Thursday, January 9, 2020

Capitalism Works

I believe in capitalism; it’s the only system in the last 10,000 years that has managed to lift the general living standard for people throughout the world. Sure, there are still people starving and living in abject poverty, but the tide is ever rising and life continues to improve for many of the least of us. Capitalism is not to blame for the poor and starving; life is not a zero sum game, nor is it, nor has it ever been, fair. Ultimately, the blame lies with our not taking responsibility for taking care of the less advantaged among us.

Capitalism doesn’t work on autopilot. Periodically it comes off the rails, and we’re living in such a time of derailment right now. In addition to caring, responsible individual action, society needs to have lots of different organizations that are morally load-bearing. What does that mean?

Individuals and organized groups of individuals may fall into one of two categories - either your objective is service to self or it is service to others. Capitalism that is guided by service to others willingly bears the moral responsibility of lifting the lives of others as it adds value to society and its shareholders. Capitalism that is guided by a philosophy of service to self has abandoned that responsibility. Poverty could be completely and quickly eliminated if all value creators were morally load-bearing.

We human beings naturally organize ourselves into groups, and by modern standards perhaps the most important group we’ve got on earth is the firm, or the corporation. Firms have to be morally load-bearing, and for most of human history they have been. But that aspect of capitalism came off the rails sometime around the 1970s with Milton Friedman’s dictum that the sole purpose of a firm is to make profit for shareholders.

That’s a fallacy of what firms are about. We need to once again find the courage to say, “We just don’t do that!” We need to vow to take a more holistic view of the purpose of business and not just make happy talk about serving others. Our corporations have to get serious about our moral responsibilities..

Measurement of a company's accomplishments matter. If you measure only one thing – profit – then in the end you’ll get only one thing. If one of the included purposes of a firm is to help the poor, then metrics must be established to measure the jobs the firm creates and the tax benefits it generates to the welfare of those same people; longer-term, it must consider whether the enterprise has stimulated other companies to establish themselves and successfully grow and continue to help the less able.

Leadership is hugely important in setting an organization’s culture. If you look at the iconic Japanese companies, the chief executive and senior management officials dress like ordinary workers, eat in the cafeteria with ordinary workers, and so are able to use the word “we” without workers laughing at them. For a CEO who wants to create that sense of commonality, it might mean taking a serious pay cut, traveling in the same style of vehicle as employees, as well as commingling with employees – so, essentially making some visible real personal sacrifice.

There is nothing automatic that will balance our world. We have to save it ourselves. It is our responsibility each time our world comes off the rails to bring it back into realignment. This time we’ve been slow to put it right. If we don’t rise to the level of moral responsbility that will make it all work, then we will continue to dump on our children a world that’s really, seriously, a mess. So we all have that responsibility to play our part. And the further up the system you are, the bigger your responsibility.

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