What’s next for capitalism? The forces shaping future economic systems in the 2020s
Increasing urgency of the climate crisis, widening economic inequalities, and the Covid-19 pandemic may together push the future of capitalism towards new directions.
January 19, 2021, Gökce Sandal
The Covid-19 pandemic, the increasing concentration of wealth, and climate change are shaping the global economy in new ways. The pandemic exposed the vulnerabilities of global supply chains and magnified economic inequalities, adding to the public's growing distrust with capitalism. On the other hand, the idea of economic growth at the expense of the planet is under increasing scrutiny. As populations, particularly in the West, begin to demand businesses and governments to define their success in new metrics other than financial growth and economic prosperity, new routes for future economic systems are starting to take shape.
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COVID-19 EMPHASISES LOCAL NETWORKS AND SELF-SUFFICIENCY
The pandemic has affected the global economic order in multiple ways, most notably by causing disruptions in global supply chains and emphasising the need for resilience in local networks. With countries shut down and global supply chains broken, many governments shifted their focus to local resources to secure a self-sufficient economy and national security of supply.
Meanwhile, as international travel and big social gatherings took a step back, local networks have been energised in new ways with people turning to their local communities to support their elderly neighbours and businesses adjusting their operations in innovative ways to support their community.
The pandemic’s acceleration of the hyperlocalisation trend has also spiked more socially conscious consumption patterns, with an increasing focus on supporting small businesses that have been hit the hardest by the pandemic. For instance, a recent survey by Mastercard reveals that 75% of the shoppers in the US were planning to spend on small and local businesses in the 2020 holiday season.
As the world gradually re-opens, it is possible that people will nevertheless continue shifting their spending power to supporting local businesses and communities, where they can see their impact the most.
In the future, these developments may, for example, prompt some businesses to focus primarily on domestic or only the neighbouring markets to reduce global supply chain-related risks. Depending on the industry, it may also be more feasible for some smaller businesses to prioritise their resources and marketing efforts on local markets, where they can have the most impact and see the most return on investment.
SCEPTICISM TOWARDS TECH GIANTS CONTINUES TO GROW
With one of the biggest global economic downturns in recent history, the year 2020 has made the interconnections between business, society, technology, capitalism and growth perhaps more visible than ever.
Already before the pandemic, the increase in the near-monopoly power held by tech giants and their anti-competitive behaviour had been raising increasing concerns regarding both free-market principles and democratic procedures.
As the pandemic’s impacts were felt unevenly across populations, big businesses, and tech giants in particular, came under further public scrutiny. Big tech mostly profited from the accelerated digitalisation during the pandemic while the rest of the economy receded, leading to heightened discussions on the widening concentration of wealth and power in the hands of few companies.
As governments take increasing measures to regulate big tech and people become more conscious of their right to their personal data, the next decades ahead will have new implications for the increasingly data-centric economic model.
In the future, values such as transparency, privacy, ethical tech and giving back to the society are set to become more important as capitalism transforms to deliver more positive environmental and social impacts alongside profits.
CAPITALISM AND GROWTH: HOW SUSTAINABLE IS IT?
The increasing urgency of the climate crisis highlights the unsustainability of the linear economy of ‘take-make-use-dispose’. As more consumers reassess the feasibility of consuming ever more stuff and pivot to more mindful consumption habits, the narrative of continuous economic growth is also increasingly being questioned.
With increasing awareness of the unsustainability of the fast-production and consumption of goods, the standard metrics of success within the current economic model are also being redefined. In the future, in addition to financial growth and economic prosperity, the success of governments, organisations, and businesses will be increasingly measured by carbon footprint and positive environmental impact.
For instance, the degrowth movement even calls upon advanced countries to embrace zero or even negative GDP growth to be sustainable. This, however, would be challenging in many aspects, ranging from falling living standards to weakened geopolitical positioning of the given country and problems in democracy, given that a poorer population’s votes could essentially be bought by promising wealth in the future.
In addition to circular economy, another increasingly pronounced alternative is stakeholder capitalism, where the needs of all stakeholders, including the environment and local communities, are served by corporations and supported by regulations.
THE FUTURE OF CAPITALISM, UNCERTAINTIES AND GEOECONOMIC SHIFTS
Together, the driving forces mapped out above are steering the development towards a recentring of the current capitalist model around new definitions, new values and new metrics for organisational success.
As sustainable profitability becomes increasingly mainstream in the future, countries and organisations will develop additional success metrics centred around the planet, society, and employees. Centring organisational values around these metrics are also likely to increase profitability in the long term, as Western consumers increasingly align their spending behaviour with the values they hold.
With the advance of technology enabling local production of goods, the shift to local communities accelerated by the pandemic and the climate crisis, the next decade ahead may be characterised by a hyperlocalisation and a re-found sense of community.
On the other hand, how the Third World will be affected by the increasingly localised production remains to be seen. For instance, the middle class in China and India have grown significantly by selling cheap goods and services to Western countries, and many other developing countries likewise saw rapid GDP growth and pulled considerable numbers of their population out of extreme poverty.
Thus, in the scenario of hyperlocalisation, significant shifts in the current geo-economical order are to be expected, which will be shaped by the future directions taken by governments, organisations and businesses, and the evolving consumption behaviours of consumers.
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KEY TRENDS SHAPING THE FUTURE OF CAPITALISM
To write this article, Futures Platform’s futurists have collected the data from different phenomena and studied linkages between them. Here are the three colliding phenomena that are shaping the future of capitalism and the global economy.
Capitalism in Crisis
Many economic experts argue that the prevailing capitalist system is heading towards a crisis. As was the case in the 1930s and 1970s, a restart with new principles is needed. The current economic model is threatened by various new developments, such as the rise of protectionism, slowbalisation, virtual currencies, climate change, arms races and new wars, supranational companies gaining more power than states when it comes to economic policy, and the challenges that automation, robotisation and artificial intelligence pose for production methods and locations.
Hyperlocalisation means the desire to produce everything locally and by oneself, be it food, services, consumer goods, news, culture, or energy. More and more people are looking for chances to fulfil their daily needs with locally produced alternatives that serve the values and goals they deem important.
In the future, a growing portion of people will experience the direct effects of climate change with the increase of extreme weather and natural phenomena, causing negative psychological impacts. Increasing climate awareness and the related anxiety has also led to new practices such as voluntary childlessness to avoid overpopulation and flight shame, due to which some people have stopped flying or are hiding the fact that they are flying out of guilt.
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