Rajiv Joshi ON

Reimagining Capitalism

Rajiv Joshi

Rajiv Joshi

Managing director
The B Team

Soaring economic inequality has led economists and executives to reconsider capitalism in its current form. Rajiv Joshi, managing director of the B Team, a nonprofit group of business and government leaders, says his organization envisions a future in which companies do more than respect human rights and follow environmentally sustainable practices. They become agents of change.

Can capitalism today advance rights and social justice?

Capitalism as it is today was founded in many ways on a set of principles that Adam Smith wrote about in “The Wealth of Nations,” and the “invisible hand” was one of those pillars of the system we currently have. But before Smith wrote “The Wealth of Nations,” he wrote in “The Theory of Moral Sentiments,” “How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.”

He talked about compassion, connectedness and caring as the basis of human interaction, and yet the system that evolved subsequently bore very little resemblance to the idea that we are all responsible for the well-being of others, and if our system is not designed in the right way, if it diminishes the well-being of some, that is a cost that we all have to pay.

If you look at the model of capitalism we have today and you look forward, we face a world in which food prices are likely to rise up to 40 percent between now and 2020. The world’s population is set to reach about 9.5 billion by 2050. We’re set for an increase of not just 2 degrees in temperatures but, by some estimates, a rise in mean global temperatures of 4 to 6 degrees and beyond. Extremes in some countries will be so catastrophic that whole ecosystems won’t exist beyond the midway point of the century.

At the same time, inequality has reached frightening levels, where the top 300 people have more wealth than the bottom 3 billion people, and climate change has the potential to wipe away any gains that we have made over the whole of the past half century. If capitalism is to truly advance human well-being, we need to fundamentally transform the role business plays in society. Especially when the top 3,000 companies are responsible for 30 percent of the environmental impact, and inequality is based, in part, on an unfair distribution of benefits in business.

How did corporations reshape Smith’s original idea?

When you look at corporations at the very beginning of the 19th century, they were formed as vehicles to address challenges that communities faced, whether they were coordination challenges of trying to build railroads across vast distances to transport goods and services to people who needed them most or whether they were designed to help provide essential services to people at scale.

But somewhere along the line, corporations became predominantly focused on maximizing shareholder benefit and financial returns—often at the cost of any other forms of benefit and often without paying the true cost of their activities. Investors, with a desire for short-term financial gains, became the principal influence on corporate behavior.

Where should business go from here?

We believe there is a bright future for business—an inclusive model of capitalism that could really drive sustainable prosperity. It looks like a world in which business has the right aspirations, where we’re celebrating the right kind of leadership and where there’s true accounting—a world where companies don’t just look at the financial bottom line but actually look at the true impacts of their production in terms of the resources they’re using from nature and the impacts they’re having on society.

We believe there is a bright future for business—an inclusive model of capitalism that could really drive sustainable prosperity.

It looks like a world where business models not only do zero harm to the planet but also provide a net positive contribution—restoring ecosystems and sustaining nature. A world in which the structures of business have changed, and the corporation exists with the obligation to drive not just shareholder value but meaningful value for all stakeholders. Where capital has true returns and starts flowing disproportionately into companies that actually generate long-term value for people and the planet.

The future of capitalism needs to be about ensuring that there’s full transparency and that businesses are free from corruption, that businesses are held accountable for the kinds of goods and services that they produce and how they produce them, where people and the planet are represented at the highest levels within companies and throughout their supply chains wherever decisions are made that affect them.

It looks like ensuring that businesses are working toward the long run and that the metrics that we have today are redefined so that success is not just about the dollar figures that companies create in terms of our current indices of success, but where we celebrate companies that can demonstrate benefits to people and the planet.

And just like the days of the Industrial Revolution in developed countries, where pioneers like Robert Owen decided to build factories on higher principles than the commercial behaviors of the time, working with trade unions to ensure that workers could collectively bargain for improvements in their pay and conditions, and providing free education and health care for employees, we need to see a revolution in the way business is conducted in some of the world’s poorest places, to ensure all workers are treated with dignity—in environments that enable them to thrive.

How do you begin to change the course of capitalism?

Redefining capitalism isn’t just about redefining business. It is also about redefining the roles that governments play, the roles that civil societies play and other pieces of the puzzle, from regulations to social norms and the transforming of consumer practices. But if we were truly redefining a model of capitalism that was working in the interest of people and the planet, it would mean that civil society was empowered and strengthened to hold businesses and governments accountable—citizen action can be the detergent that helps wash away corruption. However, in many parts of the world, the space for civil society to engage is shrinking rapidly, threatening good governance and democracy. Changing capitalism would also mean that civil society organizations, businesses and governments would actually increasingly see their role as working together to kind of steer the world in the right direction and solve problems and not to see problem solving and challenges that we face collectively as being in the domain of only one of the sectors but as actually the responsibility that falls on all of us.

Collaboration is no longer just a luxury; it’s a necessity. And we can’t wait until the seas have gone black and the forests have burned before we start working together across these sectors.

What about the demand side—what’s the role of citizens in that collaboration?

Consumers would mobilize behind brands and choose products and services that actually are good for the planet and would shift incentive structures—so that what we produce in the first place isn’t actually destroying our ecosystems, our livelihoods or our social fabric.

To get to that vision really requires a number of different efforts across sectors. It requires multistakeholder engagement. It requires companies to pay a fair wage to their employees. It requires civil societies to provide representation for workers in cases where their rights are not being upheld but also to mobilize consumers to change the behavior of companies—so that they’re voting with their wallets and holding businesses accountable for producing the right things

However, some of the biggest changes needed are clearly in transforming current business practices. We can’t address climate change or tackle inequality without rewiring the primary engine of economic activity. But to do this, we also need to redefine our overall measures of success, from GDP to quarterly earnings to the brands we celebrate—everyone needs to act together if we are to bring about the change we urgently need for a planet in peril.

What are some new measures of business success?

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