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Forum Post: Human Economics - the new global revolution?

Posted 11 years ago on Oct. 6, 2011, 7:28 p.m. EST by MQ124 (2)
This content is user submitted and not an official statement

It is with good reason that journalist, Thomas Friedman, argued in the midst of the crisis that it was “Time to Reboot America.” The laws that define relationships among individuals in society have changed dramatically, hence economy—which reflects those interconnections—must follow suit.

As we develop, we constantly devise new ways to “beat the system.” Instead of wasting taxpayers’ money trying to reverse an irreversible situation, we must change our approach toward economy and business from the root level.

The solution is to start from the place where the crisis began—the lost trust in human relationships. What has become clear is that we no longer trust one another: people don’t trust banks, banks don’t trust the rating firms, who don’t trust company share holders, who have no trust in financial advisors, who have no trust in traders, who have zero trust in governments, who simply trust no one. Period.

But despite the mistrust, we find that we are still dependent upon each other. And the more aware of it we become, the less we will want to harm one another. Many people already realize it; now we must turn this realization into action.

1) Restore Trust When a strong enough public opinion promotes values of collaboration, it will affect even those who initially want to continue living by the old self-centered rules. An illustration of this principle is that a week after it became known that AIG, which received hundreds of billions in bailout money, gave out fat bonuses to its executives, the majority of them gave it back. They couldn’t face the mounting public criticism. Education and awareness of the detrimental nature of our egotistical approach will naturally make them to want to restrict their self-centered attitudes.

2) Rethinking Consumption Consumerism causes us to want products we have no real need for, simply to improve social status. Conveying information about the rules of the new world will help us understand which values should prevail in our society, so that we can create a more balanced way of life. As a result, products that will remain on the shelves will be the ones that are truly necessary, and the advertising of products only to cause us to make yet another redundant purchase will be condemned.

3) Social-Capitalism In the January–February 2011 edition of Harvard Business Review, Profs. Michael Porter and Mark Kramer published a revolutionary concept. Traditional capitalism belongs to history, they wrote. Now is the moment for “a new conception of capitalism,” such that will move “social responsibility from the periphery to the core of the companies’ mind-set.”

Companies should still endeavor to produce profit and create economic value, yet not for the shareholders and their owners, but rather for the good of society “by addressing its needs and challenges. Businesses must reconnect company success with social progress,” otherwise, conclude Porter and Kramer, businesses will never escape the vicious cycle in which they are trapped today and their situation will only worsen over time.

Today, when a company releases a new product to the market, it wishes to “broaden its market share,” or in simpler words “to steal” clients from other companies in the marketplace. But this is exactly the approach that led to the financial crisis to begin with! Rather than trying to gain profit at the expense of others, companies should compete to create the greatest benefit to the whole of society.

When signing a contract, a company owner should ponder: “Does everyone gain from the deal I am closing now?” If the contract truly benefits everyone, then everyone, including the owner of the company, will gain from it. After all, in today’s world, we are all interconnected, and each individual action makes an impact on us all.

4) The New Kind of Companies and Businesses It’s time to re-define business and financial success. A successful firm should be one that sells products to customers, pays decent wages to its employees (including pension, insurance, and vacations), and is founded on a balanced operation. A balanced operation means that the profits of a business cover all of its investments and expenses, but it does not profit beyond that.

The stimulus will stem from the new social standard—people and companies are appreciated according to their contribution to society. In this case, our natural urge to compete—with the benefit of society as our goal—will cause everyone to create a more just and equal society.

“We do need a more humane brand of capitalism, based not only on better regulation but on better value. We do not need a society based on Darwinian competition between individuals. Beyond subsistence, the best experience any society can provide is the feeling that other people are on your side. That is the kind of capitalism we want.” - Sir Richard Layard



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[-] 1 points by mitaows (7) 11 years ago

Social responsibility just do not belong to Corporations and businesses, it is every citizen's right to exercise it! Envision economy of peace, security and sharing http://conscious-capitalism.blogspot.com

[-] 1 points by melbel61 (113) 11 years ago

Capitalism is what has created our standard of living...including medical advances that were unheard of 20-30 years ago. It sounds very nice and charming, this 'new' brand of capitalism, but it goes against human nature, which is competitive by nature. Each of us can determine for our own if we choose to 'keep up with the Jones" or not. My husband and I actually haven't, but we live in a nice house, drive decent, but not over the top vehicles, try to help our neighbors, families and friends as much as we can. have you not seen the generosity of your fellow citizens when any type of tragedy hits this nation? And who in your mind should determine what 'the greatest benefit to the whole of society" is? The government?

[-] 1 points by MQ124 (2) 11 years ago

That is a very good point! Certainly against human nature, this is the one single area we had failed to tackle. The stimulus will stem from the new social standard—people and companies are appreciated according to their contribution to society. In this case, our natural urge to compete—with the benefit of society as our goal—will cause us to create a more just and equal society.

Let us clarify. Try to answer the following question: What do company owners gain by having additional zeros in their bank accounts? Do they actually use all the millions they have? Do they truly enjoy those added “zeros”? The satisfaction they draw from the zeros is purely conditional, dependent upon the sense of power and mainly respect that comes with wealth.

But what if company owners were to sense the same satisfaction they derive from excessive wealth, out of actions to benefit society? If society respected people who contribute to society and condemned people who exploited it, powerful people would naturally use their power to contribute to society, because we all social beings and all of us, including company owners, are influenced by society. While this may sound utopian, it can materialize if our environment begins to appreciate pro-social values.

The bottom line is that capitalism should remain capitalism, but instead of trampling each other, we should compete in contributing the most to society and creating the best the most qualitative products for the best price, so that as many people as possible can enjoy them.

That is very true. Single circles, politician and governments won’t be the one deciding on what would be the greatest benefit to the whole. It require inclusion and transparency that would be the foundation of a society in which behaves and benefits mutually.

[-] 1 points by melbel61 (113) 11 years ago

But don't people (society) actually do what you are saying now? I mean, we, the people, make choices everyday as to which products or companies to support. A PC or a MAC, smartphone or droid, etc., we also choose where to shop, whether to buy local or from big box stores, etc. I agree that people should choose more wisely and look into where the products that they purchase are made. I try as much as I can to buy American, however, unfortunately, so little is made in this country. That is certainly something that we need to address. I can drive up and down the Turnpike and see burnt out factories that once housed manufacturing plants that are now gone. The only way to bring it back, however, is to get government out of the business of picking the winners and losers based upon taxation, regulation, etc. Many of the factories that are now closed would never be able to open and run efficiently with the massive regulation placed upon them by both the federal and state governments. All of us want clean air and drinking water, but when the EPA can stop the production of goods and services in the USA because a bird, or toad, or some other type of 'endangered species' may habitat in that area, the company will get up and go overseas, taking jobs with them. Its a balancing act, for sure, but one that must be discussed without both sides retreating to their usual arguments.

[-] 1 points by cmt (1195) from Tolland, CT 11 years ago

Corporations are sociopathic by law, but this can be changed.

What I mean is that the current laws say that their only responsibility is to make money. New models of incorporation law include "Benefit Corporations" and "Flexible Purpose Corporations. Those laws include responsibilities to additional stakeholders, such as employees, the community.

Also, we need to find ways to push corporations to use those laws, not the worst as they do now (Delaware, anyone?).