Gus Speth states: "The fundamental questions thus are about transforming capitalism as we know it. Can it be done? If so, how? And if not, what then?"
I have crafted a solution to transform capitalism, called the PROFIT Act. That stands for the Productivity, Responsibility, Opportunity FIT Act. The legislative act would create a matching of incentive and penalty to create responsible profits. The fund, a small percentage of an organization's profits, would accrue for all employees, to be drawn upon for retirement benefits. It would be an augmenting fund, in addition to Social Security and other retirement funds.
The catch, and how it transforms capitalism, is that the fund would be reduced to the extent that the company settles or has a judgment against it for a tort. Currently, if a company commits a tort, only the corporate coffers or the corporate officers can be held liable. The PROFIT Act fund would be accessible to augment the traditional funds.
Consider an example of how the PROFIT Act can transform capitalism. A janitor sweeps mercury off a table into a shop-floor drain, which flows into a lake. He does this daily, week after week, year after year. Twenty years down the road, neighbors living by the lake begin to die from the poisoning. Currently, the questions get asked, whether you can hold the corporate officer liable if he walked by the shop floor around that time each day. Currently, capitalism overlooks the value of all the other employees who also may see this janitor's actions. Whistleblowing laws aim to protect individuals, but provide inadequate incentive and protection.
The PROFIT Act aligns people with responsible profits, and is beneficial for corporations. Currently, the rising insurance and litigation costs are hurting the bottom line. The PROFIT Act reflects a shift in cost, from those associated with harmful behavior, to an employee benefit, the long-term retirement benefit.
This idea has been shared with people in all walks of life, and they all find that it makes sense. It couples a benefit with a responsibility in a way that allows the free market to act more responsibly.
A solution like the PROFIT Act is only one of many that can be crafted based on a new insight I have had into former dean of Yale Law School, and now federal judge, Guido Calabresi's famous framework. I have written a book to explain how the greater significance of his framework has been missed. Moreover, I go beyond a description of a tool that I term the Calabresi theorem, which shows how to craft balanced legislation, to show how the tools of law and economics fit into a broader understanding of social institutions in which capitalism plays a valuable role in altruism.
I encourage people to consider the PROFIT Act, the new Calabresi theorem and the discovery I have made about altruism as necessary to transforming capitalism, and to achieve the ideals, of life, liberty, the pursuit of happiness and equality: slightly, rearranged, those spell, acronymistically, HOPE FOR ALL (Happiness Of Pursuit, Equality FOR A Liberated Life).
Oct 27 2008 - 9:40am