"Do not be mistaken. There are many thousands of business leaders and investors at all scales who want to align their actions and their decisions with the goals of the new economy." - Bob Massie, President of the New Economics Institute (NEI).
With the collapse of communism and the disintegration of the old Soviet Union, just over twenty years ago, global capitalism had apparently triumphed. The clash of ideologies appeared to be over, as Fukuyama declared, somewhat controversially, this meant 'the end of history'.
Since then, western-style capitalism has, more or less, been the only-show-in-town; the best - or least worst - means of meeting our collective needs, for allocating scarce resources and distributing wealth.
And yet, its excesses are also blamed for their contribution to the global financial meltdown of 2007/8, which has led us into the longest and deepest global financial crisis in living memory. Five years on, western capitalism is still creaking at the seams - suffering a crisis of liquidity, reliability and confidence - and is naturally undergoing a wise degree of introspection.
So what's wrong with Capitalism 1.0? After all, it has delivered unprecedented growth and prosperity, hasn't it?
Perhaps not; take a fresh look at the evidence, and it suggests we haven't been doing quite as well as we all thought.
The slowdown in our economies should not be too much of a surprise - growth has been steadily slowing for half a century, according to Umair Haque in his excellent book The New Capitalist Manifesto.
David Korten, also shows us that any perceived growth has also been more of an illusion - what he calls unsustainable phantom wealth - based on financial bubbles, abuse of power by banks to create credit (money) from nothing, corporate asset stripping, baseless credit ratings, and creative accounting.
Furthermore, the trickle-down-effect has been just that - with prosperity reaching only a privileged few, and a decline in real income for the majority. From 1980 to 2005, the highest earning 1% of US population increased its share of taxable income from 9% to 19%, with most of the gain going to the top 1/10th of that 1%. The picture in the UK is worse still, with the fastest growing gap between rich and poor in the developed world. The current system is, of course, designed to concentrate wealth.
But at least the shareholders have done well? Not so - according to Roger Martin, author of Fixing the Game - shareholder returns have actually been lower in the era of shareholder capitalism, than in the post-war decades when managers were accused of feathering their own nests. Whichever way one looks, we have failed to create shared prosperity.
And then there is the environmental perspective. As Jonathon Porritt and George Monbiot both remind us, some of the most widely recognised causes of the crash in capital markets are also the principal, underlying causes of the environmental crisis we now face.
We clearly have to be mindful of the physical, as well as economic limits to growth, and the capacity of our planet to support our lifestyles.
According to WWF, we are already using around 1.5 planets to maintain our current consumption patterns. And in the West, the picture is worse still; we are already living a three-planet lifestyle. Collectively, we will need 2 planets by 2030 - less than 18 years away.
We are persuaded that growth is good, and without this we cannot be happy. But is this true? Tim Jackson provides a helpful and insightful reality check: "People are being persuaded to spend money we don't have, on things we don't need, to create impressions that won't last, on people we don't care about." So why are we living like this?
Our current consumption paradigm makes no sense, but for the perverse reality that our debt-based system of capitalism relies purely on continued economic expansion, otherwise it collapses. A position we are all too familiar with, these days.
So what are the alternatives? How do we overcome the serious design faults now painfully exposed, in order to meet the rigorous challenges of our time, and enable business to survive and prosper in 21st century, while ensuring we leave a positive economic, social and environmental legacy for the next generation?
There is some nostalgic debate on whether communism could make a come back, although this might not be desirable, or even likely, in the West. But it is somewhat ironic that global capitalism depends today on the existence of a Chinese Communist Party; that gives de-localised capitalist enterprises cheap labour, to lower prices, and deprive workers of the rights of self-organisation.
Of course, there is also the Chinese version of state capitalism, although this model still exhibits largely the same issues inherent in the Western approach, even if it does enable a longer-term perspective, and ideologically is unlikely to appeal to those with a disposition towards free markets.
The more likely scenario is for a modification of the current model - although views on what this might look like are spread across a continuum, from incremental change at one end, to more radical and transformative ideas at the other.
Klaus Schwab frames the debate such that it is 'not the end of capitalism as an ideology, but the issue of how capitalism's technical components - which have come off the rails - can be reformed.' One-up for the incrementalists.
In his excellent book Capitalism as if the Planet Matters, Jonathon Porritt takes a pragmatic view that capitalism 'is now the only economic game in town' and that all sides must find ways of making free markets deliver a more sustainable future, pretty quickly, otherwise the pressures will overwhelm our economies. He rightly generates a sense of urgency. More recently, Porritt has also called for co-operative capitalism - where we strive together to create a more sustainable economy.
To coincide with the Rio+20 Earth Summit, HRH Prince of Wales called for "A new economic framework that puts nature's own ingenious economy and social well-being at the heart of our thinking." In short, a call for Capitalism 2.0 - a vastly upgraded operating system.
Meanwhile, John Elkington calls call for Breakthrough Capitalism, a more radical approach that promotes integrated company reporting, an end to quarterly earnings guidance, the redesign of incentive/reward structures to encourage longer-term behaviours, new forms of loyalty share and ownership structures, and a new focus on stranded assets, focusing investor attention on the current and potential future impacts of emerging natural resource and environmental factors.
The visions for a better future are seductive, but we need to move beyond high-level statements, and get to the nuts-and-bolts of what a more sustainable system will look like and, quite importantly, how it will operate for our collective benefit.
It is possible to synthesise a set of principles for sustainable economy, drawing on the range of elements identified by each of the visionaries out there; they all offer partial views that contribute to the whole picture, and are surprisingly consistent.
While there is no substitute for a fully comprehensive exercise, based on rigorous joined-up design principles, I'll try and provide a sketch of what could be.
Less growth, more wellbeing: A more holistic approach to developing and managing our economies, based on human happiness and wellbeing; not simply in terms of money and wealth, but with values and morality back in the equation.
With a broader view of what capital means: At the core of capitalism is of course the economic concept of capital - usually expressed in terms of land, machines, and money. We now need to take a broader view, possibly on the lines of the Five Capitals Model - based on human, social, manufactured, financial, and natural capital.
Based on responsible enterprise, adding real value, where it is needed: We will increasingly see businesses taking a values-based approach, putting money and business back in the service of people and planet, to support social and environmental balance, and generate real, living wealth - what might be called profit with a purpose.
Built on holistic, systems thinking, and aligned with the circular economy: The big picture challenges of climate change, energy, scarce resources and economic re-structuring are converging to create a perfect storm, and need to be addressed at systems level - solutions will be all about optimisation of the whole system, rather than maximisation of one element.
Enabled by a well-functioning money system, and one that can direct money to where it connects underutilised resources with unmet needs, and will provide jobs for everyone seeking employment - an economy working for the people.
Away from speculative bubbles, towards creating longer-term real wealth: To find a new lens through which we can evaluate potential investments and avoid the risks of stranded assets, whose value could be dramatically reduced when major externalities, such as the price of carbon or water, are taken into account.
With shared ownership and distribution of resources and wealth: In a healthy economic eco-system we need to see more locally owned enterprises - to enable responsibility, risk and reward to be more closely aligned with true ownership.
Based on collaboration: A realisation that Western-style competition is inherently destructive - and as we all share the same goals, and ultimately the same fate - we should return to the true meaning, derived from the Latin 'competare' - to strive together, and create a foundation for Cooperative Capitalism.
Founded on new institutions & greater systemic resilience: It is possible to rebuild a system of community-based and accountable institutions, devoted to financing productive activities that create good jobs and generate real community wealth.
The range of features explored above, if fully enacted, would have a dramatic impact on the way in which our economies work - the goods and services we all decide we want, where we get them from, how much we pay for them, the scale of rewards, and how these are shared. But with such changes, while there are risks, there are also many opportunities for business.
Some might say it would be getting back to the 'roots' of capitalism, with more emphasis on free trade, local economies, re-localised production, owner-managed businesses, and less about rigged markets and unhealthy corporate domination. For those with a genuine disposition towards free markets, this might be a good thing - reviving the dream of entrepreneurship.
Perhaps the most fundamental impact comes from a greater distribution of wealth and closing the inequality gap - genuinely regenerating personal spending power - and so delivering more customers into the market for (sustainable) goods and services. This not only makes good sense, but as the recent UNCTAD Report shows us, the better performing economies are those with greater income distribution.
And this position is further enhanced by the way in which money is spent.
Markets will be refreshingly different; there will be less emphasis on virtual and secondary wants, and more on our very real and primary needs - for food, shelter, transport and mobility, and infrastructure to support and enhance life.
New markets will open up to serve the five capitals. This will mean a greater emphasis on innovation, and investment in meeting the challenges of our time in creative and affordable ways - more money in the real economy.
And as recently published research from the Economic Policy Institute shows, the greener the industry, the greater the propensity for job growth.
And those businesses that will prosper will be those that create thick value - in meeting the real needs for people, communities and the environment - and in universally affordable and sustainable ways.
So yes, a new model in this form would be good for business - if one is adding genuine value, in sustainable and equitable ways.
There is no doubt that the old form of capitalism has had its day. In many ways we are now at a crossroads - and as business leaders we have a choice - do we work towards the new economy, or stick with the old.
And while not always a straight forward challenge, anybody with a penchant for hunkering down and waiting for the good times to return, I can't see much real comfort in that direction - the great correction looks set to continue.
No. As progressive leaders, we should get brutally strategic, and honest, about the changing nature of the business landscape, and the impact this will have.
We can embrace the challenge and work through what a more responsible and sustainable form of capitalism could mean; the risks and opportunities for the business, our customers, our suppliers, and how we all make money.
In looking at the big picture, we can start developing creative solutions and new business strategies - to explore the possibilities for new markets, based on truly sustainable value.
We can adopt new models of business success, based on outcomes delivered, and real value generated and shared.
We can realise the benefits of the circular economy - through optimising resources, waste and costs. And we can collaborate with others - sharing waste and resources - through industrial symbiosis strategies.
In exploring this challenge, we can find the sweet spot of green economy; new jobs, prosperity, and improved environmental impact. And not just in the clean-tech and green sectors, but right through the economy.
In recognising the drivers for more re-localised economies, we can work through the opportunities for our business operations and supply chain strategies - revitalising regions and communities, further sharing value.
Commercially, we can review our business models, and seek opportunities to take unnecessary cost out; through reducing waste and resource costs, maintaining margins, yet spending more money on people - emphasising the creation & preservation of good jobs - while improving the resilience of the business, and its ability to generate long-term profitability: from waste-to-wages.
We can also take the opportunity to move towards shared forms of business ownership - with a fair distribution of rewards for the people that truly enable wealth creation.
We can engage with all stakeholders - including the investment community - to help them through the transition. Our integrated business reporting approaches can help spread awareness of the long-term benefits of sustainable approaches to business.
We can use our money wisely - moving it if necessary - to ensure we bank with and invest in appropriate organisations. This is not just an option for disenfranchised individuals - it applies to businesses, too.
And we can develop new forms of leadership, with vision and courage - to help us look beyond the current system, beyond present-day difficulties, and to take on the real challenge of transformation - to take our businesses to a better place, another model we have not seen before.
But perhaps the simplest and most profound advice comes from Gandhi: we must be the change we want to see.
This article is based on the Capitalism 2.0 series, originally published on 2-degrees Network.
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