politicians and meddling bureaucrats, then you must face up to a simple fact: In the years to come, a company will be able to preserve its freedoms only if it embraces a new and more enlightened view of its responsibilities.
Many CEOs have already resigned themselves to this new reality, and some have eagerly welcomed it. There are others, though, who still cling to the belief that a company is first and foremost an economic entity rather than a social one. Sooner or later, these holdouts will discover that they face the same hard choice that confronts every teenager—drive responsibly or lose your license. For the sake of capitalism, let’s hope its sooner.
In the article “Capitalism Forever? Why Companies Fail” by Sohail Inayatullah he writes: “Companies are born, companies die, capitalism moves forward. “Creative Destruction”, they call it.”, what US Treasury Secretary Paul O’Neill called “the genius of capitalism”. But economic systems (that what we do when we wake up in the morning) also fail. First, is the problem of success. “A number of studies show that people are less likely to make optimal decisions after prolonged periods of success: NASA, Enron, Lucent, Worldcom – all had reached the mountaintop before they ran into trouble.” Might not this be the case with the world capitalism system itself, after hundred years of success? Capitalism defines what we do and how we do it…
As 14th century macro-historian, Ibn Khaldun wrote in his classic The Muqaddimah (An Introduction to History): “At the end of a dynasty, there often also appears some (show of) power that gives the impression that the senility of the dynasty has been made to disappear. It lights up brilliantly just before it is extinguished, like a burning wick the flame of which leaps up brilliantly a moment before it goes out, giving the impression it is just starting to burn, when in fact it is going out” (Khaldun 1967, 246).
Inayatullah continues; in the article “Why Companies Fail” by Ram Charan and Jerry Useem in Fortune magazine, they quote Jim Collins, author of “Built to Last and Good to Great”. “The key sign – the litmus test – is whether you begin to explain away the brutal facts rather than to confront the brutal facts head on”. While for companies the brutal facts are often an unsustainable business model, cash flow problems, too much risk, and acquisition lust, for the capitalist system as a whole; the brutal facts (taken from the United Nations Human Development Report, various years) are:
- While there are still 840 million people malnourished and 2.6 billion people have no access to basic sanitation, the world’s 200 richest people more than doubled their net worth in the four years to 1998, to more than $1 trillion
- The assets of the top three billionaires alone surpassing the combined GNP of all Least Developed Countries (LDCs) and their 600 million people.
- People in Europe and North America spend $37 billion a year on pet food, perfumes and cosmetics, a figure which would provide basic education, water and sanitation health and nutrition for those deprived.
“When the whole property of this universe has been inherited by all creatures, how can there be any justification for the system in which some one gets a flow of huge excess while others die for a handful of grains?”
Of course, it could be that others are just lazy or just not smart enough or too corrupt or too feudal or too … or perhaps we need to face the brutal facts: (1) capitalism has succeeded for the last hundred years, recreating the planet, bringing untold wealth and now placing the entire planet in jeopardy. Capitalism can create wealth but distribution remains a quandary; all systems come and go, and new ones can and will be created.
Perhaps it is time to move away the metaphor of the jungle of evolution (survival of the fittest) and design and create a system that works for all – humans and Gaia. And perhaps that would be the greatest genius of capitalism, self-destruction, so that a new system can emerge.
In the book “The New Capitalist Manifesto: Building a Disruptively Better Business” by Umair Haque he writes: Welcome to the worst decade since the Great Depression. Trillions of dollars of financial assets and shareholder value destroyed; worldwide GDP stalled; new jobs vanishingly scarce. But this isn’t just a severe recession. Its evidence that our economic institutions are obsolete—a set of ideas inherited from the industrial age that no longer works for business, people, society, or the future.
Umair Haque argues that business as usual has outgrown the old paradigm of short-term growth, competition at all costs, adversarial strategy, and pushing costs onto future generations. These outworn assumptions are good for creating only “thin” value—gains that are largely illusory and produce diminishing returns every year.
For “thick” value—enduring, meaningful, sustainable advantage that deeply benefits the larger society, Haque details: A company that is `responsible’, `socially friendly’, environmentally sustainable, truly `democratic’ and innovative at its core. Transform the aggressive, mean and profit-driven corporation, of the industrial era, into a socially aware yet profitable enterprise. Democracy in the production process is essential in the world of the twitter-using, constantly linked and informed consumer, and synthesized production systems that will benefit both.
In the article “Opinion: A Defense of Capitalism” by Kevin Fisher he writes, in “The Tech” article, entitled “Who Does Capitalism Really Work For?,” Alexi Goranov argues that, “given the current economic and social state of America, it is clear that there must be an overhaul of the system. Greedy corporations and those in the upper echelon of the economic ladder have stopped at nothing to profit at the expense of America’s working class. The system has rewarded the few while failing to provide for the majority of Americans. Therefore, it is our responsibility to initiate a new, democratic way of doing things, one that puts people before money”.
This seems like a plausible argument. Yet what is its moral basis? Although not explicitly stated, the premise is that people have a right to certain things and it is society’s job to provide them. If I need something, it is the job of someone else to produce it for me…. The products of society are resources, to which all, at least to some extent, are entitled to. However, society is not an entity. It is made up of individuals, who themselves have inalienable rights. If it is society’s responsibility to provide for our needs, then the reality is that it is the job of some person to produce for the benefit of someone else. A socialist system is based upon this moral code…
Fisher continues; capitalism is a system that respects property rights and allows people to function as free individuals, just as the Founding Fathers envisioned. People interact with each other voluntarily in such a system, valuing and trading goods and services only when they see a benefit for themselves… It is the system that has made the United States the wealthiest nation in the world. It is the reason why for hundreds of years immigrants have left their homes to follow their dreams in the land of opportunity. It allows all people to live at their highest potential, enjoying the fruits of their own productive work…
You have every right to disagree with and criticize this argument. Yet the debate must be relevant to the subject at hand. Capitalism is a social and economic system, not a political one. As Michael Moore shows in Capitalism: A Love Story, fraud in the government has been rampant. There are some corporations that wield sizable influence in government policy, which they use to cheat the system and gain even more profits. Fraud is wrong, but the solution is not to reevaluate our social and economic system. Rather, we should question the effectiveness and functioning of the government. Moore says that the $700 billion dollar financial bailout was in many ways a result of the greed of bankers who happened to have connections in the Treasury Department. It was immoral, even from a capitalist point of view…
Another argument that is often made against capitalism as seen in America is the growing gap between the rich and the poor. Depending on your value system, you may or may not be troubled by such statistics…In a society that rewards productive achievement; some people are going to be richer, possibly by a lot, than others. In an ideal capitalist system, a person gets wealthy when other people value the products of his or her work. As a nation gets wealthier, it is generally true that the rich will get richer at a greater rate than the poor will get better off….
Fisher continues; America is at a turning point. In light of the financial collapse, issues with healthcare and the waning competitiveness of our education system, just to name a few, it is clear that things need to be done differently. What exactly needs to be done differently is the subject of a very important national debate.
“Capitalism is what people do if you leave them alone”~Kenneth Minogue
“Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.”~John Maynard Keynes
“The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.”~Winston Churchill
“Under capitalism man exploits man; under socialism the reverse is true”~Polish Proverb
“Doing well is the result of doing good. That’s what capitalism is all about.”~Ralph Waldo Emerson