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In 2020, the world is grappling with COVID-19 along with several other major crises. The International Monetary Fund predicts that the world could experience the worst recession since the 1930s this year, with the global economy contracting by 3% as advanced economies shrink by 6.1%. The World Trade Organization expects global trade to fall by as much as 32% in 2020. The Organisation for Economic Co-operation and Development reports that inequality in the world’s most developed economies is at its highest level in 50 years. The World Meteorological Organization recently warned that over the next five years, annual global temperatures could potentially rise more than 1.5 degrees Celsius above preindustrial levels, leading to catastrophic climate change.
There is much talk now about “rebooting” the economy, akin to rebooting a computer. But the operating system that runs most economies in the world, namely capitalism, has become obsolete, for four main reasons. First, capitalism extols the virtues of private ownership, individualism, and competition, which drives companies to accumulate and hoard assets and compete with one another in a zero-sum game. Second, it seeks economies of scale through mass production and global supply chains, which are heavily polluting and resource-hungry, and lack the flexibility to deal with cataclysmic disruptions like COVID-19. Third, it incentivizes companies to maximize short-term profits solely for shareholders rather than create long-term value for all stakeholders. Fourth, capitalism neglects to hold businesses accountable for the negative consequences of their activities, such as social inequality and ecological degradation.
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Given these deep systemic flaws, it makes no sense to reboot a dysfunctional capitalist economy. Instead, we need to upgrade and reinvent it to make it more efficient and agile, socially inclusive, and ecologically beneficial. Even before COVID-19, the discussion around “stakeholder capitalism” and “eco-capitalism” had been underway for quite some time. But while these concepts address some of the flaws of capitalism mentioned above, they don’t tackle all of them. Although these concepts have enabled individual companies to boost the impact of their corporate social responsibility programs, they haven’t created breakthrough multicompany business models that fundamentally reshape the structures and dynamics of entire industries.
It’s time to think bigger and bolder.