Capitalism Was Dying Before Covid-19 - Why That's Good for Society

When Salesforce CEO, Marc Benioff, stated that capitalism was dying at Davos, it made us re-examine what got us to this point
Capitalism Was Dying Before Covid-19 - Why That's Good for Society
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Co-founder, PledgeMe
8 min read
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Recent events have made us look closer at how we operate better as a society. A couple of months back, before anyone had heard of Covid-19, the clarion call from Davos was that capitalism was dead. 

Tough times are coming for all and there's no escaping the fact this will change our world. Now we need to come together, analyse our mistakes of the past and learn from them to ensure we have the structures in place to come out of this crisis with a long term plan that will leave us better than when we went in. 

 

Destruction Can Breed Creation

Human ingenuity sees us adapt to make the best of bad environments, or to even change them. For example at the end of the industrial revolution, when skilled tradesmen lost their livelihoods, their response was to form one of the first cooperatives to safeguard the value of their professions and community. The Rochdale Cooperative, started in 1841, created a set of seven principles of democractic and equal self-governance which still hold true to cooperatives today.

I believe we’re seeing a realignment of values once again with business’s recent rejection of capitalism as we’ve known it. Just look at last year when the US Business Roundtable, including 161 execs from the most valuable companies, renounced shareholder primacy for the first time ever.

“We need to move from shareholder engagement to stakeholder engagement” said Leanne Kemp, Queensland Chief Entrepreneur, at Davos this year.

 

The Times They Are a-changin’

We’ve progressed significantly over the last 400 years. We now have greater access to education, employment, healthcare and sanitation, extending average life expectancies. In 1950, 75 per cent of the world's population was living in extreme poverty, today that number is less than 10 per cent. We’ve gone from 90 per cent of the population being illiterate to 20 per cent

There’s a lot to be hopeful about.

But behind the data, there are still people that are being left out and undervalued. The inequality between rich and poor is growing, with studies showing the United States is leading the way. The rich are getting richer, while the middle and lower classes are losing wealth and, more importantly, power and self worth. In 1965 the average CEO was paid 20 times the average worker in the US, in 2016 it was 217 times the wages of the average worker. Sixty seven billionaires have as much wealth as half of the world's population.

 

Individualistically Centered

As a society, we’ve focussed on individualism over community, and on urban centres over our regional counterparts. We’ve externalised costs to places we in the West can’t see – whether it’s the negative impacts from plastic waste into the Pacific, modern-day slavery in Asian factories, or even absolute poverty in swathes of America. There are as many Americans living in absolute poverty as Senegal (5.3million).. There shouldn’t be people living in poverty anywhere.

And it’s not just people that are suffering. Two-thirds of the words vertebrate species are becoming extinct.

I have hope in our communities.

Throughout the last 400 years, we’ve had community groups (often those most affected) come together to solve their own problems. They’ve overthrown governments, recast what is possible, and shuffled the entire world forward on ideas around equality. Often, the wins that these communities have achieved are overlooked by the media.

Take Taiwanese Sunflower Student Movement for example. They were so frustrated with the path of their government, that they took over Parliament. Together, this student group rewrote the government's policies they wanted to see implemented, and live-streamed it all. And do you know what happened? The next election saw a shift in power, and Audrey Tang, one of those activists, is a government minister today.

Why is this all important? Because when the CEO of Salesforce, Marc Benioff, stated that capitalism was dying at Davos, it made us re-examine what got us to this point. 

“A business, which means a commercial activity considered in terms of profit. Commerce is the activity of buying and selling, especially at a large scale.”

When we talk about companies, we don’t normally think that they’d be a tool that communities could use. Many believe that our current definition focuses purely on profit rather than value. But did you know that, pre-1600s, you needed to have some sort of public good to pool your resources and get the royal approval to incorporate? Think hospitals, roads, universities.

It was only after the East India Company that this started changing. Not only was their treatment of invested money eerily similar to some of the public financial crashes we’ve seen in recent years, but they externalised costs to East India where the British public couldn’t see what was happening. Not paying workers well led to strikes and the collapse of their fabric industry.

In the 1800s further changes came, with forms introduced to remove the government from approving each incorporation, companies receiving legal personhood that removed personal liability if a company failed, and the advent of technologies that removed artisan roles in place of factories.

 

Cooperative Beginnings

But one way communities have been addressing the issue around valuing people since the start of the industrial revolution is with the co-operative movement. I mentioned The Rochdale Cooperative before, which set the modern principles for the co-operative movement - valuing more than profit, voluntary membership, democratic votes, education, and co-operation amongst co-operatives as the guiding tenants. The definition of a cooperative is a group united voluntarily to meet common economic, social, & cultural needs through a jointly-owned & democratically-controlled enterprise.

In the United States, the sector has over $500 billion in revenue and 2 million employees. In 2019 there were 156 million working age Americans, indicating almost 1.5 per cent are employed by the cooperative movement. That said, the movement is not widely understood.

“Although cooperative businesses have been responsible for many market innovations and corrections of market imperfections, little is known about their impact as an economic sector.”

Co-operatives don’t need to be small - Spanish Cooperative Mondagon has more than 100,000 member owners and 102 federated companies. A group of students started the cooperative in the 1950s in the Basque region, which at that time was the poorest region of Spain, because they couldn’t find work. They embedded democratic principles, and their region is now one of the most prosperous in Spain.

 

Teach Them to Fish for Themselves

Instead of trying to train and activate the rest of the world, what if we gave the communities most affected the tools and support to solve their own problems?

Imagine the difference for communities that could be self-sufficient. Localising employment and education would allow decisions to be made with people you know, and hopefully, care about. We need people to value the true costs of human labour and impacts on the environment. With connections not purely based on enterprise, but on community. Shared meals to build connections and trust, regular culture around local stories and celebrations, neighbourhoods where people know each other and watch out for each other.

 

The Future is Here

We’re already seeing communities come together through social enterprises. Since 1981 Ashoka has been cultivating a community of change leaders. Those willing to make an impact. And those who can come together for the benefit of the local environment and society.

Consumers are now demanding that the companies they buy from, are giving something back. 77 per cent of UK consumers said they have or would boycott a product based on the company’s environmental waste policies. It's also resulted in 86 per cent of the S&P 500 publishing sustainability/responsibility reports annually, up from just 20 per cent in 2011.

We’ve seen it too with equity crowdfunding. Harnessing the power of your local crowd to back ethically minded businesses. In 2019 we saw over $35 million invested in these types of businesses in Australia and New Zealand. Investors are demanding to see impact and change from the businesses they invest in, which can only be a good thing for our planet and society. Conscious socialism is gaining traction both in business and politics and I’m excited about the present and the future!

We’re standing on the shoulders of not giants, but our ancestors and community, and in the words of gender equality activist Diana Ryall, I hope that we will leave a planet that our grandkids could be proud of.

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