By capitalism, I mean the system in which wealth is absolutely central to economic life. Under capitalism, wealth and the other resources it can buy – scarce for most, plentiful for the few-- control the conditions under which people work and live and are organized to generate more wealth. That has changed. Success, of course, continues to generate concentrations of wealth—but concentration of wealth no longer guarantees success. Hoarding has ceased to be a reliable way to create, protect, and increase wealth and power.

Capitalism declined because a powerful revolution has taken place in the last couple of decades-- a seismic shift: from a world economy driven by excess demand to a world of excess supply. The barriers to entry in every profitable industry, which used to be protected by capital, have been eradicated. Today, most resources including capital, raw materials, or their equivalents, are generally readily available and relatively cheap. (Water is an exception, and so is fossil fuel, but the latter only artificially so, caused by our collective lack of wisdom and the will to deal with the challenge). Technology and education, which dramatically increase human capital, helped the transformation from excess demand to excess supply. Now almost every industry is in an overcapacity condition: automotive (today the industry can produce some 40% more cars than the market demands ), computers, hotels, airlines, you name it.

It is critical to grasp the implications of this monumental economic shift for future success. Commoditization, of both products and services, is one powerful result. Commoditization serves to drive down margins and profits, as the main source of difference to consumers becomes price. And the ten thousand year war between providers and consumers is over. The consumers will soon be crowned as the ultimate winners.

The driving force in the 21st century economic world is not capitalism but its rightful heir, free enterprise. By free enterprise, I mean the free movement of capital and other resources in the most efficient and effective way to produce value, and thus, wealth. Free enterprise is indeed the wealth producing engine of the future. And creative free enterprise will become the great differentiator, the winning formula among competing nations, rival companies, and enterprising individuals.

(An important caveat. Free enterprise demands a level playing field. Governments have critical role to play— as referees and enforcers. But not as participants: protectionism has been consistently associated with national failure.)

Within the free enterprise era, there will be winners and losers. The early advantage will go to those nations and those companies capable of producing vast quantities of high quality products at lower prices. Obviously all eyes turn to the incredible potential of China and India.

For the first time in its 200 year history, America faces formidable competitors, potentially capable of producing more high quality products at lower prices on a sustained basis. That is a battle America cannot win. While the ultimate success of India and China is not certain, nor smoothly achieved, it is foolhardy and certainly unwise for America or Europe to assume otherwise.

How then do we compete? By exploiting the resources that really have explained America’s success throughout our history: our intellectual and spiritual strengths. Creativity and moral values: these must be our most important assets. Almost everything else available to companies within the 21st Century free-enterprise world will be commodities, but not these.

Creativity — constant invention and innovation — will be the truly leverageable asset on a company’s balance sheet. Creativity has the power to differentiate products and services, to delight customers and consumers, and therefore to produce higher margins and profits.

Creativity will become the major sustainable differentiator between success and failure. Without creativity, America will become a maker of commodity products and services and thus a second tier plaer.

The other powerful tool at America’s disposal is the practice of human values in the free enterprise global business, Values not only have intrinsic worth but they provide a competitive advantage. A creative business demands a values-based enterprise culture. You can’t intimidate people into being creative. Creativity must be nurtured not commanded. What is true within a company is true in its external relations as well. Brand relationships with customers and consumers will have to be based on trust, and mutual respect—honesty and integrity. You don’t want to under-sell your competitors, you want to out-serve them. The American cultural traits of individual freedom and fundamental honesty will prove to be value- added strength to the tough competitive world ahead.

There is one more critical task for free enterprise in the 21st century. The fundamental solution to solving poverty and attacking the source of terrorism will be the ability to connect the world of poverty and hopelessness with the free enterprise system. That’s it. Nothing else will work. There’s a powerful implication here that is clearly not understood by policy makers today. Free enterprise will drive toward democracy. But, without a stake in society, without hope and dreams, democracy is a meaningless abstract concept.

In the end, we need not mourn the end of the capitalist era. It has served us well. Let’s embrace creative free enterprise fully. It will serve our grandchildren even better.