For my coursework in Ecological Economics with Tim Jackson, I attempted the hairy feat of discussing Sustainable Capitalism in our Globalized World. I had been so unsettled by the end of our lectures, thinking that perhaps by working to make the world's largest transnational corporations more "responsible" and "sustainable", it would just continue to fuel a faulty system. And so, foolishly (or bravely, you decide), I endeavored to write an essay on the topic of sustainable capitalism. At the end of it, I had more questions than I had answers, but I hope by sharing some of my thoughts from the assignment, I can engage you in this inquiry as well. While much of the below was taken from an academic paper, I hope I write in a less "academic" way, such that folks outside the academia and/or with no background in economics will be able to follow.
This is post 3 of 3 parts. You can read the complete series here: Part 1 on Capitalism and Freedom in a Globalized World, Part 2 on The Business of Doing Good & Creative Self-disruption, and Part 3 on 4 Ideas to Tame the Capitalist Beast.
In Part 1 and Part 2 of this series, I talked about: the faulty notion of man solely as a creature that exists to serve his selfish interests and how we live more more than the mere acquisition of more stuff; and cite examples oh how people are coming out to show that the system the world runs by isn't working, and that there are different ways of thinking about and carrying out "capitalism", whether through improved corporate responsibility, social enterprises or B corps, etc.
Here, I go on to discuss a few more thoughts that are more pertinent to me, now that I'm taking my Masters, than in the time since I started Muni, when I would talk mostly about individual action: consuming consciously, starting your own cause-driven endeavor, etc.
The ideas I've shared here may initially sound like ideas that only corporations and governments can act upon, but I sincerely believe that it's through citizens rising up and taking action that these changes will be realized. Because who comprises corporations and governments anyway? That's right. Citizens.
So, regardless of whether you work in corporate, government, NGO, academe, or are a student or retiree, I hope you find this article worth reading through, if only to start questioning how we got to this point, and what we fundamentally need to rethink if we have are to live in better harmony with nature and our fellow humans.
Taming the capitalist beast
A part of me struggled with trying to think through how, in a globalized world with such gaping inequality, developing countries could possibly catch up with developed countries, or people living within the same country - could attain a similar “reference point” through wider access to clean water, food, land, healthcare, education, and jobs.
Could it be through some philanthropic redistribution of wealth? Poverty Inc. (2014), a film on the negative impacts of treating foreign aid as a “silver bullet” and making it a permanent, institutional model. Furthermore, having dole-outs like that as an answer inhibits the entrepreneurial-minded in these developing countries of a more dignified way of living and working, and could perhaps simply serve as another form of colonialism and create a power imbalance.
So, in the interest of human dignity and striving, I refer back to some of the ideas and conditions that will allow capitalism to work in the 21st century (Chang, 2010; Jackson, 2017; Porritt, 2013; Raworth, 2017).
It is one thing to run a business in a more mindful way, with sound environmental, social and governance strategies, but it is another thing to put business in a fertile context for equality, sustainability and well-being to flourish.
Below, I shall highlight 4 ideas on how we can set the scene:
Minimize (or "satisfice") shareholder value; increase liability A rapid spike in wealth gap and the corruptibility of corporate entities began with the introduction of “shareholder value maximization” in the 1980’s by Jack Welch of GM (Chang, 2010; Denning, 2017). Through this, it further pushed corporate executives to pursue profit maximization at the expense of the long term viability of the business. Through the short-term thinking this introduced, they prioritized cutting costs including wages, investments, inventories and mid-level managers (all of which could have contributed to more sustained business operations), in order to generate the highest possible share of profits for shareholders through dividends and buybacks, which in turn, meant a healthy bonus for the CEO too. However, the success of this was short-lived, and in 2009, Welch was later reported to say that shareholder value maximization was the dumbest idea in the world (Denning, 2017; Chang, 2010). Furthermore, most large corporations today are only limited liability corporations (LLCs), meaning that if something goes wrong, shareholders only lose the money invested in their shares. Adam Smith argued that those who managed LLCs without owning them were only “playing with other people’s money” and were less vigilant about maintaining the company’s best interests (Chang, 2010). The most important stakeholders of a business are its employees, suppliers and customers, not faceless shareholders whose lives may not be significantly impacted by changes in the business
Practice trade protectionism; beware of privatization This is especially applicable to “infant industries”. Developed economies like the US and UK flourished as they did primarily to protectionism, which is anathema to the free-market policies they insist developing countries should adopt today (Chang, 2010). These countries told developing countries to do as they said, not as they did. Britain adopted free trade only in the 1860’s, when its industrial dominance was absolute. “Virtually all of today’s rich countries used protectionism and subsidies to promote their infant industries. Many of them (especially Japan, Finland and Korea) also severely restricted foreign investment.” (Chang, 2010)
Manage privatization and allow state intervention In 1988, during the Philippines’ privatization programme after the Marcos dictatorship, President Corazon Aquino was vigilant about practicing due care in the disposition of assets that belonged to the people, saying: “We must get the most we can for the people, in as fair and transparent a manner as possible, leaving no room for the smallest possible doubt about the integrity of the procedure and the people involved.” (Godinez, 1989). Smith also decried that there is also the risk that big corporations may be of an order of men “Who have generally an interest to deceive and even oppress the public and who accordingly have, upon many occasions, both deceived and oppressed it.” (Jackson, 2017).
Build a culture of trust and cooperation Organizations composed of human beings with beating hearts and consciences should be designed with empathy, to reward trust and cooperation among their members. Chang (2010) retells the story of a Japanese executive at a conference he attended: The top manager of a Japanese steel company spoke up at a conference organized by the World Bank where a debate ensued between Ha-Joon Chang arguing for the role of state intervention in East Asian growth, while the other side were economists supporting World Bank, saying government did more harm than good; and true to classic free-market economist thinking, the World Bank economists believed that government officials, as business owners were self-seeking agents. The Japanese manager said their company has grown to its size because of the trust and loyalty that his team had that they served the purpose of the company; that they served the greater interest of everyone else in the company and not just their own. “You simply cannot run a large bureaucratic organization, be it Kobe Steel or your government, if you assume that everyone is out for himself.” By assuming the best, not the worst, about their workers, Japanese companies got the best out of their people.
These are not all we need to consider. Many books and journal articles have been written on this topic, and this is merely one blog post. But these are ideas that I think we need to discuss more.
Can we put the necessary institutions and structures in place to ensure sustainable capitalism will happen? Truthfully, I don’t really know yet, and I’m just beginning to find out more. Probably, it's not easy to figure out and implement, but it's definitely worth trying.
I'm still in the process of finding more tangible evidence and proposed solutions for moving forward with ideas for a sustainable form of capitalism - because even the most human development- and environmental-oriented thinkers believe that it's not about doing away with capitalism altogether, but reimagining a radically responsible version of it.
We don't really have the time to mess around but I also believe that positive, profoundly transformative changes also require some time and reflection, and not hasty band-aid solutions that could continue to perpetuate faulty systems, or worse.
The change is not required only from business or government, but through citizens also curbing their consumption while clamoring for better management from those entities, and a revisiting of values and creating a cultural norm of mindfulness, empathy, connectedness, collaboration and "enough-ness".
One might throw one’s hands up in the air with this seemingly absurd and futile effort. But in the face of Sisyphus’ task, does the realization of the absurd then elicit suicide? Camus answers, "No. It requires revolt." (Camus, 1942)
This is post 1 of 3 parts. You can read the complete series here: Part 1 on Capitalism and Freedom in a Globalized World, Part 2 on The Business of Doing Good & Creative Self-disruption, and Part 3 on 4 Ideas to Tame the Capitalist Beast.
References:
Camus, A. (1942). Le Mythe de Sisyphe.
Chang, H. (2010) 23 Things They Don’t Tell You About Capitalism. London: Penguin Books.
Denning, S. (2017). Making Sense Of Shareholder Value: 'The World's Dumbest Idea'. [online] Forbes.com. Available at: https://www.forbes.com/sites/stevedenning/2017/07/17/making-sense-of-shareholder-value-the-worlds-dumbest-idea/#4a9ebf452a7e [Accessed 8 Mar. 2019].
Denning, S. (2016). The Economist Defends 'The World's Dumbest Idea'. [online] Forbes.com. Available at: https://www.forbes.com/sites/stevedenning/2016/04/03/the-economist-defends-the-worlds-dumbest-idea/#31a0be4026e3 [Accessed 8 Mar. 2019].
Godinez, Z. (1989). Privatization and Deregulation in the Philippines: An option package worth pursuing?. ASEAN Economic Bulletin, [online] 5(3), pp.259-289. Available at: https://www.jstor.org/stable/25770218.
Jackson, T. (2017). Prosperity Without Growth. 2nd ed. Oxon: Routledge.
Porritt, J. (2007). Capitalism as if the World Matters. London: Earthscan.
Porritt, J. (2013). The World We Made. London: Phaidon Press Limited.
Poverty Inc. (2014). [film] Directed by M. Miller.
Raworth, K. (2017). Doughnut Economics: Seven ways to think like a 21st-century economist. London: Random House Business Books, pp.13-23.
Smith, A. (1793). An inquiry into the nature and causes of the wealth of nations.