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Capitalism Must Develop More of a Conscience

By Klaus Schwab, President World Economic Forum


In today’s trust-starved climate, our market-driven system is under attack. Businesses need to adopt more of a social philosophy


Today, large parts of the population feel that business has become detached from society – that business interests are no longer aligned with societal interests.  And it is not enough to say that business has been discredited by the behavior of some greedy or even fraudulent CEO’s, and that tightening the rules will demonstrate to the public that the majority of business leaders are trustworthy.  What has come under attack now is the credibility not only of our business leaders but of business itself – or, in other words, of capitalism and our market-driven system.


THIS IS a paradox. The welfare of all people can be increased only if we use available capital and human resources in the most efficient way. Free markets, democracy, transparency, global interaction and entrepreneurship are the only way to boost economic progress and social development. Yet many people are longing now for different solutions. There has been a proliferation of simplistic, populist voices condemning the capitalist system as cold and inhumane. At a time of corporate scandals and economic stagnation, those voices find fertile ground not only among the traditionally left-out minorities, but increasingly among large parts of the middle class.


This middle-class moroseness can be explained by the sudden fear people feel for their future. The capital stock has shrunk, retirement benefits no longer seem secure, health costs are eating away at income and job security is fading even for the well trained. In some ways this movement against the system has already infected whole nations: in Latin America, several governments are at odds with the fundamental driving factors of our free-market system.


The only way to stop this new wave of anti-business sentiment is for business to take the lead and to reposition itself clearly and convincingly as part of society. Business needs to propagate—and live up to—a new philosophy I would call “society-oriented business.” This philosophy has four elements: corporate attractiveness, corporate integrity, corporate citizenship and social entrepreneurship.


Corporate attractiveness means that a corporation has to prove its social raison d’etre. This requires it not only to maximize shareholders’ value but to serve all stakeholders, meaning society as a whole. Responsible management should appreciate the likely long-term payoff of contributing to the construction of stronger societies and, hence, more vibrant economies. To build business attractiveness requires a change of the short-term mind-set of many investors—or, rather, speculators.


Corporate integrity means that business should be governed not only by rules but by values. Business leaders will be trusted only if their and their employees’ actions reflect a true culture of corporate integrity, which springs from individual moral integrity.  


Corporate citizenship means that business has to help find solutions for the big challenges of our time. Business has to work hand in hand with governments and civil society in employing its capabilities and its know-how in the fight against poverty, AIDS and all the other issues on the global agenda that undermine the dignity of life and threaten our very existence.  


And finally, business and government should support social entrepreneurs who help attack global problems, from poverty to water shortages, in their communities. There are thousands of social entrepreneurs at work around the world ( Some examples: Iftekar Enayetullah and Maqsood Sinha run a company called Waste Concern in Bangladesh. They collect waste house to house, then compost it in local plants, providing organic fertilizer for the nation’s depleted soils. Or take Bunker Roy (of Barefoot College, India), who identifies poor, semiliterate youths in rural India and trains them as architects, doctors, solar engineers and IT specialists.


The fundamental paradigms change with history and change history. The time has come to articulate and practice a more enlightened society-oriented business philosophy. If we have the strength to do so, we can all look forward to a better future.