New Capitalism | What might the future of capitalism look like? How can we reshape economic systems and capitalist societies to drive toward this next normal through efforts such as the New Capitalism Project?
Imagine a future where the economic and financial system serves everyone—a system that’s accountable for its effects on people and the planet. Envision a world where financial markets serve all members of society and where finance plays a central role in solving the social and environmental challenges facing the global community, such as poverty, inequality, and climate change. In this future, investors integrate impact considerations into all decisions – building strong communities, a healthy environment, and a sustainable future for all people. We see this as the future of capitalism, and impact investing is one path to drive towards this future, and there are others.
The New Capitalism Project (NCP) was launched in February 2020 as an effort to explore how diverse stakeholders, such as members of the business and finance community, economists, policy makers, grassroots organizers and more, who have shared goals in building a more just, inclusive, and equitable economic system, can better align their work aimed at driving systemic change. GIIN Co-Founder and CEO Amit Bouri, together with Anna Muoio of the New Capitalism Project (NCP) and Chris Jurgens of Omidyar Network, have taken steps to engage leaders from the fields of impact investing, sustainable business, economic justice, and more in a deep dialogue to more fully understand their perspectives on how the current economic system is failing, their aspirations for a “new” system, and the opportunities and the challenges to get there.
These efforts are driven by the question, “How can we move from isolated interventions to aligned action, so that we can accomplish more together than we could by working alone?” The NCP’s op-ed in the National Civic League, Aligning Action to Reimagine Capitalism, explores this concept of collective action – noting, “collective action is exactly the type of problem-solving that intractable, inextricably linked problems require. And it is exactly the approach a group of leaders and funders is understanding for one of the thorniest and most complicated problems of all: reimagining the capitalist system that so many now acknowledge is fundamentally broken.”
The NCP has sought to identify the landscape of the organizations focused on building towards the future of capitalism. The NCP has also worked to shed light on the various perspectives and theories of change to better understand how various stakeholders articulate “the fundamental problem with status quo capitalism.” The NCP developed a ‘kaleidoscopic view on the nature of the problem and the ways it can be addressed,’ which can help foster greater collective action and coordination among business and investor groups and other key stakeholders to drive towards new capitalism. More here >
Status quo: The current economic system is not working for people or the planet.
The status quo of the global economic system is not working. It is not serving the planet. It is not serving the vast majority of the world’s people. Over the long-term, it is not even serving investors.
The current status quo in capitalist societies tends to extract value from the economic system, from its workers, and from our shared natural resources largely for the benefit of those who already hold assets and power.
For instance, fallout from the global financial crisis of 2008 – sometimes called “the Great Recession” or “the Great Financial Crisis” – highlighted fundamental problems in the status quo economic system. The sudden collapse in high-risk lending and other risky strategies employed by many large, global financial firms caused a ripple effect of consequences, especially in the stock and housing markets that impact millions of everyday people worldwide. After substantial interventions by global fiscal and economic authorities, world economies recovered – but economic inequality became far more magnified. Indeed, this exposure of deep, pre-existing problems with the status quo economic system is part of what led to the founding of the GIIN in 2009.
More recently, when the world was turned upside-down by the COVID-19 pandemic in 2020, the discrepancies in how communities were affected and the underlying systemic inequality contributing to such injustice became even more pronounced. This global health crisis prompted a broader economic and social crisis that exposed some of our most troubling systemic frailties. The very engine of capitalism – its workers – seemed to get the short end of the stick, as millions were laid off the moment the crisis struck. The most “essential” workers of the crisis, like caregivers and people working in our supply chains, labor under difficult circumstances and survive at the lowest end of the pay scale. If compensation reflects value, then it is clear that our current system does not value these workers much at all.
Meanwhile, many of the world’s biggest companies – and their shareholders – enjoyed record profits during the peak of the pandemic in 2020. It is this type of glaring discrepancy that makes the need for system change even more urgent.
Additionally, the status quo of the global economic system presents other existential concerns as well. The climate crisis is growing continually more dire. The recent IPCC report on Climate Change urged for a global reduction in greenhouse gas emissions of 7.6% annually in order to avoid irreversible damage from a global warming increase above 1.5 degrees Celsius. While many impact investors are tackling the climate crisis through investments into climate change mitigates, clean energy solutions, and more – there is still much work to be done to avoid irreversible climate change.
The global ‘inequality crisis’ is threatening lives in other ways as well. Not enough progress has been made in achieving the United Nations Sustainable Development Goals (SDGs) or the Paris Climate Accord. Meanwhile, we face a crisis of distrust in business and government – the very leaders we need to guide us toward progress.
Many leaders – including economists, CEOs, investors, and even policy makers –connect our current array of global crises to a bedrock principle of status quo capitalism that was first popularized by the American economist Milton Friedman. Friedman published an article that in many ways re-shaped the global economy and underscores the capitalist societies of today. In his article, “The Social Responsibility of Business is to Increase its Profits,” Milton Friedman emphasized his conviction that business owners have one and only one responsibility: to increase profits, without regard to social and environmental consequences. That idea became the source code for the past fifty years of capitalism, which is embedded by policy makers in law, and has been set as a precedent in culture.
This is the status quo of capitalism – and now, society can no longer afford to pay the social and environmental price of that narrow philosophy.
Changing Systems – What might the future of capitalism look like?
While the future of capitalism is a topic that many leaders have been debating for decades, there are many new actors in the space as well with ambitions ranging from a recalibration of the current economic system to a fundamental reimagining and restructuring of capitalism.
It is time for a new status quo that thinks about investment capital in an entirely new way. The future of capitalism should reflect a shifted paradigm that honors the role of all stakeholders—from workers to the planet itself.
In a transformed economic system, investors should ask new questions about how to define “value,” and about who benefits from it. It is time to take a broader, longer-term view about the value investments create for people, for communities, and for the planet. We need a transformed financial system that offers a new way of doing business. We need to create a system that addresses inequality and poverty, that invests in solutions to addresses the climate crisis, and that delivers sustainable and inclusive economic growth.
One aspect of fueling this movement for new capitalism requires the leadership of organizations to drive a change in the way people think about the power of investment capital. It is this changing of mindsets as well as mobilizing more capital to invest in solutions to address the climate crisis and inequality that will drive a movement for the future of capitalism. The GIIN is dedicated to increasing the scale and effectiveness of impact investing around the world. While the impact investing industry has been growing steadily, there is still too much capital sitting on the sidelines. In order to drive systemic change so that the global economy works for all, the GIIN is leading efforts to mobilize more capital to invest in solutions to address the world’s most pressing challenges – a key component of transforming the status quo.
In addition to focusing on how we can unlock more capital for impact, we also need to think about how to have an impact on investing itself. At the GIIN, we envision a future when impact is integrated into investment decisions as the ‘normal’ way of doing things. In this future, impact investments will be a viable option for every investor, from retail to institutional. Businesses, investors, and policy makers will hold themselves accountable to multiple sets of stakeholders. This includes not just shareholders, but equally workers, customers, suppliers, communities, and our environment. The outdated concept of ‘externalities’ will be relegated to history, with finance theory accounting for risk, return, and impact.
In this way, our re-imagination of the future goes well beyond impact investing to all of investing—and indeed, to the economic system as a whole.
How do we achieve this transformed economic future?
In order to make this vision a reality, the business, finance, nonprofit, and government communities need to think about the power and potential of using finance as a force for good. Impact investing (investing with the intention to create positive, measurable social and/or environmental impact alongside financial return), Socially Responsible Investing (SRI), and ESG (adjusting investments to account for various environmental, social, or governance risk factors) are all part of the broader movement to bring new considerations to traditional finance, which is a critical step in reimagining capitalism.
As more institutions and leaders within the investment community consider the real-world outcomes of their investments, apply ESG screens and build out their socially responsible investing practices, it is important for them to also work with other industry bodies focused on not only driving towards greater impact, but towards re-shaping systems at their core. This means, to truly address the underlying problems exposed by crises such as the COVID-19 pandemic, the financial crisis, and the climate crisis, we need to tackle our systemic gaps from more than one direction.
Local, community driven approaches will need to work in-tandem with institutions to be more responsive to public needs and drive change. Achieving a transformed economic system that works for people and planet will also mean fundamental changes to our global energy systems, our food systems and our approaches to housing and employment, among many more. To get to the future of capitalism, economists and leaders around the world will need to re-imagine what a more inclusive and sustainable world will look like. It will take the collaborative efforts of groups such as those involved in the New Capitalism Project, and it will ultimately mean an elemental shift in the way businesses, investors, and governments relate to our planet and its people to be more sustainable and inclusive.
Learn more about the future of capitalism
The GIIN and our partners have been working to fuel a global movement to change mindsets about the role of capital in society and our role in shaping a ‘new capitalism’ in other words, the future of capitalism. Our focus is on how we better collaborate to drive systemic progress and create our next normal. The old normal says growth comes first and only once we’re growing we ask, “how can we be more inclusive?” The next normal will recognize that inclusion never takes route as an optional after the fact add-on. The next normal will demonstrate that inclusivity and sustainability are the foundation upon which most widespread economic impact can occur.
Some activities that are dedicated to making this vision of a new future of capitalism a reality include:
- The Next Normal Podcast: Re-imagining Capitalism for Our Future – hosted by the GIIN’s Amit Bouri, this podcast elevates the visions and voices of those paving the way towards a transformed economic system. Tune-in to hear from some the world’s most respected leaders on this topic, including John Elkington, Rodney Foxworth, Mike Kubzanksy, Ai-jen Poo, Paul Hawken, and more! Learn more about the podcast >
- Next Normal Now: Re-imagining Capitalism for Our Future – the GIIN’s signature virtual event series focused on revealing ways in which leaders around the world are creating a positive impact on re-shaping economic systems in the here and now. These virtual convenings provided a greater understanding of impact investing and how this growing movement is leading the way to a more inclusive economy and a more sustainable world. The first convening focused on Inclusive Economic Growth, the second on Climate Action, and the third session focused on Regeneration. Recordings of these sessions are available here >
For more information about the Global Impact Investing Network’s New Capitalism work, please contact us at firstname.lastname@example.org.