Why Capitalism as we know it is unfit for the Future

By Gerd Leonhard and Matt Ward and Gerd Leonhard.

Covid-19 has accelerated the demise of traditional corporate capitalism

2019 was a year of great prosperity and innovation, with stock markets booming, democracy largely thriving (well, apart from what went down in Trump’s USA), and unemployment at near-record lows throughout much of the developed world. But then, Covid-19 struck and changed everything as half the world went into lock-down, economies and supply-chains ground to a halt, unemployment skyrocketed, and the world suffered its greatest health/humanitarian crisis since World War II. All of a sudden, the future look bleak.

Covid has amplified both the divisive as well as the unifying forces in our society

None of the consequences of Covid-19 are entirely new. All of the trends such as remote work / WFH, the move to digital/virtual everything (watch: ‘The end of Analog’), and the increasing gap between productivity increases due to technological innovation, on the one hand, and workers’ stagnant compensation and declining economic perspectives, on the other hand, were already present prior to Covid. While the crisis has served as a major accelerant of many positive trends (such as faster digital transformation and increased climate change awareness), it has also forced us to pay more attention to those enormous challenges we’ve been facing for quite some time, already, such as underfunded healthcare systems, unequal access to education, and an over-reliance on just-in-time manufacturing. And as Gerd likes to say, Covid-19 a mere test run for the challenges we are facing from climate change (Moving Beyond Corona has been Gerd’s most requested speaking topic of 2020/21).

Fixing the broken incentives of corporate capitalism will require a complete system overhaul

Albert Einstein once said, “We can’t solve problems by using the same kind of thinking we used when we created them.” And when it comes to problems like climate change, income inequality, polarization, disinformation and algorithmic manipulation we couldn’t agree more.

Capitalism is both the biggest source of prosperity as well as the greatest threat

“Capitalism is the worst economic system, except for all the others…” ?

The world has changed since everything around us went digital (5G, IoT, AI…), and today we are truly at the pivot point of exponential change. While ‘trickle down economics’ may once have worked in some countries or regions (like Germany) to “redistribute” wealth across society, those days are gone. In this exponential era where a small team of some 13 people can create something like Instagram and be quickly sold to Facebook for a billion dollars, and where global tech-companies are formed from a few lines of code, the “economic pipes” have gone logarithmic, as well. No longer do the fruits of labor flow proportionally to the factory workers assembling Ford’s cars. Instead, software (written and controlled by few) is eating the world, and now, AI is eating software. Digital darwinism and the surveillance economy, everywhere.

A slave to the markets

Most public companies today cannot escape the ‘growth at all costs’ dogma of the stock markets driven by short-term thinking. This is how we got into the Facebook dilemma that has now proven to be so detrimental to our democracies, as Gerd laid out 3 years ago, here on this blog. Because of this narrow focus on GDP-growth and corporate profits, it is entirely possible — and in fact, considered ‘normal’ — to make oodles of money doing things that are detrimental to society. In fact, every time Facebook is ordered to pay a steep penalty for privacy and data violations, data-breaches or worse, their stock goes up.

An entirely different form of capitalism?

No, we are not proposing a kind of ‘digital socialism’ as the answer to humanity’s woes. And we’re not saying that simply more and ‘better technology’ will solve all of these problems, either. But Europe’s ‘social capitalism’ seems like a good starting point, though, despite all all its issues (be sure to watch Gerd’s keynote at the European Liberal Forum, on these topics, below or here).

Investor, Startup Advisor & CEO/Business Coach: mattward.io | Sci-Fi Author: mattwardwrites.com | Futurist Tech Podcaster: disruptors.fm | 3 Exits @mattwardio

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