Reimagining Capitalism
Abstract: Capitalism needs to be reimagined. Over the last century, capitalism lost the moral moorings originally envisioned by Adam Smith. For Smith, both moral virtues and self-interest are inherent in human nature. Today, we supercharge the value of rational self-interest but reject the virtues. While capitalism has a dark side, it simply needs reimagining, not removal. Many suggest the public sector should step up and take a more dominant role. My answer may be surprising. We restore virtues by having virtuous corporations in the private sector, that is, we build companies that care about their utility.
“When we begin to put justness on par with profits, we get the most valuable thing in the world (…) our humanity.”
Paul Tudor Jones II,
Founder of the Tudor Investment Corporation
and the Tudor Group, TEDx Talk, April 2015
Changing the scope of the debate and going back to basics
In the past, criticism on capitalism ranged from disagreeing with its principles to disagreeing with its particular outcomes. However, currently, the debate on the economic principles has practically ended, leaving a world where almost every country embraces some form of capitalism with varying degrees of competition, public intervention and ownership, regulation and international trade. Consequently, opponents center their arguments against this system mostly by reasoning that the already evident consequences of its dynamics (e.g. inequality of opportunity and output, rising environmental damage) will eventually lead to social unrest and political instability in every nation, making capitalism unsustainable in the long run. Recipient of the Nobel Memorial Prize in Economic Science Joseph E. Stiglitz famously argued in his book, The Price of Inequality, that divisions in today’s society are endangering the idea of a prosperous future. Similarly in his book Freefall, Stiglitz propounds that rapid economic growth has became environmentally and socially unsustainable in the current capitalist system. This argument is well intended, but also requires further analysis. The capitalist system indeed needs to be reimagined but not because of its problematic outcomes, the result of deeper issues, but because some assumptions on which capitalism are based are no longer present in modern society.
Carolina Rocha is an economist, with a BA in Economics from the Universidad Catolica del Uruguay and an MBA from Harvard Business School. Currently, she mostly works as an external consultant for her family business where she is actively designing and managing the international expansion of the firm, including advising on M&A opportunities.
