‘Lending to small business has fallen particularly sharply, as has the number of startup firms. In the early 1980s, new companies made up half of all U.S. businesses. For all the talk of Silicon Valley startups, the number of new firms as a share of all businesses has actually shrunk. From 1978 to 2012 it declined by 44%… The wane in entrepreneurship means less economic vibrancy, given that new businesses are the nation’s foremost source of job creation and GDP growth.’
Capitalism is in crisis – a statement of almost 21st Century ubiquity that mostly defies coherent and concise explanation. Essential reading comes from Time Magazine’s Rana Forooha who recently produced an excellent article explaining how this crisis has emerged – and why it’s about more than who calls themselves a Capitalist. The article charts the financial market’s transition from a growth-focused system that ‘essentially served business’, to one in which only ‘15% of capital coming from financial institutions today is used to fund business investments’.
Most of today’s capital is instead ‘being used for lending against existing assets such as housing, stocks and bonds’ – creating an entrepreneurial chokehold and a dangerously shareholder-focused, short-termist ethos that sits at the heart of the very worst business crises we have seen in the last century. As a result, ‘an ideologically broad range of financiers and elite business managers…have started to speak out publicly about the need for a new and more inclusive type of capitalism, one that also helps businesses make better long-term decisions rather than focusing only on the next quarter’.
Bad business thrives on opaque structures and a willingness to be daunted by complexity. Understanding the true natue of this crisis is the first step to changing it. The work of B-Corp and other Good Business movements show that the vision for a more inclusive, socially-focused Capitalism is not only possible, but mutually beneficial.
Watch Jay Coen Gilbert chart the Evolution of Capitalism at TED, sharing his vision to harness the power of business to solve society’s problems through B Corporations.