Consider some of the great issues of our times:

• An Environment in jeopardy, increasingly more generally attributed to the over-exploitation of the earth's natural resources, and disregard or ignorance of the resultant effects of the by-products and emissions of industrial processes beyond the tolerance and ability of our planet's seemingly infinitely complex ecosystem to process.
• A global food crisis
• A projected imminent shortfall in energy production and supply across all the nations of the world, being, as it is, dependent on diminishing sources of fossil fuels, which are expected to run out some time this century if the rate of consumption remains at present levels. A situation further exacerbated by other factors... firstly, the proliferation of emergent technologies among ever more broader sections of the global population, who's ever greater numbers will only become more reliant on them. And also the emergence of the more industrialised, economically powerful, and more rapidly developing nations such as the 'Red brick' nations like Brazil and India, not to mention China's exponential growth in these areas.
• A global 'war on terror' which at least in some respects is attributable to an international social injustice, manifest through the exploitation some of the very poorest peoples and nations on earth, who's poverty, desperation, grievances against those who responsible for such ill treatment makes them ideal candidates for recruitment to such organisations and groups of individuals who advocate extreme philosophies and methods which are commonly categorised as practitioners of 'terror'.
• A global financial system which has recently undergone the greatest recession in living memory, mainly due to the increasingly interdependent, and yet correspondingly insufficiently regulated international markets.

All of these factors have significant roots in capitalism, and the capital and economic structures driving the corporate entities largely responsible for the continued prosperity of traditionally western societies, but invariably at the expense of other nations most often in large parts of Asia, Africa, and South America.

...What if the tools needed for a solution for these problems already exists?

...What if that solution fully accorded with the concepts and philosophies associated with the free market system, and 'fiscal conservatism', AND by so doing promoted and realised more 'ethical' projects most often associated with more liberal philosophies and policies?

It has been the policy and belief of ethical organisations and those who wish to create a more equitable and humane global commercial-societal dynamic, that Capitalism is, in itself, the greatest impediment, obstacle, and most harmful influence to these ends.

Capital Blindness

The Problem with Publicly traded companies

The main reason why large multinational corporations and companies cause so much damage to societies around the world is that the very nature of their operation renders them blind to all concerns other than the ends of the corporation itself... namely, making money. And while such a singularity of purpose and blindness to extraneous considerations is most desirable in the sphere of law and justice, here it actually has the opposite effect, and creates great social injustices.
This is because the accepted capital structure at the heart of any corporation operates by the shareholders investing their capital with the view to obtaining greater returns as a result of the prospective success of the company, This is achieved by reducing expenditure and overheads, as a proportion of annual turnover, and thereby maximising the margin of profit the company makes. the board and chairman strive to this end alone. To consider any other matter, whether related to the company's activities directly or otherwise, reduces the profits to the shareholders. As, for instance, to address the carbon footprint of the company, or to pay a fair price for raw materials, pay the workforce and staff an acceptable wage, or to otherwise put in place the means to minimise the negative impact of the company's activities on people and the environment is achieved only at great expense, which must necessarily increase the proportion of turnover dedicated to such costs, and reduce the percentage of which is profit, and thus return to the shareholders.
Any Chairman or board member who would so boldly pursue such 'ethical' policy therefore, would very quickly find themselves no longer employed, as the annual results would prompt the shareholders to elect to remove the people who are the source of detriment to the returns on their invested capital, and just as quickly replace them with members who's management better accords with this end.

But herein lies the mistake of those who would oppose the premise of capitalism, in assuming that any or all of the shareholders, board, or chairmen actively engage in practices that knowingly cause such great harm, out of either a blatant disregard for the effect of the company's activities, or that they indeed somehow actually intend such outcomes.
Many invest through a desire to grow small savings, for college or university funds for their kids, or to create a nest egg for retirement, or as part of a group, to grow a pension fund, or simply to return an interest on money held in bank accounts through banks using these cumulative investments as capital to trade and make a profit for the bank and then paid proportionately as a dividend to the customers for the use of their money in this way.
It is not that the vast majority who invest in such a way intend the outcomes of these activities, it is simply that these activities are abstract, and beyond the scope and comprehension of all but the most select few versed enough in the science of economics and who engage daily with it.

In short, a disconnect exists between the capital providers (investors great and small), and those who execute the investment on their behalf.

The investors only concern themselves with the return, as numbers related to their accounts, and the traders and the companies in whom this money is invested are can only concern themselves with supplying as great a return as possible, if they do not, the investors withdraw, and the company suffers.


The Costs of the current capitalist system

Governments around the world spend Billions of their taxpayer's money fixing the problems that are the result of blind capitalism: Addressing the effects of climate change on their own, and other, and often poorer countries through methods to reduce carbon footprints, the costs of military intervention in failed states, 'terrorism' security measures (as terrorists prosper by recruiting the aggrieved, desperate, and broken peoples of the world to carry out atrocities of their design), and not to mention the enormous quantities spent on aid to these poorer countries just to effectively 'plug the dam' of overwhelming poverty.
The results of which are the perpetuation of the situation for these people and nations, as it says nothing about addressing or altering the behaviour of the companies which operate within this current capital system and that are the cause of the inequities and social injustices that prompt adverse reactions which call for this massive expenditure to ideally put right (but at best manage).
Leading to increases in rates of taxation on incomes, and the corporations that cause the problems themselves to pay for it, and ultimately drive up the cost of living, divert resources from addressing other domestic problems, and depressing the domestic economy as a whole, as levels of 'disposable' income reduces throughout the economy- A downward spiral ensues, or to use a metaphor, the foot has to be pressed harder on the accelerator to drive the engine harder in order to simply maintain the same speed... until the engine blows up.

What if Capitalism was not the problem, but the very solution itself?

The tools of Change

Stock markets such as the FTSE and Dow Jones are owned and operated by private companies.
Most Stock markets around the world already have 'ethical indexes', the FTSE, Dow Jones, Hang Seng etc. all have such indexes currently operating.
These are based on the applicant companies being rated on a scored system, whereby the company is assessed on various criteria (carbon footprint, fair trading practices, fair pay and so on) and awarded a points value, which is then aggregated to form the overall score, which would determine the success of this applicant to appear on this particular index.
But this appearance does not profit these companies in any way other than a 'prestige' value or a nod to the 'ethical reputation' of the company.

So make it pay to be ethical

The accepted philosophy and methods of ethical organisations and governments to make these companies adopt practices more in line with the ethical aims and moral standards of the people is to employ higher 'green' taxes on goods and services that are produced through methods, and which have outcomes contrary to this.
You produce a car that falls short of emissions standards, you pay higher taxes. You own a such a car, you pay higher taxes. You buy raw materials at less than market price because they were produced by people paid significantly less than an acceptable living wage, you pay higher taxes. Etc. etc. etc.... and so on and so forth.

But I think this actually has more detrimental effects than good.


Because by elevating the various taxes you cut into the profit of the company, which is their principle reason for being, so you will only make them fight you hard every step of the way, and with every resource at their disposal, which they they will happily spend in the short term in order to secure the long term prospect of profit.
All of which is time and resources not going to fixing the problem, and not changing the situation one iota.

Instead then, why not offer reduced rates of tax to companies traded on these ethical inidices?

To do this, the government of the country in which the particular index is operated officially recognise such marks as Fairtrade, The Rainforest Alliance, And other such marks as equal to their own national standard marks such as the British Standard or 'Kite' mark in UK, and that having these marks qualify the companies who's products bear them to the reduced rate of tax for the particular area of taxation related to that mark.
For instance, the Fairtrade mark relates to fair prices paid for the raw materials and commodities used to produce them, so a reduced rate of capital gains tax should be offered for the products sold, as the company has paid fair prices for these raw materials, and this higher cost must be reflected in the price of the product, often making it less affordable to the average consumer, and eating into profits through increased overheads, the reduction in tax here offsets the loss in profit.
Or the Rainforest alliance Mark which signifies a sustainable source of the commodity and benefits to the communities from which they are sourced, but ultimately contributes to a reduction in the carbon footprint in the production of their goods could should also have a reduced rate of capital gains tax, but also in Value Added Tax... as the tax on the increase in value has effectively been paid in the expense of buying commodities at a more equitable price.

We could identify many such areas of tax and ways to offer such incentives in reduced rates to create the effect we wish to see in our societies and around the world.
A bank that maintains sensible trading standards and displays prudent judgement, or takes pains to ensure it does not invest in enterprises contrary to these aims qualifies for a reduction in tax, or a supermarket that pays a fair price to farmers for their produce, and sources locally, or to fishermen who supply sustainable fish also gets a reduction... and so on.

The argument I'm sure against this method will be that the reduction in government tax revenues will hit public services and undermine it's ability to undertake such publicly funded enterprises as it sees fit. This is Backward Thinking.

When you consider the annual revenues spent by governments tackling climate change, fighting terror, waging wars caused by these iniquities, in aid to impoverished peoples and nations, fighting disease etc.

Much of These problems could be then taken care of by the corporate world in it's pursuit of increased profit through reduced taxation, which they receive by adopting those practices and employing the expense otherwise left to governments. So the reduction in incoming tax revenue will result in reduced expense of tax revenue elsewhere.

In Short:

Make Your Ethical interest the economic interest of Capitalism.


Implementation

To achieve this, a progressive implementation system would have to be employed so companies can plan to get themselves in shape to qualify to appear on the index. That is... we have to have a system that takes to the situation we desire, from the situation we find ourselves in presently.

Let's say for instance that you wish to achieve such a universal standard of ethical practice in 5 years:

Take the current index as starting point, with every company appearing on it assessed as to it's conformity to those standards, and calculate, based on what you find, a minimum qualifying level.
Award those companies a reduction in the relevant taxes ( for instance, you may offer VAT at 17.5 starting rate as in UK, but appearance on this index qualifies for a rate of 17%... only 0.5% reduction, but this is a heap of cash to a company large enough to appear on a publicly traded index!)
The companies must comply with a year on year improvement in it's ethical score to maintain it's position in the index, so the next year's tax reduction will be greater than this, as a reward for such improvement (say VAT at 16.5%)
A new 'division' or index is created for those newly qualifying companies at last years reduction rates, so over a 5 year period 4 new indexes are created for 5 degrees of ethical tax reduction qualification, in a league system.
Over the next 5 years those divisions successively raise their standards till all are equal.

The advantage here for the companies is that they get to effectively set their own rates of tax, all they have to do is comply with the standards set.

Other benefits derive from the fact that any country that adopts such a system will draw new companies to them, eager to take advantage of the lower taxes, and so create jobs and wealth, contributing to the economic health of the nation, which would also more than offset the reduction in initial revenues!

Only such large publicly traded companies have the resources to deal with such large problems that we face, but we must offer them the incentive to do so, not just demonise them and punish them with taxes
  

 

 

 

Idea edited on 08/02/2011 09:41