Social capitalism is an approach that prioritises people’s welfare over profit. It’s capitalism with a focus on improved social outcomes and more environmental sustainability. But can capitalism be adapted to put people and planet before profit? 

We continue our series exploring alternative economic models. 

Capitalism is our dominant economic system, based on the private ownership of the means of production and their operation for profit. The predominant aim of capitalism is to maximise financial profit for the benefit of private owners.   

Capitalism has been widely criticised as unjust, unsustainable, and unfair, as it has led to vast wealth inequalities and environmental destruction. But it remains the most successful economic system worldwide.  So, is there a way to do capitalism “better”? 

Social capitalism aims to do just that.  

What is social capitalism?

Social capitalism is like classic capitalism, but with an emphasis on improving social outcomes. 

For social capitalism the goal is to make social improvements that benefit people and wider society. It departs from classic capitalism’s sole aim to accumulate as much capital as possible.  

Social capitalism is when an individual or company direct any portion of labour or capital toward the public good via the private or public market.  

A business engages in social capitalism when it 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 it’s a traditional for-profit company. 

Social capitalism is not a top-down regulation of capitalism from governments seeking to manage or regulate industries – rather it’s a deliberate choice made by private actors to promote equality, fairness, and justice through their actions. 

In this way social capitalism is a value system able to improve societal and environmental outcomes for the betterment of everyone, including future generations. 

Social capitalism is any capitalist system that is structured with the ideology of liberty, equality, and justice. Instead of aiming to accumulate only economic forms of capital, it explicitly values all forms of capital, including social capital, human capital, and natural capital. Instead of maximising profit for the 1%, it involves profit maximisation for all of society. This eliminates externalities and stops labour, and therefore humans, from being treated as a commodity.”

Institute for Social Capital

Valuing Social Capital  

Under classic capitalism the factors of production are land, labour, and capital.  

Social capital is a set of shared values or resources that allows individuals to work together in a group to effectively achieve a common purpose.  

Examples of social capital: 

• Sharing information: Telling a neighbour about a new restaurant, or coworkers discussing the weather. 

• Providing assistance: Returning a lost item to a stranger, or lending something without a contract.  

• Leveraging resources: Asking a friend to borrow their car, or learning about a job opportunity from a coworker.  

Whilst classic capitalism often relies on social capital to function, it does not place value in social capital itself.  

Social capitalists invest in building a network of relationships and leveraging resources, as they believe that social capital is an important element in an organisation or individual’s success. 

Examples of Social Capitalism 

• Non-profit companies working to solve social or environmental issues, or redirecting profit back to the public good – such as investing in education and healthcare. 

• For-profit companies that choose improved social and or environmental outcomes even when it doesn’t maximise profit. And for-profit companies that redirect some profit back to the public.  

• Investment in and working for companies that are socially and or environmentally responsible, or at least those that do not create social or environmental problems or exploit these for profit. 

• Individuals actively seeking out and purchasing products from companies that are socially and environmentally ethical and sharing information with others to encourage them to purchase goods from these ethical companies. 

• Individuals boycotting unethical companies and actively sharing information about unethical companies to discourage others from purchasing products from them. 

• Replacing short-term goals that result in exploitation with long-term goals that support investment, growth, and sustainable prosperity. 

Criticisms

Social capitalism has been widely criticised, mostly for its definition’s ambiguity and variability. 

It is largely an academic exercise and may work in theory but requires an altruistic approach to capitalism that so far has only occurred rarely in practice. It also requires dramatic cultural and behavioural shifts amongst the public and industry leaders that is unlikely to occur without clear incentives. 

Some people may choose to participate in social capitalism but there is nothing to stop other corporations more motivated by profit to continue their environmentally destructive practices and outcompeting more “socially capitalist” businesses. Indeed, it’s more important for governments to introduce stricter regulation to reduce environmental impacts and improve sustainability in industry and amongst consumers.