Please permit me to preach a little theory on capitalism.
Capitalism is based on the profit motive. The market is the only thing that controls growth and success. The market acts as the stimulant and the restrictor, countering negative capitalist forces with positive capitalist forces, allowing one to make a profit and become stronger as a result. It is survival of the fittest, success for the best.
Capitalism does not demand ethics beyond what markets tolerate. It was not capitalism that drove the world into the worst recession since the 1930s – it was greed and unscrupulousness. Goldman Sachs, AIG and others at the pinnacles of financial power did not consider that they were doing anything ‘unethical’. They were simply selling, legally acceptable ‘derivatives’ which others were buying. The market is supposed to recognise that fundamental tenet: ‘Buyer Beware’.
If the market demands ‘ethical’ behaviour, then the markets will provide for those ethical concerns. In the purest sense, capitalism does NOT need governmental controls, or interference.
Capitalism itself has no ‘conscience’; it is the collective market conscience that makes changes. The ‘green’ revolution is a good example. Plagued by fears of massive tidal waves and planetary destruction, more people are demanding more environmental consciousness, and the markets follow.
On balance, capitalism creates more wealth than it destroys. Because it is organised around maximising capital rather than maximising value, it can sometimes lead to wasted resources, or worse, to destruction of value, as in environmental degradation.
In the 1990s, Ben & Jerry's (ice cream) coined the term ‘Caring Capitalism’ to illustrate its corporate stance of maintaining a social conscience. Some 20 years later, others are finally catching onto this concept. The former chairman and CEO of Coca-Cola is calling for companies to follow a standard of ‘Connected Capitalism’ and many high-profile corporate executives are joining this cause.
Connected capitalism is a simple idea: A company must still turn a profit, but it must also use the weight of its brand, as well as its capital, to be an agent for positive change in the world. The bottom line is connected to a social conscience. Capitalism is the best way to grow the economy, combat poverty and save the environment.
Worldwide, a new phenomenon is emerging, a new kind of ‘Capitalism with a Heart’. Around the globe, this new capitalism is being pushed by the new middle class to move towards having a social conscience. More and more people think it is time for wealth to be distributed more equally. When more people think that way, markets will move in that direction.
The sustainability challenge
The lack of definition about what makes a product or process ‘green’ has expanded the concept to include sustainability – which means meeting present-day requirements without compromising the needs of future generations.
Some think that sustainability is primarily social responsibility. My contention is that sustainable programmes can be successful only if they are profitable. Sustainability must generate competitive advantage – lower costs, higher performance and increased value. Profits will generate growth, beyond which social responsibility can be leveraged to enhance brand equity.
The first Industrial Revolution generated high productivity when the world had fewer people and there were seemingly unlimited natural resources. Today, there is overpopulation, combined with labour-saving automation – but resource scarcity. Now the world is not production limited; it is resource limited.
In their 1999 book, Natural Capitalism, Paul Hawken and co-authors suggest that competitive advantages and increased profits will result from properly valuing ‘natural capital’. The conventions of the first industrial revolution values that at zero.
Natural capitalism develops with four central strategies:
* Resource conservation through effective manufacturing processes.
* Re-use of materials in ways similar to natural systems.
* Change in values from quantity to quality.
* Investing in natural capital; sustaining natural resources.
Today, most disposable consumer goods go to the dump. The solution is cradle-to-cradle design. Consider how nature works: material resources continue circulating with healthy, safe metabolic processes. Industrial ecosystems must be designed similarly, to use, protect, enrich and circulate material resources. C2C responsibility means that manufacturers must be fully accountable for resources used, from design, to manufacturing, to marketplace, to end-of-life disposal and back to inception of new products.
Here is a challenge to chew on: Americans purchase nearly three billion dry-cell batteries every year and, in spite of regulations, recycle only about 2%. This means that thousands of tons of toxic waste ends up in landfills. The real value of batteries is the power they generate for a short time – the ‘usage’. But depleted batteries still look new, with packages designed to outlast the products' useful life. Major growth and success awaits developers of disruptive technologies to solve this problem by extracting materials from spent batteries for re-use in other products.
Cradle-to-cradle design and manufacturing is the beginning of Natural Capitalism, a new paradigm of clean technologies and resource conservation.
Jim Pinto is an industry analyst and commentator, writer, technology futurist and angel investor. His popular e-mail newsletter, JimPinto.com eNews, is widely read (with direct circulation of about 7000 and web-readership of two to three times that number). His areas of interest are technology futures, marketing and business strategies for a fast-changing environment, and industrial automation with a slant towards technology trends.
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