Reimagining Capitalism

August Discussion for Columbus Futurists

In June we discussed financial terrorism and the impact of bad actors on the economy and influencing future policies and actions.  We concluded that the closer you got to the details of capitalism and the way it worked – the more questions emerged about what capitalism means and how it really functions.  At our August meeting (August 25, Panera Bread Company, Bethel Rd., 6:30 pm) we will discuss the topic “Re-imagining Capitalism.”

One way to think of the capitalist model is “greed, constrained.”  It is true that capitalism is based on trading goods and services for value – at a rate that is limited only by “what the market will bear.”  As a system that must be governed and taxed, it is constrained by laws and regulations that protect both business and customer from dishonesty and misrepresentation.  Capitalists depend on public goods – police and fire protection, transportation systems, political and military cover, etc. – and taxes are levied to generate the funds to provide those services.

From that base, however, ideas and biases and priorities and goals get twisted up quickly. As the elements of capitalism have grown from hard goods traded in person to the complexity of stocks, bonds, indices and other vehicles – the creation of definitions and boundaries has become a highly political process.

In the US, the very constitution of a basic unit of business – the corporation – is rooted in a muddy and questionable history – even to questions of its very legitimacy.  For a discussion of the history of the definition of “corporation” and its emergence into near human-like status – something called  “corporate personhood” – see Thom Hartmann’s book Unequal Protection: How corporations became “people” – and how you can fight back.  Another great general background source is The Company: A short history of a revolutionary idea by John Micklethwait and Adrian Wooldridge.

But those discussions only scratch the surface of a “re-imagining” of the financial strategy. What is the objective of capitalism?  What is the ultimate goal?  Many would say maximizing profit.  But it turns out that this may be way to short-sighted.

Those who evaluate different social structures of capitalism in society have noted, for example, that so-called “family” businesses often have different goals than mere wealth accumulation.  Family business may be less concerned about actual corporate profit than they are about employing family members, or providing for family member young or old.

The non-profit corporation is another alternate form of capitalism – the corporation agrees to pursue a purpose for the public good, and to re-invest any excess revenues (otherwise known as profits in the traditional corporate world) for that purpose.  The idea is that no individual person profits from the activities of the corporation – it is totally dedicated to the public good.  In return for that consideration, our law provides tax benefits.  There is no limit to how big a non-profit corporation can be, or how much money it can make – only how those excess revenues are disposed of.

Recently a new business category has emerged as an increasing number of states recognize something called the “low-profit limited liability company” – L3C – which is “for profit” but “unlike a for-profit business, the primary focus of the L3C is not to make money, but to achieve socially beneficial aims, with profit making as a secondary goal. The L3C thus occupies a niche between the for-profit and charitable sectors.”  (Wikipedia, http://en.wikipedia.org/wiki/L3C)

While still somewhat controversial and not uniformly accepted, the L3C concept does introduce the concept of values other than monetary profits into the goals of a corporate entity.  The problem becomes score-keeping.  To the extent that money represents the “score” – how can the achievement of some soft social good be measured?  How does the L3C know if it is actually achieving those non-monetary goals?

Going even further is the concept known as the “triple bottom line” or TBL or 3BL. Writer John Elkington apparently coined the phrase and defined the idea in a 1998 book (Cannibals with Forks) based on a UN idea developed in the late 1980’s.  It promotes the idea that corporations might have responsibilities beyond merely their ability to generate monetary value – but in fact should report their cumulative social and environmental impact as well.  The trick of course, is once again to agree upon a unit of measure that is as clear and easy to compare as money, for the other two categories.

When you think about it, we already count these values in our current system – or they are “accounted for,” one might say.  Companies win informal points for their charitable contributions and support of social institutions – which tend to be non-profit corporations- and those enterprises benefit from the largesse of the for-profit community.  Environmental concerns are supposedly monitored by state and Federal environmental protection agencies, and the costs of compliance are built into the cost models for all corporations affected by them.

The discussion becomes more important as corporations grow internationally and take on the scale and influence of countries. The UN does not have a corporate member category – maybe they should.  Where corporate priorities differ from governmental priorities there will continue to be increasing friction.  And the horse is certainly out of the barn as far as any consideration of throttling back corporate privileges (as opposed to right?), corporate strategies or other boundaries from the US perspective alone.  Some of the biggest US corporations are not headquartered here – and if constraints become too onerous – they freely threaten to move elsewhere, taking jobs, tax base, and dependent business communities with them.

So in consideration a re-imagining of capitalism, there is no up-or-down vote on the economic model of capitalism itself.  It is not going away because some may indulge in abuse.

Something is not working, however.  While the corporation may grind on – the people they were design to derve and support are being commoditized and harmed.  Corporations become richer it seems, while our societies and cultures become less so.  Is there a model toward which we could move that would bring corporations back into their supporting role for larger concerns of social well-being, and progress?   Is there a new twist on the model that could serve all constituencies better?

Is there a reasonable way to re-imagine the capitalism we have come to today?

— Rich Bowers