This hack addresses the flaw at the foundation of contemporary capitalism: human nature. Despite the theoretical possibilities of utopian capitalism, success of the model is dependent on ideal situation and execution. Only humans aren’t ideal. We’re predictable in a mass psychology sense, but not in an individual sense. And many of the most visible, most destructive aspects of contemporary capitalism are the result of individual behaviour and choices, because even within an organizational context, individuals make the decisions just as they make personal decisions to vote and influence the world around them. We propose a solution that returns the focus to ethical behaviour and generative citizenship as an individual responsibility.
Capitalism is an economic structure based on a participant being entitled to reap the rewards of individual effort. In principle, the self-interest of each participant should keep a check on the self-interest of the others, creating a natural equilibrium.
As with the implementation of many structures, theory is different from practice, and what the developed world – and the United States in particular - has been held up as an example of democratic free market capitalism is, in essence, what the economist Joseph Stiglitz refers to as a ‘corporate welfare state’, in which public institutions are compromised for private benefit. (Corning 2011) Even the father of free market capitalism, Adam Smith, recognised a role for government in supporting infant industry growth, but feared that even after growth and consolidation, the businesses would be loathe to surrender the government assistance. (Buchholz, 1999)
This is what has happened. Under government protection, the individuals who run big businesses, the poster-children for ‘capitalism’, have been allowed to behave badly. And at a regulatory level, it’s unlikely that any action will be taken to redress that issue.
The perception of capitalism as an implicit part of a democratic nation has reinforced its status as a sacred cow: Challenge capitalism and you’re challenging democracy, the ideological heart of the United States. The role of big money in modern American politics has also contributed to this, with millions of dollars often required to be raised by a political hopeful before they can even nominate for a federal position. This puts big business at the heart of politics, as only those with a wealthy background can hope to break into federal-level politics, and only those politicians who actively support big business will receive the votes to keep their job, and the extremely lucrative post-politics consultancies and employment offers (Bradley, 2012).
The social contract as used to explain the relationship between a government and its citizens is based on support of the political structure as long as it benefits the supporting citizens. In the United States, only 45% of its eligible citizens vote to elect government representatives (US Census Bureau). 16% of those not registered to vote chose not to register because they didn’t believe that their vote would make a difference.
It is this type of apathy that has allowed the ‘bad behaviour’ to become rampant in many capitalist economies. It is continuing to happen because on an individual level, the level of the citizen that we all occupy regardless of position, wealth or demographics, we are failing to recognise and acknowledge the responsibilities we hold to ourselves and those around us. As champions of democracy and freedom of choice, too many of us are using that freedom to choose to do nothing.
In a modern environment, where corporations and individual citizens may wield power comparable to a government and where they are protected by said government by a morass of financial ties, and in which ordinary citizens may find their lives more strongly affected by those entities than by their elected government, the lack of individual responsibility and citizenship is the root of the problem with Capitalism 1.0, and the basis for development of Capitalism 2.0.
Research shows that individual ethics are the most influential on decision making in a corporate environment, so why does current public discussion involve creating or modifying external regulations and requirements when it’s the individuals who are making the decisions?
Our proposed solution for making capitalism sustainable in the long term is as simple as a change of focus: Let’s stop talking about the system as if it is something that has created the problems, and instead look at how individuals created the system, how they caused the problems, and how long-term, sustainable change is the prerogative of all citizens.
Our solution is a shift of paradigm from viewing capitalism as a system enacted by organizations and politics to a system enacted by individual citizens, who owe their country for having provided safety, security, welfare, education and the chance to hold and keep the wealth they generate.
By being clear and emphatic on the responsibilities of individuals, by making them a public expectation, capitalism can become a system built on strong principles and ethics. Entire organizations will find they are focused on a higher purpose because the individuals who comprise the organization are already focused on a higher purpose.
Adopting a paradigm of generative citizenship – of accepting the personal responsibility for the growth and betterment of self and community – creates a firm base for the vision and perseverance that is critical to value creation in organizations and the economy at large. Statistics indicate that poor individual ethics and the related weak decision-making are linked to poor business performance (Jennings et al. 1996). This is supported by statistics from organizations such as Vistage that encourage business leaders – and through them, their businesses – to be socially accountable, generative members of the community. Members of these organizations find higher financial returns than non-members (Vistage 2011).
Impacts in addition to financial business success include reduced regulatory and administrative costs, as businesses will behave according to the principles of the individuals involved. It will also free up government to address other issues demanded by the social contract.
First steps have been made by leading capitalists such as Soras, Buffett and Gates, who loudly, visibly and voluntarily say that ‘something is wrong’, and contribute to the welfare of society of their own initiative. But these are high-profile businesspeople leading only a handful of high-profile businesses.
The first steps outlined below are directed towards educating, activating and motivating the millions of individual citizens around the globe to be responsible, socially accountable, generative citizens in all facets of their personal and professional lives. Benefiting from citizenship – of a community, country, and even the world – brings with it an obligation to contribute to the sustainability and welfare of those bodies in return. This is the driving force for generative citizenship, and the basis on which Capitalism 2.0 will be built.
- Bring the discussion about generative citizenship that is currently happening in academic circles (Bradley, 2012) into the public sphere to increase awareness, inspire and motivate.
- Improve awareness of the need for ethical behaviour, social awareness and individual responsibility through educational channels. Educating through primary and secondary systems means that business leaders of the future will be aware of responsibilities and expectations when it comes to participating in, and leading, organizations. For those already in leadership roles, attaching mandatory awareness education to business registration requirements may also provide the incentive and motivation to guide organizations to behave in the spirit of Capitalism 2.0.
- Through legislative change, reduce the amount of money involved in politics, thereby restricting the legislative goodwill that bad behaviour can buy and encouraging a return to ethical business practices.
- Stop trying to use an economic model to fix non-economic problems. Remove the perception of financial reward as the only type of reward, especially in non-economic sectors: Emphasise that social structures are responsible for social improvement, moral expectations for moral strength, and government responsible for upholding its contract with all citizens, not just the wealthy ones. These are the actions of generative citizens who recognise their obligations to society and act upon them.