The Soul of Capitalism

[IrateCitizen]

Has anyone out there read the book The Soul of Capitalism: Opening Paths to a Moral Economy by William Greider? I just started it last night, am now just under 100 pages in, and have found it to be absolutely FANTASTIC.

If you're looking for something to validate leftist calls for socialism, or libertarian calls for "allowing the market to work", you'd better look elsewhere. A large part of this book is all about challenging accepted orthodoxies in order to help make a "moral" economy.

Some interesting points so far:

- The school of economics was developed to maximize allocation of scarce resources. However, when it comes to the United States of today, we could hardly say that resources are "scarce". But economics has not adjusted to this fact, nor has it adjusted to the realities of tremendous social costs like environmental degradation which are not even considered in economic analysis. Therefore, there has to be a massive overhaul of the study of economics itself -- and Greider points out some examples of people trying to do just that.

- The main complaint of the "Social Gospelers" of the turn of the 20th century (clergy who denounced the extreme inequities of early-industrial age capitalism) was that capitalism operated under a spirit of "irresponsibility" to accepted social norms. For example, if you were to shit on your neighbor's lawn, you could be arrested -- but if a factory basically "shat" in your river, they would go unpunished, and such behavior was actually encouraged by business norms. Fast forward to the pronouncements of famed libertarian economist Milton Friedman, in which he essentially proclaimed that this "irresponsibility" was the key to the success of the American capitalist system. Greider follows this up with the simple question, "Whose side would you rather be on?"

- If you're looking to big government to solve these problems, you'd better get over that false presumption. This is a problem that has to be solved by society itself, and government has actually helped to perpetuate many of the problems inherent in modern-day capitalism. Likewise, calls to "let the market work" are equally suspect, due to the fact that they don't address the lack of a social code in capitalism today outside of maximizing profit and dehumanizing labor in the process.

Has anyone else out there read this book? I'd appreciate your thoughts on it.

[IrateCitizen]

1. Kick?

:kick:

[redqueen]

2. Haven't read it

Does sound interesting, tho. :)

[JHB]

3. It's on the reading list

So many books, so little time

[cryofan]

4. So he doesn't offer any solutions?

Sounds interesting though....

[IrateCitizen]

6. Actually, he offers a lot of real-world examples

I just haven't gotten all that far into them yet.

One instance he spoke of was a worker-owned temp agency in Baltimore, MD. Most of the workers are recovering drug addicts and many have spent time in prison. Since they all have a stake in the work, they tend to "self-police" each other if someone isn't pulling their weight.

The workers all make $1-2 more per hour than their typical counterparts. After the first year they really turned a profit, the workers actually voted to put the money BACK INTO THE COMPANY rather than get bonus checks of several hundred dollars each.

Most of the examples are about business ventures that not only value the ability to turn a profit, but more importantly value the workers as PEOPLE and maintain a vested interest in them.

[salib]

5. Natural Capitalism

Have not read that one, but it probably refers to "Natural Capitalism: Creating the Next Industrial Revolution" (http://www.natcap.org/) as one of the examples of people trying to overhaul the study of economics. One of the critical differences with, or additions to, traditional economics is the elimination of "miraculous" resources (i.e., they simply are, and have no cost associated with them, except for the cost to exploit them, e.g., oil, coal, mining, etc.) and "disappearing" by-products or waste. I.e., this is economics that is true to the principles of accounting, and you do not simply get something for nothing.

Additionally, it is a very positive, optimistic view and outlook that is presented. Along with the Rocky Mountain Institute, they claim many businesses and organizations already trying to operate based upon the principles stated in the book. Could be something good.

[redqueen]

9. Thanks for this reference

:)

[Michael Costello]

11. wikis

There is a Wiki dedicated to this,

http://www.consumerium.org

I have to warn however that I feel he does not communicate the Wiki rules that well and is somewhat heavy-handed in the enforcement of these Kafkaesque rules. He pointed me to another Wiki:

http://www.channel1.com/users/dkesh/consumerpedia/index.php/Main_Page

which was happier to list boycotts and things like that (like the boycott of Coca-Cola after eight Coca-Cola trade union leaders in Colombia were killed http://www.killercoke.org )

[Jim__]

7. Haven't read it - but now I plan to

Haven't read it. It's on my reading list though - I loved Greider's Secrets of the Temple on the Federal Reserve System.

I am curious about something you said:

If you're looking to big government to solve these problems, you'd better get over that false presumption. This is a problem that has to be solved by society itself, and government has actually helped to perpetuate many of the problems inherent in modern-day capitalism.

I agree that government is part of the problem. However, I don't see how the problem can be solved without government. If government doesn't stop corporations from polluting, no one else can; not unless we want anarchy. How does Greider recommend the problem be solved?

[IrateCitizen]

8. I'll let you know when I get to it...

Part of it is just seeking ways to empower workers and introduce greater democracy in the workplace, which has historically resulted in increased productivity.

See my post #6 above for an example of a business doing things the right way.

Basically, Greider says that it is up to socially-responsible entrepreneurs to start around the edges, to show that such models are not only possible but BETTER, and then the majority will clamor for them. While government regulation certainly plays a ROLE, in its current state, government is just too f***ed up to provide anything other than an impediment in this affair.

[Michael Costello]

10. capital

Well, I personally have no use for capitalism. I think the only legitimate ways to earn money are either to earn it, to have it given to you (parent to child), or to receive it from a government/pension because you are no longer able, or fully able to work. I think profit (dividends), rent and interest are parasitic. I think workers should be able to keep the wealth they create (with some being taken out by government or pension for those not able to work - retired, injured or handicapped). As far as people unemployed, I think that's just part of the current system - the Wall Street Journal, Federal Reserve and so forth get NERVOUS when unemployment goes down too much. They try to boost it back up. Don't believe me, read them. They are straightforward to their white collar readers - but while they're trying to raise unemployment (or "cool the economy" or whatever they say), they have Rush Limbaugh or whatnot blaming the measures they just took to unemploy people, that sends people into unemployment, on the people who become unemployed by their measures.

As far as "maximizing allocation of scarce resources", it's not much of a secret that maximizing PROFIT is the driving force of capitalism. In fact, there are economic equations trying to say those two things are the same thing, which are pretty out there.

As far as irresponsibility to social norms, the solution for the capitalists would of course be to change the social norms. People probably don't even remember that when television came out, there was (some) debate over whether the government should own the channels, like in Europe (BBC etc.), or whether it should be handed over to capitalists. Well, we know how that went. It went to the control fo a few trying to use them for profit, instead of to government control, ie. to some extent, public control. Something rarely mentioned when the Republicans in Congress flip out over Janet Jackson's breast or Howard Stern's potty mouth. They're the people who handed control over to the "sex sells" people in the first place.

Of course the government can't solve things. The government is simply a reflection of who has power in society. Several decades ago, when over 30% of Americans were unionized (compared to like 8-10% now), working people had more power. This is not the case anymore, one reason the average US inflation adjusted hourly wage is below what it was 30 years ago. Changes have to come from popular mass movements, especially organized labor (and especially from rank-and-file militancy and control - unions can become as bureaucratic as government if people let them). It's possible that good things can be done electorally, but that is just one, small, tactic from an overall strategy, and a tactic with a very large and bad slippery-slope as well.

As far as "the market" - this is the most ridiculous thing people talk about. A commodity's lifespan is thus, production -> exchange for another commodity (e.g. gold for food) -> consumption. It's interesting to note that in the US, if one is talking about the USSR economy, ONLY the production part is talked about, and if one is talking about the US, ONLY the exchange part is talked about (consumption is usually not talked about in economic terms). The reason I suspect is because some people in the US do not want people to think someone paying their wage in rubles for bread is not much different than someone paying their wage in dollars for bread.

And more importantly, capitalists want people focusing on the exchange of commodities, and perhaps the consumption of commodities, but certainly not the production of commodities. People might start getting funny ideas, such as why does the capitalist heir sit on their behind and take from the wealth created by workers every day? Paris Hilton does nothing to create the wealth of the Hilton hotels, why does she get a massive dividend check every quarter? I suppose the answer is there is some type of mystical authority invoked from the bones and rotting corpse of her dead ancestors which supposedly gives her the right to expropriate surplus value from workers at Hilton hotels. A more down-to-earth scenario is if Hilton workers stated that she was not getting dividends any more, the police would come in with nightsticks and guns a-blazing, just as they'd come to evict some family refusing to pay (full) rent to some landlord heir. The expropriation of profit, the extraction of rent - this is backed by force, by the local policeman and his club and gun. Sometimes the evicted get blown away (like Eleanor Bumpers, some 60+ woman who the police tried to evict years ago in New York), some the evictor gets blown away (some guy in Georgia killed two cops trying to evict him from his home a few years ago). People are aware that their life is at stake in this theft though, so usually the threat of violence by police is enough.

[Redleg]

12. I saw Greider speak about the book on C-Span.

It was very interesting. I may have to actually read it.

[skeptic9]

13. I've just read a lengthy summary of the book by the author, though ...

... I haven't read the book itself. I hadn't heard of the book until I came across this DU thread.

This book seems to be about recent developments in what Peter Drucker called "pension fund socialism". In the 70s and 80s, Jesse Jackson's "Wall Street Project" and other movements advocated it, and Alan Greenspan, Jim Glassman, and other far-righters denounced it. Fear of "pension fund socialism" evidently is the reason the remaining positive FICA cash flow is available for Dubya to dole out to his wealty supporters in a "tax cut". Every attempt over at least two decades to create a dedicated publicly managed REAL Social Security Trust Fund (like union, state, or federal employees' pension funds) has met vehement opposition from "conservatives", They fear and abhor exactly the kinds of socially responsible investments Greider writes about.

I googled Greider's homepage at http://williamgreider.com

Then I clicked through links to find a list of Greider's articles from The Nation, at http://www.thenation.com/directory/bios/bio.mhtml?id=2

One of these articles, from September '03, is entitled "The Soul of Capitalism" and evidently has the gist of the eponymous book.

It seems that the AFLCIO's Office of Investment and other non-profit organizations have hooked up with mutual funds, investment bankers, and venture capitalists to engineer "union-friendly" takeovers, recapitalizations, and startups that are much more socially responsible than Halliburton, Enron, or WorldCom.

From http://www.thenation.com/doc.mhtml?i=20030929&c=4&s=greider

"This article is adapted from The Soul of Capitalism, just published by Simon & Schuster.... Aggressive pioneers in the labor movement have connected with a few kindred spirits in finance capital, investment bankers who understand the destructive side of how the present system functions and recognize that there are profitable opportunities for real "wealth creation" if the employees, union and nonunion alike, are brought into the deal. The first successful model for labor's direct investing was fashioned by its most conservative sector: the building trades, which overcame years of traditional legal obstacles and won the right to invest their pension money directly in housing and development projects that create jobs for union members.

More ambitiously, some capitalists and workers, not many but a few, are together now carrying out "labor friendly" corporate takeovers--the direct-equity investment deals that used to be the exclusive domain of the wealthy and powerful. The returns are very strong, typical of direct-equity investing. It is the operating values that are different. And the "deal flow," as investment bankers call the essential task of spotting new investing opportunities, often originates with local union leaders, people intimately familiar with both the failures and the unrealized potential in business enterprises....

Oddly enough, David Stockman, the tenaciously bright young conservative who was Ronald Reagan's controversial budget director in the 1980s, is leading one of the "labor-friendly" firms--the $1.4 billion Heartland Industrial Partners (evidently, he borrowed the name from Gerard). Stockman's venture may startle those who remember his combative style in Washington politics, but he impressed labor people with some of the deals he did for the Blackstone Group of Wall Street. Stockman managed large and successful industrial turnarounds by working with the employees and unions instead of rolling over them. Since he launched his own firm in 1999, his "buy and build" strategies have focused entirely on restoring midsized manufacturing companies to good health and profitability: auto parts, home furnishings, aerospace components and other sectors. In all, Heartland manages around $10 billion in industrial companies, probably the largest fund of its kind. The Canadian Pension Plan and Michigan's state employees' fund, as well as the steelworkers', are investors, alongside major private players like J.P. Morgan Chase and AIG, the insurance giant. "David is buying controlling ownership of these companies, and he's actually turning them around, and he's not doing it by beating the shit out of the workers," Gerard says. "David made his presentation to the trustees of the pension fund, labor and management, and asked for $10 million. When he left the room, the board voted to give him $25 million." Even the mighty Carlyle Group, run by celebrated conservative Republicans like James Baker, has stuck a toe in the same pond by launching a $750 million "worker-friendly" investment fund, perhaps designed to attract capital from the same labor investors.....

So long as the risks are pursued with tough-minded self-discipline, there is nothing in the operating rules of capitalism to prevent any of these departures from the status quo, whether they involve community-loyal investment funds or the pressuring of pension-fund trustees to alter their investment priorities, or punishing the disloyal Wall Street firms or taking control of corporations by making direct-equity investments. Indeed, these are routine practices within the system, employed every day on behalf of narrower objectives and self-interested values. The financial power of society awaits the rise of tough-minded social inventors, investing risk-takers with the courage to take control of their own money."

[IrateCitizen]

14. That's the part of it I'm on now -- but there's much more

Greider talks about the Mondragon cooperative enterprises among the Basques of Northern Spain as an excellent example of a way of doing business that gives better respect to social norms. He then goes on to discuss and give examples of how some people and groups here in the US are attempting to do the same thing to varying degrees of scale and success.

Please note that these kinds of cooperative businesses are STILL set up to make profits. They just recognize that there is a way to make profits that does not work in opposition to social norms, nor does it seek to pass off much of its long-term operating expense on to society (in terms of environmental degradation, community disintegration from job loss, etc.).

The flexing of pension fund muscle in Wall St. is a significant part of his book, but it is far from the only solution offered.

[skeptic9]

17. Does Greider focus on alternatives to traditional banking

... to raise money for businesses? Tradition and culture in many ethnic groups supports entrepreneurship with unique ways of sharing assets and rewarding investors. And there are some community banks that do not behave much like dominant large traditional banks but generate even bigger profits.

After all, under any capitalist regime, you can't run a profitable business without adequate capital.

[IrateCitizen]

18. Yes, he does hit on that subject

He acknowledges the need to raise capital in order to run businesses. WRT what you're bringing up, Greider talks about two separate groups that are challenging orthodoxies as far as "traditional" capitalism.

The first institution is small, community-oriented banks (like ShoreBank, for example). These are actual banks who seek to invest money in community projects and local start-up ventures, especially in areas in need of economic growth.

The second is investment bankers who are challenging traditional orthodoxies by actually helping to empower workers. Specifically, these are venture capitalists who go into failing companies, buy up a majority share, get the workers to pick up the rest in exchange for a voluntary reduction in salary (and they also get several seats on the board of directors), and then work over a period of 2-3 years directing the company and getting it back on its feet. When the investors then sell off their share, they give the workers right of first refusal. The investors are typically making returns of 30-35% on these ventures, and the end result can possibly be a worker-owned company. In short, everybody wins. But the investors acknowledge that there are actually a small percentage of companies in which they'll actually invest -- most are just too far gone to come back.

It's some pretty interesting stuff all around.

[rman]

15. "the way of the plunderer"

confirmation from another source that capitalism-as-we-know-it is not a good thing, and that there can be such a thing as 'morally correct free enterprise'.

From the documentary "The Corporation":
http://thecorporation.com
http://thecorporation.tv

Ray Anderson, CEO Interface Inc.:

(Interface is the world's largest commercial carpet maker, it revolutionised the modern office environment with its modular carpet tile products. The owner Ray Anderson had an environmental epiphany and reorganised his 1.4 billion dollar company, reducing its environmental footprint by one third.)

"One day, early in this journey, it dawned on me that the way I have been running Interface, is the way of the plunderer. Plundering something that is not mine, something that belongs to every creature on earth.
And I said to myself, My goodness, the day must come when this is illegal - when plundering is not allowed. It must come. So I said to myself, my goodness, someday people like me will end up in jail."

"If we are successful, we'll spend the rest of our days harvesting yesteryear's carpets and other petrochemically derived products, and recycling them into new materials; and converting sunlight into energy; with zero scrap going to the landfill and zero emissions into the ecosystem.
And we will be doing well … very well … by doing good. That's the vision."

[IrateCitizen]

16. Thanks for this example, rman

I don't know if it turns up in Greider's book, but it's very much in line with the general thrust of his book.

Markets as a means of exchanging goods and services are neither good nor evil. They are a neutral medium that can be used for either affirming social norms or attempting to tear them down. In any case, they're not going away anytime soon -- as much as the hard-core communists out there would like to believe otherwise.

Our current system is set up to do the latter -- but, as evidenced by the example you posted here, it doesn't have to be that way. There are plenty of ways that free market exchanges can be used to actually not just turn a profit, but benefit society as a whole. Perhaps the most important thing is to push for an assessment of ALL true costs inherent in manufacturing, exchange of goods and services, and financial markets. For instance, in the current system, companies do not pay for the overwhelming majority of environmental degradation they cause -- and the majority is then passed on to society as a whole. If we were instead able to better quantify these costs and factor them in as operating expenses, it might actually make companies like ExxonMobil and General Electric ones that investors and consumers on all levels would avoid like the plague, while affirming those who operate in a socially-responsible manner.

I thank you once again for posting this excellent example of how the problem isn't about the "ism" involved -- it's just about how that "ism" is applied. Soviet Communism, after all, was even WORSE on the environment than any form of capitalism has been.