Is money stopping the world go round?

Is money stopping the world go round?

by ftrprf

Capitalism is an economic and political system in which trade and industry are primarily controlled by private owners. The motive to make a profit is its most essential feature. No profit, no business, and no future. Within this system, profit forms the basic motivation for entrepreneurs.  The competition makes businesses improve, question and demand decide prices, and consumer needs are of the essence. These consumers profit from the overall increased wealth and luxury of the past decades.

This system has been successful and dominant in the Western world since the early nineteenth century. But a system is only successful in the way it is measured. If we look at economic growth, profit, and the rise in wealth and luxury, capitalism has been an immense success in generating all of this. More and more, we see a downside of this system, deciding how we live, what we do, and how we treat the planet.

It's the end of the world as we know it

In 1987, the music band REM released ‘it’s the end of the world as we know it.’ Now we are starting to see significant cracks in the system. We have reached limits to our economic growth and see overconsumption and shortages in raw materials. And we not only reached the limits of what our planet is able to cope with, we also reached the limits of what we people are able to cope with. Our well-being is under pressure, with tremendous rice of depression & burnout. Capitalism has a culture of ‘normalization,’ of assuming that dangers and changes will eventually adapt to us instead of the other way around because we, as humans, are the center of life.

The current market-economic thinking and doing is causing an existential crisis. There are not only interwoven, disruptive ecological, social, economic, and individual crises but also an essential life crisis: the system of old and familiar socio-economic thinking and doing is collapsing. Youth and young adults are at the heart of a growing movement toward a new, future-proof normal beyond the neoclassical market-economy paradigm. 

And whether we like it or not: transition is underway. The majority of big corporates have their own staff teams working on corporate social responsibility. Also, direct corporate donations are increasingly common, including sustainable production choices and advertisements.

Time for radical change

Now a more radical and fundamental trend is emerging. It includes a change in entrepreneurial motives. This is a movement called steward ownership. It was firstly implemented in 2015 in Germany, and since then, more than 100 large and small companies have joined this movement. Great examples of this are the Dutch Triodos Bank, whose shares are managed by a separate foundation and the distribution of shares is spread among a group of private and institutional investors who can not own more than 10 percent each, along with companies such as organic supermarket chain Odin and German electrical giant Bosch. Bosch has placed 92 percent of the shares in a foundation. Its board includes stewards who decide the future of the company and its mission. Profits do not go to investors but are used only to pay them back, reinvest them or donate them to charities.

The concept of “steward-ownership” harnesses the power of entrepreneurial for-profit enterprise while preserving a company's essential purpose to create products and services that deliver societal value and protect it from extractive capital. In other words, profits are given away and used for societal purposes, and dividends and wages are either taken away or capped.

Self-governance and purpose-driven profit

Steward-owned companies are committed to two principles. The first one is self-governance: the control remains inside the company with the people directly connected to stewarding its operation and mission. With the company's control held in a trust, it can no longer be bought or sold. The second principle is purpose-driven profit: wealth generated by these businesses cannot be privatized. Instead, profits serve the mission of the company, and are either reinvested in the company, stakeholders or donated. Investors and founders are fairly compensated with capped returns/ dividends.

In essence, steward ownership is a way of splitting up control and economic ownership in a company, with the goal of ensuring that the company's direction is not focused on the short-term drive for profit maximization and shareholder value but is in the hands of people who are directly involved in the company and feel responsible for the social goals it has set for itself. Stewards are not interested in profit maximization but focus on a healthy, sustainable, and socially responsible company.

It can be different

Recently, another giant joined this movement. Rather than selling the company or taking it public, Mr. Chouinard, his wife, and two children have transferred their ownership of Patagonia, valued at $ 3 billion, to a specially designed trust and a nonprofit organization. The family irrevocably transferred all the company’s voting stock into the Patagonia Purpose Trust. The trust ensures a socially responsible business and destines its profits - currently $100 million a year - to combat climate change and protect undeveloped land around the globe.

The company has long been known for its ethical outlook and efforts to address climate issues. Famous and highly successful campaigns such as, for example, the "don't buy this jacket" slogan have made the company very well known. Here, the company asks consumers to buy only the much-needed clothing because of the high amount of water needed for production. Instead, it offers consumers a lifetime warranty and free repair under the slogan ‘reduce, repair, reuse and recycle’. 

“Hopefully, this will influence a new form of capitalism that doesn’t end up with a few rich people and a bunch of poor people,” Mr. Chouinard, 83, said in an exclusive interview. “We are going to give away the maximum amount of money to people actively working to save this planet.” Chouinard never wanted to be an entrepreneur and has always had a critical view of capitalism. He also had options to take his company to the stock market, which would have generated immense amounts of capital to invest in battling climate change. About this, he stated: “I don’t respect the stock market at all,” he said. “Once you’re public, you’ve lost control over the company, and you have to maximize profits for the shareholder, and then you become one of these irresponsible companies.”


This critical eye is reflected in Patagonia's own operations. Instead of an achievable 30 to 40 percent growth per year, the company deliberately does not want to exceed 10 percent per year. On this, it says:' our mission is to question the issue of growth'. The goal is to address the tension between the market's demand for endless growth and the planet's need for a break. As a result, Patagonia was cited in the article "why de-growth shouldn't scare businesses" in the Harvard Business Review as an example of a company pioneering the creation of a new norm around business and consumer culture. It is reported that Walmart, Nike, and H&M are already in the process of setting up a second-hand clothing line and free repair.

Cynicism equals change

An interesting detail is that, with the transformation of Patagonia, the ‘traditional financial markets’ try discrediting the Chouinard family, with articles like ‘Patagonia Billionaire Who Gave Up Company Skirts $ 700 Million Tax Hit’ by Bloomberg. This article states, for example, ‘the moves mean Chouinard won’t have to pay the federal capital gains taxes he would have owed had he sold the company,’ and ‘Ray Madoff, a professor at Boston College Law School, said there’s a broader question of whether the ultra-wealthy should be able to circumvent taxes.’ In this article, Bloomberg seems to suggest that the Chouinard family gave away $ 3 billion to avoid $ 700 million in tax. Change might be a really scary thing…
Steward ownership is a rapidly growing movement. To us, most innovative is how businesses make responsibility part of their business structures, overthrowing the economic foundations on which most of these companies were built. A renewed economy requires a profound change in our thinking. What does a person really need? It is now very clear that there are limitations and limits to our pursuit of wealth, looked at from the point of view of both man and the earth itself. Patagonia and steward ownership in general are examples of fundamental changes in the economy. It shows the first cracks or, to be more optimistic, transitions towards a system of balance and well-being. A rise of a minimalist lifestyle in the form of numerous trends all embody an aversion to a consumer society. Therefore, the question is whether companies like Patagonia are really adopting such radical policies or are just responding very early to emerging consumer demand...