Broadening our Sight to Rethink Capitalism: A Multi-level Stakeholder Approach

Abstract

Market capitalism and the traditional narrative backing it up – namely, that market competition benefits individual freedom and collective welfare – are under attack. At a time where Western societies could either reject or transform capitalism, an alternative, stakeholder narrative of capitalism is taking shape that accepts individual freedom and collective welfare as societal objectives, but sees cooperation as the main engine of welfare, rather than competition. To ground this stakeholder narrative, we propose a multi-level theory starting from the fact that organizations must solve the collective action problems plaguing team production to contribute to welfare. Based on Ostrom’s work on collective action, we argue, first, that the rules-in-use governing team production are central to explain how much welfare an economic system creates. Second, we argue that the traditional narrative, as a higher-order institution, impedes collectives to develop rules-in-use according to Ostrom’s design principles, which are governance principles collectives should adopt to sustain cooperation. Our theoretical analysis shows, on the one hand, how the traditional narrative harms both welfare and individual freedom, and, on the other hand, allows us to derive propositions that, together, offer an alternative, stakeholder narrative of how market capitalism can achieve these goals.