But that is not enough, Handy says. Capitalism needs to work for many more people than it does today. The benefits of capitalism are spread among perhaps 2 billion of the world’s 6 billion people. If capitalism does not succeed in the developing world, then the poor will leave: Migration is already, he says, “set to be the major issue of this century.” For all our sakes, we must find ways to make capitalism work everywhere.
That may require a different variant — or several different variants.
If we give too much priority to maximizing wealth creation, we may again forget the reasons we wanted wealth in the first place. As Charles Handy observes, “Capitalism knows all about the means of wealth creation but is unclear about the ends, who or what that wealth should be for. That may yet be its downfall.” To be sure, it is the get-rich-quick fever of the past decade’s wealth creation that has brought down so many of today’s companies and undermined faith in the financial system. Raw greed is not a stable foundation for a society to build on.
Do capitalists care? Jennings is a pessimist, likening bankers’ ability to forget the lessons of past mishaps to a form of professional Alzheimer’s disease. Larry Elliott and Richard Schroth are equally glum: “The most probable outcome of this financial chaos will be the traditional activity of ‘study, wait, delay, and forget.’ Those in political and business circles most responsible for the ‘Enrons’ of our time are the ones who do not want change.” And to tell the sad truth, public opinion polls give comfort to the foot-draggers. A recent poll found that American business leaders were even less trusted than Catholic cardinals.
In the end, neither reminders nor prescriptions will solve the problems. It will take capitalism to reform capitalists. If the markets begin to favor companies that struggle to put honesty before fudge, if they distrust mergers and reward transparency, if they prefer good management to earnings management, then change will occur. Only investors have the power to make good governance rewarding — and only if it is rewarding will companies adopt it as a matter of course.
Reprint No. 02407
Frances Cairncross, FrancesCairncross@economist.com
Frances Cairncross is management editor at The Economist. Her most recent books, The Death of Distance: How the Communications Revolution Is Changing Our Lives (Harvard Business School Press, 2001) and The Company of the Future: How the Communications Revolution is Changing Management (Harvard Business School Press, 2002), examine, respectively, the economic and social effects of the global communications revolution, and the ways in which the Internet affects how companies operate and are managed.