Evil Capitalism?

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Is there a distinction between citizenship and corporate citizenship?

Ought there to be?

Or is it a distinction without a difference?

If there is such a thing as corporate citizenship, what does it mean?

In an article in the Wall Street Journal, the question of corporate citizenship is explored…

The big question being, “Do corporations have a responsibility to create jobs?”

And the question makes sense in the context of the Occupy Wall Street phenomenon we see—and smell—in parks from sea to shining sea…

As well as in the larger context of what is good for the country—and society--both in the long term and the short term.

Capitalism and Conscience

Milton Friedman is trotted out as the pure capitalist icon that he is…

As the poster boy for the “heck no, our only responsibility is to shareholders” crowd…

While Starbucks’ CEO Howard Schultz righteously affirms the post-industrial viewpoint that…

“Values increasingly drive consumer and employee loyalties.  Money and talent will follow those companies whose values are compatible.”

So who’s right?

Both are right…

But with a few clarifications.

Friedman is from the laissez faire camp and believes that a company ought to be left alone…

And that when it comes to social policy…

Corporate executives should leave well enough alone…

And focus on making profits, or there is no company and no jobs.

As the WSJ points out, Friedman’s great fear was that corporate social responsibility was a “fundamentally subversive doctrine,” and that…

“There is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game.”

The difficulty with Friedman’s point is that “the rules of the game,” frequently change…

As they often should have, for the benefit of society.

Now, market capitalism has improved the lives of billions around the world...

No question about it.

But the facts are also that…

Many of the changes corporation have made, were not made willingly...

That had to emanate from and be enforced by, the government.

In the past, corporations “playing by the rules” profited by…

Engaging in slavery, using child labor, paying unlivable wages, providing sweatshop conditions…

As well as dangerous work environments, not paying pensions to lifetime workers, polluting the air, rivers, and seas…

Not to mention failing to tell consumers of dangerous attributes of their products, exposing workers to toxic elements…

Monopolizing markets, price gouging, adding cancer causing agents to food, and not adding safety elements to their products, like seat belts or air bags until compelled to do so by law.

The Social Contract

And that’s the down side to pure capitalism…

It lacks any loyalty to the society that allows it to thrive in the first place.

Are corporations then inherently evil?

No.

But the profit motive alone does not provide the motivation to avoid or correct the real problems mentioned above…

John Locke’s idea of the social contract applies here…

Wherein individuals are—or ought to be—“bound morally, by "The Law of Nature, not to harm each other in their lives or possession”…

But, “without government to defend them against those seeking to injure or enslave them, people would have no security in their rights and would live in fear."

Does the social contract apply to just individuals?

Or does it also apply to individuals who happen to run corporations, too?

Past behavior shows that corporations often harm society in the absence or neglect of some form government oversight...

So, it looks more like Howard Schultz is right, doesn’t it?

Maybe so; although there is the great temptation for the government to abuse the social value aspect and over-regulate firms and industries out of existence…

Thereby killing jobs...

And picking winners and losers…which industry will regulators go after?

Which will firm will the government favor?

This kind of “top-down” determination breeds its own problems of bribery, cronyism, corruption within corporations...

And can lead to inefficiencies and loss of competitiveness of firms.

This is part of the “subversion” Friedman was talking about...

Which is a huge problem in societies that have a more “corporatist” structure…

Where economic planning is a function of massive government oversight and corporate cooperation.

Too much top down influence has proven to stifle innovation and strangle economic dynamism and productivity…

Which results in chronically high unemployment levels.

Another factor to think about is the different social norms of societies…

That multinational firms operate in…

Which can cause operational conflicts between one market and another…

Leading to higher costs…

And lower levels of competitiveness…

Which leads to…loss of jobs.

Is America all about pure capitalism?

Of course not.

The Reality of Abstractions

Capitalism is a theory…

An abstraction that does not observe social outcomes …

Only profit.

But America is not a socialist country, nor statist society…

At least, not yet…

Nor should it be.

And, the social contract—if we can call it that, works both ways.

Just as corporate abuses are many, and have been noted here…

Governmental abuses and excesses are also plentiful and present real dangers to the well-being of Americans.

The division of powers among the three branches of government was designed to minimize such abuses…

But abuses, fraud, waste, and rights violations still occur, nonetheless.

It may be slightly disheartening to hear…

But given how human nature is want to abuse power…

Whether through governmental channels, or corporate behavior…

Competition, greed, and suspicion are part of the human element that is present in all human activities.

In that light, perhaps the best way forward is to continue with the system we have…

But with an expanded social contract between individuals and the state…

Which would also include corporations.

Where rights are protected…

And responsibility is demanded…

And when one side is let down…

Consequences are paid.

But even this is not an easy answer…

Because, although Mr. Schultz from Starbucks stresses that corporations ought to adhere to values…

Just whose values should be the standard?

There is certainly some basic values that all can agree on…

Whether one calls them common sense or “Natural Law.”

But trust me; there are many more that will not be shared…

By one half the country or the other.

The answer may be, as the Brits like to say, is to simply “muddle through” over the long term.

Not very satisfying, is it?

My immediate solution?

For the moment, I think I’ll just spend some quality time—but not too much time-- in a nice park…with a cup of coffee.

And those are…The Gorrie Details.

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