May 21, 2012

Capitalism 2.0: The Informed Consumer

Our founding fathers created a democratic governing system with a clear emphasis on separation of church and state which has always been one of the great pillars of this country. They recognized the dangers of theocracy and power in the hands of the few and the unelected. It can be argued that most institutions, when tangled with power and money, become vulnerable to corruption and human greed if the right checks and balances aren't in place and enforced.

Corporations which are founded on profit creation and marketshare maximization are no different. They are too vulnerable to corruption and fraud. However, local and federal governments have tried to prevent fraud and corruption through regulations, oversight and law enforcement. In the United States, this complicated marriage between corporations and government has evolved over the years and considering the latest financial crisis that began in 2008, two major problems can easily be observed that if not mitigated will only lead to more economic crisis and loss of faith in institutions:
  1. Regardless of the number of regulations, level of oversight and enforcement by government officials, legally speaking there is always a loophole and a way around laws in the ever more creative corporate legal space. There is also outsourcing where a corporation can move certain parts of their operations and activities to other countries where laws, oversight and regulations are more favorable. 
  2. The very government officials who write legislation, regulations and oversee corporations are being heavily influenced through corporate lobbying and campaign financing. The very laws that are supposed to keep corporations in check are being written by elected officials who are receiving millions from these same corporations. 
That being said, corporations are not to be blamed. They are all systems, products of today's economic environment and market forces that encourage them to contentiously find new venues to increase their profits. If there is a market for a product or service, corporations will make it available regardless of moral, ethical, societal or environmental impact. Porn is a good example, which is one of the most successful online industries today. In short, corporations are just players and capitalism the game. Here is Thomas Jefferson on capitalism:
Wealth acquired under capitalism is in and of itself no enemy of democracy, but wealth armed with political power – power to shake off opportunities for others to rise – is a proven danger. We shall crush in its birth the aristocracy of our moneyed corporations which dare already to challenge our government to a trial of strength and [to] bid defiance to the laws of our country.
James Madison also feared that the “spirit of speculation” would lead to “a government operating by corrupt influence, substituting the motive of private interest in place of public duty.”

Even the very cells that make up the human body and enable life require the right checks and balances or they can become cancerous, meaning they grow and spread out of control, eventually causing the demise of the very system that enables their existence.  As such corporations too can harm the very society, planet and communities they belong to if they grow only for the sake of profits without considering their impact.

As such there is need for a new evolution of capitalism, a new business ecosystem where profits, innovation and societal impact all have equal importance for corporations. The answer is not more regulation, more government, socialism or communism. Instead w need a Capitalism 2.0 which includes the consumer in the equation and conversation. That is, a bottom up approach to corporate responsibility which starts with the informed consumer. An informed consumer is an empowered consumer and an informed population can be much more powerful and effective force as well as a checks and balance system to corporations than any government or regulating body. Just like we can influence government through our vote, we can influence corporations through our purchasing habits. So far most products and services have been judged by consumers based on quality, cost and experience. It's time we give consumers more information to include as criterion in their purchasing decisions.  This can include a company's social responsibility practices, charity donation, lobbying efforts and campaign donations.

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