Capitalism Reimagined | November 23, 2021

Capitalism Reimagined: Seven dimensions of a better economic system

David Bank
ImpactAlpha Editor

David Bank

ImpactAlpha, Nov. 23 – In the not-too-distant future, a powerful and diverse movement has succeeded in redesigning the rules, practices, narratives and power relationships of a broken economic system and ushering in a world in which all people and the health of our planet are valued.

This sustained, collective effort has shifted a market economy to an economy that uses markets to serve the common good.

Okay, so we’re not there yet. But over the past 18 months, the New Capitalism Project has tried to model that emergent movement and the new system it is already creating. The project, backed by Omidyar Network, the Ford and Rockefeller foundations and other funders, initially engaged a wide range of organizations to make sense of the landscape of those already working to shift business and investor norms, practices, mindsets and values. The project then enlisted a dozen leaders to participate in a collective strategy process that is still ongoing.

The ambitions of the diverse participants range from limited recalibration to fundamental restructuring of an economic system that, they agree, is underachieving, toxic and unsustainable for people and planet. Some organizational strategies emphasize collaboration, others confrontation. Some participants authentically believe in the forward-looking power of business and the redemptive possibilities within capitalism; others don’t.

But there was broad agreement that an opening exists “to move towards a more unified and positive version of the future” and to bridge ideological silos and theories of change to forge a more coordinated movement, according to the project’s interim report. 

This opening served as the starting point to develop shared perspectives on critical questions: How is the current economic system failing? What would a “better” economic system look like? What are the key barriers to such aspirations? And finally, what are the most important and integrated actions to drive systemic change? 

ImpactAlpha has invited several participants to share the New Capitalism Project’s work on next week’s Agents of Impact Call. Meredith Sumpter of the Coalition for Inclusive Capitalism, Carol Anne Hilton of Indigenomics Institute, Eli Kasargod-Staub of Majority Action and Amit Bouri of the Global Impact Investing Network, along with Omidyar Network’s Chris Jurgens, will sketch some of the elements of the new capitalism and the steps needed to realize it.

To move beyond well-worn terms like “inclusive,” “equitable” and “just,” the team took a stab at describing a better economic system across seven dimensions. To lay the groundwork for next week’s discussion, we’re summarizing the New Capitalism Project’s interim vision of that not-so-imaginary future.

1. What good business looks like.

Businesses and financial institutions, based on common impact standards, have earned public trust through their accountability for value creation for all stakeholders, including the natural and social systems on which healthy markets depend. The legal definition of business includes “for public benefit” – and businesses that don’t maximize public good lose their licenses to operate. Small businesses, cooperatives, employee-owned businesses and corporate forms not yet invented compete with big businesses, and all businesses build power, wealth, voice, opportunity for workers and communities marginalized by the prior system. 

2. What good money + capital look like. 

Both the public and private investors redefine the purpose of capital to finance positive, measurable impact for people, communities and the environment. Good money drives personal and community well-being; and ensures equitable investments necessary for every person to reach their full potential and every community to thrive. 

3. What good investment looks like. 

Long-term value creation is embedded into accounting, reporting and corporate governance, with environmental, social and governance, or ESG considerations integrated into all investment decision-making. Strengthened regulations have curbed financial sector power and concentration, banned extractive activities and empowered asset owners and their communities to reclaim and assert power in corporate governance.

Public investors use their strength to shape capital markets. More firms and funds are owned and operated by people of color and women, and a pipeline of talent is cultivated to take on leadership in the C suite. Investment and finance professionals have a mandate to serve under-served communities and must demonstrate public benefits, and can lose their credentials if an annual review shows they have failed to serve a public benefit. People in communities have the power to own and create wealth in their local economies.

4. How we measure what matters. 

Shareholder primacy and financial materiality has given way to societal and environmental materiality. Fiduciary duty requires taking societal and environmental materiality and impact factors into account. Negative and positive externalities are disclosed, priced and built into the financial markets.

5. What working peoples’ voice and power looks like. 

Labor and capital are equally valued. “Worker investors” are equal in importance to capital investors in corporations and industries. Workers reap the benefits of their labor, are valued for their economic contribution, and compensated appropriately through living and thriving wages and jobs with dignity, benefits, and opportunities for growth. 

Working people are seen as a long-term asset to be cultivated and invested in, not an expendable expense item. Companies publicly disclose how they treat workers. Public benefit companies adopt practical measures to give working people a voice in corporate governance. Corporate profits are capped, and profits shared above that cap. Wage and capital income is taxed equally.

6. What government’s role looks like. 

A functioning, multiracial democracy creates guardrails, duties and incentives to ensure that all people enjoy a decent basic standard of living (wages, healthcare, etc.) and to create a market in harmony with nature. Rules and practices prioritize people over capital and support innovation and competition through regulations, tax policies, restrictions on lobbying and monopolistic manipulations and mandates for lending to specific communities, addressing a history of structural racism and inequality. Uniform reporting requirements create transparency about companies’ negative and positive impact on stakeholders.

7. What business engagement in politics looks like. 

Corporations understand the moral responsibility of standing up for good democratic principles and practices. Corporate political activities are aligned with companies’ commitments to all stakeholders. Corporations, organizations and other entities are barred from contributing to political campaigns and restrictions are placed on individual campaign contributions. 

The new definition of fiduciary duty requires companies to disclose lobbying activities and demonstrate that their lobbying serves the broader interest of their stakeholders. Accordingly, business leaders use their influence to address broader issues, including reforms to the electoral and legislative system to build the center rather than amplify the extremes, and other long-term business interests like stakeholder primacy, climate action, living wages and worker power.