Should humanity ever stop innovating
Can capitalism show consideration for people?
"There is one and only one social responsibility of companies," wrote the economist Milton Friedman in 1962: "To use their resources and to direct their activities in such a way that they increase their profits, as long as they stick to the rules of the game."
The US group Smithfield Foods, which is also active in Mexico and Europe, has a pork processing plant in Sioux Falls, South Dakota - the ninth largest of its kind in the US with around 3700 employees. At full capacity, almost 20,000 pigs are processed into a variety of food products there every day - comparable to the Tönnies factories in Germany.
In the beginning of the coronavirus pandemic, many companies had to shut down temporarily to contain the spread of the virus, but Smithfield remained open; as a food supplier, it was considered systemically relevant. But the Sioux Falls factory had a problem.
On March 26, 2020, with the number of infections rising rapidly on the east coast of the USA, the local newspaper reported Argus Leaderthat there was a confirmed corona case at Smithfield. The boardroom decided to keep the factory open anyway and offered the employees a bonus. But on April 9, the newspaper reported, “Workers say they do not feel safe and do not find that a $ 500 'responsibility bonus' [...] is sufficient compensation for putting their health or potentially their life at risk Many employees, especially those who worked almost shoulder to shoulder on the assembly line, belonged to the lowest socio-economic classes and had little financial security. Understandably, they felt compelled to make a momentous decision: either their health or their work.
As of April 2, there were 19 confirmed cases among them, and now Smithfield has put in place a more robust testing protocol. But by April 11, Smithfield's only case had become 369, the CDC (Center for Disease Control) reported. The factory continued to operate throughout this period, but production was scaled back and then ceased on April 12, pending investigation by the South Dakota Department of Health and the CDC. From March 16 to April 25, laboratory findings confirmed 929 corona cases among the factory employees (25.6% of the workforce) and another 210 among their direct contact persons.
Smithfield's reluctance to act promptly and effectively had parallels in many regions of the world. Reasons for this included sluggishness and a general lack of clear, available information, but there were also weighty economic motivations. Removing a critical link like Smithfield from the food production chain has implications for many others - from pig feed manufacturers to consumers who buy pork to bring to their home. Remaining in operation and protecting everyone involved would have been possible, but also expensive. It appears that the priority of Smithfield's leadership was profit. Their dilemma lay at the intersection of two competing impulses: Earning money against being considerate of others.
This is a conflict that affects companies in every industry and in every country. The crucial questions are easy to formulate but difficult to answer: Who or what should be most important to a company? Its customers, its employees, or its shareholders (that means its profit margin)? Should a company act in an ethically responsible manner? Should it take the health of employees and society into account when making decisions? What should be the top priority in the event of a disaster like the corona pandemic?
This is a dichotomy at the core of the capitalist system that affects us all, no matter what corner of the world we are in. And there are no easy answers.
The doctrine of the free market economy
The Business Roundtable (a non-profit organization run by US corporate executives) was concerned with corporate responsibility when it updated its Principles of Corporate Governance issued. The members' new position was the opposite of what they had been advocating since 1997: the primary goal of a company should no longer be to maximize profits for its shareholders, but should also include other "stakeholders" (persons with legitimate interests) Bringing benefits - employees, customers and citizens.
This is a striking and dramatic turnaround. The view that corporations should focus on more than just profit margins breaks with decades of dogmatic capitalist doctrine of the free market economy. Soberly, it is unlikely that anyone would actually change their behavior because of this public statement. However, the fact that this was said at all is remarkable. It is worth asking what that would mean for a free market economy that is truly global today.
While the declaration is a welcome rejection of a highly influential but false theory of corporate responsibility, [...] the only way to force companies to act in the public interest is to make them subject to legal regulations. "
Eric Posner, "Milton Friedman Was Wrong"
The classic doctrine of the free market economy says that a company only has to worry about making money for its shareholders. The theory goes that a company must devote all of its resources to maximizing profits. To do anything else, wrote US economist Milton Friedman in 1962, would "completely undermine the very foundations of our free society itself." Accordingly, jobs and wages are reduced to a minimum, working hours are extended, and employees are hired and fired according to their cost productivity. It also means that other factors such as environmental and ethical concerns, the transparency of what companies say, and the health of employees (as in the Smithfield case) take precedence.
The core principles of capitalism have been around for a long time, albeit in different forms. People have almost always sought possession. But the free market economy that we have today is still relatively young. In the 18th century, Scottish political philosopher Adam Smith described this system and made the pioneering claim that self-interest is beneficial to all of us. "We do not expect our meals from the benevolence of the butcher, brewer or baker, but from their consideration of their own interests," he wrote in The Wealth of Nations. "We do not turn to their love of people, but to their self-love, and never speak to them of our own needs, but of their advantages." The baker wants to earn money, so he makes bread (which we want) for it for sale; we in turn produce goods or services for self-interest in order to sell them.
Free market capitalism, which is based on this principle, is a system of take. We would not meet the needs of others if we did not benefit from them ourselves.
Freedom to move
Capitalism has another notable feature: a free market requires movement. The economy has to be constantly on the move. We have to buy and sell, we have to create and accumulate wealth and then reinstate it, and we must not stop. Butchers, brewers and bakers have to produce and sell every day to survive. Standstill means death. Goods, services and work need "movement, movement, movement" (as Henry James wrote in his memorable description of New York in the early 20th century) for all to benefit. The importance of exercise is most noticeable when there is a forced break, such as in a recession or pandemic. In such a situation, the market often reacts with panic at first.
Friedman was looking at this from the other side - instead of through one force on movement he wrote over freedom for movement as something highly desirable. He thought capitalism was a perfect fit for the concept of freedom, which he equated with liberalism prior to the 20th century. From this liberal perspective at the time, he wrote that the ideal goal of the market was "to preserve the highest degree of freedom for each individual that is compatible with the freedom of one not restricting the freedom of the other."
Freedom was so precious to Friedman that any restriction - by government, corporations, or any other authority - was absolutely undesirable if it went beyond a necessary bare minimum. Most of all he hated any kind of restriction on the movement of goods, services or workers in the economy.
“What the advocates of the free market - or as they are often called: the neoliberals - told us was only partially true at best and simply false at worst. [...] The 'truths' that the ideologues of the free market want to sell us are based on lazy assumptions and blinkered visions. "
Ha-Joon Chang, 23 Things They Don't Tell You About Capitalism
The allure of freedom and unhindered movement is undeniable, and this form of capitalism has been a central philosophy for many leaders over the past few decades. US President Ronald Reagan said in awe, "There's really something magical about the market when it can function freely." For some, that's the only way to live. Author and journalist Thomas Friedman wrote in 1999, "The free market is the only ideological alternative that remains." Further, Milton Friedman presented the absence of restrictions as not just an economic protocol but a philosophy of life, stating: "Freedom is a rare and delicate plant." In 1990, perhaps at the height of the western hubris of liberalism, the rock band Primal Scream sang: "We wanna be free to do what we wanna do" what we want).
It all sounds so wonderful, and the simple charm of capitalism is immensely popular. But what has emerged in recent years is a swamp of unwelcome consequences that we should be aware of as much as possible.
Irony and dilemma
Decades of free market capitalism have created enormous (albeit unequally distributed) prosperity, but in the realm of humanity have produced rather meager results. In its most glaring form, capitalism is an employer who is brutal and, on top of that, cynical. He does not favor altruism and sees people as functions that can be used and moved as the market demands.
The Russian-American author and theorist Ayn Rand put it in perhaps the most striking way: “No creator [no thinker, artist, scientist, inventor] was motivated by the desire to serve his brothers. [...] The creator served nothing and nobody. He had lived for himself. "
In biting words, economist Ha-Joon Chang expressed the irony inherent in this model: “The market beautifully harnesses the energy of selfish individuals who only think of themselves (and at most their family) in order to establish social harmony. “Although he spoke out against the callousness of such a view, its application in a South Asian sweatshop, a multinational delivery service or any company that employs staff on zero-hour contracts would be no stranger to it. Capitalism is not blind to qualities like honesty and integrity - it just sees them as essentially selfish functions, the primary use of which is to maximize profits.
"There is one and only one social responsibility of companies: to use their resources and to align their activities in such a way that they increase their profits as long as they stick to the rules of the game."
Milton Friedman, Capitalism and Freedom
On the more positive side, the theory also claims that the market moderates the excesses of humanity. For example, a company might not over price a product because a competitor would undercut it; Workers couldn't get lazy knowing they could be easily replaced. That may be true, but one wonders if a world of thwarted selfishness is a particularly desirable outcome.
The German sociologist and political scientist Max Weber wrote at the beginning of the 20th century about the potential for “the spirit of capitalism” to be reduced to utilitarian thinking: “That is honesty usefulbecause it brings credit, punctuality, hard work, temperance as well, and therefore are they virtues: - from which a. would follow that where z. B. the Sham honesty does the same service, which is sufficient and an unnecessary surplus of this virtue would have to appear reprehensible as unproductive waste [...]. ”With this view, moral virtues are mere raw material for profit.
It is a cynical view, and as Weber recognized, people often suffer from it. It is easy to see that then a sick worker - as in the case of Smithfield's first corona patient or a professional athlete with a concussion - can be seen as an unproductive link in the chain that means loss and needs to be replaced.
In Smithfield's case, the dilemma was as intricate as it was real. If a sick worker stays at home, the company's profitability may decline. The prospect of a complete closure of the factory increases this financial loss enormously. In addition, as one of the largest employers in the region, Smithfield is important to their macroeconomic and social health. In addition, the closure of a manufacturing facility can jeopardize the viability of others up and down the supply chain.
Should a company be all about profit? To what extent should it take into account the impact its decisions have on so many others, not least its employees? Employees are human beings, as are, in economic terms, mechanisms that generate profit (in this case in the form of chops, ham and similar products). Their abilities as people to work, to produce, to innovate are tied to this, but also to their safety, their mental health, their self-esteem and so on.
It is precisely the latter characteristics, which do not immediately bring a noticeable profit, that companies are now gradually perceiving with a delay.
Forced to work
In practice, of course, there are many less harsh and cynical views around the world. Capitalism is different in China than in the United States and there, in turn, different from Sweden. But when the going gets tough, the system's priorities quickly become apparent. When we are trained in selfishness, when, as Weber writes, when we are “forced” to live in this way, an ego-focused survival instinct sets in; you want to keep your job, eat, feel safe. In the capitalist system this means "first things first"; and from the point of view of companies, “the most important thing” has always been profit. As a result, concerns such as caring for employees, donations to good causes, caring for the environment, public education, and even the survival of smaller competitors are seemingly less important.
It is worth asking whether we have dedicated our world to a system that is fundamentally opposed to mutual care.
Capitalism's disinterest in the health of workers goes beyond physical well-being; his fixation on profit also has serious consequences for their psychological well-being. Our working life is inextricably linked with a high level of worry and stress. So many of us today talk about how busy we are, even though we use time-saving devices like cell phones, washing machines and digital printers every day. It is paradoxical, but it may be the compulsion of the capitalist system to be on the move.
The German philosopher Walter Benjamin saw capitalism as a religion: "There is no 'day of the week', no day that is not a feast day in the dreadful sense of the unfolding of all sacred pomp and the extreme tension of the worshiper." There is no rest, no pause .Time is money; every moment is one that could and actually should be devoted to further acquisition and profit. Capitalism is "probably the first case of a cult that is not atonement, but guilty", continues Benjamin, "an immense sense of guilt that does not know how to atone". This sense of guilt is echoed in the worry that seems so pervasive today.
Weber, too, was amazed at the incessant desire of capitalism and the fact that it drives people to want to acquire more than they actually need to live.
“Above all, the 'summum bonum' of this 'ethics': the acquisition of money and more and more money […] is so purely an end in itself that it is at least entirely as something in relation to the 'happiness' or the 'benefit' of the individual The transcendent and absolutely irrational appears. "
Max Weber, Protestant ethics and the spirit of capitalism
This compulsion is seen everywhere in capitalist society, from the culture of long working hours to the relentless investment activity of the super-rich. That does not mean that capitalism has our desire for more and more created but that it promotes it - with undesirable side effects for our quality of life. Could it be that capitalism is anti-happiness and anti-joy?
For example, despite promises to the contrary, wages in the US, adjusted for inflation, are no higher today than they were in 1970. Some argue that employee benefits such as employer-paid health insurance have increased and that real wages have increased with it. The fact that many employers pay the lion's share of health insurance for the family - currently an average of over $ 21,000 per year and employee - does not help them gain more purchasing power in everyday life. As a result, many households have more than one person working.
According to capitalism, this is great: if every household has two workers and then has to employ someone else (for example, to look after children or to help out in the house), then unemployment falls and productivity and the market grow. But the real picture is far more murky, and the consequences, such as the shortage of free time, raising children, maintaining marriage and other relationships, may not be fully appreciated.
Inequality of opportunity
The free market economy also has an impact on self-confidence and self-esteem, because the system ties both directly to pay and productivity. According to the theory of the free market economy, the enormous salaries of the top company bosses are justified because they produce so much added value for the company. Chang wrote: "If bosses get 300 times more than the average employee, they say it has to be because they add 300 times more value to the company." In fact, that's pretty much Milton Friedman's point of view. Regarding the internationally so different living conditions, he said: "If the Japanese worker has a lower standard of living than the American, it is because he is on average less productive than the American."
The horse's foot here is “on average” - an already unclear term that is only tenable if one ignores the enormous gap between the poor and the rich. Quite apart from its weirdness (one commenter sarcastically asked, "Have you ever considered the possibility that [Amazon boss] Jeff Bezos just works 130 billion times harder than you?"), This notion challenges workers' self-esteem, especially those of the lower socio-economic classes, and completely ignores other factors such as the environment.
“I'm not denying that some people are more productive than others and that they need to be paid better - sometimes a lot better. [...] The real question is whether the current level of diversity is justified. "
Ha-Joon Chang, 23 Things They Don't Tell You About Capitalism
Finance mogul Warren Buffett is often quoted as saying, “If you plant me in the middle of Bangladesh or Peru or anywhere else, you will see how much that talent brings out in the wrong soil. [...] I work in a market system that happens to reward what I do very well - disproportionately well. "
It went well for Buffett. But if dependent employees work long hours every day for a minimum wage and with limited job security and have no realistic hope of changing anything in this situation, how are they supposed to see themselves? The notion of social mobility advocated by free market supporters implies that everyone accepts these terms because "their own child could be the next Thomas Edison, J. P. Morgan, or Bill Gates." However, this is a fantasy that even an idyllic free market economy does not support. Not all can be rich. Inequality is embedded in the capitalist system. In fact, it's probably true that inequality is capitalism's most successful product.
The best system?
In short, the exclusive fixation on profit and the belief in the benevolent work of self-interest oppose humanity in so many things. Yet many persist in advocating this system. Even Chang, who is critical of its many excesses, believes "that capitalism is still the best economic system that mankind has invented."
It will not be easy to change the priorities of capitalism, as the Business Roundtable suggested - not least because it is a seemingly corollary of the principles and ideals that our societies value most. Weber had a lot to say about the "rational" aspects of modern capitalism as it developed throughout the Western world since (and largely as a result of) the Reformation, and the work ethic that it brought with it. Milton Friedman saw the market economy as the obvious, logical conclusion for any free-thinking person: “It allows unanimity without uniformity; […] It is a system of effectively proportional representation. ”Rationality and democracy - aren't they what western society values most?
And yet the results of the free market economy are so disappointing. The inequality of wealth distribution, to take one example, is staggering. At the end of 2019, according to Credit Suisse's Global Wealth Report 2020, “millionaires, who make up exactly 1% of the world's adult population, accounted for 43.4% of global net wealth. In contrast, the 54% of adults with assets below $ 10,000 combined made up less than 2% of global wealth. "
Contrary to the promises of politicians, the fortunes have not trickled down and the dream of social mobility seems to be getting further and further afield. This has had tremendously damaging effects on emerging economies, for example in Russia and all of Africa. The consequences for our psychological well-being are immeasurable, and so it is perhaps no wonder that we are currently not enjoying the fruits of a system that supposedly creates the greatest benefit for all, but living in a time that some are a time of worry and Call outrage.
"Across the 34 countries surveyed, a median of 65% of adults when asked about the narrowing of the gap between rich and poor in their country answered that they were generally pessimistic."
Kat Devlin and J. J. Moncus, "Many Around the World Were Pessimistic About Inequality Even Before Pandemic," Pew Research Center (August 6, 2020)
The inevitable conclusion seems that capitalism has completely misjudged (or perhaps ignored) the needs of humanity, and the Business Roundtable and others are beginning to realize this. However, his 2019 declaration was soon questioned and even criticized.
Should companies be socially responsible, should they care for the needs of their employees, should they respond to the needs and demands of the public? Should they, frankly, show consideration for people? The trend is towards “yes”, contrary to the theory of the free market economy that has prevailed for so many decades. Ironically, it is the market that started this trend; the media - traditional as well as social - have corporations forcedto change their policy. Smithfield's corona problem would probably not have become known so early without media pressure.
Pay attention to your fellow human beings
Mining could be an industry in which one would not expect examples of the practical implementation of the Golden Rule.
A more considerate approach could be beneficial, but whether that will be sufficient is doubtful. After all, as I said, capitalism is linked to some of the most important values in the world today, from democracy to rationality. One can hardly imagine an activity in the western world that does not have capitalist principles in its genes. Even in traditional Christianity, where one might expect that selfishness is not recommended, certain popular groups promote a “prosperity gospel”: Prosperity and health are guaranteed for those who have enough faith - evidenced, among other things, by financial donations to the respective person Grouping or their preacher.
Indeed, many over the years have seen something like religious belief among the most ardent proponents of capitalism. Eugene McCarraher of Rutgers University describes capitalism as "the religion of modernity" and "the gospel of prosperity and its promise of gilded salvation". Walter Benjamin called capitalism “a pure cult religion, perhaps the most extreme that has ever existed”, and the journalist Naomi Klein called it “the religion of the free market economy” and a “fundamentalist belief”.
It should be noted here, however, that the Bible would not support such a religion. For all its philanthropy, capitalism is not known for upholding what the Bible calls "the second greatest commandment": duty, others and their needs just as important to take like our own. Indeed, the Bible contradicts many of the core principles of capitalism: that prosperity is the same as success, that self-interest benefits everyone, that profit should be maximized to infinity, that charity is an option but not a necessity, or that life should be primarily about to acquire material things. In fact, this very book warns of the ultimate annihilation of a system of buying and selling that is arguably indicative of the capitalism we know today.
We should really be concerned about the worrying consequences of the free market economy. It is clearly not a system that is beneficial for everyone. Smithfield was faced with an insoluble dilemma, torn between the free market principles on which his success was based and the interests of workers. In this pandemic, thousands of other companies have been in a similar fix.
The question we need to ask is, should we look for something better?
McCarraher thinks this is necessary. He asks what could happen if society turned against the system: “What if the losers of the market economy refuse to accept their commandments […]? What if they blasphemously refuse to accept the orders of the market and its unpredictable, inexplicable will? ”British writer, journalist and critic Rebecca West had similar doubts about the system; she wrote in Black Lamb and Gray Falcon (1941): “[Capitalism] is not nearly as good as what we want for ourselves; one can only look at it with disappointment. "
As McCarraher notes, capitalism as a secular religion has "turned the world into business" and has convinced us that there is no better alternative. To this end, he has “waged a blitzkrieg against utopian speculation, with the aim of sabotaging the ability to even dream of a world beyond capitalism”. But the critics of the system still dream. Klein hopes for "a new civilizing paradigm". McCarraher envisions a time when "work would not be drudgery digging for money in a predatory pursuit of increasing" productivity ", but rather providing for and promoting people."
There is no doubt that one day we will see the end of capitalism; no man-made system can last forever. In fact, the vision described by these critics of the current system looks very similar to the “second great commandment” if it were implemented: a world where the needs of all are at the forefront in people's minds and where therefore the pursuit of profit is not the driving force Strength will be. Such a day cannot come too soon.
- Walter Benjamin, “Capitalism as Religion” (1921).
- Ha-Joon Chang, 23 Things They Don't Tell You About Capitalism (2010).
- Kat Devlin and J.J. Moncus, "Many Around the World Were Pessimistic About Inequality Even Before Pandemic", Pew Research Center (August 6, 2020).
- Milton Friedman, Capitalism and Freedom (1962, 1982).
- Milton Friedman, "The Social Responsibility of Business Is to Increase Its Profits", New York Times (September 13, 1970).
- Naomi Klein, The Shock Doctrine: The Rise of Disaster Capitalism (2007).
- Eugene McCarraher, The Enchantments of Mammon: How Capitalism Became the Religion of Modernity (2019).
- Eric Posner, "Milton Friedman Was Wrong", The Atlantic (August 22, 2019).
- Adam Smith, An Inquiry Into the Nature and Causes of the Wealth of Nations (1776).
- Jonathan Steinberg, Erin D. Kennedy, Colin Basler et al., "COVID-19 Outbreak Among Employees at a Meat Processing Facility — South Dakota, March – April 2020", Morbidity and Mortality Weekly Report, Centers for Disease Control and Prevention (August 7, 2020).
- Max Weber, The Protestant Ethic and the Spirit of Capitalism, translated by Talcott Parsons (1930, 1992).
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