Do we need a “new” capitalism?

Do we need a “new” capitalism?

Almost fifty years ago, Professor Klaus Schwab and his colleagues at the European Economic Forum (later to be the World Economic Forum) produced the “Davos Manifesto,” a distillation of their thinking about the ways CEOs should manage their businesses in a rapidly globalizing world. After making the obvious points about the need to serve clients and operate profitably, the Manifesto states that “management has to serve its employees because in a free society leadership must integrate the interests of those who are led,” and, more broadly, “management has to serve society. It must assume the role of a trustee of the material universe for future generations.”

Decades later, Professor Schwab and co-author Peter Vanham expanded on these ideas in a book called “Stakeholder Capitalism,” making the case that business leaders need to see beyond their responsibility to their shareholders, and must incorporate the views, needs, and expectations of their workers, their customers, and the communities they share.

“Conscious capitalism,” a similar concept but with a greater focus on sustainability and environmental concerns, entered the business lexicon about a decade ago when John Mackey, co-founder of Whole Foods, and co-author Rajedra Sisodia published a book by that title in 2013. Mackey and Sisodia, like Schwab and Vanham, convincingly made the case that businesses can do well by doing good. 

At Prosono, we agree. As management consultants, we specialize in helping purpose-driven business leaders find new ways to be both profitable and socially responsible. Immodestly, I’d say we’re experts at helping businesses find new ways to do (very) well while doing (very) good. 

But there’s something that bothers me about all of these calls for a “new” capitalism, and it has to do with what I think of as the mis-identification of agency. 

Let me explain.

Professor Schwab and Messrs. Vanham, Mackey and Sisoda, and the business executives who have joined the stakeholder/conscious capitalism chorus, all seem to agree that capitalism needs reforming, and that the business of reforming capitalism should fall squarely on the shoulders of business leaders. This is the “CEO as change agent” model. 

While there’s nothing wrong with urging CEOs to view their enterprises more holistically, I think the CEO argument sells the underlying mechanics of capitalism short. I think the real change agents are, in fact, all of those stakeholders who are pushing capitalism in new directions.  

In my view, we don’t need a “new” capitalism, or even a new name for capitalism. What we need is a better understanding of how quickly the values of consumers, investors, workers and our communities are changing. Simply put, digital technology and 21st Century global communication are markedly accelerating the speed of change – including the speed at which values change – and, too often, businesses and corporations are lagging behind. 

Capitalism is adaptable. But the underlying values of the human beings who make capitalism work are changing fast. Business leaders just need to catch up. 

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