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The New Co-op Capitalism
There are five key reasons why I believe this is so.
First, the public is angry and the media is on its side. While initially this anger was directed at bankers, it will soon shift to big business more generally, at companies that pay their executives millions of dollars while laying off workers. At companies that are still recording significant profits and are unwilling to share any of that bounty with those of their customers who are finding life tough. At investors who take over companies with little of their own monies by pledging the companies’ own pension funds, and then walk away with impunity when the company files for Chapter 11. We are already seeing a rise in public protest in the form of demonstrations and web-based campaigns and boycotts. Anticipate more of this in the coming months unless political and business leaders make explicit that they are on the public’s side.
Second, there is now a mandate for government to intervene that simply was absent over the past three decades. In a recent survey conducted in the US, more than half of those polled now say the free market should not be allowed to function independently. This is a seismic shift. Again, it is banks that are the first to see the impact of this, with interventions ranging from nationalization to the capping of executive salaries. Although I don’t predict or condone such wholesale micromanagement by government of the private sector as a whole, any company that could be perceived to be acting against the public good now risks standing in the line of fire.
Obvious industries to be targeted first are the fast-food industry and Big Pharma. With health costs soaring, and governments needing to rein in expenditure, predict more pressure on fast-food companies to take responsibility for the obesity crisis and on pharmaceutical companies to deliver affordable medicines. Under Gucci Capitalism, mandating corporations to do things for a greater public good was rare. Under Co-op Capitalism, mandates rather than voluntary measures will increasingly be the norm. No wonder some of the smartest companies are pre-empting this and swiftly pledging to make necessary changes unbidden. Both PepsiCo and Mars, for example, are hurrying to shift their product mix toward healthier lines.
The third reason why the time is now ripe for a new form of capitalism is that the downside of globalization has finally been exposed. Just how quickly the financial crisis infected country after country—Taiwan is now expecting its GDP to fall 11 percent—shows us all too clearly how in an interconnected world we stand or fall together.
Under Gucci Capitalism, I felt it was always quite likely that the chances of collective fall were higher than collective ascent. That was because the only body truly protected in the international arena was business. Under the aegis of the World Trade Organization, companies could feel secure that they could sell their goods all over the globe.
While the rights of global business were well cared for under Gucci Capitalism, no comparable mechanisms were set up to address the global problems that businesses were culpable for: climate change, infringements of labor and human rights, or the negative consequences of relocating business in terms of job losses and ghost towns. Instead these were dealt with, if at all, by a patchwork of weak separate bills and bodies that lacked teeth, clout, and resources.
Discussions are already under way about the creation of a global financial-regulatory system. The financial crisis revealed the limitations of trying to regulate a global industry nationally. But this is just the beginning. If Co-op Capitalism is capitalism’s next incarnation, expect the establishment of new WTO-type global institutions or the integration of new toothsome global rules into existing bodies—this time with a mission to address the myriad problems that are generated by business and affect the general public both domestically and overseas.
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NixThis
"Capitalism" should be a bad word that people are embarrassed to use at all. Sorry if I sound like a (gasp) Marxist but the word is just plain ugly now. It reeks. I like "Co-op" though.
NYUKULELE
you. excellent piece. fresh thinking like this is exactly what we need. of course, the greed meisters will say co-op capitalism is unrealistic. when they do, just look around and see where their sense of realism has taken us.
NYUKULELE
that's supposed to open with 'thank you'
carlfc
Perhaps the author should leave the capitalism label behind and consider this the beginning of free market mutualism.
That is we all share the risk and reap the rewards.
cbeenthere
EXACTLY!!!!
boatscain2003
Brilliant take on a very clear and present problem facing down the entire planet. I applaud and appreciate your insight on this issue.
peterjones
Groundbreaking piece that amidst all this comment on where we are at, actually helps us understand where we could go - if we have the ambition to follow Hertz' position
gardengirl
visionary, spot on, clear as a bell.
thank you, noreena.
cashandburn
I'm not sure what it is but ... lectures about the failing of gucci capitalism from a skinny blonde with perfect hair?
Or the vague, aspirational arguments offering no detail, other than feel-good points and cherry-picked anecdotes?
Something in there just suggests this vision will prove just as accurate as all the other leftist visions of recent times - bad on economics, poor on incentives, big on wishy-washy aspirations that underplays how the world works.
citivas
Great post. Right ideas and well written. I just wish I was as optimist as her. The bankers I know all feel they are biding their time and fully expect to return to previous practices as soon as possible -- they definitely have not accepted any fundamental shift. They believe they are just being persecuted by an ignorant public and hypocritical Washington and never did anything wrong. So if left to their own devices count on them not to do the right thing...
melissar
While I was genuinely inspired by this piece, I attribute my ease-to-be-swayed to my young age and undeveloped opinion. There's too many salivating comments for me to trust this proposal as level-headed, however, the only criticizing comment was from someone named"cashandburn." Considering their point of view, I can't decide if the alias is humorously ironic or sadly predictable.
Cranium
Hertz shares with Marx/Engels a greater descriptive ability (of problems) than analytical/prescriptive ability. The problems she describes are real, and are to a major extent the problems of a warped theology - I'll give her 'Gucci Capitalism. But plenty of gov't regulation initiatives, whether at national or international level, will attempt to dispose of the bathwater, and will float the baby away as well. While some increased regulation on the financial markets/mechanisms is way overdue (a return to Glass Steagal, protection for pension funds, ratings entities stripped of (most, since all is impossible) conflict of interest, Maria Bartiromo forced to intone 'AAA' repeatedly as a junk bond is used to spank her, etc.), the better hope is for local/private/digital responses to the new world order.
cvharquail
Cashnburn, just FYI,
The author has her PhD in economics from Cambridge. She is a leading authority on globalism. She wrote the well received book "The Silent Takeover: Global Capitalism and the Death of Democracy ". Agree or not agree with her position, her credibility is undisputable, blonde or not.
Your credibility, on the other hand... well at least we can be sure you're a sexist. What's *your* PhD in?
cvharquail
Cashnburn, just FYI,
The author has her PhD in economics from Cambridge. She is a leading authority on globalism. She wrote the well received book "The Silent Takeover: Global Capitalism and the Death of Democracy ". Agree or not agree with her position, her credibility is undisputable, blonde or not.
Your credibility, on the other hand... well at least we can be sure you're a sexist. What's *your* PhD in?
cashandburn
Resting arguments on authority, PhDs and the like, is a logical fallacy, meaning that my qualifications and the validity of my criticisms are not linked. For the record, I have two politics degrees, as well as 10 years more experience of the financial markets than the esteemed Ms Hertz.
My name, referring to the post above, is that of my blog - cashandburn.com, in which I try to move the debate on from tired, cliched screeds such as the above.
Thank you.
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