Stakeholders vs Shareholders 
by Ed Mayo, Executive Director, New Economics Foundation.

Let's put current concerns over stock markets and war aside. 

Both US and European economies are generating material luxury that is unprecedented in human history save perhaps for the elites - the priests, politicians and pharaohs - of previous civilisations. 

But despite the hedonism of modern consumer culture, neither has eliminated poverty, scarcity and both - in the face of climate change and wider environmental risk - are systemically unsustainable.

The reason is that we have not yet, like King Midas, recognised the limits of our conception of wealth. 

Our current model of wealth is the primacy of shareholders. Everything we touch, from science to art to public services, we now want to turn into shareholder value. 

Even the current debate we are used to on 'stakeholders' versus 'shareholders' is a simply an argument about which delivers better for shareholders - a ruthless focus on shareholders or an enlightened consideration of stakeholders. 

But return on capital is a fundamentally misleading concept of wealth. The reason is that it treats critical dimensions of what counts for the good life as tradeable commodities that you can cash in or out of the market economy. 

As Robert Kennedy said, "it measures neither our wit nor our courage neither our wisdom nor our learning, neither our compassion nor our devotion to our country it measures everything in short except that which makes life worth while."

In the face of climate change, the pursuit of profit is leading to disaster:

Currently airlines pay no duty or VAT on aviation fuel, no VAT on airline tickets and no VAT on new aircraft. The reason is business capture of politics and the lack of effective global governance. If air fuel were taxed, a London-Sydney flight would cost an extra £925. 

And yet, air travel is the fastest growing source of greenhouse gas emissions. Emissions are predicted to rise by 215% by 2015. 

Meanwhile the number of people affected by weather-related disasters has rocketed 65-fold in 30 years, to 18 million people this year. And countries like Bangladesh, Guyana and Tuvalu face absolute disaster in the face of rising sea levels. 

This is shareholder value - where what matters is the sway of human income rather than that of human rights. 

The focus on shareholders reflects a one-eyed obsession with the market and private institutions. It says little about the far more prevalent non-market institutions of the family, voluntary and community sector and the state - where social and not economic return takes priority. 

The post-war model of wealth creation, after all, separated out economic and social return. The private sector was seen to generate economic activity, some of which could be redistributed for social return through taxation (spent in the form of public services) and philanthropy. Private sector activity, in short, focused on economic return: public and charitable sector activity on human needs and social return.

Today, this model is jaded as society adapts to technological and economic change, from global to local levels. It is easy to assume that the extrovert dynamism of the shareholder model is how we should organize at every level - that we should privatise the state, honour our corporate raiders, promote work skills over education for the sake of fulfillment. 

But there is a different paradigm for organization on the rise, which is based on the stakeholder approach. 

The traditions of voluntary, co-operative and public sector have been coming together to forge new models of association, entrepreneurship and action for the public interest. Stakeholder means other-centred - that is both self-interest and mutual aid.

Examples are micro-financiers, ethical investors, social entrepreneurs, time bankers, organic farmers are all examples of a new emerging ethical market. Here in the UK, our EPI with the Co-operative Bank suggests that these are now worth £14 billion in the UK.

In my view, these both represent a significant innovation, deliberately blending social and economic outcomes. 

I would argue that Europe has stronger examples of both socially responsible and socially directed business activity. 

Europe has led the field on stakeholder consultation and social reporting - with examples like Skandia, Novo Nordisk. It has excellent examples of social enterprises, from ONCE, a disability non-profit that runs the lottery in Spain, social co-operatives delivering care in Italy, through to Coin Street Community Builders, a community development corporation on a scale that US voluntary leaders could only dream of. 

Many of the innovations we are going to rely on in future, including sustainable agriculture, renewable energy and micro-enterprise development, come from this social enterprise sector.

These are the seeds of a new model of wealth creation that blends market return with the imperatives of human dignity and ecological sustainability.

Price values what is scarce and what makes money. It does not, as Edgar Cahn argues, "value what is universal - what every human being has - the ability to care, love, share, rear children, take care of parents, be a good neighbour, be a citizen striving for a better world."

In other words, in the shareholder model, the core characteristics of our humanity are worthless in market terms. 

Yet these are the characteristics that have enabled us to survive as a species, that evolution determined were the characteristics that enabled us to avoid extinction in a hostile world.

King Midas saw that gold is not enough. Relationships come before and after the pursuit of monetary gain.