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Technology & Innovation

Rules for Making Capitalism Sustainable

Conventional measures of economic performance, such as investment and productivity, are often skewed to favor short-term profits. Here is how capitalism can take a longer view.

What’s the Latest Development?


Common evaluations of economic growth have come to favor short-term profit over long-term investment, says Nancy Folbre, economics professor at the U of Mass, Amherst. An important distinction in understanding the problem is the difference between public and private companies. Executives at public companies depend on the continued investment of a large number of shareholders, constraining their actions to please those who are often more interested in getting a return on their money than the long-term future of the company.

What’s the Big Idea?

Until a viable alternative to capitalism emerges, small changes can be made to the global economic order to make the world a more just and more stable place. One change involves stopping quarterly earnings reports, which drive capricious investment, in favor of yearly reports. Investment banks could sell ‘loyalty securities’ which offer a higher rate of return in exchange for longer-term investing. Assessing the value of ‘stranded assets’, such as unpaid mortgages and the environment, would also contribute to more responsible investing.

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Our idea offers a solution for how the for-profit health insurance provider business model can be innovated on to not only allow for active participation and collaboration by policyholders in the creation of value, generate additional revenue and help finance the cost of health plans, but also provide for the realization of an improved, and invariably more productive alignment of interests and strategies across the entire healthcare value network.

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