Defining a New Type of Capitalism: Social Capitalism
Several definitions of “social capitalism” exist, but I believe this to be the most useful, as it describes a practical mid-way point between “late-form capitalism” and “socialism” that looks more like well-oiled free-market social democracy and less like the political, economic, and social inequality that sparks revolutions.
What is Social Capitalism?
Social Capitalism can be defined as a socially minded form of capitalism, where the goal is making positive social improvements, rather than focusing entirely on accumulating of capital. It is a utilitarian form of capitalism with a social purpose.
Social Theory? This is a social theory, a socioeconomic theory that uses the term Social Capitalism. I didn’t like the other definitions of the term… so I redefined it. It is like Social Liberal or Social Democracy, in fact it is a Capitalist system designed with those sort of “social morals”.
Utilitarian? It is word play, as this system is both practical and “that which does the most good for the most people” given the circumstances. See utilitarianism.
What is a social benefit? A social benefit is an action that does the most good for the most people, without doing harm, with complexities considered.
Historic Materialism: If, in Marxian terms we are in an era of “late form capitalism”, then it is in a capitalists interest to find a next phase which doesn’t spell their distinction. Sure, we could try going backwards to the 1900’s or further via some Gilded Age Mises-type logic, but that is sort of an insanely idealist game-plan. Anyway, others may suggest it, I won’t be. Learn more about Marx.
What Types of Ventures Qualify as Social Capitalism?
There are many ways to direct labor and capital toward the positive social outcomes that meet this definition of social capitalism.
A social benefit can come via philanthropic organizations or charitable organizations, but it isn’t limited to that.
Any for-profit or non-profit can make their ends into a “positive social outcome,” not just in terms of their product, but their business structure, pay structure, the materials, and energy sources they use, how they brand themselves, etc.
A social benefit can be produced by public programs in the right setting. It can be a mixed-market program that uses the private and public market, or it can be individual workers who chose to direct their labor toward a social benefit using a government run program or 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 a 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 a social capitalist.
- If you help an old lady cross the street (your labor) or give her a dollar for groceries (your capital), you are practicing social capitalism via your labor and capital.
- If you help start a government program aimed at increasing social benefits which embraces the market system, you are a social capitalist.
- If you invest in a company that offers social benefits and you are a social capitalist.
- If you structure your 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 a social capitalist.
- If you run a non-profit temp agency that helps people get work, you are taking social capitalism to the next level.
- If you band together with 100 more entrepreneurs doing the same thing and coordinate, you produce a social capitalist collective in organized action.
If an organization makes a profit and is for all purposes capitalist, but acts toward a social benefit in its end product, hiring, investing, or production, even if its a traditional for-profit company, it’s 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 under Lenin, Castro, Mao, etc. is different from the concept of socialism. Socialism, as realized in our history, has lent itself to authoritarianism because of its focus on the state running everything rather than the individual. However, where socialism in practice has failed spectacularly, different tempered forms of capitalism (from the Gilded Age to the Modern Age) have given us modern America and the West. We can argue about ideas all day, but we live in a capitalist society with an electorate comprised of individualists, and it is doubtful that anyone would be able to create 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 nation I’ve heard of has had a class system, typically with no class 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 that says, “the ends of social justice, equality, liberty, and general happiness are what we care about. Given the reality of our surroundings, let’s 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?
Isn’t this just philanthropy or Utopian “Bourgeois Socialism?” Carnegie and many of the powerful industrialists 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 criticized some forms of socialism in their Communist Manifesto. Some of these were close to what I describe here, namely “Christian Socialism,” “Utopian Socialism,” and “Bourgeois Socialism.” This last form was socialism without a class struggle or political revolution. It improved the life of the lower-class without abolishing the upper-class. Social capitalism is a combination of all these, but it is not Communism or Socialism in the modern sense. It isn’t just old-style philanthropy; it is much less idealistic and much more practical version. It says, “the class system isn’t so bad as long as it includes mobility and a lack of human suffering. Capitalism has a lot of merits regarding incentive and liberty.” This is a common-sense theory, applicable to our current society, accounting for our actual social system, technology, and government. I do apologize if readers were looking for a theory that involved revolution or benevolent patriarchs born to rule over people; this theory is more concerned with social benefit than with egos, conflict, and drastic evolutions in the mode of production. Balance, not the overthrowing of a class, is a more practical answer in general.
THE BOTTOM LINE: Social Capitalism is a practical and utilitarian moral theory concerning directing capital toward the common benefit 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. Social capitalism is concerned with the goals of equality, liberty, and happiness, not just the way to move toward those goals, although the means should strive to be socially minded and ethical too.
Thus, the “millionaire” or today multi-billionaire, is not the master who knows what is best for others and plays the role of their brother’s keeper as Carnegie predicted. Instead, all individuals work together by electing to direct their labor and capital toward the social benefit, each being the 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, ideology, an identity, and 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, Tesla’s focus on collective progress and “green energy solutions” is in the spirit of social capitalism even though it isn’t non-profit.
- Social Capitalism is when you invest in companies that have a focus on the public, whether it is Google, Apple, or Tesla, or a non-profit. It may be local or global. The investor isn’t seeking capital purely for money’s 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 line, but profiting from something you are morally opposed to without trying to push the company to do better is not the general ideology of a social capitalist. Is a social capitalist who invests in a company that invests in the Dakota Access Pipeline morally obligated to withdraw their investment? Perhaps they should voice their concern to the company as an investor instead? We need to consider 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 ethically-based happiness for the many.
- Social Capitalism is often seen as being centered around not-for-profit businesses. Profit may be made; private for-profit businesses may participate in social capitalism. A social capitalist has to have a business to direct capital or labor toward a common benefit. Profit itself isn’t the goal. See “what is a non-profit?“
- Social Capitalism has the potential to improve people’s lives, regardless of what the government is doing in practice.
- Social Capitalism is giving not only capital and labor to promote the public good; it is giving the culture and spirit of social capitalism with it. The goal isn’t 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 with the socially minded giants of industry and their common-person counterparts.
- Social Capitalists know America has about $90 trillion worth of assets while the entire federal budget is $3.8 trillion, a tiny fraction of which is discretionary spending for non-military or health public goods. Many Americans are progressively-minded, philanthropy-minded, and charitable. People like George Soros, Bill and Melinda Gates, Warren Buffet, Mark Zuckerberg and Pricilla Chan, and the Kochs are people who are good at making money and already have power, networks, and know-how to influence the social structure around them. We need to create a culture that fills statistically obvious gaps in the quality of life, rather than as state-enforced mandates.
- Social Capitalism bands people together in collectives and uses technology to network and organize. It isn’t a grassroots from the ground-up idea. It is also a top-down concept that starts with the leaders of industry. It uses traditional top-down business models, capital, and investors. Social Capitalism starts with accepted business practices that we know work and pairs them with newer, more egalitarian business ideas born out the silicon valley startups. The new business models have been shown to work too. Our tested Capitalist ideas can be paired with the boots on the ground organizing of paid and volunteer labor like Capitalism, charity, and philanthropy, but for a unique purpose.
- Social Capitalism bands collectives together with earning power to pay the tax rates the .0001%.
- 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 on 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, both of which require state involvement. Why spend billions of dollars lobbying politicians when a private market solution would not be as 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. In an ideal world, this would be the purpose of government, but, as we know, it isn’t always in practice.
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 benefit.
Social capitalism gives a modern name to an old idea, an evolution of philanthropy, charity, and capitalism that has great potential to embrace America’s love of capitalism, modern networking technology, and the general 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 socially responsible.
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 or 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.
Comparing Capitalism and Social Capitalism
- 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.
- 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. The goal is not the accumulation of wealth for the sake of profit, but the accumulation of capital in the interest of ensuring a better educated, healthier, happier, 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 augments it by filling in gaps with non-profit enterprises created with money amassed by capitalists in the regular market. 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 a central government.
Social Capitalism is Capitalism; it does not replace it. Social Capitalism is the “capitalist mode of production.” It has a different goal and value-set than traditional self-interested capitalism.
TIP: One could say, “Where capitalism seeks to profit as an end, social capitalism seeks to profit as a means.”
TIP: Non-profit means the intention of the company isn’t to make a profit; it doesn’t prevent the people involved from making 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 labor, and, at least as far as commodities are concerned, being market-based. The only difference is that social capitalism implies social benefit as the end of the cycle rather than the individual accumulation of capital for the sake of individual power or wealth.
What Social Capitalism Isn’t
Social Capitalism is never an excuse to defund a social or economic class. Instead, it presents an opportunity to improve people’s lives. 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.
A potential Social Capitalist venture: A great example is a non-profit public option for healthcare and a management service for HSAs in the form of a mixed private and public option and “HSA bank/investment firm.” The government might implement single payer insurance under some future president, sitting alongside a generous GOP HSA plan with assisters provided. However, a collective of high-earning Americans could create a non-profit, public option that could be effective and perhaps even profitable. Taking on many insurance contracts and managing many HSAs could potentially pull in billions in profit and solve a social issue at the same time. I’m sure many people 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 included. These could be things like an option to pay more to cover even more, reports on the good that has been done, and generous policies like annual contracts, so people never have to worry about being dropped by a plan. Such a plan might offer 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. 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 of wealth; now we need to collectively and purposefully bring these two concepts together, as a mission statement of all those who place importance on not only capital but social responsibility.
NOTE: 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.