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84 Harvard Business Review March 2011

HBR.ORG

Dominic Barton is the
global managing director
of McKinsey & Company.

Capitalism for the

Long Term
Business leaders face a choice: They can reform the
system, or watch as the government exerts control.
A call to action from McKinsey & Company’s global
managing director by Dominic Barton

ILLUSTRATION: JAMES JOYCE

T

he nearmeltdown of the nancial system and the ensuing Great Recession
have been, and will remain, the de ning issue for the current generation of
executives. Now that the worst seems
to be behind us, it’s tempting to feel deep relief—and
a strong desire to return to the comfort of business
as usual. But that is simply not an option. In the
past three years we’ve already seen a dramatic accelerationin the shifting balance of power between
the developed West and the emerging East, a rise
in populist politics and social stresses in a number of countries, and significant strains on global
governance systems. As the fallout from the crisis
continues, we’re likely to see increased geopolitical
rivalries, new international security challenges, and
rising tensions from trade, migration, andresource
competition. For business leaders, however, the
most consequential outcome of the crisis is the challenge to capitalism itself.

That challenge did not just arise in the wake of
the Great Recession. Recall that trust in business
hit historically low levels more than a decade ago.
But the crisis and the surge in public antagonism it
unleashed have exacerbated the friction betweenbusiness and society. On top of anxiety about persistent problems such as rising income inequality,
we now confront understandable anger over high
unemployment, spiraling budget de cits, and a host
of other issues. Governments feel pressure to reach
ever deeper inside businesses to exert control and
prevent another system-shattering event.
My goal here is not to o er yet another assessmentof the actions policymakers have taken or will take as
they try to help restart global growth. The audience
I want to engage is my fellow business leaders. After all, much of what went awry before and after the
crisis stemmed from failures of governance, decision
making, and leadership within companies. These are
failures we can and should address ourselves.
March 2011 Harvard Business Review85

CAPITALISM FOR THE LONG TERM

In an ongoing e ort that started 18 months ago,
I’ve met with more than 400 business and government leaders across the globe. Those conversations
have reinforced my strong sense that, despite a
certain amount of frustration on each side, the two
groups share the belief that capitalism has been and
can continue to be the greatest engine of prosperityever devised—and that we will need it to be at the
top of its job-creating, wealth-generating game in
the years to come. At the same time, there is growing concern that if the fundamental issues revealed
in the crisis remain unaddressed and the system fails
again, the social contract between the capitalist system and the citizenry may truly rupture, with unpredictable but severely damagingresults.
Most important, the dialogue has clari ed for me
the nature of the deep reform that I believe business
must lead—nothing less than a shift from what I call
quarterly capitalism to what might be referred to
as long-term capitalism. (For a rough de nition of
“long term,” think of the time required to invest in
and build a pro table new business, which McKinsey research suggests is atleast ve to seven years.)
This shift is not just about persistently thinking and
acting with a next-generation view—although that’s
a key part of it. It’s about rewiring the fundamental
ways we govern, manage, and lead corporations. It’s
also about changing how we view business’s value
and its role in society.
There are three essential elements of the shift.
First, business and finance must...