Posted 5 years ago on Oct. 6, 2011, 7:28 p.m. EST by MQ124
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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