Capitalism Is Changing – Are You Ready?

As emerging economies grow, will they adapt to the Western model of capitalism? According to Christopher Meyer and Julia Kirby, co-authors of Standing on the Sun: How the Explosion of Capitalism Abroad Will Change Business Everywhere, it’s actually the other way around. Just as a species transplanted into a new environment will evolve over time (changing the color of its feathers or growing a longer beak), capitalism will also start to look very different. The transition, says Meyer, “has already begun globally, but I would see this as a 20-year trend. Somewhere in the 2040s, the emerging economy will be larger than the G7 [Western industrialized] economy.”

The new capitalism, driven by emerging markets’ “perfect storm of digital technology, rapid growth, and a young population that all reinforce one another,” will look different in a variety of ways, says Meyer. Notably, the lines between nonprofit and for-profit enterprises will blur, and companies may undertake more of what’s currently known as “corporate social responsibility.” That’s not necessarily because capitalism is becoming kinder and gentler, he cautions: “It’s not that they want to be nice. It’s how they’ll be able to be successful.” But in the process, “that will lead to a form of capitalism that, overall, meets more of people’s needs.”

In emerging economies, one innovative example is Dial 1298 for Ambulance, a Mumbai service in which a nonprofit foundation buys ambulances, and a for-profit company pays market rate to operate them. “The foundation can take donations from sources of patient capital to buy ambulances without unreasonable interest costs,” explains Meyer. “They can lease them back to the ambulance service and everybody makes money.”

In developed economies, there are also nascent signs that capitalism is changing. Meyer – the co-founder of Monitor Talent – points to social impact bonds, which are a new method of financing government innovation; the rise of B Corporations, which prioritize social good as well as shareholder profit; and increased consumer demand for ethically-sourced products such as Fair Trade Coffee or humanely-raised meat.

There’s also one aspect to capitalism’s evolution that may alarm Western corporations. The sovereignty of intellectual property, Meyer speculates, is on the wane. “I think China will continue to fight a rear guard action of paying lip service to IP laws, but they’ll build a knowledge economy that sees the utility of knowledge and tries to maximize it,” he says. “This is a very deep tectonic shift that’s happening in capital…The next version of capitalism is not going to start with the assumption that you can own knowledge the way you can own a piece of land.” The skirmishes are already starting, whether it’s with film piracy or prescription drugs: “It’s going to be an ugly scene, with Western diplomats arguing with India and China about shutting down companies that are saving lives in their country. It looks like a loser from a PR perspective, doesn’t it?”

Meyer stresses that Standing on the Sun, which was nominated for the Financial Times and Goldman Sachs Business Book of the Year Award, is an analysis of how things will evolve – not how they should evolve. “I’m not saying creators of IP shouldn’t be rewarded,” he says. “But we’re going to find an evolution of these laws. I think people who proceed believing that law and order will prevail, and we’ll keep doing things the way we do them here [in the West], are going to be surprised.”

How do you see capitalism evolving, in the West and in emerging economies?

This post originally appeared on the Forbes website on October 28, 2012.

Dorie Clark is CEO of Clark Strategic Communications and the author of Reinventing You: Define Your Brand, Imagine Your Future (Harvard Business Review Press, 2013). She is a strategy consultant who has worked with clients including Google, Yale University, and the Ford Foundation. Listen to her podcasts or follow her on Twitter.