Pandemic recovery will require rethinking capitalist norms, expert says
'We should broaden the scope of capitalism,' says business advisor Navi Radjou
Originally published on September 18, 2020.
Rather than planning COVID-19 economic recoveries around old capitalist norms, one business advisor believes that global enterprises need to re-invent their approach to capitalism by taking steps to combat growing inequality.
"Recent research actually shows that whatever wealth was created in the last 12 months went to the top one per cent of Americans, for example," said Navi Radjou, an innovation and leadership advisor based in New York City, during an interview with Spark host Nora Young. "This is why I think we have to ask ourselves … what is normal? If the normal is actually dysfunctional, why are we trying to resuscitate a sick patient?"
As Radjou sees it, capitalism has created widespread social inequality and contributed to considerable environmental degradation through the effects of human-induced climate change, as well as through the economic and social system's emphasis on short-term gains and individualistic competition.
"It's about winning all the time," he said. "And the notion of cooperation, you rarely hear in corporate America. It's always about competing and winning."
Radjou acknowledged that capitalism has enabled increases in overall comfort of living and has also contributed to increases in material prosperity across the world, but he said capitalist reforms need to centre around the creation of a "sense of purpose."
"Right now, the purpose is just about making money," he said. "Instead of that, we should broaden the scope of capitalism and say … we could simultaneously create economic value and we can create social value and we can create ecological value as well."
According to Radjou, companies like the European multinational food conglomerate Danone — as well as smaller companies, like U.S-based commercial flooring giant Interface — are among those that have already taken steps to maintain their existing capitalist leanings, while simultaneously attempting to improve their social impact.
"People call it conscious capitalism or regenerative capitalism," he said.
Danone, Radjou pointed out, invests in regenerative agriculture, which enables the company's U.S. farmers to "enrich their soil, preserve biodiversity, as well as improve animal welfare," all while signing fixed, long-term contracts that maintain a steady income for the company's producers.
"This is an approach that Danone has been using for the last couple of years," he said.
Interface, according to Radjou, has spent the last two decades taking steps to reduce the company's overall carbon footprint and is even working on launching new carbon negative carpet tiles.
Possible to increase profit while increasing positive social impacts
While some might argue that companies need to maintain existing capitalist structures to ensure continued material prosperity, Radjou argued that it's actually in a company's best economic interest to adhere to frugal economic principles.
"The frugal economy essentially is an economy that reduces the huge gap that exists right now between supply and demand along four dimensions: Time, distance, trust and values," he said.
In effect, by reducing the gap between supply and demand, not only are companies able to save on costs, they're also able to better service consumers — especially the section of consumers that Radjou calls "value and values conscious."
"Especially millennials [and] Gen Z, who are now almost 40 to 50 per cent of the global consumer-base, they're essentially voting with their [wallets]," he said. "They are actually asking for brands that are actually socially and environmentally conscious. So they are willing to even pay extra for those brands that have strong social and environmental credentials."
Though it might seem utopian, Radjou said he's hopeful because of changes he's seeing in global consumers, as well as the investor community, who are slowly demanding more responsible business practices.
"Even in some cases some shareholder communities … are putting pressure on companies to do the right thing for society and the planet."
At the same time, Radjou said even some government institutions — like those in Europe — are "heaping" pressure on companies to take steps to be more socially conscious.
"All studies show that if companies invest in societal and ecological [initiatives], it has a direct impact on [a company's] bottom line and the top line," he said.