Is #Capitalism really broken?
It was with a feeling of deja vu, that I read this in Huffington Post today, together with considerable anger:
“Our current form of capitalism, which puts the pursuit of success and profit as top priorities, is not only leading to unprecedented environmental destruction but is also increasing social inequality. “
In our first presentation to the opening plenary of the international Eonomics for Ecology conference at Sumy, founder Terry Hallman concluded:
“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 second presentation in 2010 would re-present the core argument from his 1996 paper, on a new form of capitalism measured in terms of human wellbeing. People-Centered Economics. He began:
“My 2009 presentation to this conference was titled “Economics in Transition: The ‘Triple-Bottom Line’ of financial, social benefit, and environmental benefits. Among three main areas of economics, the financial sphere remains dominant over social economics and environmental economics. The reason for this is very simple: in order for any system of economics to be sustainable over time, it must first be financially sustainable. If a system costs more than it produces, it requires infinite inputs over time. Infinite inputs are not available in a finite world, and we live in a finite world. If we pursue a system that costs more than it produces financially, it must and will necessarily collapse. But now, the financial system itself is broken: it costs far more than it produces.”
He went on to relate what Bill Clinton had been warned in 1996 about the inevitability of social unrest, which concluded:
“Economics, and indeed human civilization, can only be measured and calibrated in terms of human beings. Everything in economics has to be adjusted for people, first, and abandoning the illusory numerical analyses that inevitably put numbers ahead of people, capitalism ahead of democracy, and degradation ahead of compassion.
“Each of us who have a choice can choose what we want to do to help or not. It is free-will, our choice, as human beings.”
It was far from welcome when shared in conversations with Guardian Sustainable Business. At the time, Jo Confino was then editor.
In 2012, Another conversation on ‘Creating Shared Value’ led me to comment on the concept of corporations making a profit by solving social problems. This was also removed. It was an extract from our ‘Marshall Plan’ proposal for Ukraine:
“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.
“In this case, for the project now being proposed, it is constructed precisely along these lines. Childcare reform as outlined above will pay for itself in reduced costs to the state. It will need investment for about five years in order to cover the cost of running two programs in parallel: the existing, extremely problematic state childcare scheme, and the new program needed to replace it for the purpose of giving children a decent life. The old program will be phased out as the new program is phased in. After this phase transition is complete, the state will from that time forward pay out less money for state childcare. Children will have a better life, and will be more likely to become healthy, productive assets to the nation rather than liabilities with diminished human development, diminished education, and the message that they are not important — the basis for serious trouble. There is no need whatsoever to give these children less than a good quality of life as they grow and mature. The only problem is reorganization of existing resources. “
In 2010, David Mills, editor of Guardian Social Enterprise suggested I submit something as the basis for an article. What I sent him and Jo Confino, I was told, was not a suitable format.
It would become the first of my submissions to McKinsey’s Long Term Capitalism challenge, where Re-imagining Capitalism for People and Planet has been surprsingly popular.
My follow up article — Re-imagining Capitalism: The New Bottom Line was even more so. The term was subsequently used by The Guardian to describe the kind of business we were involved in , investing in social and environmental change.
Lest the point has been missed from what I describe above, the primary focus of the ‘Marshall Plan’ for Ukraine was investing in childcare reform, to transition children from institutions to loving family homes. Speaking recently of impact investment, Bono is making claim to the argument for putting people over profit.
Reporting for the BBC, Nikki Fox brings us up to date with the childcare situation in Ukraine, this weekend.
Above all Terry Hallman was a practioner and left hung out to dry he died in his efforts to leverage investment. Maidan activists who found his body, had spoken to him on his last night:
“The author of breakthru report “Death camps for children” Terry Hallman suddenly died of grave disease on Aug 18 2011. On his death bed he was speaking only of his mission — rescuing of these unlucky kids. His dream was to get them new homes filled with care and love. His quest would be continued as he wished.”
21 years ago, He began with an argument against the assertion that the purpose of business is to maximise shareholder return, the purpose of business is to benefit people over profit.
Jo Confino, opining for Huffington Post on Love in Business isn’t really the same thing.