The cure for capitalism is more capitalism. Actual control system provides all-or-nothing instruments that prove to be insufficiently rough. Or it provides pointed interventions that proved to be a mechanism that promotes secular interests rather than contains them. A transparent monetization of externalities can solve the issue. And it is easy to do too.
Capitalism is the greatest support for market system - an efficient way to distribute resources and goods. The fundamental shortcoming of capitalism is legitimation of individual supremacy over societal. Formerly it has proven to be a valid incentive to seek advantage and develop powerful tools for that. The later has characterized humans since they became homo. So the shortcoming was intentionally tolerated as long as the positive effect --establishing humanity-- was provided and the negative effect --self-annihilation and weakening of the population-- could be contained.
Lately economy grew to the global scale. This means that 2) the leverage on individual actions has grown proportional to the system size. 2) The complexity of supply chains that serve products from cradle to grave leaped beyond any comprehension. Individuals are neither required nor able to optimize eudaimonic value of their actions. The butterfly effect of negative unintentional consequences has become very real. Poor individual actions now may lead to the suffocation of their own industry and supply chain.
Should people find a solution for the issue either by upgrading abilities to make optimal (as opposed to optimized) decisions or by refocusing supremacy on social values (prohibits individual actions without an evidence that it will represent societal interests), capitalism, production and social systems will become sustainable, will carry weight. Should people fail to adjust, the globalized system will fall apart; the variety of goods specimens, volume of goods supply and the goods exchange will crumble; the population and survival chances will drastically reduce.
A quota-based calculation has been long a tool for many economy planners and governmental regulators. This is how they rationalize decisions on the system level. Nevertheless the taxation brackets are set firm and are largely egalitarian. They rarely depend on the entity's actual performance or the performance of the industry.
If actual performance isn't measured, an enterprise that piles up externalities works under the same rules as the enterprise that acts responsibly and bears additional costs due to rigorous decision making and long-term planning. In the long run responsible enterprises will be driven out of business by reckless culture. It is antithetical to human values.
The issue of supply-chain complexity and interdependency of the world can't be currently resolved by an individual. Though, it can be reasonably approached by a business entity. Labor division and collective brain power can assist in planning long-term and in detail. An incentive that encourages business entities to do that could aid capitalistic short-sightedness.
Now, it is essential to understand that even under the threat of death penalty no human will be able to plan an find the optimal solution. There is no universal formula yet. A certain amount of externalities will always bug us. It is not the point to eliminate the issue completely but to create a system that systematically tries to improve itself and bite the issue out of existence bit by bit. The power leverage has to be applied properly.
It is easy to track externalities on the system level. Government should assume controlling function. It also should provide a forum for dynamic prioritization of the externalities in question. It should set the annual targets and let the enterprises pay for any mismatch. The actual penalties should be distributed by the performance-based quotas. The quotas should be trade-able.
For instance, should the externality in question be poverty. The entire population share under the poverty line could be reliably assessed. A metric of poverty (wealth) can be introduced so that the most wealthy individuals score high, and the barefooted score the lowest. The contribution of an enterprise into getting rid of poverty equals the annual differential of the company's head count multiplied by their respective poverty score. A responsible enterprise would create more jobs increasing head count and it would increase wages over time rising the wealth score. It doesn't matter how big the enterprise is. The differential metric provides size-independent universal assessment of contribution to the common goal. The companies that score the worst should fall into the highest tax bracket incentivising changes or speeding up liquidation of ineffective businesses. The amount of tax collected is proportional to the related expenses on the poverty issue and is the subject to quota system.
The quota system can be tied to local or federal programs. It would work on the regional level because it actually creates desirable living environment if the prioritization is left to democratic devices. It's unlike the CO2 quotas that work only on the global scale. The CO2 imposes taxation on the few localities but the benefits are spread all over the world - a physical phenomenon. In social systems it is contained. What is created by a social system stays and is consumed by the system. Either the better subsystem wins big time the migration game benefiting people and capitalists, or the other subsystems will catch up with the same aproach - activity-based differential taxation, that is.
Today governments try to compensate for the negative impact of business externalities. It is a battle that can't be won. Firstly, the nature of the problem is as huge as our system. Governments will need to employ, i.e. to constitute, 100% of GDP to have a reasonable chance to succeed. Secondly, such governmental take-over will kill capitalism and market.
Indeed, all capitalistic entities are perfectly capable to balance individual and societal interests. Seeking perfection and advantageous solutions is in their nature. They only fail to internalize the big picture - the very picture drawn on the fabric of societal values. This picture is relatively simple to obtain. It has been done and can be done at any precision. Governments can assume the role.
Then several targets have to be set - a process that's already mastered by the political system. A clear, automated quota-based taxation system could provide incentives to eliminate societal shortcomings by the capitalistic enterprises. It can be monetized thus providing additional avenues to grow economy and capitalize on improvement of life. Government will become a friend of citizens and capitalists at the same time, having no tongue in cheek.
There is a question of applicability. How much would it cost to implement and run the system. An idealistic answer - whatever it costs. An alternative would be disastrous. A pragmatic answer - it would be much cheaper than the measures taken today in an attempt to restore the long-term balance. Our governance could cost less and carry much more weight. Just a few targets at a time (let's say an amount that is always the same) could do wonders.
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