CORRECTIONS AND RESPONSES

As always there are corrections, rebuttals, and general responses submitted to me when I write and send an update. So I wanted to respond to those related to the last time. They all deal with the section on capitalism. I’ll paste them here and then respond to them one by one.

"I especially enjoyed your section on capitalism, since I study capitalism directly and indirectly in my work. I just read David Harvey's The Enigma of Capital: And the Crises of Capitalism, which I really enjoyed. A couple random thoughts and tidbits I've been learning that you may

already know and have taken into account (but if not, you might find interesting):

• Market economy is not synonymous with capitalism- one of my classmates said this to me while we were debating whether economic activity builds or can build 'civil society' in our Civil Society and the State class.  Being around hippy-anarchist types all the time had influenced me to forget to differentiate between the two, and his comment (which in hindsight seems underwhelming to me) actually rendered me speechless for a moment (rare occasion).

This is true. Sometimes I use short-hand and don’t always write out what I mean. I was specifically referring to free-market capitalism. I wasn’t talking about a market, which does not have to be free or capitalist, nor a free market which does not have to be capitalist. I was specifically referring to free-market capitalism. So when I wrote a blog about whether the free market corrodes human character, I made sure to explicitly say free market capitalism or at least the free market as we see it today in its U.S. version. To summarize, I was specifically looking at markets that were free and specifically free markets that incorporate the accumulation of wealth and increasing financialization, specifically using the accumulation of wealth to build up a greater accumulation of wealth such that the means and the end and the motivation are all one.

• 3% Growth- I forget Harvey's explanation of why capital likes to grow at at least 3% in particular, but one of his main arguments about/observations of capitalism is not that it is a market economy, but that it it is a logic that perpetually invests and reinvests money to make more money (and then reinvest). The logic is to invest where one speculates there will be greater return ad infinitum, which means growth of profit/increasing returns is intractably embedded in the logic of capital. That is why I think it is problematic (as you mentioned) to try to add adjectives in front of capitalism. This does seem to be a fundamental, definitional aspect of capitalism, whereas social justice or environmental sustainability can only ever be addenda.

Exactly, you’re touching on the root of the problem with the various “adjectival forms” of capitalism. If the problem with capitalism today is something that is not fundamental, then it’s easy to change that part or branch of capitalism and give it a new name like neo-capitalism. But if the problems we experience with capitalism as a society are fundamental to what capitalism is or how we understand and practice it today (see next paragraph), then we need to look for radical changes. I use the term radical purposefully. Etymologically, radical means dealing with the root or related to the root. It doesn’t necessarily mean drastic or markedly unorthodox. What we have to decide, as a people, is if the problems we experience with capitalism are fundamental or not. If they are, we need a response that deals with capitalism at its root. Otherwise, we will continue to generate the same problems while dealing with the symptoms.

It’s important to emphasize that the definitions, understanding, and practice of capitalism has not been constant in its history. It has definitely changed throughout time. So I’m only dealing with it in its current version, today, specifically in the U.S. context, though there are similar contexts in other parts of the world.

The last point is that, today, a mechanism in which speculators invest where there is greatest return might require that we qualify “return.” Specifically, many speculators try to invest where there is greatest long-term return which is completely different than investing where there is greatest return, in general. The greatest return almost always is accompanied by the greatest risk and some capitalist speculators try to avoid the greatest risk. The ones who don’t mostly fall into the venture capitalism camp (sorry to use another adjective in front of capitalism). Experientially or anecdotally (among my friends), most people start speculating in the “greatest long-term return” camp. Perhaps, as a goal you want to accumulate enough wealth where you can simply invest where there is the biggest general return which implies the greatest risk which eventually may

lead to venture capitalism.

• "The coercive forces of competition"- Harvey kept using this epithet almost anytime he mentioned competition. It highlights a general theme of the book, which is that perpetual growth and expansion and reinvestment of profits is not so much an expression of people's greed (which has been on the scene long before capitalism), but a necessity for people running businesses in a capitalist system. Economic competition is not necessary for a society to survive, but in a capitalist system, people running businesses really do face the reality that if they do not compete and grow and capitalize on innovation and reinvest, they will not merely stay small, but they will likely lose their ability to stay open.

The difficulty of Harvey’s point here is that it is both true, today, and yet, does not have to be (and was not always the case). It is true: if you don’t reinvest profit to innovate and attract new people and grow, in today’s world, you will stay small and possibly close down. And that is not necessarily related to greed. But let’s look at related questions to that process. How much of my profit should I reinvest? What specifically should I reinvest my profit in? How will I reinvest my profit? Should I reinvest my profit in a way which I consciously know will close down competitors forcing them out of business? Should I reinvest my profit in a way in which I consciously know will force competitors to sell to me or merge? Can I reinvest my profit in a way that is harmful to the environment? May I reinvest my profits in a way that adversely affects society and the emotional health of people? Should I choose to reinvest my profit in a way that closes down smaller businesses catering to a local or hyperlocal audience which I do not need? All of these questions and more go deeper down this “greed-less path of reinvestment” and show how greed can be involved in a “greed-less” process.

Corporations are smart entities. It’s not necessarily any one particular person or group. Every incentive is aligned to maximize profit, so it’s fair to say that this entity is greedy. It’s not a negative or positive statement (depending on your ethics); it’s just fact based on priorities. In fact, as a corporate executive or employee, you have a fiduciary responsibility to maximize profit for your shareholders. If you do not, the shareholders can sue you. So think of it like this.

1. Reinvesting capital to innovate, compete, and grow is not the same thing as maximizing profit.

2. Reinvesting capital to innovate, compete, and grow is also not the same thing as prioritizing profit above all else.

3. How you define profit can determine what you maximize. If profit is specific to me alone as a corporation and not to the people to whom I am selling or the society in which they live, it affects what I maximize, whether I am greedy, and the value I produce in society.

• Economy is how society puts food on the table- this isn't from Harvey, but a phrase that I like. Economic activity across time and cultures and societal sizes is fundamentally how society provides for itself so it doesn't starve to death, or doesn't die from exposure. People tend to equate economy with currency, or GDP growth, or competition, or businesses, but these things are simply not fundamental aspects of what economy is. It helps pose the question: how well is our society providing for itself?

I think this was my FAVORITE comment. I really loved that someone wrote this. It’s so true. How well is a society providing for itself? It has an aesthetic element and a philosophical and political one which is why we often speak of the political economy. What is the philosophy by which we determine the health of our society? What is the philosophy which guides us as we provide for society? What is the philosophy by which we measure how well we provide for ourselves? That is the question.

To quote one of my favorite professors, Professor Emeritus Cornel West, the true test of any democracy is how well the most vulnerable are treated. I would say the exact same for a true political economy, remembering that an economy is how we provide for ourselves. The true test of any political economy is how well the needs of the most vulnerable are provided. And that’s it. That’s the core of it all, the root of the problem. If economy is how a society provides for itself, free market capitalism as it exists in the US is doing a poor job.

Today because our economy is so tied to this artificial concept of money and the amount of it available in society, the economy is tied to the amount of currency (whether direct like cash or indirect like credit) and, even more, to the distribution of that money. This leads to one of the obstacles created by capitalism in the form which we’re discussing. This accumulation of wealth and use of money to make more money tends to create a highly unequal distribution of money and wealth in society. It doesn’t just tend to create a distribution in which everyone has enough and a few people have a super excess. It creates a situation in which some people have a super excess and some people have a super paucity. That’s the problem.

CAPITALISM II

We First Book Video: "We-defining Me" from We First on Vimeo.

Some of you may have been confused by the last post on capitalism. You wonder how is it possible that companies are not doing enough.

Without giving you all the facts and figures, the main point is that the world is facing staggering problems in areas of global health, global homelessness, global climate change, global conflict, food security and agricultural development problems, energy instability or deficiency, water scarcity, gender disempowerment, unemployment, underemployment, education, youth leadership, etc. The list goes on. Yes, it’s true that most countries give a small percentage of their budget to help with foreign assistance, foreign aid, or international development. But this is not the same as the 1% of pretax profits the average company gives to charity.

To explain, let’s use the U.S. as an example. It is true that less than 1% of its budget goes to foreign aid, so it seems similar to the average corporation, on first glance. But remember, much of what countries do is domestic. If the US works on shelter and housing domestically, it’s the Department of Housing and Urban Development (HUD); if they work on it in foreign countries, it’s the U.S. Agency for International Development (USAID) or Department of State. If the U.S. works on energy security domestically, it’s the Department of Energy (DoE); in foreign countries, it’s USAID or State. If the U.S. works on public health domestically, it’s the Department of Health and Human Services (HHS) and the National Institutes of Health (NIH); in foreign countries, USAID or State (or the international parts of NIH, HHS, and a bit of Homeland Security). So when you say that the U.S. spends less than 1% on international development, remember the key word is international. They are also doing local or domestic development all the time.

Still, I do believe the government could do more. Generally, countries that spend a greater proportion of their budget on effective education and health have higher standards of living (Norway, Sweden, etc.). So I do want the government (around the world) to do more. However, I’m specifically speaking about corporations due to the limitations of government. Before talking about corporations, let’s think about the benefits the government has. It has 60 years of knowledge in foreign aid and over 80 years of knowledge since the New Deal (U.S. government). It has guaranteed income—the tax base. It can create legislation or use executive power. And it has existing administrative, programming, and financial infrastructure at the local and state levels. However, the government is limited by fraud, corruption, bipartisan politics, jarring bureaucracy. In trying to solve problems of global and domestic poverty alleviation, the government struggles (or doesn’t struggle) with national interests versus global need, disagreements about where the poverty line should be, lack of enthusiasm towards social programs for the poor (in the U.S.), and feelings that the non-profit sector, families, and churches should handle poverty efforts.

The non-profit sector also faces great advantages and limitations. Remember, when I say non-profit sector I’m including philanthropies/foundations, NGOs, charities (501c3 status) and non-profits which can have other tax exempt status. Generally non-profits enjoy being seen as credible and neutral. More generally, non-profits have the advantage of super-motivated volunteers and staff, potential ability to attract big contributions, field expertise (many NGOs have feet on the ground in various countries around the world or in local communities), and limited staffing, bureaucracy, and overhead. Obviously this does not apply to all NGOs, however, the big large NGOs are not most NGOs. Unfortunately, NGOs and the non-profit sector also deal with fraud and corruption like the government. There can be policy conflicts between headquarters and people out in the field. Money is always a problem. A lack of coordination between NGOs working on the same or related problems diminishes impact. And NGOs are always subject to the agendas or requirements of donors and host country governments.

And that leaves . . . you guessed it—corporations. Of course, social enterprises (the 4^th sector), NGOs and the non-profit sector are doing all they can. They can continue to improve efficiency, but they are doing a lot. Governments need to do more. However, corporations have not really scratched the surface of their potential to contribute to solutions to the major problems plaguing the world, today.

We looked at the short history of corporate charitable giving, Corporate Social Responsibility (CSR) movement, and Cause-related Marketing (CRM). So yes, to summarise, U.S. corporations went from 0 charitable giving in the early 1900s when they were barred from making such contributions to giving to arts and culture in the 1950s and 1960s. In the 1970s they began to give to civic causes, and then moved to national and global issues of poverty and social justice in the 1990s and 2000s. And yes, contributions grew from 0, then, to $14 billion in 2009. Still it’s a small percentage of the profits that companies pull in annually. Most importantly, CSR is still somewhat of a second thought and operates with problems and deficiencies in many companies. Here are few of the problems according to Simon Mainwaring.

• Giving is disproportionate to profits and salaries – The $14 billion in 2009 is small compared to money (billions) made by investors and top executives not to mention bonuses.

• Top executives are uninvolved and insincere – In a 2010 McKinsey survey of 1800 respondents, more than 50% considered sustainability to be “very” or “extremely” important. Contrast that with the fact that only 30% say their company invests in sustainability and embeds it in business practices, while only 25% said that it is a top priority for their CEO.

• Companies fail to understand CSR – According to the same survey, 20% of executives claimed their company has no definition of sustainability. Fifty-five percent thought that CSR related to management of environmental issues; 48% thought it was related to governance issues like ethics, regulations, and compliance; 41% thought it was related to social issues like worker rights and labour standards.

• CSR efforts are just window dressing – The great majority of companies still use CSR as a tool for public relations and their public image. Simon Mainwaring even quotes the Economist as saying “ . . . for most public companies CSR is little more than a cosmetic treatment. The human face that CSR applies to capitalism goes on each morning, gets increasingly smeared by day, and washes off at night.”

• Companies spin their CSR and CRM – Companies have been exposed for green-washing, cause-washing, and local-washing in order to market themselves.

• CSR results and measurements are scattershot – There really are no national or international standards of achievement in CSR. So few companies measure their results. Most of us use various watchdog agencies to watch, analyse, rate, and rank corporations on their socially conscious good work.

When I say “it’s not enough,” this is what I mean.

I’ll close with a report mentioned in We First. One of my favourite people is Paul Newman (God rest his soul). When he was alive he convened a group of CEOs and founded the Committee Encouraging Corporate Philanthropy (CECP). The CECP commissioned a report from McKinsey to project 10 years into the future to see if social responsibility was important for the future of corporations. The report predicted 5 important trends between 2010 and 2020: (1) a rise in the power of emerging nations, like China; (2) a shrinking of the labour force and talent pool due to demographic changes; (3) a global integration of capital markets, trade, and technology; (4) natural resource scarcities; and (5) competition among nations to attract work.

The report mentioned 4 scenarios based on how extensively corporations adopt true social responsibility.

Scenario 1 – People put greater demand on companies for social change and corporations react positively. Consumers began to trust corporations that they will agree to enact social change. Consumers and corporations become partners in actually improving the world. And governments allow corporations to voluntarily meet these social expectations.

Scenario 2 – Corporations try to adopt some social changes, but citizens fail to trust them. As a result, government and NGOs stop partnering with corporations to enact social change, and we are left with a “patchwork” of international laws and standards and a “bifurcated system of capitalism.”

Scenario 3 – Society’s expectations of businesses continues to rise, but companies refuse to enact changes for positive global impact. Governments enforce regulations reducing capital and increases expenses for companies. Citizens (who are also consumers) distrust companies creating a problem of expectations.

Scenario 4 – Societies and companies cannot match their expectations or their engagement levels so there is an ever-downward spiral of social responsibility. Trust in business drops low enough that the economy suffers exacerbating the very global social problems we are trying to solve.

The report says that only the first scenario is the logical and preferred scenario. Each of the rest does not have a beneficial outcome for corporations.  Which of the scenarios do you think is likely to happen? Do you see any other options or scenarios not listed?

CORRECTIONS

I normally like to take a moment to correct anything from the last update. Usually these corrections come from readers who point out how silly I am trying to write about so many things (but these are really just thoughts in my head). So here are the updates or corrections from last time.

First, my intelligent friend Alex mentioned that he also noticed that British television shows don’t last as long as U.S. American shows. He believes part of that is due to the fact that we pay for a TV license here in order to have television service. I never knew to whom it goes. Alex explained that this annual fee goes to broadcasters and may give them much more financial protection to try out new shows and series. Good point.

The second correction was related to the section called The Town. I worded the section on "The Town" poorly. What my friend, Praj told me is absolutely true and much more nuanced: people have good parts and bad parts (as opposed to Hitler being all bad). I think what I was referring to in that section was contradictory messages. Does Hitler love and care about humanity? In one context, you might say yes (in the magazine article); in another you might say no. Hitler himself would say yes and tried to construct an image of what he wanted the world to see or know (he did the exact same thing at the concentration camp at Theresien in which he invited the world to see what was going on, showing himself as a really great guy who was treating the people there well). So I was (poorly) pointing to the fact that the truth of us in not in our constructed image of ourselves (which does involve actions in order to construct the image) but in our actions outside of the construct.

I am focusing on the phenomenon when your words differ from your deeds. Are you the deeds or the words? Some people would say it’s possible to believe one thing and your actions show another. Instead of being able to believe one thing and do another, I was simply talking about the fact that what you do is not separate from what you believe but what you do is the very thing you believe (the truth lying in your actions). So instead of Hitler’s hate-filled, genocidal actions being different than his love of humanity, I would argue that he did not have a love of humanity which is borne out in his deeds regardless of the image he portrays or the beliefs he says he has (his true beliefs being his actions).

Again, Praj brought up an excellent point saying that he wasn’t sure if some groups pursuing profit is a bad thing (if there are other groups helping people). I tried to be careful with my wording about the job (and at work). I actually wasn't commenting on profit-driven organisations (though I could comment on it). I think my main point, poorly conveyed, was that the role given to me is not what was advertised to me and not what I wanted to do. So if people want to go to India and create a certification programme and call it an educational programme and help upwardly mobile people get jobs when they would be competitive without the presence of the programme, that's fine. And people can make money doing that. What I've tried to communicate at work is that picture/vision is not what I wanted to create/do. It's ok if someone else wants to do that, and I don't begrudge him or her. However, I didn't go to London to only teach Company products (and wasn't told that) or to do the kind of work where we're jumping on moving trains or work that helps grow the GDP and inequality together. It's just not what I wanted, and as other people get to choose what they would like to do, I think I'd like to do something else. I also thought I would be working partly in the philanthropic arm of the company, so it was sad that didn't work out. :-)

The toughest part in such situations is that your opinion is not valued or understood. People think because it’s a for-profit technology company we’re not doing development work. Unfortunately, many groups do development work besides just international and community development organisations. And if we enter into the education field, we’re doing development work. I’ve been told that you don’t sit and force teachers to sit through an entire year of schooling so they learn the material they are going to prepare. This was one of the strangest comments told to me to show why we didn’t need to teach the material to future trainers. What was not understood is that teachers (people who major in a specific academic field or education) [should] already know the material they are to teach; this is why they don’t sit through an entire year of the subject they will teach. When I have had to teach teachers new things like how to incorporate engineering into science curriculum, I have most definitely taught the teachers just as they will teach the students. This type of thing where I’m asked my opinion as the education person but whenever there is a disagreement, my opinion is disregarded or dropped or dismissed—this happens again and again and again. And it has an effect on you even though people expect it to have none.

The last correction or amendment I wanted to make was to the section called Women in the last update.

POLITICKING from AMERICA II

I think some people might have been confused. My best friend told me that US involvement in international relations is not that simple. Nothing is black and white. So let me go back over the basics.

This is not a conspiracy theory at all. I’m not talking about any particular type of collusion or conspiring to do anything to take over the world or secure US domination. Now, some of our government documents openly use this language (where in the past I don’t think it would have been so open) so if one does the research, one must come to terms with that. But if there are any people conspiring it is not something that all people are tied into.

Companies have an uncanny ability to make employees fight for its own goals. What I mean is that the goal and the bottom line of a company is to make a profit. Companies then have a great ability to make the employees fight to make a profit. Companies do this by tying incentives of employees to the profit of the company so that every employee from the person who cleans the floors to the CEO is doing what it takes for the company to make a profit. Haven’t you seen this? Haven’t we all been in situations when dealing with an employee of an organization or company and we’re amazed at how emotional the employee gets about the work when in reality it doesn’t really matter at all, in the big scheme of things? Yes, sometimes the passion is due to the fact that the person is passionate about the work, but usually the person has incentive to do well in the job. And doing well usually means enhancing or growing the business of the company. And enhancing the business of the company usually means more profit. It’s quite amazing, actually. So everyone in the company is working to increase profit, like members of an impersonal entity, the movements of a large machine. And it works.




The lone goal of a traditional company is profit and increasing it.

Companies have disproportionate influence over our government. This is not an opinion or biased or conspiracy theory. It’s just true. We have politicians who are elected into office. They need large amounts of money to run for office. The only people that can sway them on how to vote or what to fight for are people who vote for them and people who can give them money so they can campaign for votes. Companies can give money. They hire lobbyists who go to politicians and sway them to do what they want and politicians listen. In fact, a single lobbyist is more powerful than a single citizen. DC people will tell you this is only because lobbyist know the system and how to get what they want, but as it stands, it is true. With increasing mergers of companies in today’s age, there is a decrease in the amount of corporate voices heard. Regardless, the message of a corporation is always the same: help me increase my profits and don’t pass laws that reduce my profits. Corporations have risen to a point of being given the benefits of citizens but don’t have the responsibilities of citizens (the tide is slowly changing as people are trying to hold them to more and more responsibility). The problem is that voting is not required by law. So MANY citizens do not vote. The least participative is the lower class. This is why you never see anyone campaigning for “lower class values” and “the poor” and winning a presidency. No, Clinton (both) campaigned for the middle class which is great but it doesn’t help “the least of these.” A single mother working multiple jobs to take care of multiple kids is unlikely to make it to the poll station to voice her opinion. So it has the affect of diluting the democracy to a point where it isn’t a democracy. The salient feature of a democracy is the multiplicity of voices and choices. But you never really have a choice of a candidate campaigning for the lower class. You never really have a choice of a candidate who is not supported by the top companies in the country. In other words, we tend to lack a multiplicity of voices; every voice is not heard. People are free to choose who they want. But we don’t have choices that represent all peoples. And to top it off, a single lobbyist has more potential and power in a senator’s office than a single citizen, on average. This is not new to anyone in DC. This is how the system works.

The lone goal of a traditional company is profit and increasing it.

Companies have disproportionate influence over our government.

The government therefore works, in many cases, to increase the profits of its companies. This comes from the logical progression. It ranges from subsidies for corn and strengthening of the insurance infrastructure to the favor of US companies for development and relief in war and peace and the opposing of nationalizing of resources of foreign countries.

That’s just math. But there is hope, it is true that Obama might be less beholden to corporate interests since he had the largest campaign with individual donors than I’ve ever seen, but he is still beholden to them as is the Congress with whom he works. But it does indicate that another way is possible. And I look forward to a day, however impossible it may be, when such a campaign is fully and only funded by individual donors.

Politicians used to be quite cordial in earlier times (maybe when I was kid?). In public they were political enemies, but they would share a drink and laugh after the debate was over. They knew and understood how the game works and who funded whom. But these days it seems to have increased in vitriol and personal intensity.
Africa has been ravaged by such economic imperialism. The Middle East was controlled by it. We saw last time how effects of it were felt in Latin America, but there has been a rising tide of “leftist” governments (left from our perspective) and leaders are trying to take resources into the hands of their people, rid themselves of the IMF, and keep their land free of American military bases. This is not in every Latin American country but there is a definitely a noticeable trend. Next time (because this is a little long I’ll talk about trends in Asia.