Let's Think

Adapt-or-die-time for capitalism, democracy?

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The fix in which big business entities like KPMG and global corporations like Bell-Pottinger, McKinsey and SAP finds themselves in South Africa is but symptoms of capitalism globally.

In an opinion piece on his blog Disconnected Democracy, Graham Sell last week wrote: “Do we really believe we have an otherwise ethical and socially responsible business community when, for the last 30 years, leading business schools have been teaching CA's and MBA's that their only responsibility is to generate profits for shareholders?”

In his introduction of the Sell piece to its readers, Gareth van Zyl of BizNews wrote: “… capitalism has probably been the world’s most effective system in terms of creating wealth, but by prioritising profit over all else, what kind of society are we creating?”

How capitalism has developed over the last number of decades, into a force threatening democracy on a global scale, came sharply under the spotlight in 2014 with the publication of Professor Thomas Piketty of the Paris School of Economics’ book, Capital in the Twenty-First Century.

It was his contention that capitalism’s inherent dynamic propels powerful forces that threaten democratic societies as the tendency of returns on capital exceeding the rate of economic growth, threatens to generate extreme inequalities that stir discontent and undermine democratic values.

Later that same year, the editor of the authoritative German magazine Der Spiegel Michael Sauga, under the telling headline The Zombie System: How Capitalism Has Gone Off the Rails, wrote that capitalism increasingly looks terminally ill. He also warned that it is becoming abundantly clear that it is not just capitalism, as an economic system, that is under threat of collapse. There are also increasing fears that it might be dragging down democracy with it as the preferred political system.

Even crown prince Charles, of the United Kingdom (UK), at the time added his voice to calls for “fundamental transformation to global capitalism.”

He called for a more "inclusive capitalism" to, amongst others, “create an inclusive, sustainable and resilient society” and avoids the risk of “bringing us to our own destruction.”

Another expert, an adviser to the UK-government and fellow of the New Economics Foundation think-tank, David Boyle, warned that without“a radical solution” for problems in the UK’s mortgage market, the middle classes in that country will disappear within 30 years leaving only a “wealthy elite and sprawling proletariat”.

In April this year, two researchers at the Griffith University, in an article on The Conversation website revealed how globally wealth has over the past three decades  became concentrated in the pockets of large corporations, which only follow the logic of finance capital – the logic of money. 

Half the shares of the world’s corporate giants can be traced to 30, mainly corporate, owners.

What are the implications?

This brings us back to Graham Sell’s argument that, back in 1970, American economist Milton Friedman, sowed the first seeds of the Shareholder Supremacy doctrine, claiming that the only responsibility corporate executives have, is to generate profits for shareholders, and any other definition of social responsibility is a "fundamentally subversive doctrine."

This unleashed the perfect storm of corporate greed, in which ethics and integrity take a back seat to increasing shareholder wealth.

The result was: “Living and breathing people have become impersonal ‘human resources,’ because the shareholder is all that matters. Corporations frequently use ‘human resource’ layoffs to balance the books, cynically depriving these people of an income to maintain or generate additional shareholder wealth.

“As Simon Sinek so aptly put it in his talk Nobody Wins, ‘We don’t care how hard you work, or how long you’ve been here, you are on the wrong side of the spread sheet.’  He also likens Shareholder Supremacy to a sports coach prioritising “the needs of the fans over the needs of the players.”

In the wake of these developments came not only the, now in South Africa well known, phenomenon of so-called state capture and rampant corruption, but also signs of democracy on the back foot as ordinary people are losing faith in “the system” – and taking to the streets in protest.

What is the solution?

The question can be posed: Will it take another French Revolution, this time on a global scale, from the ashes of witch a new dispensation will develop to bring back hope for a better life to the masses?

We believe not.

South Africa is already proving there is another way – punishing the “big players” where it hurts them the most, their bank accounts. Bell Pottinger has already fallen while the list of institutions cutting their ties with KPMG is growing, almost by the day. Signs are also there that McKinsey’s and SAP’s days of reckoning are approaching fast.

South African civil society is showing the world the way, with organised and well-focused civil action.

However, that is not enough if democracy and capitalism is to save itself. The instruments democracy has developed for itself over the years, like prosecuting authorities, should come into play – and fully so. 

As we wrote in a previous article: “… companies – especially those with profit as its main mission – do not run on autopilot. Individuals are responsible for its management and final decisions, and should take responsibility for it.”

Accountability to the people is the absolute core principle of democracy, and we renew our call that those who are perpetrating offences against the people should be prosecuted – irrespective of the positions they hold, be it a high political office, chief executive, or account manager at a corporation.

by Piet Coetzer

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