We do not have to be constrained by our current dysfunctional system of capitalism,argues Michael Townsend. People are already finding and implementing more attractive alternatives. A quiet revolution is under way …

Capitalism is at the crossroads. Since the onset of the worst financial crisis in living memory, capitalism is suffering a crisis of liquidity, reliability, and confidence. It is facing accusations of failing to create shared wealth, of neglecting the planet, of generating an ever-widening gap in our societies, and even in failing its primary allies – the shareholders.

Our system of commerce is naturally undergoing a wise degree of introspection: Can it survive, will it evolve, or will a new system emerge from a scorched landscape of creative destruction? These questions have been our constant companions, since the teams at Earthshine and TSSS set out on our journey in search of Capitalism 2.0, almost two years ago.

Thankfully, we are not alone. More and more people are asking questions, and exploring new possibilities. We have found at least at least ten different new recipes for better forms of capitalism, including: Breakthrough, Clean, Community, Conscious, Constructive, Cooperative, Mindful, Progressive, Responsible, and Sustainable. We have also discovered more radical visions for a New Economy, a Sharing Economy, and a Collaborative Economy. Inspiring stuff!

But, while each new prescription offers value, too many are configured on the same old paradigm, with the core tenets of capitalism – including growth and consumption, and dysfunctional money and financial systems – largely untouched. With only incremental changes, it is highly likely that we will continue to see the same old problems associated with the concentration of wealth and power.

We need to create a new system that will support the transformation to a sustainable and low carbon economy, providing opportunity and wealth for the many, not just the few.

But let’s not completely throw the baby out with the bath water; while incremental reforms are unlikely to lead us to where we really need to go, there are still some positive aspects that we might draw upon, from all these new models. As with any good design, we can and should be influenced by the full range of possibilities, pulling together the different components into a consistent and comprehensive new design.

And so we have developed an initial synthesis – drawing on the range of elements identified by the multitude of visionary thinkers explored – leading to nine design principles for a more sustainable and fair economic ecosystem:

1. Less growth, more wellbeing.

2. A broader view of what capital means.

3. Based on responsible enterprise, adding real value, where it is needed.

4. Holistic systems thinking; aligned with the circular economy.

5. Enabled by a well-functioning money system.

6. Away from speculative bubbles, towards creating longer-term real wealth.

7. Shared ownership and distribution of resources and wealth.

8. Based on collaboration and striving together.

9. Founded on new institutions and greater systemic resilience.

These principles for a better future are seductive, but we need to move beyond high-level statements, and get to the nuts-and-bolts of what a more sustainable system will look like and, quite importantly, how it will operate for our collective benefit.

In a practical sense, there is much cause for hope. Despite the very real challenges involved, we have found a huge amount of good work already going on – albeit largely under the radar. There is also a surprising amount of cohesion and consistency in both design and direction. We get a sense that a genuine transition is not only possible, but it’s already happening – a quiet revolution, with a gradual migration towards a better system.

There are, of course, many challenges in making the transition to a new form of economy. Within the space of this article, we can only hope to touch on a few of the key shifts required, and to highlight just a few of the people and organisations already working towards a new economy.

Weaning ourselves off the twin drugs of growth and consumption

This is not going to be easy, especially as our present day reality is that most business models are founded on continuous growth - more and more consumption - and the linear take-make-waste economy.

After all, this is generally how profits and apparent business success have been generated, thus far. It will take a brave and foresighted leader to kill the ‘golden goose’ and make the shift towards a new business model.

But this choice may become somewhat less daunting, as businesses face a new reality. There is a perfect storm brewing at the intersection of growing resource scarcity and a looming energy crisis, set against the backdrop of continued economic / debt re-structuring, and the growing impacts of climate change.

For how long will we be able to keep on delivering good levels of return, or still be around, even? The reality is, every business has a shelf life - but some could be shorter than we might hope for.

We need to think about our businesses in new terms. This is where circular economy principles can help, with business activity focused on re-use, repurposing, and recycling. This means economic activity and transactions come from within the existing pool of global resources. Profitable enterprise can continue, but only by adapting the business model, where profits are more appropriately generated from utilising the resources in use, rather than by extracting and wasting virgin resources.

There are some high-profile trailblazers out there. The Ellen MacArthur Foundation is doing great work to promote the widespread adoption of circular economy models. We also see businesses like Unilever striving to deliver its range of products using fewer resources and seeking to change customer behaviours and consumption patterns.

And B&Q is working on experimental business models, shifting from selling to leasing, with products configured on cradle-to-cradle designs. It will be interesting to see how these, and other forward-thinking organisations deliver on this challenge - we hope they succeed and inspire others to accelerate their own journeys.

While the circular economy offers much potential, many businesses are still broadly operating within a growth paradigm and, therefore, still striving towards year-on-year growth in sales. Thankfully, there are a few even more advanced souls we can learn from.

Patagonia, the Californian outdoor clothing company, is perhaps one of the best known examples of a company that is really engaging with a mindful approach to consumption - by taking the seemingly counterintuitive approach to encouraging its customers to buy less!

And by really pushing the re-use, repair and recycling business model - in pursuit of the company’s mission of building the best product, causing no unnecessary harm, and using business to inspire and implement solutions to the environmental crisis.

Moving away from short-term markets

Changing our business models in this way will require a genuine transformation - and this naturally requires careful management.

In an ideal world, this transition would be smooth and seamless, but it is highly likely that some form of transition in business results will be experienced. The road to change is often bumpy and difficult.

The real magic comes in holding two situations at once; discontinuing the risky stuff, while ramping up on the sustainable goods and services. Dong Energy, one of Europe’s leading energy groups, is managing its transition away from fossil fuels, towards 85% renewables by 2040. And if a fossil fuel company can do it, anyone can.

But for many, moving away from short-term markets - to generate longer-term value, for a sustainable future - we might also need to look beyond the constraints of our current organisational models. We can’t always do what is needed within the confines of a conventional PLC format.

We are also pleased to see an increase in alternative business formats, particularly in the United States, with the emergence of the Flexible Purposes Corporation and also the ‘B’ Corporation. Both of these models allow for greater flexibility, enabling businesses to incorporate a range of goals in addition to the profit motive.

And they are growing rapidly in popularity. By early March 2013, 700 businesses have become Certified B Corps, across 60 industries in 24 countries. Perhaps one of the higher-profile B Corps, at least in terms of sustainability, is Patagonia. This growing roster of progressive companies also includes Ben and Jerry’s and a whole host of businesses working towards the new economy.

We might also need to consider realigning our ownership structures. Ownership is everything: it provides the power and authority to make decisions in the long-term interest of all stakeholders (including the planet); it affects our ability to deliver sustainable business strategies; it also provides the power to distribute wealth.

It can difficult for conventional shareholder-driven businesses to imagine moving away from the short-term clutches of the stock market. Buying back shares - either directly or through an employee ownership scheme - and re-capitalising the business is generally seen as an expensive and impractical option.

But then again, which route is likely to be more costly in the long run - the cost of buying back shares, or the challenge of dealing with a rapidly falling market capitalisation of a business failing due to an inherently unsustainable model?

Perhaps Dell provides an unlikely source of inspiration here? The computer technology company has recently taken the company back into private ownership, to provide the scope to make ‘painful changes’ that could impact on short-term profits, while they turn the company around. Dell shareholders have recently approved a $24.9bn (£15.6bn) buyout offer by Michael Dell and Silver Lake Partners. This will end Dell’s 25-year tenure as a public company.

We might go even further and explore collective ownership models, which have experienced a great resurgence in interest since the financial crisis. Cooperatives around the world are proving to be more resilient and more competitive than conventional businesses.

Shared ownership really does mean shared wealth. A real world success story can be seen with the continued success at the John Lewis Group in UK - its 84,700 staff are sharing in the profits of the business with each member recently receiving an annual bonus worth 17% of their salary, the equivalent of nine weeks’ pay.

Shared ownership models have the added benefit of keeping money circulating in the local economy. According to a new report by economic analysts K2A, co-operative businesses boost local economies, generating a quantifiable benefit of an additional £40 for local suppliers, customers and employees for every £100 in sales. This is termed “sticky money” as it stays close to home, supporting the local economy.

We are also pleased to learn of an emerging approach, advocated by a number of Trade Unions in the US, whereby they are investing in businesses to enable them to become co-operatives - this sounds quite an exciting and potentially liberating strategy, for businesses in all territories of the world. The key point is that there are alternatives, if we are open to explore them - we don’t have to feel trapped by short-term structures.

Change of ownership is also occurring at institutional level, increasingly driven by stakeholder pressure - thanks to campaigns like Bill McKibben’s 350.org. This has been driving pension funds and other institutional investors to divest their holdings in some of the world’s biggest oil and gas companies, due to the threats posed by climate change. A bold move, and one that could become the norm; just watch the stock prices drop, in the drift away from stranded assets.

A new monetary system?

But the most fundamental change of all concerns our system of money. Can this really change, given the many embedded vested interests? We believe it can.

There are already a number of active campaigns, calling for changes to our monetary system. In the United States, the New Economy Working Group has established a very comprehensive agenda - for citizens and institutions alike - in reforming the money system, by emphasising the role of Main Street as the engine for generating real wealth.

At a global level, there is growing influence from the Global Alliance for Banking on Values, which is working to make sure we have access to more sustainable banking alternatives, wherever we are in the world.

Positive Money is a not-for-profit research and campaign group. It started with a focus on changing the UK money system in order to create a fairer and more stable economy. To this end, Positive Money researches and communicates how the current money system works and develops proposals and campaigns for change. It raises awareness of the connections between our current monetary and banking system and some of the biggest social, economic and environmental challenges that we face today.

This movement has recently expanded its reach - as the International Movement for Monetary Reform - to encompass similar groups in other countries, including Austria, Croatia, Finland, France, Germany, Iceland, Ireland, Israel, Netherlands, New Zealand, Slovakia, Spain, Sweden, Switzerland and the USA.

But we can also take action ourselves. The Move Your Money campaign urges us to do just that - move our money - so we can help build a better banking system through our collective buying power.

Beyond the illusion

We need not be under any illusion - we do not have to be constrained by our current dysfunctional system of capitalism. If it doesn’t work for the majority, people will find more attractive alternatives, effectively bypassing mainstream capitalism.

We have been very encouraged by the innovations and shifts we see around the world. And as Bob Massie, President of the New Economics Institute suggests, perhaps the new economy and a more sustainable form of economy, isn’t that far away?

But don’t take our word for it. We do not pretend to have all the answers, but we do hope to provide a vehicle for people to explore the art-of-the-possible, and to encourage participation in the co-creation of a new, more sustainable system of economy and commerce - a system fit for all in the 21st century. And so we invite you to join us at the Sustainable Economy Project and ‘be the change’.

Michael Townsend is Founder & CEO Earthshine Solutions, and author of A Journey in Search of Capitalism 2.0.

Image courtesy of Shutterstock.com.

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