I recently attended the Responsible Business Forum in Oxford, UK which was run by the Economics of Mutuality and Oxford University. The topic was ‘Putting purpose into practice’ and it explored how businesses can use their corporate purpose to drive profit that is good for people and the planet.
The Economics of Mutuality are a research group that was created by Mars Corporation. It started about 12 years ago with the research focusing on the question ‘what is the right level of profit and at what cost?’ They have since developed a range of materials and resources to help businesses understand the case for social change as well as provide management theory that brings people and planet into core business decision making.
The first address was by Shelby Coffey who has an extensive media background. Coffey was the executive vice president at ABC News in New York before joining CNN in 1999, where he was news chief at CNN. Previously, he was editor of the Los Angeles Times. He is currently the vice chair of Newseum, a museum dedicated to promoting the importance of a free press and the First Amendment.
He spoke about the evolution of capitalism in the 21st century, mainly through a media lens. He used this to state the case for changing capitalism by presenting business practices leading up to this moment.
In particular, his topic focused on the role of capitalism to build or destruct society.
To frame it, he spoke about the 7 deadly sins of capitalism.
The 7 Deadly Sins of Capitalism
Sin 1: Chasing profit at any cost
This stems from Milton Friedman‘s management theory in the 1970s. The main belief that a ‘company should have no ‘social responsibility’ to the public or society because its only concern is to increase profits for itself and for its shareholders. The shareholders in their private capacity are the ones with the social responsibility.’
The focus was delivering shareholder returns only in the short term and consequently the long term implications of business decisions were not realised.
The prevailing belief seemed to be that positive social outcomes would flow from jobs creation and delivering shareholder returns. However, this has unfortunately led to practices that ended up maximising profit at the expense of the society and the environment.
A previous article of ours about the evolution of 3 mindsets of social change in business references this in more detail.
Sin 2: The rise of creative destruction
Capitalism created creative destruction. The premise of capitalism is efficiency and growth. This led to prioritising growth over creative outlets.
Joseph Schumeter coined the term ‘creative destruction’ as a summary of the free market’s ceaseless churning echo capitalism’s critics in acknowledging that lost jobs, ruined companies, and vanishing industries are inherent parts of the growth system.
According to the Library of Economics and Liberty ‘Over time, societies that allow creative destruction to operate grow more productive and richer; their citizens see the benefits of new and better products, shorter work weeks, better jobs, and higher living standards. Herein lies the paradox of progress. A society cannot reap the rewards of creative destruction without accepting that some individuals might be worse off, not just in the short term, but perhaps forever. At the same time, attempts to soften the harsher aspects of creative destruction by trying to preserve jobs or protect industries will lead to stagnation and decline, short-circuiting the march of progress.’
Coffey gave the example of Agriculture. In the early 1990s agriculture accounted from almost 50% of global employment but currently its only 2%.
Sin 3: Driving social inequality
Coffey discussed the widely known statistic researched by Oxfam that ‘the world’s eight richest billionaires control the same wealth between them as the poorest half of the globe’s population.’ As capitalism rewards greed and power, it creates an uneven distribution of wealth in various classes. Further, the globalisation of business has led to supply chains becoming more opaque. This leads to exploitation and opportunities to further increase the distance between rich and poor.
Sin 4: Crony Capitalism
Protecting the capitalist system as it stands allows the rich to increase their power and wealth. Therefore, it is no surprise that lobbying is big business as it protects the rich and powerful. In the US, there are over 12000 practitioners and lobbying is now a $USD 3.5bn industry. Obviously, not all lobby groups are bad, however the ones with more money are more powerful. And you can all guess the interests of the lobbyists with all the money..! This leads to unequal power distribution and a continued use of capitalism to make the rich richer.
Coffey didn’t share this, but a good example is the recent Greenpeace investigation into the influence of coal lobbyist in Federal Government. It is a shocking revelation that the most powerful politicians in Australia are being actively influenced by lobbyists who are pushing the agenda of fossil fuels. Check out the investigation here.
Sin 5: Money Laundering
The free market has allowed thieves and crooks to rule the world. This has increased with technology of instant systems to load offshore money flow. Highly credible law firms are involved in such big theft.e.g. Panama Paper leak.
Sin 6: ‘Homo conferential’ world
This is a new word I learnt, which I think Coffey made up and am pretty sure I spelled it incorrectly! Anyway, it refers to a spin on homo sapiens, however in this case the natural habitat of a homo conferential is at conferences, meetings and gatherings. When a person becomes a serial conference attendee, it can often shape a false world view (I promise I am not a homo conferential!). Worse, it also creates a sense of things happening, but it is really just a facade.
This ‘theatre’ feeds into corporates, with Coffey offering an example where companies often announces novel goals one year, inflate the numbers in the next year but don’t actually work on achieving the goals. The companies keep changing the goals or falsifying numbers as per convenience, with very little action on the problem.
Sin7: Demon speaks of bottom-line
Almost coming full circle back to sin number one, the business world has been blinded by profit. The focus has only been on the bottom-line and how to extract maximum value out of it, at the detriment of people and planet.
Thankfully, Coffey shared about the positive movements of groups like the Economics of Mutuality who are shaping robust management theory and practice to align profit with purpose that is good for people and planet.
Coffey engaged the whole audience through an amazing mix of anecdotes, facts and reflections about how capitalism has shaped the world we live in. These seven sins were not meant to condemn capitalism, but create a burning platform for change. This level of profit maximisation and greed is not sustainable and Coffey shared a case for evolving capitalism for sustainable growth. Sustainable growth needs to look beyond profit and incorporate people and planet. If this shift can be achieved, better outcomes will be achieved for all, including the rich.
Author’s note: Special thanks to Saikat Sanyal for collaborating on this article.