A consensus is growing that capitalism needs a course correction. Professor Rebecca Henderson voices an impassioned plea for a new approach to business, one that goes beyond immediate profits and shareholder returns. She makes a by-now familiar case: Managing for the short term might be good for stock prices this quarter, but it will prove catastrophic for humanity in the long run. Intriguingly, Henderson comes across not as a harsh critic of multinationals but as a fan of the strategies that companies such as Unilever, Nike and Aetna have undertaken to address environmental, social and governance issues.
A global crisis is intensifying, and a new version of capitalism might help.
Climate change poses a major threat to the world’s prosperity. Without dramatic action, floods and other natural disasters will claim hundreds of thousands of lives and exact untold economic damage. Meanwhile, the concentration of wealth is such that the 50 richest individuals hold assets worth more than those owned by the bottom half of the world’s population. And the institutions that once created stability – including government, communities and families – are unraveling.
Only a reinvention of capitalism can address these frightening realities. Global capitalism has devolved into a short-term-oriented, extractive endeavor. The drug industry dramatically illustrates the folly of this profits-at-any-cost ethos. In 2015, Turing Pharmaceuticals said it would raise the price of Daraprim, an AIDS drug. One tablet would no longer cost $13.50; instead, the price would be $750. Turing’s chief executive, Martin Shkreli, didn’t apologize for raising prices: He argued he should have boosted prices beyond the 5,000% jump he had already imposed...