The Problem with Capitalism (100% Pure Version)

Salt ponds in San Francisco Bay help satisfy Americans’ appetite for salt. Picture: Jim Wilson, New York Times

I am a big fan of a capitalist economy. Frankly, a socialist economic model leaves me feeling a bit, err, underwhelmed. But, like many modern day (see post neanderthal) societal inventions like the bible, constitutions, and laws, flexibility is not an intrinsic part of their design. Some will argue this is the point, especially with the bible, but that’s an argument for another blog – not this one. I am concerned with the adherence to pure capitalism that is preventing corporations from acting logically in the interest of their clients and society in general.

The most notable case of the corporation turned public destruction organisation has been hilariously represented by the tobacco industry. It turns out, you don’t have to have a cancer causing product to act destructively. All you need is a penchant for pushing overconsumption; enter the fast food industry, auto industry, and the oil & gas guys (and they are mostly guys). But, the group is now joined by a surprise entrant: the salt industry. It’s a surprise to me, because salt is generally a good thing. Unfortunately, according to this story, they seem hell bent on helping to kill their clients by the tens of thousands. Why? According to them – it’s good business. Oh, and it’s our fault because after years of cultural marketing we simply can’t do without the heavy doses of salt.

I am continually perplexed by this kind of defensive, destructive behaviour. It flies in the face of one of the tenets of their own capitalist mantra: long-term shareholder value. When faced with the knowledge that your product is making people sick or killing them, surely you would find a way to avoid doing this so you could keep them as customers (forget the morality). Instead, company after company tries to deny the facts, then obfuscate the truth, then block legislation, and finally figures out a way to operate without actually changing their product all that much (even with people dying, other people lose interest in the long run).

I have first hand experience working inside one of these behemoths that adhered to this approach. Luckily, when I was working at AT&T, our product was not killing people or making them ill (angry, maybe). But, AT&T had a similar problem as the salt industry. AT&T was on a nearly catastrophic course towards reduced profits due to severe price compression on their business: making phone calls. Instead of spending the bucket loads of cash (it was actually described as railroad car loads of cash by senior management) on innovation and figuring out how they may remain relevant for the long-term, they spent most of their energy attempting to block clients from achieving savings, lobbying for more restrictions on competition, and instructing a sales force to spread fear uncertainty and doubt about the competition (some of which was warranted). This ended with AT&T being bought by SBC. What would have happened if they had marshalled their resources for productive change, instead of hanging onto the past?

An obvious alternative approach is powerful, long-term, and helpful. Psssst, it also looks a lot like social business. Especially if you define social business as business set up to ultimately help society at large.

Let’s use the salt guys as our case study, but this could apply to any of the industries in various ways. Salt, referred to as “the foundation of civilisation“, is essentially a good thing. Unfortunately, the salt industry has ensured we have too much of it; so the good thing is now killing us. What to do? Listen to Seth Godin for a starter. Seth often talks about making a profit from the goodness of your product and to avoid selling crap just because you can. Seriously, what would happen if the salt industry owned up to the health problems associated with too much consumption of salt, created awareness of the benefits of salt, and helped their clients change their business models to maintain the use of salt (boutique, different uses, etc.)?

Enter social business. It operates the same, but differently. A social business has a profit motive, but it also aims to serve / benefit society. Instead of remaining marginalised at the edges of public services, social business needs to step into the void being created by the salt industry, the fast food industry, the oil and gas industry. Imagine an economy dominated by social businesses; it will not be free from problems, but I would imagine the problems will be a bit less dangerous.

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