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Capitalists are debating capitalism—and socialism—more than they have in years

Eshe Nelson
Berkshire Hathaway chairman and CEO Warren Buffett enjoys his favourite beverage, cherry Coke, before the Berkshire Hathaway annual meeting in Omaha

More than 40% of Americans say socialism would be a good thing for the country, according to a Gallup survey published earlier this week. Capitalists sense the threat.

Some are trying to get out in front of the challenge with calls for more sustainable and inclusive economic growth that’s still based on capitalism. Ray Dalio, founder of the world’s largest and most profitable hedge fund, Bridgewater Associates, published a note last month on how capitalism needs to be reformed to avoid being replaced. “All good things taken to an extreme can be self-destructive and that everything must evolve or die,” he wrote. “This is now true for capitalism.”

The desire for another economic model to counter the more damaging consequences of capitalism, such as inequality and climate change, has been building. In the US, it can be seen in the popularity of democratic socialists like Bernie Sanders and Alexandria Ocasio-Cortez. In Europe, socialist parties battling to wrest influence from far-right populist parties recently have been winning.

Now, talk of capitalism vs. socialism is on the rise in corporate circles. Executives are stating where they stand on this renewed debate and shareholders are asking executives to spell out what the political shift could mean for their companies.

Keeping score

“Capitalism” was mentioned in 54 calls and conference presentations for public companies based in North America and Europe in the 12 months to mid-May, according to transcript data from research firm Sentieo. Mentions of “socialism” rose to 11 after having barely been discussed over the past decade.

The data only include companies with at least $1 billion in market cap. The mentions were mostly in analyst and shareholder meetings and earnings calls. While the numbers are still relatively small, it signals a shift in the overall conversation.

 

Capitalism is inclusive!

In March, Nigel Wilson, CEO of investment management group Legal & General, kicked off an earnings call with analysts saying “we are delivering inclusive capitalism, and inclusive capitalism is delivering for our shareholders and for our customers.” At an annual shareholders meeting in January, Josef Kaeser, CEO of German industrial company Siemens, said companies need to step up because politicians were creating divisions. Companies like Siemens “should pave the way for inclusive capitalism and should exemplify it,” Kaeser said. “Whether we call it social market economics 2.0, that is no more than the successful effort to strive for economic strength and to aspire to ensure that society and employees have a direct or indirect share in the success of that company.”

Executives at Pfizer, Wells Fargo and Starbucks were all asked about capitalism in their most recent earnings calls. At Berkshire Hathaway’s big annual meeting this month, Warren Buffett and Charlie Munger were asked “With all the talk about socialism versus capitalism taking place among Democratic presidential candidates, do you anticipate an impact on Berkshire in the form of more regulations, higher corporate taxes or even calls for breakups among the many companies we own if they were to win?” In response, Buffett said “I’m a card-carrying capitalist.” He added: “I believe we wouldn’t be sitting here except for the market system and the rule of law and some things that are embodied in this country. You don’t have to worry about me changing in that manner, but I also think that capitalism does involve regulation.” Later he said that he didn’t see the country going socialist “in 2020 or in 2040 or 2060.”

Capitalism is unapologetic!

Others are more staunch defenders of capitalism. Scott Wine, chairman and CEO of Polaris Industries, said on an earnings call in April: “In today’s culture where it seems popular to malign capitalism, I am proud that Polaris stands as an example of the virtue of free markets and strong competition for consumers and stakeholders alike.”

This month, William Stone, chairman and CEO of SS&C Technologies, said at a JPMorgan conference: “I like to win unabashedly and I’m a capitalist unabashedly, right, and I’ll try to save the world later. But, first, we’re going to make some money in this business because that’s my job for my shareholders and that’s how I take care of the people that work for me and the suppliers and the overall, the communities we’re in. But make no mistake, right, we’re a for-profit company and we’re not apologizing.”

 

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