One thing about capitalism that’s pretty certain is that it’s changing. Capitalism a hundred years ago looked very different from capitalism today, and capitalism looks different in different countries. The field of comparative economic systems was born out of the socialism vs. capitalism debate, and, for that reason, those of us interested in that field should be thankful for that debate. At the same time, the socialism vs. capitalism debate has done and is doing much harm to intelligent discussion of economic systems. Those of us reading Capitalism, Socialism and Democracy this term know that Schumpeter thought socialism could follow capitalism naturally, in Marxian fashion, but it really wouldn’t look very different from the super-big-business capitalism that would exist at that time.
Today’s OnPoint on NPR featured two distinguished guests who were discussing the future of capitalism. Business guru and Harvard professor Michael Porter (remember the 5-forces analysis?) talked about his recent article in the Harvard Business Review on the new capitalism, based on Shared Value, in which firms recognize that the way to be truly profitable is to align their goals with societies and to do good while doing well. But not in that outdated Corporate Social Responsibility (CSR) way, relegating to a CSR department the task of undoing the harm done by the core business, but by integrating the doing good part into the core business mission. Porter argued that the best companies are doing this already, and that capitalism will be made better not through more regulation and more government, but, au contraire, by businesses moving to the “shared value” model.
Robert Reich, author of Supercapitalism, was the other guest, and he was not buying any of that feel-good talk. He couldn’t help but remember the many examples he personally saw of companies investing a lot into what was clearly bad for society but good for profit. His book on the future of capitalism, Supercapitalism, agrees with Porter in finding the CSR model wanting, but thinks that the future lies in separating capitalism from democracy as much as possible. These were questions Schumpeter struggled with in his book. It is easy (apparently, for some) to dismiss those musings from 1942 as idle speculation, but these contemporary contributions and debates remind us that we still know little about how economic and political systems work, that knowing more would still be extremely important, and that capitalism is changing in perhaps fundamental ways even as we continue to talk about a model of a market economy that never really existed. Porter’s view seems to be going in the direction of moving government and business closer to each other. Reich thinks the way to progress is through separating those two as much as possible.