Corporations as the Central Institutions of Society

Mark Twain observed that, “Prediction is very difficult—particularly when it involves the future,” and he was right. One way to reduce the risk of becoming an infamous forecaster—like the experts who told us the Internet would quickly collapse, that Apple would never introduce an iPhone, and that the world would need fewer than four or five computers—is to focus on the present, look for trends growing more powerful, examine the strength of the forces driving these trends, and utilize sound conceptual frameworks for judging the future power of these trends. In short, to see what might happen, look carefully at what has been happening. A fundamental trend in recent decades has been for societies and governments to assign ever more responsibilities to corporations and their leaders. Some of these responsibilities are legal; others are social and political norms. A second trend has been a reaction to the first one: corporations have become much more active and sophisticated as political and social actors. Both of these trends are likely to accelerate in the future, as a result of powerful driving forces, and this will produce a new phase of capitalism. The defining feature of this phase will be the role of large corporations in advanced societies. For well and ill, they will become the central coordinating mechanisms in advanced societies. As a result, the justification for capitalism will shift. It will no longer be the reliable and historically stunning production of goods, services, and wealth. In all likelihood, the core mechanisms of contemporary capitalism—the large corporations—will be less successful at producing wealth. Instead, the rationale for their existence and power will be their role in coordinating and executing a vast range of important social objectives. In an era of slow economic growth, declining state capacity, and vast challenges like climate change, corporate capacity, for well and ill, will become a central rationale for capitalism.