Can Capitalism be Fixed?

I had the privilege of participating in a panel titled "Making Capitalism Great Again"   My first thought was - when was it ever great. Do people not remember slavery?

I was on this panel with a Nobel Prize Winning Economist!  I not only held my own - others on the panel started using my lensing. So I was clearly qualified to discuss this with a Nobel Prize winner. And yes - now that you know how awesome I am - you should totally take at least ONE of my courses. (https://humanistlearning.com/jennifer-hancock/)

First off - let me say - I do like capitalism. I just don't have any delusions that it's ever been all that great. Being better than the alternatives - does not making something great. It just makes it better than the alternative. 

Second, we have never ever ever ever gotten anywhere close to the ideal of how capitalism should work as laid out by Hayuk in his book The Road to Serfdom. Hayuk makes the case for capitalism (as opposed to socialism) by explaining the ideal - which is that free markets provide for the best distribution of goods and services and wealth by allowing people to compete for resources. Those with the most need - end up with the needed resources through the process of fair competition.

Obviously - this is NOT how our system has ever worked. Mostly because - we actively and intentionally exclude people from being able to compete in the system.  And yes - I am once again - talking about slavery. We've always allowed for criminal exploitation in our capitalism. Exploitation handicaps the system  and distorts the market and creates unfair advantages. Allowing exploitation (whether of people, or of resources) prevents the full promise of what capitalism can deliver. 

Third - exploited people - don't like being exploited. So it should NOT surprise anyone who wants to advocate for capitalism that some people equate capitalism with exploitation - and don't like it.  Want to fix capitalism and make it great?  Acknowledging how we have collectively failed to deliver on that ideal - is necessary first step. 

Finally - I am optimistic.  Given how badly we've totally and completely failed to create the necessary conditions (an even playing field) which is required for capitalism to function - it's astonishing how much we have accomplished. We live in the safest time to be alive. We have gone the moon and explored the starts. We have made deadly diseases a thing of the past. I can now search the internet from my phone - oh and we have phones and can talk to anyone on earth whenever we want!  How awesome is that.  And we've accomplished all that - while handicapped and with one arm tied behind our back. Imagine what could accomplish if we actually allowed EVERYONE to participate in the system!  And I mean EVERYONE! 

What follows are the notes I made for myself about - how to fix capitalism and make it "great." 

• False dichotomies  - we tend to think in terms of false dichotomies and we need to stop. Seriously - it's preventing us from seeing the obvious solution right in front of us.  Examples of false dichotomies?
• Competition vs. Cooperation. Many pro-capitalist people focus on the competitive nature of capitalism. The reality is the best way to compete - is through cooperation. The most effective teams - collaborate. We must do both - compete and cooperate. If we focus on one or the other we fail.
• Capitalism vs. socialism is another false dichotomy. We actually can do both at the same time. And we should be doing both. Crazy I know.
• Politicians like to tell us - we either do capitalism or we do socialism. We can do both. They rightly point out - the problems of socialism. But they always seem to fail to mention the problems with capitalism. For a list of these - read Marx's Das Kapital. 
• Both capitalism and socialism have pros and cons. We should be figuring  out how to maximize the benefits of both (competition and cooperation) and we should work to minimize the harm caused by both capitalism and socialism. 
• To do this - we need to not be afraid of either capitalism or socialism and instead understand that we need to compete cooperatively and seek balance and avoid extremes. 

Hayuk teaches us - capitalism only works if there is an even playing field. This is a requirement. If this condition is not met capitalism does not work and it’s NOT a free market. (distorted) 

• Our current problem? 
• We practice and reward exploitative capitalism instead of humanistic capitalism 
• Exploitation is a criminal enterprise masquerading as business. 
• Again, Hayuk tell us the role of government is to create - an even playing field. Instead - we have allowed criminals to use government to distory the playing field for their advantage. 
• Reality - We have ALWAYS subsidized exploitation and put barriers in the way of humanistic businesses. 
• Examples: 
•  Local to me - In my community - we had both slavery and cooperatively owned fishing ranchos. The government sided with the slave owners, and ran off the cooperatively owned business. Why? Because the existence of a cooperatively run business meant - the slaver - had trouble keeping his labor as they would run away to freedom and the right to work for themselves.  Did out government based on freedom support these freedom loving laborers? No - we used the military to force them to keep working for a person they didn't want to work for. This is what I mean by distorting the playing field and giving advantage to bad actors at the expense of good ones. 
• Currently - this is still a problem. Our government still some businesses over others. For instance - it's illegal to run a business to benefit the community.  If you do this - your shareholders can sue you. So people who want to run good community businesses - legally can't.  We prohibit employees from unionizing and maximizing their bargaining power - privileging employers over employees.
  Our tax codes - privilege ownership over actual work. 
• An even playing field - must treat EVERYONE equally. Everyone. Otherwise - we distort the system and the result is not good. For anyone except those who are legally privileged and protected. Everyone else - is prevented from competing and - the result is not capitalism as outlined by Hayuk. 

• 3) Solution? 
• Recognize Exploitation for what it is 
• b. Promote cooperation and humanistic businesses 
• c. Even the darned playing field – for everyone 
• i. Employers, employees, environment, etc.
• Create a Social safety net. 
• We can and should harness competition for this - but  must exist and be robust – otherwise – distortions will continue. If people are too poor to participate in the economy, then capitalism can't work it's magic. 

Oligarchy vs. Capitalism

I was asked about this the other day.  Are people confusing oligarchy with capitalism and blaming capitalism for the excesses of oligarchy. I'm not an expert - but yes. 

The problem with oligarchy is that decisions are made to benefit the oligarchs - not to benefit the proletariat. And yes - I am going to go into Marx here. His model of how capitalism functions is still the most accurate ever produced. There are several things that happen that are bad over all in an oligarchical system.

1. abusing anyone is bad. There is no other justification required to demand it not happen. It's harmful. Period.
2. 2nd. When the people creating capital (the workers) do not get a share of the capital they create - that is inherently abusive and therefore bad.
3. 3rd - we start moving into economic issues. When workers cannot afford to consume the goods they create - the market for the goods is necessarily reduced. Businesses only exist if there are customers to purchase the goods and services being offered. No customers - no business. From a purely economic standpoint (if we ignore the moral problems with abusing people) - to create a healthy economy - we need to create consumers. Enough consumers to help fuel the economy. Paying workers too little means they don't have the means to consume basic goods and services. And this depresses the economy and collapses it. Workers must make a living wage or the economy suffers from lack of consumers as there are never enough oligarchs or bourgeoisie to fuel growth or consumption.
4. 4th - hoarding of wealth means money doesn't circulate. Think of money as the lifeblood of the economy. A healthy body is one where the blood flows freely throughout the body. If blood starts pooling and collecting in one part of the body - it's a toxic life threatening situation. The same is true of wealth. It has to flow and be consumed and move in order for the economic system to be healthy. When wealth starts to accumulate and get hoarded - it's been taken out of the system entirely. You are basically draining the system of it's life blood. The money cannot be used to create more wealth or goods or services. This happens because - hoarded wealth is not being distributed to the people people who helped create the wealth and who would actually spend it - the members of the proletariat. Basically - wealthy hoarding is stealing. It's inherently abusive.
5. 5th The income inequality that occurs by design in oligarchical systems creates income inequality - which is one of the leading drivers of societal violence. The more inequality there is - the more violence. The more equality there is - the less violence there is. Hoarding of wealth through oligarchy is bad not just because it restricts the flow of capital and harms the economy, and not just because it necessarily requires the exploitation of workers, but also because all of this increases the general levels of violence in society.

Oligarchies are not capitalist systems. They may look like unbridled capitalism - but a capitalist system is also a system of laws - laws that dictate the flow of capital. Oligarchies are systems of laws that allow for the hoarding of wealth - the exact opposite.

Basically- think of oligarchies as systems of legalized theft. The reason Russia has oligarchs - is they literally stole 52% of the wealth of the country - and took it out of the country. It's legalized theft.  A form of kleptocracy.

Capitalist systems allow for the flow of capital. Not the hoarding of capital.  Capitalist systems can be abusive, but they can also be humanistic.  Wealth creation is good for everyone, assuming the wealth created is equitably distributed and used to help improve society.  If wealth is created and hoarded and used to abuse - it's bad.

So - let's recognize wealth hoarding for what it is - abusive theft and start insisting that capital flow to everyone and be used to create and improve society - humanistically. 

A Rational Minimum Wage Proposal

The goal: a relatively objective process, as opposed to just picking a number that sounds good

Charles Lane of the Washington Post authored a really interesting essay on the minimum wage. Here it is: http://www.bradenton.com/opinion/national-opinions/article158853904.html

His proposal:

Consider: Since 1938, the federal minimum wage has not exceeded 54 percent of average private-sector hourly wages, a level it hit in 1968, nor fallen below 28 percent, which is where the $7.25 federal minimum ranks today. 

The midpoint between those extremes is 41 percent, a number that felicitously resembles ratios between minimum and average wages in other advanced industrial countries. 

Multiplying 41 percent by the current average hourly wage, $26.22, yields a new federal minimum of $10.75. Phase it in over a few years, index it to wage growth or an equivalent factor - and move on to less contentious topics like health care, or how many angels can dance on the head of a pin.

I LOVE this proposal.  First some background on why.

The minimum wage is designed to ensure that workers can afford basic necessities. It’s not an entry level wage – it’s supposed to be a living wage because in capitalist systems, wages tend to depress and that’s a problem because when wages are too low – people can no longer consumer and if you have no consumers, you have no business.

Setting a minimum wage helps ensure that no one cheats by paying employees less and all of society benefits from having wage earners who can actually support themselves without subsidy from tax payers and who can also afford to consume the goods and services created by a society.  People opposed to the minimum wage shouldn’t call themselves capitalists.

Mr. Lane’s proposal is reasonable, rational and can be tied to average wages, has some reasonable rational math to back it up and if implemented would mean that we NEVER have to have this debate again.   It can also be set at the state level  so that the variations in average wages are taken into account.

Business as Community

Unless you are a solo-entrepreneur, your business includes people.

Your company is built by people for people and people matter. Those people who intersect with your business are your community. Whether they are employees, bosses, or customers.

This understanding of business as community is the foundation on which humanistic business management is built. Smart leaders recognize and accept the responsibilities and opportunities that comes with being part of a community.

Business should be both about opportunity and about responsibility. Exploitative capitalism exploits the opportunities, but doesn’t take responsibility for the outcomes of their behavior. It’s irresponsible.

Humanistic capitalism grasps opportunities in a way that is responsible to the communities in which they work and operate.

Isn’t it time we start rejecting exploitative business models and promote more humanistic ones?

To learn more check out:

• Why Humanistic Management
• Principles of Humanistic Management

Balance: Everything Requires It

A man does not show his greatness by being at one extremity, but rather by touching both at once." ~ Blaise Pascal

 
I have several quotes I use to remind myself of philosophic truths to help me navigate difficult situations. This is one of them. It’s a reminder to me to see balance. Whenever I find myself drifting into a rigid ideology, or I find myself arguing with someone thinking I am right and they are wrong, I think of this quote. It’s a reminder to myself that we both can be right. The opposite of a great truth is often another great truth.

Holding one truth to the exclusion of other truths doesn’t help us solve our problems or win friends and influence others. Seeking a balance between extremes – both of which are true, is a good way to try and navigate life. That way you are taking advantage of all that is good and hopefully avoiding the pitfalls that come with being at an extreme.

Here are some opposites that are both good but that need to be balanced to achieve success.

Skepticism/Optimism

Skepticism is good. It keeps you honest and keeps you from making mistakes. But taken to an extreme and all things become equal and relative and it is impossible to make decisions because skepticism devolves into nihilism. Which isn’t good.

Optimism is also a good quality – in moderation. Taken to an extreme and you get unrealistic wishful thinking that not only doesn’t help you solve your problems, the lack of realistic thinking makes it nearly impossible to solve problems.

Balancing skepticism with optimism helps you be both skeptical and optimistic at the same time. Helping you to avoid nihilism and flights of fantasy to tread a more realistic path to your goals.

                Responsibility to self and to others

Responsibility is a good thing. It gives our lives meaning and purpose.  Too much responsibility and we become overwhelmed and break down.   If we only think of ourselves, we are selfish. If we only think of others, we are self-less, but not in a good way.

In order to thrive we need to balance self-care with care for others.  If we don’t care for ourselves, we cannot care for others. Balance is needed.

                Capitalism/Socialism

I am like aspects of both capitalism and socialism.  Capitalism is a pretty decent system for allowing individuals to work on what they think is important. Laissez faire capitalism is exploitative and cruel.

Socialism in moderation is also good. It helps us think of our impact on others and to collaborate for the public good. Socialism taken to an extreme, where only the community good matters, as with capitalism, also becomes exploitative and cruel. 

 The problem in both cases (extreme capitalism and extreme socialism) is that care and concern for individuals gets lost in the ideology when taken to extreme. This is unfortunate because in their moderate versions, they are both systems designed to promote the welfare of the individual!

Balance helps us remember in our pursuit of happiness (capitalism) that other people matter too  (socialism). Finding the middle ground helps us get the benefits of both systems without devolving into exploitation of the individual to advance a “greater good”

                Autonomy/Social Responsibility

This last one also requires balance. We are all autonomous individuals, but no one is or should be an island. Humans in isolation go crazy. We are tribal animals and need our tribe to feel secure. Which is why we need community.

But just as care of others (social responsibility) is a good thing, too much means the loss of the individual or the subsuming of the individual to the greater good of the community.

When we seek balance between our need for autonomy and the need to be socially responsible we realize that by helping the community thrive, we help ourselves thrive – as individuals. It’s not either or, we only really thrive when we do both – in balance.

Conclusion:

When you find yourself struggling along some dimension in your life, or in your work, the problem is probably caused  by you valuing one ideal over it’s opposite ideal and if you remind yourself to balance those competing ideals, you will probably get a better result.

Try it and let me know how it goes.

Humanistic Tendencies in Business

Not everyone has Humanistic Tendencies. But maybe they should.

The problem with living in a capitalistic system is that we have to struggle to work to get money to pay for things like housing and food. In a barter economy people would either build a house themselves and farm for themselves or barter to get what they didn’t have.

Don’t get me wrong, I consider myself to be a capitalist. I think the improvement in human welfare that has come with capitalism has been overall beneficial. It’s just that I recognize the social limitations of the system. For instance we have a homelessness problem that capitalism is incapable of fixing because the people who are homeless are homeless because they don’t have the funds to secure housing. It isn’t just “bums” and “winos” who are homeless anymore. It’s also families who are what we now refer to as the working poor.

Capitalism only works as a system to create and distribute the goods required by society to function when people have the capital or funds to consume the goods created or produced. When people don’t have the means (ie: enough capital) to consume goods and services, they are unable to participate in the system or benefit from it. If enough people are impoverished enough that they can’t consume anything the system produces, then the system either collapses and/or distributes good in an incredibly unequal way.  And that’s where we’ve been as a society in the past 10 years.

One of the things that Marx figured out in Das Capital was the importance of worker’s wages to the maintenance of the system. A lot of people in the west haven’t read the book – it’s a huge work. Volume 1 has over 1,000 pages and it’s filled with math and philosophy. But it’s also one of the most accurate models of how a capitalist system works that’s ever been written.  He accurately predicted the booms and busts the system would generate and he accurately predicted how labor would respond to these booms and busts.

What causes the booms and busts? Labor’s wages. When labor is not paid enough to consume the goods they create, the system collapses. The engine of capitalism isn’t the capitalists (or owners). It’s the consumer. No customer, no business. Who are the customers? The laborers. Failure to understand this causes a huge number of problems for a business and for the economy.

This isn’t to say that if you are making jumbo jets you should pay your employees the amount they need to purchase one. Only that you need to pay them enough that they can participate in society and afford food, housing and the basics plus a little more to consume a few modest extras.

The problem is that capitalist forces tend to drive labor wages down because it’s a benefit to the capitalist to pay as little wage as possible. If you can get away with that, you gain an advantage over a competitor who is paying their employees more. If enough businesses pay too little, the system collapses.

This brings us back to the topic of humanistic tendencies in business.  Being concerned about the humans who work for you and the humans who consume your goods and services is good business. There is no division between the people who work for you and the people who buy your products. They are the same people.

It is very easy to see your business as an independent entity. You are competing. What you do doesn’t necessarily impact the societal whole. Except that it does. And a humanistic understanding of business acknowledges that are businesses are embedded in society. We serve society and are dependent on society. It’s a two way street.

Paying a living wage to your employees benefits your company (in terms of lower employee turnover), it benefits your customers, which for most of us not building jumbo jets, is our employees, and it benefits society because it helps make your company a positive force in society instead of a societal drain that is leaching tax payer benefits to supplement your less then living wage to ensure your laborers can continue to live.

Humanistic tendencies in business are pro-people, pro-business and pro-society. It’s not one or the other. It’s all three. In collaboration.

Proof that people are basically good

Humanism’s starting point is the idea that people are basically good. The success of our philosophy depends on whether that statement is true or not. Turns out, it is and the Panera Bread company just proved it. The Panera Bread Company opened a store this past year that is run on a non-profit model. Basically, people pay for their food on the honor system. If you can’t afford to pay, you can still get food. If you can afford to pay, you pay and perhaps pay a little extra to cover the cost of the food of your fellow customers who can’t afford to pay. And – it works!

The good folks at Panera bread didn’t know if this would work because, well, you just can’t ever be sure of basic human nature. And leaving the payment up to the best behavior of your customers is a risk. But it turns out that people are basically good and the number of good people more then makes up for the few who might be taking advantage of this system. Which is good because this model actually pays for itself as a way to help feed the hungry. So double plus good.

The next time someone tells you that people are basically evil don’t believe them. Thanks to Panera Bread we now have capitalist proof that people are basically good.