Capitalism is seen as a threat , not a solution , largely because it ’ s perceived as “ exploiting workers , cheating consumers and creating inequality ” ( Mackey , 2012 ), meaning the rich get richer and the poor get poorer . This is because people in control have allowed the entrenched and historical ethical basis of business to be diluted by economists who have developed a self-serving and ultimately perverse version of capitalism which is far removed from its ethical roots . Adam Smith , in his seminal book The Wealth of Nations , put forward the case that capitalism is built on two ideas :
• Businesses are built to create wealth and for individuals to pursue their self interest and wealth while at the same time
• Human nature dictates a need in us to desire and care for others and business reflects ideals that transcend purely selfish motivations
This second tenet of Smith ’ s philosophy of capitalism was largely ignored and capitalism developed in a more stunted and self-interested way that increased societal divisions and led to the development of communism as a perceived fairer system for wealth distribution ( Smith , 1776 ).
According to John Mackey , two significant barriers to our capitalist systems being fairer , more ethical and more efficient are ‘ the myth of profit maximisation ’ and ‘ crony capitalism ’.
The myth of profit maximisation is that the ultimate purpose of business is to maximise profits for investors . Successful businesses are always profitable but the myth , that this is the sole purpose of business , has done huge damage to the reputation of capitalism . The true purpose of business should be to improve our lives and create value for all stakeholders .
Crony capitalism does away with the founding principle that true freeenterprise capitalism imposes strict accountability and international discipline on businesses . Crony capitalists operate in such a way as to maximise selfinterest and use the awesome power of governments to secure advantages available only to them . The Enron scandal was a classic case in point .
“ While free-enterprise capitalism is inherently virtuous and vitally necessary for democracy and prosperity , crony capitalism is intrinsically unethical and poses a grave threat to our freedom and well being ”
( Mackey , 2012 )
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