If the dilemma faced by mankind were to be summarised in just a few figures, these would make a good start. First: 16.82. That’s how many degrees Celsius the ­global-mean surface air temperature rose to in August 2023; the highest ever registered and around 1.5 ­degrees higher than the pre-industrial period (1850-1900).

Next: 2,500 billion. That’s how many Swedish Krona the world’s five biggest oil companies made in profits in 2022, which was double that of the previous year. Investments in new extractions of oil and gas in 2023 are predicted to approach 6,000 billion SEK the highest figure since 2015, according to the International Energy Agency (IEA).

Ramping up production

In the pursuit of bigger profits, the oil and gas ­majors are ramping up production rather than investing in renewable energy sources that are known to be less profitable. By the standards of modern capitalism, the oil majors’ advances make an amazing success story.

The ExxonMobil share price has risen by 250% since the autumn of 2020, and in September 2023 it reached an all-time high. ExxonMobil CEO Darren Woods’ compensation rose from 175 million SEK in 2020 to over 400 million SEK in 2022. The shares he received as a bonus during his six years as CEO are now worth 1.8 billion SEK in total. The signal the system is sending to Darren Woods and others in similar positions is: keep up the good work! So expect production and sales of fossil fuels to continue to increase.

The problem of course is that ExxonMobil’s income state­ment and share price only tell one side of the story. At the same time as this hyper-effective profit-making machine enriches shareholders, it’s also indirectly gene­rating waste in the form of huge costs, both human and economic.

The extreme weather events of 2023 make the looming climate catastrophe caused by rising CO2 emissions – which ­researchers have long been warning us about – seem less like a distant dystopia and more like an acute situation in the here and now. And ExxonMobil’s share of the bill for the costs is precisely zero. The pro­fits flow to the company’s owners while the costs are ­incurred by current and future generations of people.

Ultimately, this inherent conflict can be seen as a question of priorities: what’s more important – profit or the survival of humanity? For more than 50 years now, the answer has been obvious: ­profit!

What’s more important – profit or the survival of humanity? For more than 50 years now, the answer has been obvious: ­profit!

In recent years, however, many have started to question the fairness of this choice for what seems to be good reasons. To understand where capitalism stands today and where it is heading, we need to rewind the tape.

There are two key years to keep in mind, the first of which is 1970. That was when an ­essay written by the American economist Milton Friedman was ­published in New York Times Magazine. The 18,000-characters-long essay exudes a sense of frustration. Friedman questioned the prevailing doctrine at the time of the need for businesses to exercise social responsibility.

A global revolution

He dismissed it as nonsense, making his view clear in the essay title: “The social responsibility of business is to increase its profits.” It would mark the start of a global revolution in the business world. The singular purpose of a business was to enrich its owners. Shareholder capitalism was born.

In its statement on the purpose of a corporation, the powerful Business Roundtable, an ­association of the leading companies in the United States, declared that corporations ­existed to serve their owners. The new dogma was ­personified by the legendary Jack Welch, CEO of General Electric between 1980 and 2001. His business principles included continuous restructuring ­processes, relocation of production to low-wage ­countries, and a crass staff policy of firing the bottom 10% of employees deemed to be low performers every year.

The core of this new doctrine is perhaps best captured in the character of Gordon Gekko, played by Michael Douglas in the film Wall Street from 1987. “Greed, for lack of a better word, is good. Greed works. Greed ­clarifies, cuts through, and captures the essence of the evolutionary spirit.” The film’s director Oliver Stone thought that the film would serve as a warning to the ­upcoming generation. Instead, it became arguably the most ­successful recruitment campaign ever for the ­finance industry. Everyone wanted to be like Gordon Gekko and Jack Welch, who in 1999 was hailed by Fortune as “CEO of the Century.”

To get to the next key year, we need to fast forward 49 years to 2019, the year when the Business Roundtable adopted a new version of its statement on the purpose of a corporation. This one contained a dramatic change: the wording about shareholder value was now replaced by a statement about how the company would benefit all stakeholders: customers, employees, suppliers, communities and shareholders. The new statement was signed by 181 business leaders, including Amazon’s Jeff Bezos and Apple’s Tim Cook.

A model under strain

Later the same year, the Financial Times, the ­favoured newspaper of the global financial ­industry, launched a large-scale campaign called “Capitalism: time for a reset.” The editor at the time, Lionel Barber, wrote: “The liberal capitalist ­model has delivered peace, prosperity and technological progress for the past 50 years, dramatically reducing ­poverty and raising living standards around the world. But in the decade since the global ­financial crisis, the model has come under strain, particularly the focus on maximising profit and shareholder value. These principles of good business are necessary but not sufficient. It’s time for a reset.”

This marked an extraordinary U-turn. What had happened? According to the reputable business news­paper The Economist, the answer was simple: Karl Marx was right.

According to the reputable business news­paper The Economist, the answer was simple: Karl Marx was right.

In an analysis performed back in 2018, the news­paper concluded that many of the renowned philosopher’s predictions about capitalism had actually come true. According to Marx, capitalism is in ­essence a system of rent-seeking ­whereby a few can accrue vast profits at others’ expense without contributing to ­society. He also believed that capitalism tended to create monopolies, that it would inevitably reach the far corners of the world and that workers would be the losers through ­being forced to move from one insecure job to the next.

Half of the companies in the 2003 ­ranking of the world’s top ten companies – Apple, Google, Amazon, Nvidia and Meta – hold monopolistic ­positions in their ­respective markets. The tech ­giants’ dominance has been ­compared to that of America’s so-called robber barons of the late 19th century. The gig economy has created an army of workers in a weak negotiating position.

The share of value created in companies that goes to the employees has ­steadily declined in the Western world since the 1970s. According to the International Monetary Fund, a major contributory factor to the high rate of inflation in the past two years is that companies took the opportunity to increase their profits.

Another side effect that has been linked to the shareholder paradigm is increased inequality. In 1970, the CEO of a large US company earned the equivalent of 24 workers; by 2021 this figure had risen to 399. Whereas wages for ordinary people rose in the post-war decades, over the past 15 years they have stagnated, but for those at the top they have risen. Financial Times columnist Martin Wolf has called the system that enriches the few rather than the many “rigged capitalism.”

A somewhat bizarre effect of the focus on share prices is that large companies increasingly opted to spend their money on buying back their own shares, a short-term manoeuvre, rather than invest in the future. And this happened at the same time as the post-financial crisis economy was suffering from a lack of investments. The 2008 financial crisis, caused by profit-driven and risk-averse banks, had political as well as economic consequences. Populism has become widespread in both the United States and Europe. As former Trump strategist Steve Bannon put it: “The legacy of the financial crisis is Donald J. Trump.”

Like powerful AI

In a global survey ­conducted in 2020 by PR consultancy Edelman, 57% of respondents agreed with the statement: “Capitalism as it ­exists today does more harm than good in the world.” Shareholder capitalism can be ­described as a powerful form of AI that programmes companies to seek ­increasingly larger profits without considering the ­consequences for society.

The time seems to have come for a reset, and attempts to achieve that are now well underway.

The Financial Times is not the only one to put its foot down; environmental, social and governance (ESG) investing and impact investing are concepts which any business leader with an instinct for self-preservation has been throwing around in recent years.

If the industrialisation of the late 1800s and ­early 1900s was Capitalism 1.0, of the postwar years Capitalism 2.0 and of the Jack Welch era Capitalism 3.0, perhaps the search for Capitalism 4.0 is best symbolised by Larry Fink, head of Blackrock, the world’s largest ­investment manager with ­assets of over 9,000 billion USD (around 100,000 ­billion SEK or ­almost 20 times Sweden’s GDP).

Already in 2016, he encouraged companies where Blackrock held shares to make their businesses environmentally and ­socially more sustai­nable. His interest in the issue did not originate in a wish to save the world, but rather to earn money. Many of the world’s pension fund managers began doing the maths years ago. With an investment horizon of, in many cases, 30 to 50 years, it would be an advantage if the planet was habitable when pensioners are due to get their money. In other words, offering investments with a climate-friendly profile was a major business opportunity. In his annual letter to CEOs in 2020, Larry Fink wrote that “climate change has become a defining factor in companies’ long-term prospects.”

Many have followed suit

Many other financial actors and big companies have followed suit. According to the consultancy McKinsey, 90% of the biggest US companies now publish ESG reports. There has been a surge in the number of funds claiming to invest ­ethically and climate-consciously. Companies have signed undertakings to ­reduce their CO2 emissions. The goal of ­becoming “climate neutral by the year X” is as much a matter of course in ­annual reports as are profit forecasts.

A total of 35,000 billion USD is ­estimated to be invested with some consideration given to either the climate or corporate social responsibility. After Russia’s invasion of Ukraine, further requirements were placed on companies to pull out of the country, whatever the cost. Companies that failed to respond fast enough faced customer protests and boycotts. The largest US companies mentioned ESG an average of nine times in their 2022 quarterly ­reports to investors, ­compared with once in 2017.

This all sounds promising, but there’s a problem: who decides what it takes for a company to be deemed sustainable?

This all sounds promising, but there’s a problem: who decides what it takes for a company to be deemed sustainable? And what incentives do companies actually have to set ambitious goals if no one forces them to do so? ESG barely managed to establish itself in the business world before it became a dirty word. Blackrock and Larry Find have become the target of ferocious attacks, not least from the conservative right, which believes that ESG stands for “woke capitalism,” an invention of leftist potheads to advance their agenda.

Among the most vocal critics is the US presidential candidate Ron de Santis, and among those heading the campaign is the world’s richest man, Elon Musk, who called ESG a “bluff” and on which he commented on X, f­­ormerly known as Twitter – which he now owns – as ­follows: “The woke mind virus is either ­defeated or nothing else matters.”