Start with the British East India Company, circa 1600.
Too far back? Then perhaps ponder only a hundred years ago in the U.S., with the Progressives and Teddy Roosevelt? Or later, FDR’s New Deal? Or Richard Nixon’s 1970 establishment of the U.S. Environment Protection Agency?
In virtually any such historical frame one can find the creative, innovative, — and, yes, sometimes courageous — spirit of “free-market capitalism” adapting and evolving. Outcome: improved quality of life for many millions of people around the world.
To be sure, in democratic societies, this private sector economic system has absorbed varying degrees of public support and government regulation (i.e. “the mixed economy”). And it has survived many natural and man-made disasters — as well as its own systemic flaws.
Well, what of 2019 — and beyond?
The news at this interface of business and society is not good.
Axios reports:
“One of most important trends likely to drive the 2020 presidential race: A growing disillusion with capitalism as practiced, and a coming struggle over how to recast this pillar of the Western order… a 12-point decline in young adults’ positive views of capitalism in just the past two years [to 45%] and a marked shift from 2010, when 68% viewed it positively.
“Flaws in the system – including forgetting about so much of society – are largely to blame for widespread disaffection with establishment institutions, leaders and answers.”https://bit.ly/2QVZwhH
George Mason University public affairs professor Steven Pearlstein, in a Vox debate, “Is capitalism worth saving?” https://bit.ly/2s3NqnT offers this blunt assessment: “Capitalism isn’t dead, but it has to be saved from itself before it’s too late … America needs a new social contract between business and society.”
And criticism is now coming from within the business community as well. This from one of its sanctuaries, The Financial Times: Columnist Martin Wolf, in reviewing new books on capitalism, offers these observations – “The idea that business pursues profits and only profits can only produce bad business and dire outcomes … Profit itself is not a business purpose. The purpose might be making cars, delivering products, disseminating information, or many other things. If a business substitutes making money for purpose, it will fail at both.”
The rebuttal –
A strong case can be made that capitalism is already well into a 21st century model, evolving, yet again — this time into a new, more reflective, inclusive and responsive socio-economic system. Ideally, it might be thought of as “democratic capitalism – a political, economic and social ideology that involves a combination of a democratic political system with a capitalistic economic system” [Wikipedia].
If so, the “democracy” element is the increasing influence, the voices, of “corporate publics” — the many categories of stakeholders (among them, employees, customers, suppliers, communities) with shareholder primacy modified but by no means neglected. This, of course, is magnified by the arrival of digital social media.
This business model, integrating traditional business objectives with the acceptance of new social responsibilities, is called sustainable business, sustainable development, corporate social responsibility, corporate citizenship, ethical business and integrated planning/reporting. It has been gestating for a few decades but now may well be approaching critical mass. A few of the many elements of this transformation:
. Many new kinds of partnerships between business and governments, NGOS, and academic institutions to address social issues. The premier global organization for such progress, the United Nations Global Compact, is composed of some 9000 companies in 160 countries operating in concert with about 4000 such partners under the Compact’s ten standards. These range from human rights and labor rights to environment and anti-corruption.
. A specific, measurable global agenda, The UN Sustainable Development Goals: In 2015, UN member countries adopted a set of seventeen challenging goals to protect the planet and improve prosperity for all. Each goal has specific targets to be achieved by the year 2030. The World Bank’s “2018 Atlas of Sustainable Goals” documents relevant data and development work, including that of many companies.
. Special private sector– public sector partnering on climate change. When President Trumpannounced his plan to withdraw from the Paris Agreement, businesses, cities, states,and citizens across the country pledged to ensure that the U.S. would remain a global leader in reducing emission, thereby delivering on the country’s ambitions climate Paris Agreement goals.
. Surging socially responsible investment (SRI) – New report: In 2018 about one-quarter of the $46 billion U.S. investments under asset and wealth management were invested with “ESG” (environment/social/governance) standards – a 30% increase over two years. These investments seek, and quite often get, returns comparable with traditional nvestment criteria. In fact, some studies show that this management philosophy can enhance profitability.
. Powerful CEO champions – Prime example, Larry Fink, Chairman/CEO of BlackRock in his recent “Sense of Purpose” letter to CEOs: “A company’s ability to manage environmental, social and governance matters demonstrates the leadership and good governance that is so essential to sustainable [long term] growth, which is why we are increasingly integrating these issues into our investment process.”
Increasingly influential voice of workers – Employees at high tech digital communications companies are protesting and withdrawing their services when they judge use of their companies’ products inconsistent with their moral/ethical values.
. Educating the next generation of business leaders – Principles of Responsible Management Education is a consortium of several hundred colleges and universities around the world presenting curricular and co-curricular guidance on the Compact’s and similar planning and operating standards
. Corporate courage, “Brands Taking Stands”- Risking opprobrium from some stakeholders, companies are nevertheless separating from organizations they judge to be anti-social on issues such as gun control, gender equity, racism and immigration. This ranges from discontinuing product lines or services (think Dick’s Sporting Goods re fire-arms); or withdrawing advertising or other support.
Much progress. Yet so much more left to do.
Many fundamental societal challenges – cultural and economic class divisions; new mass uncertainty; wage stagnation; political campaign finance; voting rights; truth vs “fake news”; and the transgressions of corporate tech giants powerful enough to be arbiters of global information — these all hover ominously.
In sum, political pundit David Axelrod’s has presented this challenge:
“This is the issue of our times. Can capitalism and our democracy endure when the gains of prosperity increasingly accrue to a relatively small cohort of winners while the majority struggles simply to hold their place? And what do we do about it?”
So, in the context of the immense power global business has to serve and advance society, this oft-quoted aphorism seems especially timely and appropriate:
“To those whom much is given, much is expected.”