By Mostafa Sayyadi and Michael J. Provitera
Capitalism, the foundation of many nations, may need to use a more systemic approach to see if capitalism is the best way to provide welfare for humans. Countless articles and books have been published on the importance and role of capitalism in the economic development and material well-being of the entire society. Capitalism, as the driving engine of economic growth and the well-being of society, is not always admired by economists and sociologists. [1] [2] [3] Although capitalism saved millions of people from poverty and increased their average lifespan, it is still a controversial subject. Today’s first global problem includes wide income inequality and the exclusion of minorities. Second, there is an ever-increasing growth of greenhouse gases that have upset the biological balance of our planet. Although the COVID-19 crisis has subsided, the climate change crisis is likely to become the world’s number one crisis due to ignoring the opinion of millions of environmental activists and experts. [4] [5] [6] A crisis that is the result of prioritizing financial gain and ignoring collective interests such as the importance and necessity of survival for millions of people around the world!
The main goal of capitalism forgets to focus on both important indicators of social welfare and freedom equally. [7] [8] Capitalism is seen as a means of increasing social welfare. And the balance of freedom and prosperity has not been addressed with the same effort. This one-sided focus on welfare instead of a systemic approach to both aspects of freedom and welfare has led to ignoring the opinions and efforts of environmental activists. Thus, this may be the reason for the destruction of natural resources and suffocating our planet under what has been noted as the burden of climate change. This focus has changed the ethics and social responsibility of businesses. Many companies no longer think about the health of the market in which they do business. [9] [10] Some do not invest in healthcare and education as recommended as solid principles of business ethics. [11]
Taking a systemic approach to capitalism and simultaneously paying attention to profit and freedom does not mean abandoning the importance of profit and shareholder value. On the contrary, this approach advises companies and businesses to pay attention to the system of preservation such as social and natural resources that they rely on along with profits.
The capitalist system focuses on a systemic approach when it employs all resources for all people from rich to poor and economies of scale and those that need development. A capitalistic system requires increasing public awareness and expanding a political and cultural movement that improves business ethics and increases the social responsibility of companies. There are many facets that need attention such as a more effective climate change approach and a welfare system. Social responsibility must be the core competency of both governments and organizations to promote human survival.
Organizations can guide innovations and government funding can help. [12] [13] Accepting social responsibility to combat existing super-crises certainly has a compelling reason even for profiteers. Countries such as Sweden and Denmark provide successful milestones in the important role of social equality on the effectiveness of the entire capitalist system. Extensive education and health care workers in Sweden and Denmark have influenced and accelerated this innovative social capital. These countries, such as Canada, historically have a higher Gross Domestic Product and a higher level of social welfare.
About the Authors
Mostafa Sayyadi works with senior business leaders to effectively develop innovation in companies, and helps companies—from start-ups to the Fortune 100—succeed by improving the effectiveness of their leaders.
Michael J. Provitera is an Associate Professor at Barry University. He is an author of Level Up Leadership published by Business Expert Press.
References
- [1] Kahan, A.S. (2012). Max Weber and Warren Buffett: Looking for the Lost Charisma of Capitalism. Society, 49(2) ,144–150. https://doi.org/10.1007/s12115-011-9518-4.
- [2] Randall, C. (1980). Weber’s Last Theory of Capitalism: A Systematization. American Sociological Review, 45(6), 925–42. JSTOR, https://doi.org/10.2307/2094910.
- [3] Perman, D. (1985) Schumpeter’s sociology of economics:The role of the ‘competent economist’, Economy and Society, 14(4), 429-449, DOI: 10.1080/03085148 500000023.
- [4] Galdón, C., Haanaes, K., Halbheer, D., Howard-Grenville, J., Le Goulven, K., Rosenberg, M., Tufano, P. & Whitelaw, A. (2022, Feb 01). Business Schools Must Do More to Address the Climate Crisis. Harvard Business Review. https://hbr.org/2022/02/business-schools-must-do-more-to-address-the-climate-crisis
- [5] Baskin, K. (2020, June 222). 4 lessons from COVID-19 to help fight climate change. Sloan Management Review. https://mitsloan.mit.edu/ideas-made-to-matter/4-lessons-covid-19-to-help-fight-climate-change
- [6] Winston, A. (2020, January 23). Leading a New Era of Climate Action. Harvard Business Review. https://hbr.org/2020/01/leading-a-new-era-of-climate-action
- [7] Merkel, W. (2014). Is capitalism compatible with democracy?. Zeitschrift für Vergleichende Politikwissenschaft 8(2):109-128 DOI:10.1007/s12286-014-0199-4
- [8] Macarov, D. (1977). Political Ideologies and Social Welfare: The Case of Israel. International Social Work, 20(2), 44–50. https://doi.org/10.1177/002087287702000208
- [9] Balis, J. (2021, March 10). 10 Truths About Marketing After the Pandemic. Harvard Business Review. https://hbr.org/2021/03/10-truths-about-marketing-after-the-pandemic
- [10] Olynec, N. (2016). Why all businesses should embrace sustainability. IMD. https://www.imd.org/research-knowledge/articles/why-all-businesses-should-embrace-sustainability/
- [11] Spiller, R. (2000). Ethical Business and Investment: A Model for Business and Society. Journal of Business Ethics, 27(1/2), 149–160. http://www.jstor.org/stable/25074371
- [12] de Jong, M., Marston, N. & Roth, E. (2015). The eight essentials of innovation. McKinsey Quarterly. https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-eight-essentials-of-innovation
- [13] Hill, L., Brandeau, G., Truelove, E. & Lineback, K. (2015, January 14). The Capabilities Your Organization Needs to Sustain Innovation. Harvard Business Review. https://hbr.org/2015/01/the-capabilities-your-organization-needs-to-sustain-innovation
