This is what we know to be true: business is good because it creates value, it is ethical because it is based on voluntary exchange, it is noble because it can elevate our existence and it is heroic because it lifts people out of poverty and creates prosperity.
Free-enterprise capitalism is one of the most powerful ideas we humans have ever had. But we can aspire to even more. Let’s not be afraid to climb higher.
Alexander “Sandy” M. Cutler, the former chairman and CEO of Eaton (a global power-management company), says it well: “In a period of time when so many questions and doubts have emerged about major institutions in society, business has not done a particularly good job of telling its own story … how important it is to providing livelihoods for families, what business does for communities and for institutions like our schools and universities, and the role business has in helping solve so many societal problems.”
Far from being a necessary evil (as it is often portrayed), free-enterprise capitalism is an extraordinarily powerful system for eliciting, harnessing and multiplying human ingenuity and industry to create value for others. It must be defended not just on the basis of the profits it generates, but also on the basis of its fundamental morality. Free-enterprise capitalism must be grounded in an ethical system based on value creation for all stakeholders. Money is one measure of value, but it’s certainly not the only measure.
In a way, the practitioners of capitalism created their own trap and fell into it. They accepted as fact a narrow conceptualization of business and then proceeded to practice it in that way, creating a self-fulfilling prophecy. Had they rejected the caricaturized version and embraced a richer, more complex definition of capitalism, this would not have happened.
As pioneering stakeholder theorist Ed Freeman and his colleagues write, “Business is not about making as much money as possible. It is about creating value for stakeholders … We need to hold up the numerous companies, large and small, that are out there trying to do the right thing for the stakeholders, as the real paradigm of business, rather than deeply flawed companies like Enron.”
We need to discover anew what makes free-enterprise capitalism what it has been: the most powerful creative system of social cooperation and human progress ever conceived. We next need to rethink why and how we engage in business to better reflect where we are in the human journey and the state of the world we live in today.
We need a richer and more ethically compelling narrative to demonstrate to a skeptical world the truth, beauty, goodness and heroism of free-enterprise capitalism, rather than continuing to harp on the tired maxims of self-interest and profit maximization. Otherwise, we risk the continued growth of increasingly coercive governments, the corruption of enterprises through crony capitalism and the consequential loss of both our freedom and our prosperity.
Those who recognize and embrace the life-affirming power of free-enterprise capitalism must reclaim the intellectual and moral high ground.
Reprinted by permission of Harvard Business Review Press. Excerpted from Conscious Capitalism: Liberating the Heroic Spirit of Business. Copyright 2014 Harvard Business School Publishing Corporation. All rights reserved.