What Economic Models Reveal About the Hearts of People
If you’ve heard of Howard Schultz then you’ve probably heard him talk about his concept of ‘moral capitalism’; it’s his battle cry and his business model. But even if you haven’t heard of Howard Schultz or ‘moral capitalism’ by name, you may be familiar with the concept through one of its main American examples, Starbucks, Schultz’s company. As CEO, he runs Starbucks according to this gospel of humanity, fair-play, honesty, and morality- even in business. Many economists, proponents of Capitalism, and unfortunately much of the history of Capitalism, have helped indict the word ‘Capitalism’ as symbolic of an evil system of inhumane and immoral profiteering which has innate class domination and inequality as its end goal. However, to change this sad reality, we can look at capitalism through two different lenses to find truly redeeming potential in the idea of Capitalism and profit-seeking business in general.
First, one might return to the ideological origin of capitalism in the work of two famed theorists, Adam Smith and David Ricardo, who argue that through trade, economic freedom, cooperation, land & labor compensation, ownership rights, and basic self-interest, people could get more out of life together, than if we either worked on our own to reap the undeveloped fruits of the earth or if we commandeered every resource and forced those resources into a system of proportional distribution. But most people won’t want to read the elongated, less linguistically contemporary version of the paraphrasing of capitalism which I have provided and so it is much easier and more effective to go the second route and look at capitalism as it plays out in modern times in some of our most well-known companies in America.
Most modern for-profit business models represent the basic gist of capitalism (i.e. firms, specialization, trade, investment, compensation, profit, etc.) A (whole) lot of them are bad or detrimental in someway (immoral, selfish, conniving, mean, greedy, bully-ish, profiteering, etc) – a vast majority of large corporations have little-to-no visible ethical or moral commitment to balance their quest for profit. I’m talking about companies that try to prevent workers from exercising their first amendment right to assemble.
Some multinational corporations promote slavery (i.e. some diamond retailers, chocolatiers, and fruit producers.) Most others simply take advantage of the nonexistence of international law and slackness of human and/or civil rights protections in other countries like China, capitalizing on sociopolitical vulnerability and material desperation. A disconcerting number of companies discombobulate and disintegrate the democratic political process in the United States by abusing their right to lobby the government by ‘crowding out’ popular concerns and buying support from elected officials, thus capitalizing on the slackness of our government’s transparency and lack of effective campaign finance laws (e.g. Phillip Morris).
However, there are examples of profit-seeking business models at work that are visibly and structurally committed to equity and beneficence. Starbucks stands out as one such example in the American and global marketplace. Some may defend Goldman Sachs against the onslaught of charges it has faced in the court of public opinion as a ruthless, conniving, and treacherous corporation that often cannibalizes its own clients, but few have truly ill words to speak against a company like Starbucks (most people would much prefer to have few accusers than to have to have numerous defenders). Joe Nocera just wrote a great article a few days ago in the New York Times juxtaposing companies like Schultz’s Seattle-based Starbucks and Lloyd Blankfein’s globally integral Goldman Sachs. Nocera astutely summarizes the main point of his article The Good, Bad and Ugly of Capitalism: “Maybe the time has come for Blankfein to watch what Howard Schultz is doing at Starbucks. Sometimes, the best way to do well really is to do good.”
The overwhelming perception of Starbucks as a company that treats its workers, customers, and international business partners (planters, traders) more than decently proves to justify the extra price of the ‘deluxe’ coffee. From their ‘fair trade’ model and programs to their seemingly satisfactory compensatory packages for their domestic workers to their personal touch in customer service, Starbucks seems to have a decent, beneficent brand image working for itself in the market place as profits pour in faster than the coffee pours out. Some challenge the claims of moral capitalism by Schultz and Starbucks as marketing claims and unsubstantiated or even disproven, but the fundamental point is this: the fact that people believe that Starbucks is a moral company and it seems to do a good job of portraying itself that way and undoubtedly keeps workers happy demonstrates a reality about capitalism in the 21st century and presumably from its start. Capitalism is truly social and truly a matter of big, far-reaching relationships; ask any marketing executive, she or he will tell you.
Companies life Starbucks and Goldman Sachs whose varying public images seem to impact their performances prove that you can’t plainly say Capitalism is objectively moral or immoral. Capitalism is nothing. There is actually no such thing as Capitalism. You could not go anywhere and find ‘Capitalism’, that is, not if you’re looking for ‘Capitalism’ as some ontologically real system that operates uniformly with or without people. But if you’re looking for people working with a capitalistic model, productively, collectively and individually all at once, you can find that throughout the world, throughout time, and even in the animal kingdom. But that’s just the crux of the matter: the people.
Capitalism isn’t a robot, or a machine, or a person, capitalism is a context of work, labor, gain, profit, survival. It’s a way of looking at how people have been making ends meet and making the most of life for ages, epochs even. So for those who say capitalism is awesome and those who say it is the bane of human existence, I say… it depends on who the capitalism is. If the capitalism you’re talking about includes banal, evil, malicious, treacherous people, then the capitalism is just that. If the people are good, then the capitalism is good. People make capitalism work; people are capitalism. In fact, just as people make capitalism work, not vice versa; capitalism takes the form of those people. Capitalism conforms to culture, nature, needs, interests, and social norms. Capitalism is people, people are capitalism. We’ve got to stop holding a ‘system’ accountable while letting people off the hook. People are supposed to be moral or decent; tools are not.
And so, there is hope for capitalism yet, great hope. There is as much hope for capitalism A) as there is for people and B) as there is for any system of living which ultimately will still boil down to the people. Look at capitalism’s philosophical counterpart, Marxism/socialism; there are good socialisms (only partial though, as they still rely on capitalism for productivity and added value) and bad socialisms (e.g. the most notable Marxists socialist countries in the world, China under Mao, the U.S.S.R., Cuba, North Korea).
Most people would concur that the various injustices which have been actualized under the name of capitalism have been matched and perhaps outdone in the name of nationalist socialism. It’s all about the human culprits. One of the worst and most deceitful tricks that have been done in contorting, misconstruing, and misrepresenting Capitalism is taking Smith’s rhetorical point of the invisible hand and concretizing in our mind and in our language the notion of the Market as an individual, moral agent with decision-making capability. This is how we’ve escaped blame for our immoralities n the Marketplace, by pretending that it was the Market and not us. It’s time to take down the capital M in market and put up the capital U is Us.
Finally, I begin my last point about Capitalism (or any system) and people. The people, on either side of the counter, make economics work, make it moral, or make it treacherous. As evidenced by Starbuck’s profitability and truly indomitable public image as a beacon of moral Capitalism, there is a place for morals in Capitalism as much as capitalism exists within society, if society is an arena of moral and ethical formation and consensus (and any critic of Capitalism has to believe it is intertwined with society for their critique to be relevant). So, more so than the government and the regulators, it is the consumers and the producers who are responsible for the moral reputation of Capitalism and its human components. Consumers need not shop only by price but also by conscience and conviction, looking across the counter and seeing a human counterpart, not a ‘job’. That is to say, ‘the market’ is susceptible to social pressures. And that social pressure means the Market doesn’t act on us: we act on it.
Not too long ago an NU student named Ryan Fazio wrote an article about a campaign which had success hiking the wages of the food service staff at Northwestern University under the popular name of The Living Wage Campaign. Fazio criticized the campaign, citing himself as a prophet who told of the impending doom of the campaign’s economically-unaware agenda, stating essentially that wages cannot be affected by an “exogenous” force like a group of students (who are actually customers of Sodexo and Northwestern). His reason was because “wages are determined by a complex interaction” which was not too complex for him to then paraphrase holistically and effectively in the next 14 words.
Fazio’s fundamental point is that because the Living Wage Campaign is run mostly by liberal students, a good number of whom are the type to hang out around an occupy encampment, itcan’t be based on simple economic principle. He cites liberal tendencies to favor “taxation” and “public hostility” to influence the labor market irrespective of the most competitive equilibrium for labor prices, even though these are actually students who pay tuition and boarding fees which cover the cost of food and are therefore customers (Customer ist King, ja?)
I too believe that labor unions are too powerful and mostly operate counterproductively to the market momentum (most Unions are corporations themselves). I believe government regulation often ousts incentives for productivity and at many times doesn’t have the smooth, balanced outcome of market activity. I even predicted to various people and continue to predict that in the future, hours or workers will be cut, but not because ‘that’s just how it is’. No, I believe that will come to pass because that’s just how it is when you’re dealing with treacherous and exorbitantly greedy conglomerates like Sodexo!
The difference is clear, the cross is still carried by people, the human culprits. Prices and wages don’t exist. People value stuff, qualify it numerically, and then translate that value to currency; it’s still all about the people. If you have a problem with workers’ hours getting cut… why would you blame the people who are fighting for the workers and not blame the company who juxtaposes their wages to their hours and makes it an either-or ultimatum? Why does the company represent some always already morally exonerated party who is just “acting according to the market”? Why can’t the company be stupid sometimes? Could it be because we are sheep, in a sociological and sociopolitical system which has been commandeered by companies and company owners themselves? The slave-owning founding fathers of this great Nation were just responding to the market too.
Yes, I went there, because if ‘the Market’ can allow slavery then, #&%@ ‘the Market’ and its supply and demand equilibriums. But you see, I’m the one defending markets as innocent by indicting the actually sentient, moral agents: the people. If you’re really just advocating low-wages and don’t think people should be paid with consideration to their life needs, with consideration to the company’s billion-dollar profit margins, then you are rotten too and the door is that-a-way. I’m only mentioning this rambunctious article written in my school’s DailyNorthwestern three whole months later because of the clarity and apolitical poignance of Nocera’s NY Times piece at this critical time in our Nation’s economic history.
Nocera’s well-written piece demonstrates what can be in intellectual and practical discourse when we set aside political and ideological agendas and talk about real issues (which is what Smith and Ricardo were doing all along; we have simply lost our way). The shabby and solely political, ideological, and dogmatic defenses of Capitalism, laissez-faire, free-market economics are totally useless and potentially detrimental. What kind of economic code, which Milton Friedman rightly argues is founded in a philosophy of freedom and economic self-determination, does not allow within its boundaries social advocacy, public opinion, societal pressure, morally- or ethically-based demand and even ‘public hostility’? Whatever it is, it’s not capitalism; it’s systemic exploitation. Why shouldn’t we be hostile to exploitation? (*Ahem* If we are the exploiters).
You see, nothing really exists outside of our imagination as people. And as Aristotle famously argued our imaginations more often than not will convince itself that we are great people and justify everything we do, so why not create a system that allows us to abuse people and then say “well, that’s just how it is”. Anything which does exist outside of our perception doesn’t actually matter and that which does exist in that realm is a result of our choosing to believe or not believe to see or not to see. Capitalism isn’t something you can go find and objectively measure and thus defend with a strict code of rules. Capitalism is whatever capitalists say it is and it’s all about gain in the end — capitalism is about making gains and making the most of life, in all aspects of life, gains in all facets.
After all, it was Adam Smith himself who said “All money is a matter of belief” and that “No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.” I choose to believe that capitalism can work and can be beneficial to human life, because I believe that people can work and be beneficial to human life – but when the primary belief in the benevolence of humanity breaks down, so does my trust in human systems. And so, if in the coming days, people, Americans decide that they not only want the best quality product, but also want to make sure the people who made it and served it are treated with the utmost dignity, then, just as Adam Smith argues all self-interested beings will do, every company will at the very least market that image as a reality.
That’s one thing that is absolutely undeniable — that the law of supply and demand is an interaction between people, and what is supplied is whatever is demanded. Customer is queen or king. It’s about time we start adding morality and ethics to our set of demands and stop fussing at the people right behind the counter because we are a lot closer to them, in more ways than one, than the ‘Invisible Hands’ sitting cooped up somewhere in a sky-rise, cutting checks and drooling over bonuses.
There are good CEOs and good companies, moral corporations; there is moral capitalism because as moral beings even our self-interest is moral in itself, but only if we see ourselves as humans reflecting humanity, one to another. In the end, the words of James Baldwin ring true: “your invention reveals you”. How we function in society, economy, and polity speaks not about some preset reality nor preponderant moral code, no such things exist. How we function as a society, economy, and polity has to do with Us: the market reveals Us and shows what kind of people we are. Indeed, the market is a test, a proving ground for your heart in search of the question — just how moral are you?