Now folks, before we get started, I'm going to come right out and say it: I am a capitalist. I like capitalism. Capitalism is a force for good in the world.
Of course, it doesn't currently have that reputation, and we'll come to that. There are reasons - good reasons - for it.
See, now, a lot of people out there feel that capitalism is to blame for the world's woes. They imagine that if the world were run on fairer principles - socialism being the main contender - then people would have a far better lot in life.
I disagree; socialism, by despising wealth, seeks not to create wealth but to destroy it. Sure, it'd put everyone on an even footing - we'd all be in the most abject form of poverty. Name a single Eastern Bloc country that fared well under socialism. China has only started to thrive as its ruling elite embraced capitalism, albeit to a controlled extent. And if Russia has suffered under capitalism (and nowhere near as much as it suffered under communism) then it is because they have the worst sort of nepotistic crony-capitalism.
But all of this is an argument for another day. What I'd like to concentrate on here is why capitalism has such a bad rap here in the West, where we enjoy a far higher standard of living as a result of...well, it's not due to socialism.
Anyway - I read an article today that summed much of it up. In brief, the article points out - quite rightly - that modern economics is based on the idea that the sole purpose of any business (and here they are referring to publicly floated companies, but the principles seem to be applied by most companies of every sort) is to maximise short-term profit.
Just that. Short-term profit. To take value from the customer and give it to the shareholder. (I had a similar argument with one of my contemporaries during my university days, and it was like beating my head against the wall). Nevermind that the customer might be so royally pissed off that he never buys from you again and tells everyone he knows to avoid you. As long as you get that short-term profit, you're golden. That these short-term profits are bad profits never once enters the equation.
This way of thinking is dinned into economics and business students all over the western world. And the problem it creates is that that is how people see companies under capitalism - existing solely for short-term profit, with no morality or ethics applied. It also means that, by focusing only on short-term profits, your long-term profitability is screwed.
Some people have realised this, and apply a more long-term view to their activities, with the result that, by creating a more touchy-feely aspect to their business, they (hope to, at least) increase their long-term profitability by not only winning new customers but also - and vitally - by retaining their old customers. Sound business sense, of course - but clearly not practised anything like widely enough.
Steve Denning over at Forbes has expressed it far better than I can, so I shall wind up my spiel here. I shall just leave you with a quote from Fred Reicheld, quoted in the linked article:
”Whenever a customer feels misled, mistreated, ignored or coerced, then profits from that customer are bad. Bad profits come from unfair or misleading pricing. Bad profits arise when companies save money by delivering a lousy customer experience. Bad profits are about extracting value from customers, not creating value. When sales reps push overpriced or inappropriate products onto trusting customers, the reps are generating bad profits. When complex pricing schemes dupe customers into paying more than necessary to meet their needs, those pricing schemes are contributing to bad profits.”
Hurrah for common sense.
