A vision for capitalism 2.0: What changes do you want to see?

Plan A or B Choice Showing Strategy Change Or DilemasOn June 13th Sir Richard Branson and corporate sustainability leader Jochen Zietz launched The B TeamThis initiative calls for a new set of progressive business values that “prioritize people and planet alongside profit.” A worldwide consensus is building that there has to be a better way for business.

(Click here to learn about the Capitalism 2.0 Project (CAP2) – a joint initiative by Earthshine Solutions and TSSS that complements the incredible work of the B Team.  CAP2 is designed to provoke thought and discussion as we weave together the existing efforts that will lead us to a new Sustainable Economic Ecosystem.  Your ideas and input are a vital ingredient in making this change.)
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What would Ghandi say?

Companies are making admirable strides towards greater sustainability yet the question remains: Can these new and progressive companies thrive within a system that is fundamentally flawed?  Can Capitalism in its current form support a new ecosystem of sustainable business?  What are the flaws of the current system and what systemic changes are necessary to usher in the era of Capitalism 2.0?  And perhaps most importantly, what would a sustainable society look like?

For 8 years I’ve been working in the sustainability movement and when I look back at our success I’m at best uncertain as to whether we’re making progress.  We’re good at measuring carbon and other impacts, finding eco-efficiencies, engaging at the c-suite level and giving awards to each other but are we really making the necessary changes that will lead us to a truly sustainable society?

After all, carbon levels keep rising (we just passed 400ppm), coal plants continue to be built, employee working conditions continue to be unsafe (e.g. Bangladesh factory collapse and fatal fire), conflict minerals continue to be mined, financial institutions “too big to fail” continue to exist, wealth concentration persists and even intensifies, species extinction is a daily reality, deforestation is rampant – is this the change we want to see?  Would Ghandi (“be the change”) be proud of us?

Mohandas K GandhiIt’s interesting to reflect on the quote often attributed to Gandhi, “be the change you want to see in the world.”  In fact, there is no documented evidence Gandhi ever phrased his thoughts so simplistically.  He is quoted as saying, “If we could change ourselves, the tendencies in the world would also change. As a man changes his own nature, so does the attitude of the world change towards him.”  Ghandi did tell us that personal and social transformations go hand in hand, but he also taught that real change is achieved by great numbers of people working together with discipline and persistence.

Towards a Sustainable Society

Let’s explore some of the flaws of our current Capitalist system and begin to imagine what a sustainable society would look like – a society that would comfortably house the emerging ecosystem of sustainable business and provide wealth, opportunity and satisfaction for the greatest number of people.

Too Big to Fail

How is it that we didn’t identify and correct flaws in our current system after the worldwide economic collapse of 2008?  How did we miss this opportunity?  Do we have collective amnesia? Or is it that we simply can’t come to a consensus about how to move forward?

There is much debate about how we should deal with a crisis like what we experienced in the financial sector in 2008. Some of us contend that we must avoid ‘bailouts’ and allow for these giant and potentially economy-shattering institutions to be allowed to fail.  Others point out that such an approach would only create further havoc for our economy and society.  The question we should be asking is: How is it that we still have a system that allows such a crisis to develop in the first place?  How do we systematically address these behemoth companies so that we will no longer be held hostage, as individuals, communities and societies, to their unrestrained and risky behaviour?

Wealth Concentration

wealthIn the last 30 years the pace of wealth concentration has escalated.  In the US today, the top 1% take home a whopping 24% of national income and own 50% of stocks, bonds and mutual funds.  Has this led to greater job growth, investment and prosperity for our society as a whole?  Many would argue that wealth concentration in the US is systematically eroding the middle class – the ultimate engine for a strong economy and a flourishing society.

The system that allowed this concentration of wealth and erosion of the middle class to occur would be changed in a Capitalism 2.0 world.  How it would change would certainly be tied to a discussion around the topic of ownership.

Ownership Models

How is it possible that an employee can work for a company for 20 or 30 years and then retire with so little equity (in that company’s wealth) that they are forced to ask the government (taxpayers) to help them with their daily food needs and health care.  This doesn’t sound like a system that is working very well.  But that’s not the worst of it.  A recent study released by the Committee on Education and the Workforce, Democrats,  showed that Walmart employees are legally allowed to be paid so little that the government of Wisconsin actually needs to subsidize each employee to the tune of $6000/year while the vast profits of this giant company are concentrated in the hands of shareholders.  A system that transfers the obligation of paying workers a fair wage to the taxpayers as opposed to the company for which they work, so as to increase shareholder profits, is a system that needs to change.

The Banking System

This is a big one.  How do we envision the role of the banking sector in our society? Does our current banking system support job creation and stronger societies?  Does it support entrepreneurs who are looking to hire people and grow their companies?  What would a sustainable bank look like?  Would it have a trading floor that would bet for or against currencies strictly for the purpose of short-term gains or would it use its collective intellectual and financial resources to find ways to make our world a better place and help companies that want to create jobs and improve our societies?  There are many organizations that are showing the way in this regard (e.g. Triodos) and we can use them as a model for a banking system that works for people rather than one that will stop at nothing to grow profits at the expense of well….everyone.

The Race to the Bottom

Running businessman.Our current model puts companies against each other as they race to squeeze out costs from the supply chain.  What’s wrong with that you might ask – don’t we want to get rid of waste?  Of course we do but is that in fact what these companies are doing?  Or are they engaged in a risky ‘race to the bottom’ where decisions are made based on short term costs alone, without regard for societal impacts or long term sustainability?

Take a company that manufactures a standard t-shirt; often the differentiating factor is price.  The challenge is to get the product to market for a lesser price that the competition – that’s the differentiating factor.  So within our current system we search the globe and award the contract to the lowest cost manufacturer.  That model leads directly to low wages and poor working conditions.  But that’s only one part of the story.

Another place to reduce costs is by taking shortcuts on environmental protection.  Once again companies compete in a race to the bottom in their quest to reduce costs.  The legacy of this system is a soiled environment, degraded or destroyed ecosystems and exploited people by the hundreds of millions.  The fact that children, who generally don’t have a voice, and future generations, who certainly don’t have a voice, will inherit a world that is severely degraded barely enters into the conversation.

CAP2: A new system for a better world

Cap2 rsIn a CAP2 world we would look at a new system that brings companies together to ensure a universally healthy and safe supply chain.  Companies would differentiate themselves in how they position their brand, innovate new products, invest in communities and connect with their customers.  The race to the bottom would be replaced with an inspired upward spiral of building shared values with customers and suppliers alike and ultimately driving value to the most important part of the supply chain – its people.

Join us in our quest to design a better Capitalist system. “The Capitalism 2.0 Project” is a global movement that will work towards maintaining the best aspects of the current Capitalist system – incentive, personal reward, variety and innovation – but correct the flaws. Our plan is to work with a global audience to design a better Capitalist operating system – a system that creates wealth, opportunity and satisfaction for the greatest number of people.

Our White Paper, “A Journey in Search of Capitalism 2.0”, is due in October.  Join the movement and share your ideas for the coming change to our Capitalist system. Sign up today to be notified when the paper is released.  We need your help to make the system better!
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The Capitalism 2.0 Project is a combined effort of Michael Townsend of Earthshine Solutions and Brad Zarnett of TSSS

 

  • Danish Khan

    Love this article! The concept of CAP2 is really exhilarating. However, there are still a number of ‘HOWs’. May be the white paper would help in addressing such doubts. Can I assume that CAP2 is the concept and The Team B is the actualisation of this concept?

  • Peter Forint

    I’m reading Frank Stronach’s autobiography, The Magna Man, and their Corporate Constitution as a tool for turning employees into capitalists is cited as a key factor in Magna’s success.
    http://www.magna.com/about-magna/our-culture/corporate-constitution

  • Tim Ragan

    Hi Brad,

    This a great initiative and one I wholeheartedly support and will sign up to. I have been researching the whole field of “toxic behavior by organizations” for a number of years now, and that work has led to my conclusions that there
    are a handful of very significant “design flaws” in our business institutions which directly account for the vast majority of much of what we observe today as “bad behavior” — poor labour practices, excessive riches to a chosen few, outsourcing catastrophes, incentives
    to pollute, etc.

    I’ve outlined these key “toxic behaviors” in a short book “Through the Detox Prism” which seeks to explain how they are in fact “design features” of our institutions, how they create the conditions which allow for “bad behavior”, and what we can do to design them out of our
    institutions. Here is a link to the book if interested:

    http://www.amazon.com/Through-Detox-Prism-Exploring-Organizational/dp/1927465060/ref=sr_1_1?ie=UTF8&qid=1372353909&sr=8-1&keywords=detox+prism

    Hope this adds some value to this important conversation about designing for Capitalism 2.0, Brad.

  • Daniel Da Silva

    This looks very interesting but not sure how it is different to what Integrated Reporting is trying to achieve?
    http://www.theiirc.org/

  • Tristam Sculthorpe

    Great topic. Any discussion of big public corporations allows me an opening to put forward the Rule of 10: It is a problem to be solved by the owners of corporations – the shareholders. The shareholders of Public Corporations need to take back control. Corporations were first conceived and developed over 400 years ago, when the shareholders ran the company. Today public corporation’s share ownership so fragmented that the hired help – the corporate
    executives – are running the show resulting in golden parachutes for CEOs who have failed utterly. What we need is the rule of 10. The highest paid person in a corporation can’t make more than 10 times what the least paid worker gets – including bonuses, benefits and pensions (NO you can’t just start to contract out all the low paying jobs). When a business makes a profit, a quarter should go to the employees (proportionately ie pension fund) a quarter to the shareholders and half to improve the financial stability of the company. The Board of Directors should be chosen by lot – half from the pool of shareholders who express a capacity and an interest and half from the employees who express an interest. An criticism about runaway executive pay is usually accompanied but blustering from the ultra-conservatives about Ayn Rand. Well, Atlas Shrugged was about an inventor, innovator and entrepreneur – not a hired executive (paid help) who ran a company in to the ground WITHOUT DILIGENT OVERSIGHT while paying himself whatever he wanted. The shareholders – are the ones who OWN the company, it’s time they took back control. We need a shareholder evolution.