Is Capitalism Dying? What will be the future?
What form of capitalism do we need in the future?
Today, capitalism in its traditional understanding is increasingly criticized by society. New forms such as green, social, and inclusive capitalism arise to fulfill the standards of our new society. Which one do we need and do we need it at all?
„Capitalism has brought with it progress, not merely in production but also in knowledge“ ~ Albert Einstein. It changed our lives forever, defined the role of the state and each individual in society. It is much more than just an economic system. It is a social order that has shaped our thoughts, feelings, and being for centuries.
„Capitalism has brought with it progress, not merely in production but also in knowledge“ ~ Albert Einstein.
How Does Capitalism Work?
It is often thought of as an economic system in which private actors own and control property in accord with their interests. Supply and demand freely set prices in markets in a way that can serve the best interests of people. The rise of capitalism to global dominance is still largely associated with the industrial capitalism that made its decisive breakthrough in 18th century Britain. The main feature of capitalism is the desire to make a profit. Basically, those who work the most and bring the most benefit to society receive the most rewards as a result.
The Criticism of Capitalism
Nevertheless, today, capitalism in its traditional understanding is increasingly criticized by society. Growing inequalities in the distribution of income among market participants, increasing pressures on the environment, and related consequences such as scarcity of natural resources and climate change have eroded confidence in the existing economic system. Much of the economic activity and employment has shifted to the Internet, and taxes have gone with it, which undermines the ability of the authorities to finance the social sphere and correct distortions in the economy with benefits and subsidies.
Moreover, the coronavirus pandemic has sparked an active discussion about modern social structures. Economists and politicians started talking about the end of the era of individualism, the formation of a new way of life, and voices that predict the death of capitalism are beginning to sound louder and louder. Tension is growing almost everywhere and is spilling over into mass protests and political polarization.
“As soon as the gap between the rich and the poor becomes too large, there is a threat. We remember the French Revolution, the October Revolution, the yellow vests,” Penny Goldberg, an ex-chief economist at the World Bank, scares the capitalists. The institutional crisis is evident, people believe in democracy less and less and are no longer only against globalization, but also against elites, politicians, and experts
The “New” Capitalism
In this context, the ability of companies to simply generate profits can no longer be considered a primary criterion for success. Intangible aspects such as human capital development, innovation, customer loyalty, environmental impact, social activities and work with people become more and more important. This is called “social capitalism”.
The public’s opinion is also shifting more and more in the direction towards a sustainable future and that’s where the supporters of “green capitalism” find their place. They believe in the coexistence of a growth model of capitalism and the finite nature of our planet with the new forms of renewable energy. However, with the popularity of the theory, there is a discussion about “how green the green energy is” and if capitalism can really co-exist with sustainability.
Another extension of capitalism is a so-known “inclusive capitalism”, first introduced by Klaus Schwab, the founder and executive chairman of the World Economic Forum. In the last years, the popularization of ideas about inclusive capitalism has acquired clear organizational forms. At the initiative of Lynn de Rothschild, the international non-profit organization Coalition for Inclusive Capitalism (CIC) was established. On the CIC website, there is a list of Coalition participants: Unilever, Johnson-Johnson, Nestlé, Pepsi, BlackRock, Vanguard, AmundiAsset Management, JPMorgan Chase & Co., etc.
More and more corporations become B Corporations (Benefit Corporation), businesses that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose. In 2020, even Vatican has also joined in a partnership with its support. In general, “Inclusive Capitalism” has two main conceptual aspects: (1) lift people out of poverty and (2) power global innovation and economic growth.
So, What Form of Capitalism Do We Need?
Perhaps this is the defining question of our time. And we need to answer it correctly if we want to preserve our economic system for future generations. “Fundamentally transforming the foundations of the economy is the biggest contribution we can make towards building a sustainable future. The current economic crisis may be painful, but it will be nothing compared with the crises we will face if we continue to grow in a way that threatens the life-support systems on which we rely” ~ Jonathon Porritt, “Capitalism as if the world matters “.