Finding a Fix for Capitalism's Failures

Over its roughly 100 year history, market capitalism has undoubtedly improved many millions of lives through increasing prosperity. But there is also a growing awareness that capitalism's flaws are becoming increasingly exposed.

These shortcoming were explored in recent research by Harvard Business School professor Joseph Bower and and in several panel discussions at the School's centennial business summit last fall.

Bower's team asked dozens of business leaders and academics around the world to look forward several decades and identify threats to the market capitalism system. Themes that repeated:

• Inequities in the distribution of wealth and power.
• Environmental challenges associated with economic growth.
• The inability of world governments to confront these issues, as well as the problems of worker migration and protectionism.

The panel's makeup was impressive: Lawrence Summers, former Harvard president (and soon-to-be-named White House economic adviser); Thierry Breton, France's Former Minister of Economy and now a senior lecturer at HBS; and Sir Ronald M. Cohen, chairman of Portland Capital LLP, Portland Trust, Bridges Ventures.

The panel agreed on the value of capitalism, but suggested a number of adjustments:

• The capitalist system must help to support a safety net for workers including the areas of pensions, insurance and training.
• Social entrepreneurship is coming of age, but must be developed into a formal profession and be targeted at the world's greatest problems.
• In addition to social entrepreneurship, broad-reaching public policies in education and health care are needed, with the support of business leaders.
• There are many ways businesses can address social problems, while still satisfying their own self-interest. These include employing the disadvantaged and pursuing environmental initiatives.

What do you think? How must our capitalist system and institutitions change to be effective in the 21st century?