Defining a New Type of Capitalism: Social Capitalism
Keeping in mind different definitions of “social capitalism” have been offered over time (see below), and that a unique definition is presented here:
What is Social Capitalism?
Social Capitalism can be defined as a socially minded form of capitalism, where the goal is doing social good, rather than just the accumulation of capital. Thus, it is a utilitarian form of capitalism with a social ends.
What is the social good? The social good is very generally that which does the most good for the most people, without doing harm, with complexities considered.
What Types of Ventures Qualify as Social Capitalism?
There are many ways to direct labor and capital toward the social good that would meet this definition of social capitalism.
Social good can be done via philanthropic organizations or charitable organizations, but it isn’t limited to that.
Generally any type of for-profit or non-profit can make their ends “the social good” (not just in terms of their product, but their business structure, pay structure, what materials they use, what energy sources they use, how they brand themselves, etc).
The social good can even be done via a public programs in the right setting, such as a mixed-market program that uses the private and public market, or by individual workers who chose to direct their labor toward the social good via a government run program or via an industry that uses government subsidies. It can even be done through non-businesses related individual action where labor, but not capital, is exchanged.
If the end goal of the direction of labor and capital is “social benefit”, in a capitalist, or at least partially-free market, system, then it falls under the veil of social capitalism.
The Social Capitalist
If someone elects to direct any portion of labor or capital toward the public good, via the private or public market, they are being a social capitalist.
- If you help an old lady cross the street (your labor) or give a her dollar for groceries (your capital), you are practicing social capitalism via your labor and capital.
- If you help start a government program aimed a the social good, that embraces the market-system, you are being a social capitalist.
- If you invest in a company that offers social benefits and you are being a social capitalist.
- If you structure you business to be more socially responsible (for example: by paying your employees more, having a progressive work environment, or by choosing environmentally friendly deals or infrastructure) then you are being a social capitalist.
- Run a non-profit temp agency that helps people get work, now you’re taking social capitalism to the next level.
- Band together with 100 more entrepreneurs doing the same thing and coordinate… and that is a social capitalist collective in organized action.
If an organization makes a profit and is for all purposes capitalist, but acts toward a social good in its end product, hiring, investing, or production, even if its a traditional for-profit company, its social capitalism. Likewise, any entrepreneur or laborer who works for, with, or invests in the company is a social capitalist.
TIP: The goal here is to realize that socialism in practice (i.e. Lenin, Castro, Mao, etc; not socialism the concept) has lent itself to authoritarianism (largely in part on its instance on the state running everything rather than a focus on the individual, not due to its ideals). However, where socialism in practice has failed spectacularly, different tempered forms of capitalism (from the Gilded Age to the modern Age), while messy, have given us modern America and the west. We can argue ideals all day, but we live in a capitalist society with an electorate comprised of individualists, and it doubtful anyone would be able to magically vote in a perfect utopian state by next Tuesday. In the meantime people are suffering and many think the planet is too. Even if we could have carefully implemented pure socialism tomorrow, what is there to stop an authoritarian from turning it against us and further muddying the concept in the eyes of history? Citizens have always been in a power struggle with Barons, Churches, and Kings and every historic nation i’ve heard of has had a class system (typically with zero mobility outside modern times). It seems hasty to run from Barons to Kings, Kings to Barons, or from either to the Church in an attempt to outrun the ever present class system and economic and political inequality. Where is the voice of those who care deeply about social issues, but don’t feel obligated to solve that problem with a revolution leading to central power and bureaucrats? Social capitalism is a workaround for all of this that says, “you know what, the ends of social justice, equality, liberty, and general happiness are what we care about, so, given the reality of our surroundings, lets leverage the market to create that”. In this way we not only get social justice, but we ensure economic and individual liberty too… what good is social equality if half the voter base is miserable anyway?
Isn’t this just philanthropy or some type of Utopian “Bourgeois Socialism”? Carnegie and many of the greats thought it was the duty of the new rich to be their brother’s keeper, their method for doing so was via philanthropy. Meanwhile, Marx and Engels criticize a number of forms of socialism in their Communist Manifesto, some of these are close to what I describe here, namely “Christian Socialism“, “Utopian Socialism“, and “Bourgeois Socialism” (roughly socialism without a class struggle or political revolution; lifting up the lower-class without abolishing the upper-class). Social capitalism is sort of a mash-up of all these things, but it is not Communism or Socialism in the modern sense really and it isn’t just our grandfather’s philanthropy, it is much less idealistic and much more practical version that says “the class system isn’t so bad as long as their is mobility and a lack of human suffering and actually capitalism has a lot of merits regarding incentive and liberty”. This is simply a common-sense theory, applicable to our current society, accounting for our actual social system, technology, and government… but I do apologize if one was looking for a theory that involved revolution or benevolent patriarchs born to rule over man, this theory is more concerned about social goods than egos, conflict, and drastic evolutions in the mode of production. Its just that I think that balance, not the overthrowing of a class, is a much less aggressive and much more practical answer in general (especially given history).
BOTTOM LINE: Social Capitalism is a practical Utilitarian moral theory of how to direct capital toward the common good via markets as individuals and collectives. It is not Charity specifically, it isn’t socialism per-say, and it is not just capitalism, it is more like an evolved version of Philanthropy, accessible to ALL rich or poor, meant to be embraced by collectives and to provide competition and solutions in the private market. Let us make the word “social” great again by detaching it from the divisive concepts of central planning and big government, those aren’t the ENDS, those are the MEANS, what a social capitalist cares about is the ENDS of equality, liberty, and happiness, not just the MEANS (although certainly means can and should strive to be socially minded and moral too).
Thus, the “millionaire” (today multi-billionaire) is not the only one who gets to play the role of their brother’s keeper like Carnegie predicted, but instead all individuals get to work together by electing to direct their labor and capital toward the social good, each being each other’s keeper.
Ways to Define Social Capitalism
With the above examples and definitions noted, here are other ways to define the term:
- Social Capitalism is an idea, a movement, an ideology, an identity, and a technology. It is an opportunity to be a proud, moral, and socially progressive capitalist that anyone from Pope Francis to Carl Icahn can respect.
- Social Capitalism is when you create a non-profit company that both solves a social issue and makes a profit that can be re-directed back toward the public good. For-profit companies can be socially capitalist entities too, for example Telsa’s focus on collective progress and “green energy solutions” is in the spirit of social captilisim (even though it isn’t non-profit).
- Social Capitalism is when you invest in companies that have a focus on the public good, be it a Google, Apple, or Tesla, or be it a pure non-profit, be it local or global. Here the investor isn’t seeking capital purely for capitals sake, but for a socially responsible end.
- Social Capitalism is not investing in companies who don’t meet your standards, or investing with them but actively letting them know you expect more. Every individual gets to draw their own line, but certainly profiting off something you are morally opposed to without trying to push the company to do better is not the general ideology of a social capitalist. (Ex. a social capitalist that is invested in a company that invests in the Dakota Access Pipeline isn’t morally obligated to pull their investment, but they should voice their concern to the company as an investor… again we are using capitalism to enact positive change, not trying to “punish” capitalists or be in denial about our current need for “less than clean” energy sources).
- Social Capitalism is an ideology of liberty, equality, and justice; it is a Utilitarian philosophy. Liberty because all action is elective, equality because anyone can be a social capitalist and no group is excluded from its benefits, justice because it is moral and ethical to care for the public good, and Utilitarian because its ends are moral-happiness’ for the many.
- Social Capitalism is centered around not-for-profit businesses. This doesn’t mean a profit isn’t made, or that private for-profit businesses can’t participate in social capitalism, or that a social capitalist has to have a business to direct capital or labor toward the common good, it means that profit itself isn’t the goal. See “what is a non-profit?“.
- Social Capitalism is doing the job of a perfect Utopian government, regardless of what the government is actually doing in practice.
- Social Capitalism is giving not only capital and labor to improve the public good, it is giving with it the culture and spirit of social capitalism. The goal isn’t just giving, it is motivating and creating more givers.
- Social Capitalism is creating private non-profit social welfare solutions both as individuals and collectives, using technology to network together the socially minded giants of industry and their common-person counterparts.
- Social Capitalism is knowing there is about $90 trillion worth of assets in America, and the entire federal budget is $3.8 trillion (a tiny fraction of which is discretionary spending for non-military or health public goods); And knowing many Americans are progressively-minded, philanthropy-minded, and/or charity-minded; And knowing people like George Soros, Bill Gates, Warren Buffet, Mark Zuckerberg, and even the Kochs are moral people who are darn good at making money and already have power, networks, and knowhow; And, with those points in mind, it is creating a culture that fills these statistically obvious gaps as a joy of life, rather than as a state-enforced mandate.
- Social Capitalism is banding together in collectives and using technology to network and organize. It isn’t just a grass roots from the ground up idea, it is also a top-down starting with the current giants of industry idea. It is using traditional top-down business models, capital, and investors (using what we know works) and pairing it with more egalitarian business environment ideas born out the silicon valley startups (that have been shown to work too) and paring that with the boots on the ground organizing of paid and volunteer labor. Just like regular capitalism, charity, and philanthropy, just for a unique purpose.
- Social Capitalism is banding together in collectives with such earning power that we pay those tax rates the .0001% do. In this view, it is arguably even doing the lord’s work and perhaps paying the church’s tax rate could be justified in some instances (as who says socially minded Christians, or another religious group, can’t bring the church into this, one may find they are the ideal social capitalists).
- Social Capitalism is setting up businesses in clever ways to enjoy capital gains tax rates and loopholes, it is using star-power, dollars, and manpower to collectively bargain via the private market to push down prices and get great deals.
- Social Capitalism is an alternative to other social forms like democratic socialism, Christian Socialism, and actual socialism, both of which require state involvement. Why spend billions lobbying politicians when a private market solution could be created without being beholden to the whims of government.
- Social Capitalism is an alternative to the traditional ends of capitalism (the accumulation of capital). It doesn’t change the game, it just changes the point of the game from “more for me” to ensuring social welfare, education, public health, and the general common good (which should be the purpose of government, but as we know it isn’t always in practice, it is stepping up and taking on this role ourselves).
Of course for all the things it is, it notably isn’t something new.
People have long given via churches and capitalists have long directed their capital to the public good.
Social capitalism is then just giving a modern name to an old idea. An evolution of philanthropy, charity, and capitalism that can become a religion of sorts. A mindset that embraces America’s love of capitalism, modern networking technology, and wide-felt sentiment toward social responsibility which can be found in most of America’s ideologies. It is a new gospel of wealth, not just for the wealthy, but for those who feel social responsibly.
TIP: Under other definitions, Social Capitalism can be defined as the economics of social markets and the using of social capital, it can also be defined as pertaining to a progressive business environment, it can also be defined as pertaining to things like crowdsourcing. Although I find all of these past definitions of Social Capital and Social Capitalism interesting and worth exploring (see our page on social capital), these are either not the ideas this page is about or are only loosely related. See The Emergence of Social Capitalism: Adaptation or Threat? and The New Definition Of Social Capitalism for other views on what “social capitalism” can mean and has meant to others in the past.
FACT: The father of this idea is to me Andrew Carnegie who laid out a basic form of this concept in his Gospel of Wealth.
The laws of accumulation will be left free; the laws of distribution free. Individualism will continue, but the millionaire will be but a trustee for the poor; intrusted for a season with a great part of the increased wealth of the community, but administering it for the community far better than it could or would have done for itself.
Of such as these the public verdict will then be: “The man who dies thus rich dies disgraced.”
[Self-directed Philanthropy], in my opinion, is the true Gospel concerning Wealth, obedience to which is destined some day to solve the problem of the Rich and the Poor, and to bring ‘ Peace on earth, among men Good-Will.”
– Andrew Carnegie describing how individualism can lead to collective social benefit. Of course in his day there were far less
Comparing Capitalism and Social Capitalism
- If Capitalism is an economic and political system in which a country’s trade and industry are controlled by private owners for profit, rather than by the state….
- … Then Social capitalism is an economic and political system in which a portion of a country’s trade and industry are controlled by private owners, rather than by the state, but in which the goal is not the accumulation of capital for the sake of profit, but the accumulation of capital for the sake of ensuring a better educated, healthier, happier, moral, ethical, and just society.
Social capitalism doesn’t replace the need for government any more than charity replaces the need for public health programs like Medicare. It, simply augments it by filling in gaps with non-profit enterprises created with money amassed by capitalists in the regular market.
Simply, it is a private market-based alternative to socialism for those who want to be more progressive and socially conscious than their government allows for, and it can be done without the pitfalls of central government.
To be clear, social capitalism sits aside capitalism, it does not replace it! In other words, social capitalism is the “capitalist mode of production“, it just has a different goal and value-set than traditional self-interested capitalism.
TIP: One could say, “Where capitalism seeks profit as an end, social capitalism seeks profit as a means”.
TIP: Non-profit means the intention isn’t to make profit, it doesn’t mean the business can’t or doesn’t make a profit.
TIP: The capitalist mode of production is characterized by private ownership of the means of production, extraction of surplus value by the owning class for the purpose of capital accumulation, wage-based labour, and, at least as far as commodities are concerned, being market-based. The only difference is social capitalism implies social benefit as the ends to this cycle, not just individual accumulation of capital for the sake of individual power or wealth as an ends.
What Social Capitalism Isn’t
Social Capitalism is never an excuse to defund a social or economic class, instead it is always an opportunity to lift those classes up. It is never an excuse to deregulate government, instead it is always an attempt to augment government and remove its burden. It is never an excuse to waste money or funnel dark money, it is always an attempt to maximize the effective delivery of a service (which implies conducting good and profitable business). Social Capitalism is never an excuse to price gouge or extort, the focus may be on the ends, but the means matter too.
Perhaps most importantly, Social Capitalism it is never based on propaganda. It is always focused on fact and transparency with its actions philosophically justified, simply explained, and visible to anyone who wants to see them. Social Capitalism is a source of pride, not something shameful that needs to be kept in the dark for fear of persecution.
An example of a social capitalist venture: A great example is a non-profit public option for healthcare and a management service for HSAs (so a private public option and “HSA bank/investment firm”). Sure the government could implement single payer under some future president, sitting alongside a generous GOP HSA plan with assisters provided… but a collective of high-earning Americans could create a non-profit public option that was effective and perhaps even profitable (or rather, taking on that many insurance contracts and managing that many HSAs would easily pull in billions in profit and solve a social issue a the same time!). I’m sure many would willingly pay more into a fund to know that fund was saving the lives of others across the country (especially if other “feel good” perks were tied in, such as an option to pay more to cover even more, reports on the good that has been done, and in return generous policies like annual contracts so people never have to worry about plan drops). Even better if these sorts of things can have the tax benefits associated with charitable contributions. Ideally, these sorts of ventures would become so well oiled that the government’s most economic solution would involve some reliance on it… and it is in this way the ideology can backwards engineer change, rather than trying to force it through the front door before the foundation is built. Adam Smith’s capitalism has brought industrialization and wealth to nations, Carnegie gave us the gospel, now we need to collectively and purposefully bring these two concepts together, not just as a responsibility of some barons, but as a mission statement of all those who place importance on not only capital, but on social responsibility.
Other ideas: Collectively buying unused homes and buildings creating a private market solution to public housing. Creating alternative public education programs, bringing an upper-class education to all neighborhoods rich and poor (teaching them about business, taxes, investments, etc). Offering unique and non-predatory loans aimed at helping people afford things like installations of solar energy. Offering asset management services to other social capitalists, creating socially responsible funds that people can direct their HSA and 401k/IRA dollars to.
NOTE: The above is the gist, there is as much room to expand ideas related to social capitalism as there is room to discuss all the aspects of capitalism and its effects.