Capitalism is the answer not the problem

There seems to be a palpable hostility towards capitalism, currently. It is often projected as the instigator of social problems like poverty, environmental impacts, consumerism, wealth inequality, and water/energy imbalances, to name a few. Often, what are shown as shining examples of the failing experiment of capitalism are really examples of cronyism or simplistic views on capitalism.

The trend right now seems to be that governments and NGOs are best suited to resolve many of the issues we face. Governments/NGOs are not in the business of making money, but in resolving problems; they make good watchdogs against selfish business interests. I would content that capitalism is not the problem, but rather the best solution to resolving large scale issues like climate change, poverty, etc. Capitalism, in its intended form, is what we now refer to as shared value. Michael Porter defines shared value as “addressing social issues with a business model.”

Governments and NGOs have the ability to come up with solutions to many of these problems, the road block they run into is scale. They can only manage their financial resources they receive from taxes, grants, or private donations. This limits them in their ability to scale a solution up to a macro level as they cannot regenerate their income streams. Businesses, on the other hand, have the unique capability to create a product or service based on a need and generate a profit from it. This profit is what enables a solution to a social problem to be infinitely scalable.

My proposal here is not one which is policy or regulation oriented, but rather a social paradigm shift in the way we view capitalism. There does not need to be an adversarial relationship between government and business. Collaboration can be the most effective way to get large scale resolution to many of the social issues we face. I do not believe this is a pipe dream either, we live in an incredible time where access to information, transparency, and technology are unparalleled. This access empowers businesses to actually recognize issues and map a route to resolution. All we have to do is simply accept that this is a role which the private market can and should fill and actively participate in it.

For a more in depth discussion on this topic you can view Michael Porter’s TEDtalk on the subject.

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