(MENAFN - Daily Outlook Afghanistan) In 2015, theinternational community launched a renewed effort to tackle collective globalchallenges under the auspices of the United Nations Sustainable DevelopmentAgenda and the Framework Convention on Climate Change (COP21). But after aninitial flurry of interest, the progress that has been made toward achievingthe Sustainable Development Goals and tackling climate change has tapered off.Around the world, many seem to have developed an allergy to increasingly starkwarnings from the UN and other bodies about accelerating species extinctions,ecosystem collapse, and global warming.
Now is not the time todebate whether progress toward global goals is a matter of the glass beinghalf-full or half-empty. Soon, there will no longer even be a glass to worryabout. Despite global news coverage of civic and political action to addressour mounting crises, the underlying trends are extremely frightening. In recentmonths, the Intergovernmental Panel on Climate Change (IPCC) has marshaledoverwhelming evidence to show that the effects of global warming in excess of1.5oC above preindustrial levels will be devastating for billions of peoplearound the world.
A recent report fromthe Intergovernmental Science-Policy Platform on Biodiversity and EcosystemServices serves as yet another wake-up call. Human activities, the reportconcludes, have put an unprecedented one million species at risk of extinction.The oceans that supply food and livelihoods to more than four billion peopleare under threat. If we do not take immediate action to reverse these trends,the challenges of playing catch-up later will probably be insurmountable.
For decades, most ofthe major economies have relied on a form of capitalism that deliveredconsiderable benefits. But we are now witnessing the implications of the Nobellaureate economist Milton Friedman's famous mantra: 'the social responsibilityof business is to increase its profits. A corporate-governance model based onmaximizing shareholder value has long dominated our economic system, shapingour accounting frameworks, tax regimes, and business-school curricula.
But we have nowreached a point where leading economic thinkers are questioning thefundamentals of the prevailing system. Paul Collier's The Future of Capitalism,Joseph E. Stiglitz's People, Power, and Profits, and Raghuram G. Rajan's TheThird Pillar all offer comprehensive assessments of the problem. A capitalistsystem that is disconnected from most people and unmoored from the territoriesin which it operates is no longer acceptable. Systems do not work in isolation.Eventually, reality asserts itself: global trade tensions reemerge, populistnationalists win power, and natural disasters grow in frequency and intensity.
Simply put, ourapproach to capitalism has exacerbated previously manageable social andenvironmental problems and sowed deep social divisions. The explosion ininequality and the laser focus on short-term results (that is, quarterlyearnings) are just two symptoms of a broken system.
To maintain awell-functioning market economy that supports all stakeholders' interestsrequires us to shift our focus to the long term. In some ways, this is alreadyhappening. But we need to channel the positive efforts underway into aconcerted campaign to push systemic reforms past the tipping point. Only thenwill we have achieved a feedback loop that rewards long-term, sustainableapproaches to business.
Most important, wemust not succumb to complacency. Short-term tensions over trade and otherissues will inevitably capture the attention of people and governments. But topermit the latest headlines to distract us from impending environmental andsocial catastrophes is to miss the forest for the trees.
Having said that, theimpetus for driving positive change cannot be based on fear. The looming crisesare both real and terrifying, but repeated warnings to that effect havediminishing returns. People have become immune to reality. Long-term change,then, must come from a readjustment of the market and our regulatoryframeworks. Although consumers, investors, and other market participants shouldkeep educating themselves and pushing for change, there also needs to be athorough and rapid re-examination of the rules and norms governing capitalismtoday.
We need to impose realcosts on market participants who do not change their behavior. That won'thappen through speeches, commentaries, and annual reports. The market economyis a powerful force that needs direction, and regulators and marketparticipants themselves are the ones holding the compass. It is time to getserious about establishing the direct financial incentives and penalties neededto drive systemic change. Only after those are in place can we begin to debatewhether the glass is half-empty or half-full.