How the Current Pandemic Reveals a Need for Systemic Change
By Frederick Alexander
As the the number of COVID-19 infections rise, I have begun to see the pandemic as both a symptom and a model of the larger crisis we face: that of our unsustainable exploitation of common resources and vulnerable populations. As the world’s attention focuses (necessarily) on the pandemic, I hope that we can begin to understand how our vulnerability in the face of the coronavirus is part of this broader systemic crisis, and that we will choose to respond accordingly.
TSC Core Concepts
The Shareholder Commons has several ideas at its core:
Prosperity at risk.
Despite the incredible increase in human well-being around the world over the last two centuries, we now face an existential threat from the degradation of critical environmental systems and social institutions, as well as a moral crisis of injustice and exclusion for those left behind through unprecedented inequality.
The paradox of profit.
The pursuit of profits by business in a free market system is responsible both for our increased material wealth and the systemic dangers we now face.
Time for a reset.
A future in which we all thrive depends upon our economic model being recalibrated to ensure that profits guide decisions without being prioritized over critical systemic and moral issues.
Collective action.
Redesigning capitalism for a thriving planet will require many individual businesses to sacrifice financial return, even over the long term, in order to balance other critical factors, thereby creating a prisoner’s dilemma that can be solved solely through collective action by universal investors.
Read more of my thoughts about these ideas here and here.
Not Heeding the Call to Fix Capitalism
There is a general understanding that something in capitalism is broken. This can be seen in attempts to integrate environmental, social and governance (ESG) concepts into financial models and in calls for business leaders to act more “responsibly” by pursuing “purpose” alongside profit. The Business Roundtable, an organization of large company CEOs, has even called for a new form of stakeholder governance to integrate issues of people and planet with the profit motive.
Despite these well-intentioned efforts, there is little appetite to change the fundamental profits-first business model fueled by shareholder primacy. The Business Roundtable insists that individual companies will all “do well” (financially) by “doing good” (socially/environmentally), creating long-term value for shareholders at any company that applies these ideas. No one seems willing to acknowledge, however, the inconvenient truth that some companies need to sacrifice financial returns — even over the long term — to preserve common resources crucial to the healthy functioning of the entire system. (Read more about an attempt to have it both ways.)
While people acknowledge the risks of prioritizing financial return, they still refuse to actually prioritize anything else. Why is it so hard to preserve our own future? A clue may lie in our collective behavior over the last few weeks as we grappled with the onset of the COVID-19 pandemic in our communities.
The Virus Meets the Human Condition
Less than a month ago, today’s nightly news was unimaginable. Despite reports from abroad, scientific evidence and the warnings of public health professionals, we were unable to picture Sophie’s Choice triage in U.S. emergency rooms, shelter-in-place orders, or a 34% stock market fall. Yet these are now our daily realities, with no end in sight.
The critical fact is not that we couldn’t imagine a pandemic; it is that we failed to link it to our own everyday behavior. We were unable to believe that a catastrophe would result from simply continuing with our accustomed routines: socializing, traveling, and walking down the street.
It isn’t that we are stupid or lazy or selfish; the problem is that we are practical, empirical creatures. When something works 100 times in a row, we are almost biologically incapable of believing it won’t work the 101st. In the evolutionary environment, that was a useful rule of thumb: It would be a dangerous waste of time and energy to puzzle through an obvious question like whether we should run from an approaching predator.
It is this bias toward the familiar that caused us to ignore early warnings and miss the opportunity to socially distance and isolate ourselves in order to get ahead of this looming catastrophe. For humans, it is almost impossible to believe that doing the things we have always done could now be dangerous.
The Collective Action Problem
The difficulty of changing familiar ways is even harder when the change must be collective to be effective. The doctors told us to stop shaking hands, which we had been doing our entire lives. We all remember the awkward embarrassment that accompanied our first few elbow bumps; no one wanted to be the first person to abandon an important social practice. If it is important, we thought, won’t the other person refuse an extended hand? More seriously, perhaps, experts wanted businesses to shut down to slow the spread of the virus but could provide no assurance that competitors would do the same.
Asking everyone to stop a familiar, successful practice with no guarantee that anyone else will do so simply defies human nature. And without the assurance of collective action, the unfortunate reality is that the archetypal tragedy of the commons continues to play out in all aspects of our personal and professional lives.
Profits and Value: An Old Belief That’s Hard to Shake
The same two difficulties that we faced in the early days of the pandemic — trying to change familiar habits and collective behavior — have dogged our attempts to create more responsible business practices.
For more than two centuries, we have successfully raised standards of living around the world by relying on a free market economy led by independent, profit-seeking businesses: the invisible hand of private vice leading to public good. Even if corporations caused considerable harm, they created huge amounts of value as they powered the industrial and information revolutions.
Despite our material success, we are aware that unfettered profit-seeking is now threatening social and planetary boundaries to a catastrophic extent.
Under these circumstances, allowing corporations to continue to use their immense wealth and power to seek profit without taking responsibility for their social and environmental impact should be untenable; yet we keep using the same playbook, unwilling or unable to change our habits and familiar rules.
Just as we heard the early warnings from China about a new respiratory disease, we know about rising global temperatures, melting ice caps, dying species and failing freshwater resources. Just as public health professionals warned about our lack of preparedness for a pandemic, economists have calculated the devastating effects of degrading the environment and social institutions.
Tragically, intellectually sound evidence is losing out to the type of evidence we flawed humans value: our own limited experience. Why change? Aren’t we getting more and better stuff year in and year out? And even if some of us are convinced that we need to reduce our levels of inequality and carbon emissions, how can individual businesses change and survive in a world dominated by competition for profits?
Moreover, this continuing behavior erodes our resiliency. By ignoring the long-term risks of uncertainty, we have developed attenuated, global just-in-time supply chains that are great for mass production of cheap goods at healthy margins, but not so good in a crisis that demands stockpiles and nimble production. We have developed dependencies on items like fossil fuels and monocultures that threaten our ability to survive changes in circumstance. We have perfected production for today, but such perfection is brittle and difficult to adapt to tomorrow, which will change in myriad ways we cannot predict.
Using the Lesson
Our economic system faces that same challenge we faced with the pandemic. We need to overcome our resistance to necessary culture change. Our failure with the virus will cost many lives and depress the economy, but we will bounce back. We will not be so lucky if we fail to change our corporate ways.
Few would argue that we shouldn’t use monetary policy and fiscal stimulus to bring the economy back. But while we have the lessons of the virus in mind, let’s do it in a way that doesn’t repeat our legacy mistakes; it is time to break from our dangerous patterns and recalibrate our economic system.
Simply bringing back the same profits-first system would be to miss the lesson of the coronavirus: Follow the science, listen to the experts, and take collective action to create a resilient economy in preparation for new realities.
Hard as it may be to imagine, the wealth-creating, free market strategies that we engage in on a daily basis are threatening our way of life, just as handshakes suddenly became a deadly disease vector. Let’s take this opportunity to meet the threat and rebuild our economy in a fashion that accounts for science, resiliency, and the benefits of collective action.
Frederick Alexander is Founder of The Shareholder Commons, a nonprofit organization dedicated to helping shareholders protect common resources and vulnerable populations.
B the Change gathers and shares the voices from within the movement of people using business as a force for good and the community of Certified B Corporations. The opinions expressed do not necessarily reflect those of the nonprofit B Lab.
Lessons from a Crisis: The Challenges of Changing Habits and Collective Behavior was originally published in B The Change on Medium, where people are continuing the conversation by highlighting and responding to this story.
