Monday, January 6, 2014

Capitalism has a bright future full of innovation and hope

by R. Edward Freeman

The Guardian

January 6, 2014

Last summer I spoke at a conference on a panel called, Capitalism in Question. Many of the speakers discussed capitalism's unsustainable growth, environmental neglect and unsavoury scandals. As a professor of business ethics, I am certainly aware of these topics, but I remarked to the audience that I felt like a clown attending a funeral.

Where others see doom and gloom, I see a bright future full of innovation and hope. I've been called an irrepressible optimist or worse, but I believe that we live in a time where business has the potential to solve the world's toughest problems. Keep in mind that I'm not writing here to whitewash the problems of business. Capitalism may not be perfect, yet it is the greatest system of social co-operation ever created thus far. Capitalism works because entrepreneurs and managers figure out how customers, employees, suppliers, communities, and people with the money all can cooperate to benefit. Competition is important but it is a second order property that gives people more choice in a free society.

After the recent global financial crisis, there was a need for new thinking about business. The old model of business of profit maximisation contributed greatly to the crisis. However, there are real tangible signs that this model is changing. With each new generation, people are wondering if this is what business is all about. We have seen Generation Y embrace companies that do good in society and make money too. Technology is forcing companies to become more transparent. Consumers and other stakeholders are more vocal now and cannot be ignored as they were in the past. Many stakeholders, such as suppliers, communities and financiers, are now holding companies to a higher standard than in the past.