Why We Need To Rethink Capitalism

Just Index – Another resource for conscious consumers

One of the hardest parts of being a conscious consumer is knowing which companies to support. Luckily, new resources like the Just Index are coming to our aid.

Paul Tudor Jones is the founder of the Just Index, a nonprofit that ranks the ethics of corporations in the US based on criteria chosen by US citizens. This inspiring TedTalk reveals another innovative way we can use the free market to correct the pitfalls of capitalism.

 

 

Highlights from Why We Need To Rethink Capitalism

Capitalism – an economic and political system in which a country’s trade and industry are controlled by private owners for profit, rather than by the state.

Over the past 50 years, we as a society, have come to view our companies and corporations in a very narrow, almost monomaniacal fashion, with regard to how we value them.

 

We have put so much emphasis on profits, short term quarterly earnings and share profits, at the exclusion of all else.

 

It’s like we’ve ripped the humanity out of our companies. We don’t conveniently reduce something to a set of numbers to play with like lego toys in our individual life; we don’t value someone based on their monthly income or their credit score. But we have this double standard when it comes to the way we value our businesses and it’s threatening the underpinnings of our society.

US Corporate Profit Margins

US Corporate Profit Margins - Rethinking Capitalism

This is great news if you are a shareholder, but what about the average American worker?

US Share of Income Going to Laborer vs CEO-to-Worker Compensation Ratio

Graph of CEO Pay vs Laborer Wages - Rethinking Capitalism

Higher profit margins do not increase societal wealth, they exacerbate income inequality.

If the top 10% of American families own 90% of the stocks, they take a greater share of corporate profits and there is less left for the rest of society.

Relationship Between Income Inequality and Social Problems

Relationship Between Income Inequality & Social Problems - Capitalism

The further to the right you go, the greater the income inequality. The further up you go, the worse the social and health problems are. These health metrics include nine factors such as life expectancy, teenage pregnancy, literacy, social mobility etc.

Where is the US on this chart?

United States Income Inequality & Social Problems Graph

The US is literally off the chart…

The greatest income inequality and the greatest social problems according to these metrics.

History always closes the gap between the rich and the poor…

It typically happens in one of three ways.

  • Revolution
  • Higher Taxes
  • War

There may be another option for us: Increase justice in corporate behavior.

Where are we now when it comes to corporate behavior?…We are so entrenched in a profits mania that we don’t even know how we are harming society…

US Corporate Giving as a Percentage of Pre-Tax Profits

United States Corporate Giving in the last 40 years - Graph

US Corporate Giving as a Percentage of Pre-Tax Profits with Corporate Profit Margins

US Corporate Giving vs Profit Margins

We can clearly see profit margins have gone up and giving has gone down. Does this feel right?

Good people part of a bad thing

We are so deeply entrenched in this profit mania that well intentioned people don’t even realize they are a part of it.

The Solution: Drive more just behavior.

We can utilize the free market system that got us here to turn things around.

We can help companies and corporations learn how to operate in a more just fashion, but we need to define the criteria for just corporate behavior. Right now there is no widely excepted standard for companies or corporations to follow… but Paul’s non-profit plans to change that.

The JUST Index (independent, third party) plans to offer this framework. By polling the public they define what just performance means to the people and publish the performance of America’s largest 1,000 companies according to these standards.

The Goal

As people begin to see which companies are more just, human and economic resources will be driven toward them. Just companies will become the most prosperous and will lead the way toward sustainability.

“If justice is removed…the great, the immense fabric of human society…must in a moment crumble to atoms.” – Adam Smith

 

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Dave

I am a minimalist, environmentalist, and conscious consumer with a background in environmental studies, conservation, and tech. I founded prch to help others be more sustainable and realize an alternative to consumerism.