A New Form of Capitalism?

In May 2009 the Oxford Social Enterprise forum met to discuss a New Form of Capitalism. Among those speaking were Pamela Hartigan of the Skoll Centre, Malcolm Hayday from Charity Bank and a former director of Oxfam America as the top names shaping this new economy.

It didn’t include the man who’d addressed the international Economics for Ecology conference a week earlier and concluded his first presentation to the opening plenary with these words:

‘At this point, the simple fact is that regarding economic theory, no one knows what to do next. Possibly this has escaped immediate attention in Ukraine, but, economists in the US as of the end of 2008 openly confessed that they do not know what to do. So, we invented three trillion dollars, lent it to ourselves, and are trying to salvage a broken system so far by reestablishing the broken system with imaginary money.

‘Now there are, honestly, no answers. It is all just guesswork, and not more than that. What is not guesswork is that the broken — again — capitalist system, be it traditional economics theories in the West or hybrid communism/capitalism in China, is sitting in a world where the existence of human beings is at grave risk, and it’s no longer alarmist to say so.

‘The question at hand is what to do next, and how to do it. We all get to invent whatever new economics system that comes next, because we must.’

The issue was raised in a discussion on UNLTD — who didn’t take kindly to my contribution. It was deleted.

Back in 2004, when we introduced the P-CED social business model to the UK with a business plan to tackle poverty. It reasoned:

“Traditional capitalism is an insufficient economic model allowing monetary outcomes as the bottom line with little regard to social needs. Bottom line must be taken one step further by at least some companies, past profit, to people. How profits are used is equally as important as of profits. Where profits can be brought to bear by willing individuals and companies to social benefit, so much the better. Moreover, this activity must be recognized and supported at government policy level as a badly needed, essential, and entirely legitimate enterprise activity.”

We joined the Social Enterprise Coalition in 2006. I described this work which I was told, was beyond their focus.

When the ‘Marshall Plan’ for Ukraine was published online in 2007, it re-iterated the point about applying profit for social benefit. I shared the story on the Long Term Capitalism challenge, as ‘Re-imagining Capitalism: The New Bottom Line’:

‘An inherent assumption about capitalism is that profit is defined only in terms of monetary gain. This assumption is virtually unquestioned in most of the world. However, it is not a valid assumption. Business enterprise, capitalism, must be measured in terms of monetary profit. That rule is not arguable. A business enterprise must make monetary profit, or it will merely cease to exist. That is an absolute requirement. But it does not follow that this must necessarily be the final bottom line and the sole aim of the enterprise. How this profit is used is another question. It is commonly assumed that profit will enrich enterprise owners and investors, which in turn gives them incentive to participate financially in the enterprise to start with.

‘That, however, is not the only possible outcome for use of profits. Profits can be directly applied to help resolve a broad range of social problems: poverty relief, improving childcare, seeding scientific research for nationwide economic advancement, improving communications infrastructure and accessibility, for examples — the target objectives of this particular project plan. The same financial discipline required of any conventional for-profit business can be applied to projects with the primary aim of improving socioeconomic conditions. Profitability provides money needed to be self-sustaining for the purpose of achieving social and economic objectives such as benefit of a nation’s poorest, neediest people. In which case, the enterprise is a social enterprise.’

It began 21 years ago, with a position paper which took a stand against shareholder primacy, describing a business model for social benefit. It argued that with the agreement of stakeholders and governing documents altered to reflect this primary purpose, it was entirely legitimate. Interviewed in 2004 when P-CED was introduced to the UK, founder Terry Hallam explained:

“The P-CED model is not a charity sort of operation. It is business. What we choose to do with profits is entirely up to us, and we choose before anything else happens to set most of our profits aside to assist poor people. In fact, our corporate charter requires us by law — UK law, where rule of law is very well established — to use our profits only for social benefit. We cannot do anything else with it.”

Just before her death, the late Pamela Hartigan came to the conclusion that social entrepreneurship is a distraction, that it is mainstream capitalism that needs to change.

“People should replace profit as the bottom line” wrote Oxfam CEO Mark Goldring for Huffington Post, reiterating our own argument.

When City of London Mayor Fiona Woolf spoke of the need for an inclusive form of capitalism, she raised the same points about social unrest that could be found a decade earlier in our business plan.

It’s UNLTD who had been so hostile toward my earlier participation who are now re-inventing our argument for changing company articles for social purpose.

For the man who put all these things into practice in his efforts to leverage social enterprise in Ukraine, it would end in death. His as well as many children left to die in remote locations, described as ‘Death Camps’ for Children.

Have a good think before you try building a brand over their dead bodies.