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MAPping the Future

Modern capitalism: Where lies its genius?

(Conclusion)

Is self-interest designed to optimize profit, regardless of how the means impact the common good? Should values be traded off to make the numbers? “Moral values out, material values in” seems to capture the sentiment of transactions resulting in today’s income inequality. A distribution imbalance (private capital gets greater rate of return than the overall growth of the economy) widening the gap between the rich and the poor.

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To quote Professor Oded Izraeli of Oakland University, Michigan, it “threaten[s] to create an underclass whose members’ inadequate education and low skills leave them with poor prospects for full participation in the economy as earners or consumers—causing political instability.” And as Gates notes, “Capitalism doesn’t promote equality of opportunity and/or outcome despite the idea of a level playing field. Those without good nutrition-support and education may never make it to the playing field. Neither does capitalism provide for those who lack competitive skills—the elderly, children, the developmentally disabled.” It brings to mind Social Darwinism’s “survival of the fittest” and the biblical quip: “Am I my brother’s keeper?

Numbed by the science of economics, capitalism has ostensibly overlooked the one component, almost immeasurable, that makes all economic activity possible: “human relationship”—the dignity of people behind every economic transaction: customers, suppliers, workers, even host communities—to whom it has obligations entwined with those relationships, and the responsibility to fairly give something back to them.

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The question: Do stakeholders get to share fairly enough in the success of industries? Do workers get something back, say a commensurate pay and/or healthy workplace? Do customers get something back, say better quality and innovations delivered? Do suppliers get the worth of what they supply? And the society that provides services and opportunities, does it benefit too, say in unpolluted air and waterways? As the saying goes: “Do good to society and society will return the favor!”

Bent of greed

But the fact remains that economic inequity enlarges the rift between classes … giving rise to antielitism and conversely, to populist themes. A trend disputing today’s capitalism as that “robust system … enhancing quality of life!”

Yet, capitalist practitioners seem blind to this insidious run of things! Fascinated by the magic of numbers deep in the study of transactions, (the desiccated bits and pieces of the productive mix), the integrity of the enterprise—the respect for stakeholders—gets side-tracked in favor of the logic of money, i.e., how people utilize money to optimize return, not in how improvements are applied to reduce inequity. And “[t]he logic of wealth-creation is swamped in the politics of profit maximization, yielding to the bent of greed, which only aggravates social inequities.”

The problem of extreme profit maximization is that it abets social inequity and conflicts with values of greater humanitarian importance—the regard for the welfare of others. Unregulated, such mantra of extremes becomes “the chief supreme index of business virtue,” which eventually leads to embracing wrongful means! And virtue descends into a self-seeking game of “winner-takes-all”—I, myself and me!

Couldn’t the genius of capitalism chart a “middle way” that harmonizes the conflict between profit maximization and social responsibility; that private good advances the common good … and make society even a more hospitable and fruitful place for capitalism?

Certainly, to be in business is to make money and optimize gain for shareholders. But to make money as the only goal, “strips away that part of ourselves that needs to thrive. Something in us that wants to endure beyond retained earnings”—the aspiration for social usefulness; the fulfillment and joy of a life well-lived … having been a blessing to others!

Unfortunately, business doesn’t lend itself so easily to talks about values and goodness. It is a constant tug-of-war between self-interest and social responsibility. Not until it realizes, late in the game, the emptiness of having done nothing but make money! And in the rush to find meaning, wades into the philanthropic pond and snaps at CSR (corporate social responsibility) options! But again, as Clive Crook of Financial Times and Atlantic Monthly observes: it is “not to bring philanthropic ideas to business, but to bring business ideas to philanthropy … just another outlay for another kind of business investment.”

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In the case of CSR, Crook notes, “it is the tribute that capitalism everywhere pays to virtue … but it is at best a gloss on capitalism.”

“Consultancies have sprung up to advise companies on how to do CSR, and how to let it be known that they are doing it.” But “plenty of CSR policies smack of tokenism and political correctness more than of a genuine concern to “give back to the community. (Judge companies by their actions and CSR enthusiasts will be disappointed.)”

Do good, do well

Capitalist practitioners will have to rethink the priorities that guide everyone in the system—from entrepreneurs/investors to regulators. The ghastly tracks left behind by the inordinate acquisitive desire for wealth, is a letdown to the capitalist ideology! It has forgotten that “CSR is more about how companies conduct themselves in relation to stakeholders (the workers, consumers, the broader society in which firms operate and, as is often argued, future generations) than about straightforward gifts to charity. Donations, large or small, are not the main thing,” Crook says.

It is actually in integrating CSR into the business strategy that makes real contribution to society (a straightforward drive, allowing the robust break in the economy to filter down to stakeholders thereby giving substance to “inclusive growth.”)

To quote Elizabeth Stuart, senior policy adviser, Oxfom International, Washington: “CSR should not just be in a company’s PR (public relations) department. It should be central to its core business functions … which would mean innovation and new working relationships.” The better in fact for the enterprise to take the initiative at self-regulation and keep wealth-creation within society’s ethical values, than wait for external regulators to step in (as happens in mix economies) with some unsavories to boot.

“Doing good is within every company’s grasp,” adds Chappell. “Consenting to it is the first step at putting values back into the driver’s seat. All it requires is trusting in it, persevering in it, believing that your own good intentions will be met with goodness in return—i.e., to have faith in the good turning up. Faith is a word rarely used in the vocabulary of business. But it, too, has its place!”

The learning from history is this: The principle of doing good enhances an enterprise’s reputation and appeals to customers; it attracts good people to the organization than would enterprises that wheedles to man’s baser desires. Conversely, doing what hurts others will hurt society and, what hurts society will eventually hurt ourselves. INQThis article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines, or MAP. The author is management and development finance consultant; past president and advisory council member of the Government Association of CPAs; past director of PICPA and former senior officer of Land Bank of the Philippines.

For previous articles, please visit map.org.ph.

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