Conscious Capitalism. John Mackey

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СКАЧАТЬ of consciousness about their true purpose and overall impact on the world. Their tendency to think in terms of trade-offs has led to many unintended, harmful consequences for people, society, and the planet, resulting in an understandable backlash.

      3 In recent years, the myth that business is and must be about maximization of profits has taken root in academia as well as among business leaders. This has robbed most businesses of the ability to engage and connect with people at their deepest levels.

      4 Regulations and the size and scope of government have greatly expanded, creating the conditions for the spread of crony capitalism, restricting competition in favor of politically well-connected businesses. Crony capitalism is not capitalism at all, but is seen as such by many because it involves businesspeople.

      These are significant challenges, but they must be overcome if we are to continue to spread freedom and bring dignity and the fruits of modernity to the billions on the planet who are still in dire need.

      The Intellectual Hijacking of Capitalism

      The early intellectual case for capitalism was built almost exclusively on the theory that people create businesses to pursue only their personal self-interest. Economists, social critics, and business leaders largely disregarded the second and often more powerful aspect of human nature: the desire and need to care for others and for ideals and causes that transcend one’s self-interest. The founding father of modern capitalism, Adam Smith, recognized both of these powerful human motivations. His book The Theory of Moral Sentiments preceded his far better-known book, The Wealth of Nations, by seventeen years. In the earlier book, he outlined an ethics based on our ability to empathize with others and to care about their opinions. Through our ability to empathize, we are able to understand how other people are feeling and imagine what it would be like to be in their shoes.

      Smith was far ahead of his time, both in his economic philosophy and in his ethical system. If the intellectuals of the nineteenth century had embraced and integrated his economic and ethical philosophies, we might have avoided the extraordinary strife and suffering that occurred in the nineteenth and twentieth centuries over competing political and economic ideologies.

      Unfortunately, that did not happen. Smith’s views on ethics were largely ignored, and capitalism developed in a stunted way, missing the more human half of its identity. This created fertile conditions for ethical challenges to capitalism, which were not long in coming. Karl Marx attacked capitalism as inherently exploitative of workers. Critics used the Darwinian idea of the survival of the fittest to describe markets as inherently ruthless and brutal. Just as nature was seen as “red in tooth and claw,” business was seen as harsh, dehumanized, and uncaring. These descriptions ignored the higher-level human aspirations and capabilities that free-enterprise capitalism potentially taps into so well.

      Another factor that fed distrust of capitalism was a failure to distinguish between the fixed-pie or zero-sum concept of mercantilism and the expanding-pie concept of free-enterprise capitalism. Much of today’s animosity toward capitalism stems from a misconception that we need to share all resources fairly and equitably. But the reality is that by artfully combining resources, labor, and innovation, wealth can be greatly expanded. The poor can become wealthier without requiring the well-off to become poorer. The pie grows, and there is more for everyone. This idea is at the core of capitalism’s extraordinary and unique ability to generate wealth.

      The Unintended Consequences of Low-Consciousness Business

      When businesspeople operate with a low level of consciousness about the purpose and impact of business, they engage in trade-off thinking that creates many harmful, unintended consequences. Such businesses view their purpose as profit maximization and treat all participants in the system as means to that end. This approach may succeed in creating material prosperity in the short term, but the resultant price tag of long-term systemic problems is increasingly unacceptable and unaffordable. Too many businesses fail to recognize the significant impacts they have on the environment, on other creatures that inhabit the planet (such as wildlife and livestock animals), and on the physical health and psyches of team members and customers. Many businesses have created stressful and unfulfilling working conditions and fostered and fed unhealthy appetites and addictions in their customers. Many companies tend to treat all these as externalities, outside the scope of their own concerns.

      Symptoms of dysfunction and disaffection abound in the corporate world. The average level of engagement that American team members have with their work has remained at 30 percent or less for the past ten years, and almost as many people are hostile to their employers.¹³ Top executives at the helm of many major corporations have rigged the game to enrich themselves at the expense of the company and its stakeholders. While employee wages in the United States have been virtually stagnant for decades, executive pay has skyrocketed, fracturing workplace solidarity. According to the Institute for Policy Studies, the ratio between CEO pay and average pay was 42:1 in 1980, 107:1 in 1990, and 525:1 in 2000. It has fluctuated in recent years, standing at 325:1 in 2010.¹⁴

      Given all this, it is not surprising that the reputation of business has suffered. Corporations are widely seen as greedy, selfish, exploitative, and untrustworthy. Big business, in particular, has a terrible reputation today. Gallup has found that Americans’ confidence in big business has declined steadily, from about 34 percent in 1975 to a historic low of 16 percent in 2009, rebounding to 19 percent in 2011.¹⁵

      The Myth of Profit Maximization

      The persistent myth claiming that the ultimate purpose of business is always to maximize profits for the investors probably originated with the industrial revolution’s earliest economists. How did this myth originate? It appears to have come from two sources: a narrow view of human nature and an inadequate explanation of the causes of business success.

      Looking to create elegant mathematical models of economic systems, academic economists adopted the narrow view that we humans are maximizers of economic self-interest to the exclusion of all else. By logical extension, businesses, too, were deemed to be pure profit maximizers. These simplistic assumptions enabled economists to create models that seemed to explain some of the workings of the larger economy.

      The classical economists also formulated their theories by observing and describing the behavior of various entrepreneurs and their businesses. They observed correctly that successful businesses were always profitable and that, indeed, the entrepreneurs who organized and operated these successful businesses always sought to make profits. Businesses that were not profitable did not survive for long in a competitive marketplace, because profits are essential to the long-term survival and flourishing of all businesses. Without profits, entrepreneurs cannot make the necessary investments to replace their depreciating buildings and equipment or to adapt to the always-evolving and competitive marketplace. The need for profit is universal for all businesses in a healthy market economy.

      Unfortunately, early economists went far beyond merely describing how entrepreneurs always seek profits as an important goal, to concluding that maximizing profits is the only important goal of business. Taking it one step further, the economists soon asserted that maximizing profits is the only goal entrepreneurs should seek. The classical economists went from describing the behavior in which they observed successful entrepreneurs engage while operating their businesses, to prescribing the behavior as the correct one that all entrepreneurs should engage in all of the time. How did they come to this conclusion?

      In the United States, we often take for granted the availability of large pools of capital to invest in new businesses because our economy has been producing these pools for more than 250 years. However, at the beginning of the industrial revolution, capital was quite scarce. Successful enterprises accumulated profits, and entrepreneurs and investors redirected accumulated capital into promising new opportunities, at unprecedented levels. Not surprisingly, then, classical economists became enamored with the СКАЧАТЬ