It’s Time To Reinvent Capitalism
Capitalism has created immense wealth and countless jobs over many decades. But it no longer works for everyone and must be reinvented to build a better future.
The model is broken
The current model of capitalist has increased wealth in many countries over the last 60 years, as it helped reduce poverty and improve people’s lives. But during the last 20 years the model has increasingly failed, as the gap between rich and poor widens to unfair and unsustainable levels. The concept of a business focussed solely on maximising profit is under review, as responsible organisations expect to make profit in a way that ensures the sustainability of the planet and its people. Similarly, it is no longer acceptable for a business to work solely for the interests of shareholders without considering the needs of other stakeholders in the community. And it is no longer enough for business leaders to care only about those who benefit without considering those who lose out.
The inherent promise of capitalism that the next generation will be better off than the last has been broken, as young people struggle to reach the standard of living or quality of life of their parents. The outsized growth of big businesses has had a negative effect on millions of people, as competition suffers and profits flow to fewer companies. Workers too are rewarded in different ways, as the wages of people with the right skills soar above those without. In the digital economy the power of a dominant few is obscenely rewarded, as they grab a disproportionate share of the spoils. The relative size of the financial sector has a negative affect too, as it pays people at rates other more worthy areas of the economy find impossible to match. As a result there is a flow of talent from more productive to less productive sectors, which disadvantages society as a whole.
Government has a role
Government, of course, plays a vital role in the economy, as the fallacy of free market capitalism is always tempered by regulation. But the discipline of regulation contains many loopholes, which are most often exploited by large rather than small businesses. The ideal make up of any economy is of course a mix of start-up, small and big businesses. But one of the features of the digital economy is that the rewards of the market are unfairly tilted towards big business. Tax avoidance plays a role too, as large companies use their resources to minimise tax bills while using public services and infrastructure paid for by others. The reduction of the tax base is also a significant problem, as the rewards for companies that pay low or no tax are lucrative, long-term and strategic. In this regard, good government is essential as those who lobby for their own agenda over the common good undermine the true benefits of capitalism.
So, the much-lauded traditional model of capitalism is finally and definitively broken and must be reinvented to build a fair economy that works for everyone.
