#40: US Elections Show Need for System Change

Flawed systems are largely responsible for recent US election results. These systems degraded society and misled citizens into supporting policies that will accelerate degradation. Improving systems (i.e. system change) is essential for protecting business and society. Many factors influence elections. This post discusses a few systemic flaws that influenced the US elections and how System Change Investing (SCI) helps to resolve them. These flaws relate to political parties, media, regulations and reversion to old ideas.

Vested Interest-Controlled Political Parties

Over the past 40 years, life became more difficult for average citizens under the Republican and Democratic Parties. Weakened campaign finance laws allow unlimited, anonymous political donations. As a result, both major parties largely are controlled by individuals and companies who can afford to make large campaign contributions.

This caused nearly all economic and stock market growth over the past 40 years to be concentrated at the top of society, while inflation-adjusted wages remained nearly flat. Today's young people are the first generation in US history that will be worse off financially than their parents.

Rather than voting for traditional Republican or Democratic candidates (under whom their lives got worse for 40 years), citizens chose an unconventional candidate for president. The vote essentially was an anti-system, anti-establishment vote.

Divisive Media

Prior to 1987, the Fairness Doctrine required major media to present both sides of controversial issues. If a media announcer made a factually incorrect, inflammatory claim (e.g. climate change is a liberal conspiracy to destroy the economy), experts rebutting the claim might show its irrational, emotional nature. Through this mechanism, the Fairness Doctrine promoted the use of honest, dignified announcers who respected those with differing opinions.

Removing the Fairness Doctrine allowed media to make inaccurate, inflammatory claims without rebuttal. They essentially are allowed to lie. Citizens watching this divisive media could be misled into believing inaccurate positions, focusing on smaller problems, and ignoring larger ones (e.g. environmental degradation, concentration of wealth, loss of democracy). Rude announcers often ignored facts, insulted those with differing opinions, and blamed problems on the other political party.

Children and adults frequently admire media announcers and see them as role models. Nearly 40 years of acerbic media taught citizens that ignoring facts and disrespecting others is admirable. It is no coincidence that citizens elected a president who speaks and acts like the divisive media announcers they've been watching for more than a generation.

Regulations

Regulations and laws are prohibitions against harming others. There can be no civilized society without them. Yet regulations that prohibit companies from harming the environment and society can restrict profits. Financial systems that compel companies to put ever-increasing profits and investment returns before all else can incentivize companies to oppose regulations.

They cannot logically or effectively argue that they should be allowed to profit by harming the environment and society. Instead, business-influenced media often misleads citizens into believing the irrational idea that regulations harm society.

When companies are allowed to harm the environment and society (through the absence of effective regulations), they often cannot voluntarily stop harm. If they try, costs usually increase and they ultimately go out of business. In competitive markets, allowing harm essentially is the same as compelling it.

Deceptive media turned many citizens against regulations and encouraged them to elect a president who said he would remove them. Allowing (i.e. compelling) companies to harm the environment and society will accelerate environmental and social decline.

Reversion to Old Ideas

Throughout history, flawed, destructive systems changed, usually by collapsing quickly (e.g. American and French revolutions, end of US slavery and USSR communism). During collapse, as pain increases and current ideas seem to be ineffective, there often is a reversion to old ideas. This usually accelerates collapse as ideas that failed before fail again.

Rapidly growing environmental, social, economic and political problems around the world indicate that humanity has entered another phase of system change. We might only have a few years to voluntarily change systems before they involuntarily change through collapse and great disruption of business and society.

Opposition to ESG, DEI, sustainability, and environmental and social protection strongly indicates that we have entered a phase of system collapse. Many years ago, the prevailing ‘wisdom’ was that these approaches harmed society. But extensive research, experience and empirical evidence show that they often strongly benefit it. Common sense also shows that protecting the environmental and social systems that enable business and the economy to exist is logical and beneficial.

Yet once again, deceptive media and other factors turned many citizens against society-enhancing actions. They are reverting to old proven-false ideas and electing candidates who promise to enforce them.

Current Sustainability Approaches

Nearly half the US essentially voted to protect the environment and society. They will continue to invest in and support companies that do this. ESG and sustainability might face growing backlash under the new administration. But many companies know that protecting the environment and society is simply good business. It provides extensive financial and competitive benefits.

Responsible investing and corporate sustainability will not disappear, especially in more proactive European and other countries. However, electing leaders who accelerate environmental and social decline will create increasing problems for companies and investors.

Current responsible investing and corporate sustainability approaches have not come close to resolving climate change and other major challenges, even under supportive administrations. Their ability to succeed under a less supportive one will be even lower.

Current approaches fail mainly because they seek to change companies instead of the systems that control them, and because they focus on symptoms (e.g. climate change) instead of root causes (i.e. flawed systems). Awareness is growing that new, more effective investing and sustainability approaches are needed, ones that effectively address system change and root causes. SCI provides them.

System Change Investing

SCI rates companies on their efforts to promote essential systemic changes, such as strengthening campaign finance laws, requiring honest media, and implementing policies that prohibit harmful corporate behavior. Investors use this research to shift investments to system change leaders. This strongly incentivizes companies to implement system change strategies.

SCI makes system change practical and profitable for investors and companies. It uses the capital markets to engage companies in system change. SCI reduces investment risk and enhances returns, impact, reputation and assets under management.

For more information about SCI, visit our website SystemChangeInvesting.com or contact us at info@SystemChangeInvesting.com