Capitalism, the mutually beneficial, voluntary exchange of products, goods and services powered by private decisions in a free market system, is being shunned by American youth, corporate leaders and global elites under the pretenses that shareholder driven capitalism is outdated, unsustainable and incapable of addressing the present challenges particularly highlighting income inequality, climate change and social justice.
Klaus Schwab, founder of the World Economic Forum, conceptualized and has advocated a third-way capitalism among the global elite since the 1970s. His vision is a fundamental replacement of “shareholder capitalism” with “stakeholder capitalism” in decades to come.
As per Mr. Schwab three economic models exist for consideration:
-shareholder capitalism, the current dominant model embraced by most western corporations, holds that a corporation’s primary goal is to maximize profits
-state capitalism entrusts the government with oversight and direction of the economy, such as China
-stakeholder capitalism (a model proposed by himself, Mr. Schwab, a half century ago) positions private corporations as trustees of society positioning them to better address current economic and societal challenges
Mr. Schwab expounds that advocates of shareholder capitalism had neglected to consider the fact that a publicly listed corporation is not just a profit seeking entity but a social organism as well. Financial industry pressures to boost short term results coupled with single minded focus on profit have caused corporations to become increasingly disconnected from the real economy. According to Mr. Schwab, traditional capitalism is deemed no longer a sustainable option and here are some reasons why:
-due to its failure to address environmental concerns, the current economic system undermines the well-being of future generations
-millennials and Gen Z generations are no longer willing to support in any measure (to include working for, investing in and buying from) corporations which do not advocate values beyond maximizing profit
-executives and investors are coming to the realization that their success is intimately related to that of their customers, employees and suppliers
In order to fully implement this new form of socially, environmentally conscious capitalism, companies will need to adopt new metrics to measure shared value creation among the stakeholders and should include measures of achieving ESG (environmental, social and governance). Another metric to be adjusted is executive remuneration by aligning salaries with long term shared value creation. Mr. Schwab concedes that corporations should maintain their core competencies and continue promoting an entrepreneurial mindset yet their primary cause should be commitment to improving the state of the world in which they are operating. Corporations desiring to leave a mark on the world should advance globally shared goals such as are outlined in the Paris Climate accord and the United Nations Sustainable Development Agenda.
The complete presentation may be seen in the Davos Manifesto.
The intention of this essay is to enhance understanding of this new progressive version of capitalism actively penetrating American corporations, workplaces and markets. It is unclear as to whether corporate leaders, financial markets and average citizens understand the type of tyranny that will ensue from implementation of such a program. Stakeholder capitalism would, at best,
–politicize every single aspect of American lives. Every corporation through marketing of their products will be preaching societal, environmental or bureaucratic messages (a phenomenon already seen in some packaging and advertising)
–determine our freedoms through commerce. Corporations will make decisions about which products are offered to the American public based on social, environmental, political trends. One need only consider banks refusing to handle banking transactions of gun manufacturers or corporations banning use of plastic straws
–usher in a fascistic economic system. Once federal and international bureaucracy interfaces with corporate policy to “achieve common goals for the common good,” true liberty in the economic system will be snuffed out
Again, do advocates understand for what they are advocating? And even if advocates are prepared to surrender the traditional capitalistic system that has successfully lifted the majority of the world out of extreme poverty over the course of a century in favor of an internationally conceived, condoned progressive capitalism because they feel deeply passionate about solving income inequality, climate change and “human rights,” have they considered what might come next?