Beyond capitalism

In the 1990s, with the fall of communism it was generally believed that democracy and capitalism would triumph and solve the problems of the world. Globalization was welcomed as the new wave of the future. Countries which allowed  unregulated business environments were admired.  It ushered in a world that was driven by giant corporations.

The doctrine, enunciated by the economist Milton Friedman was THE PRIMACY OF THE STOCKHOLDER. The concept that a corporation had equal obligations to other stakeholders – society, employees, customers – was considered as too idealistic. Corporations preached that if their stockholders got rich, everybody in society would benefit. This was the “trickle down” philosophy.

This belief has now proven to be false. Even Pope Francis has said that the “trickle down” belief does not work for the benefit of the masses  but only benefits a few. In a world driven by corporations and unregulated capitalism, the masses have turned to populism and even authoritarianism as an alternative. Unfortunately, democracy has  now become identified with capitalism. The belief that is gaining ground is that if unregulated capitalism has not worked to benefit the people, then democracy also will not work. The perceived alternative is populism or authoritarianism.

The perception is increasing that the main defenders of democracy are the elites who are the primary beneficiaries. This belief is vividly captured in a book Winners Take All: The Elite Charade of Changing the World  written by Anand Giridharadas. Here is one review of the book:

“...argues that the equivalent of today’s slaveholders are the elite citizens of the world , who are philanthropic more often than not-- but in ways that ultimately serve only to protect and further their interests and cement the status quo... For when elites assume leadership of social change, they are able to reshape what social change is – above all, to present it as something that should never threaten winners.”

According to Giriharadas, the roots of the problem go all the way back to Andrew Carnegie, the famed American industrialist, who advocated that people be aggressive as possible in their pursuit of wealth and then give it back through private philanthropy. It was “...an extreme idea of the right to make money in any which way, and an extreme idea of the obligation to give it back” writes Giridharadas, who accuses Carnegie of “dripping with paternalism” for never considering that “the poor might not need so much help had they been better paid.”

This disillusionment was better expressed by Unilever’s outgoing CEO, Paul Polman, who recently asked: “Why should the citizens of this world keep companies around whose sole purpose is the enrichment of a few people?” 

The Ford Foundation is a revered name in corporate philanthropy. But, Henry Ford was known to have caused the death of several striking workers at Ford plants. He was known as a rabid union buster. This is the same thing we see in present-day tycoons who will give millions to feed the poor; but, will resist any attempt to increase the minimum wage even though NEDA studies show that the minimum is far below what is needed by a family to live decently. 

Alternative capitalism?

Is there an alternative to the concept that a corporation’s only social responsibility was to increase its profits? In a recent article in the Financial Times, it was reported that “...the catalytic text for the new era of purposeful capitalism was a letter sent to chief executives a year ago by BlackRock’s Larry Fink, who with $6.3 trillion of assets under management counts as the biggest investor of them all.”

He wrote: “With governments failing to prepare for the future, people were looking to companies to deliver not only financial performance but a positive contribution to society, benefiting customers and communities as well as shareholders. Without a social purpose,  companies fail to make the investments in employees, innovation and capital expenditures needed for long term growth – and above par returns to the likes of BlackRock.”

My problem with Fink’s letter is that it sounds too much like another form of corporate social responsibility ( CSR), a concept  businessmen have been advocating for the past few decades to show that aside from profits they recognize their social obligations to the community. This campaign to convince the world that business cares for the world as much or even more than profits has been going on for the past few decades. I recently read that Lehman Brothers, whose collapse in 2008 triggered the global financial meltdown, had a page on sustainability in its 2007 annual report hailing the company’s role as an environmentally conscious “global corporate citizen.” 

Is government the answer?

There  are those who are now contending that the China model – authoritarianism and state capitalism – may be the answer. But the loss of freedoms – including freedom of religion – and state oppression makes the China model unpalatable to many including to me. It is also true, however, the perception that democratic governments are actually controlled by the elites has increased the distrust in governments and increased the popularity of populist leaders. 

Can society trust finance or business to decide what is best for society? In a recent survey in the United States, among those whose ages range from 18 to 29, more favored socialism over capitalism. 

Most informed observers now agree that corporations must serve a social purpose. The question is whether this can be done under the present system of unregulated capitalism. 

Creative writing classes for kids and teens

Young Writers’ Hangout on Jan.12 and 26 (1:30pm-3pm; stand-alone sessions) at Fully Booked BGC. For details and registration,  email [email protected].

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