Market Capitalism Questioned

Despite Barack Obama's presidential victory in the United States, the financial crisis will erode the ability of the United States to promote market capitalism, it seems. Richard Haass wrote an excellent op-ed over the weekend called "What the Recession Means for Foreign Policy." Not only did he predict the reduction of U.S. foreign policy tools such as defense spending and foreign aid, but he also said U.S. capitalism will come into question:

One other adverse consequence merits mention. The appeal of free markets is much diminished. The ability of U.S. officials to preach persuasively on the virtues of market reform is all but gone. The backlash against markets will almost certainly go too far, with adverse results for economic recovery and democracy around the world.

We are already seeing increased anti-Americanism, the result of perceptions that the global economic slowdown had its roots in the U.S. mortgage market. Globalization itself is further tarnished. What we can expect is heightened state intervention, protectionism and mercantilism as governments look to enter into arrangements that guarantee preferential outcomes.

Susan Aaronson wrote a similar argument in Policy Innovations last week in her popular article "Financial Crisis Hurts U.S. Soft Power." Like Haass, she predicts traditional policy tools will be weakened and, like Hasss again, U.S. market ideology will take a hit:

First, America's global standing is, to a great extent, reflective of how it projects its power, relates to other countries, and keeps its commitments to them. If the global financial meltdown makes life worse for the world's poor, many people may link the U.S. model of democratic capitalism with global misery. They may be less receptive to economic and political strategies presented by U.S. diplomats and NGOs. Meanwhile, the financial crisis will make American taxpayers less able to provide generous levels of foreign aid to help the world's poor.

Second, although many countries will be desperate for investment, U.S. investors could come under considerable pressure to create jobs at home. U.S. tax policy is likely to favor domestic job creation and investment in the U.S. market. Meanwhile, U.S. investors may be less welcome abroad than, for example, Chinese or Indian investors—Americans and Europeans are more likely to demand transparency, accountability, and human rights.

Will people associate U.S. power with "global misery" or with the opportunity and pluralism that Obama's victory represents? Perhaps both. I am speaking at a conference with the European Parliament in Brussels this week called "Ethics in Business - Corporate Culture and Spirituality." In February, I am speaking about a very similar topic in Tokyo. There is clearly a demand for reflection on the future of market capitalism.

Philanthrocapitalism: Just Another Emperor?

One of the topics we cover at Policy Innovations is trends in social organization, how they affect globalization, and vice versa. Based on his new book, Michael Edwards of the Ford Foundation wrote an interesting article for openDemocracy on the subject of philanthrocapitalism—the "movement to harness the power of business and the market to the goals of social change." He believes it's time to look past the hype and really debate whether this influx of market mojo is delivering what it claims. Are social goals compromised in favor of financial ones?

[ASIDE: We ran an article by Laura Raynolds of Colorado State University not too long ago discussing a similar moment in the evolution of Fair Trade. Raynolds argues that Fair Trade's new position in the marketplace—due to success in scaling up and expansion into new products—puts it in conflict with its social goals.]

Edwards believes that civil society's shift from community organizing to services provision represents an erosion of the sector's power to participate in social transformation: "The accumulated outcome is that civil society may be getting larger—but not stronger or more effective in leveraging fundamental changes in society."

What are the changes Edwards wants to see?

Systemic change has to address the question of how property is owned and controlled, and how resources and opportunities are distributed throughout society.

How do we get there?

[C]ollaboration among separate organizations may be better than blending or competition. It preserves the difference and independence required to lever real change in markets (not just extend their social reach), and to support the transition to more radical approaches that might deliver the deeper changes that we need, like new business models built around "the commons" such as open-source software and other forms of "non-proprietary production"; and community economics and worker-owned firms, which increase citizen control over the production and distribution of the economic surplus that businesses create.

How do we keep nonmarket civil society motivated?

What separates good and bad performers is not whether they come from business or civil society, but whether they have a clear focus to their work, strong learning and accountability mechanisms that keep them heading in the right direction, and the ability to motivate their staff or volunteers to reach the highest collective levels of performance.

I think the most important critique Edwards makes is that market-style projects shouldn't be the sole logic of civil society—social entrepreneurism has hit the scene with a fair amount of zeal. If civil society acts as a social immune system, as Paul Hawken puts it, then that system should have several curative options. Plus, people are more and more motivated to find meaning in their work—social entrepreneurs are filling a niche.

When critiquing the new unity of philanthrocapitalism, Edwards sets it in comparison to the diversity of actors that was required in successful social movements of the past. But right now there is no unified movement. The only thing comparable is the set of actors that are pushing the shift to an environment-friendly lifestyle—though goals may overlap, they are loosely bonded at best in their actions. And the problem they are trying to solve is so inherently tied to our existence as consumers, making it no surprise that fast-acting market forces have swooped into the new environmental gap in our political consciousness.

Has philanthrocapitalism only flourished because civil society becomes too calcified when it is based on institutions instead of a broad social struggle?