The Conversation Continues – Moral Capitalism?

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John Friedman Says:

Thanks for your comments. Kelsi, have you ever read Steven Young’s “Moral Capitalism“? He uses economic theory, history, philosophy and a multi-cultural analysis to restore the definition of capitalism to a financial model, without the overlays added by culture and other schools of thought.

I’ll check out what you’re doing at Investors’ Circle. One question I do have, is there any evidence that socially responsible investments (that is, those that were in companies that engage in transparent reporting, social progress and environmental stewardship as well as profits) fared better during this downturn? In theory, companies that followed the principles of ‘real’ value creation should not have been overvalued (to the extent of those that didn’t) or were they simply dragged down with the rest of the markets? Does anyone know or have any idea?

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Kelsi Boyle Says:

I’ve only read Steven Young’s excerpts, but find him incredibly forward-thinking, favoring ethical reflection over Social Darwinism is the only way for capitalism to survive in any healthy way.

As for evidence that SRI is faring better than traditional investment, we’re still waiting to see how everything plays out. There is much to be learned in this realm and we hope to delve into some studies in the near future. However, because mission-driven companies have strong social value streams even when the dollar return may be low, Investor’s Circle is staying optimistic. After all, some of IC’s more well-known success stories — companies such as Niman Ranch, Honest Tea, ZipCar and CitySoft — were funded during the most recent economic downturn of 2000-2001, and are still thriving today. Final results of dollars invested via our 2008 Fall Conference as well as the upcoming event in April will be very telling.

This Inc. article also addresses how times like these require innovation and growth strategies, which I feel, is exactly what socially-responsible enterprise does best:

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John Friedman Says:

I have met and worked with Mr. Young and I think he’s brilliant. You’ve got it exactly – capitalism reflects the culture in which it operate so corruption leads to corrupt capitalism; social darwinism leads to ‘brute capitalism’ etc.

The power of capitalism is unparalleled as a force for social and economic advancement – from creating wealth to opportunities to changing gender roles, eliminating (or challenging) historic class distinctions, etc. Therefore, there are huge differences of perspective around the world as to how favorably the currently dominant (American) model is viewed. Not only have we have seen resistance in some cultures where these things are perceived as threatening to the dominant social, political, economic and religious orders, we have also seen outright skepticism that efforts to be environmentally or socially responsible are seen are excuses for trying to preserve first-world status by preventing others from enjoying the same benefits and quality of life that the industrialized world has for many decades.


One Response

  1. At the macro level, not only do we have cultural versions of capitalism (thanks for the reference to Moral Capitalsim – have not seen it yet), but we don’t even know or have a shared understanding of how economics actually work. I’ve been studying Keynes recently (as many folks apparently have!) and i was fascinated to learn in “John M. Keynes” by Hyman Mynsky that Keynes was and is largely misunderstood. He pointed out that a private investment driven economic growth system (that’s what we have) is dependent upon the continual growth of relative needs (Keynes apparently did not yet recognize that such growth is not only unstable, but also unsustainable). I attach the passage below. The point: the evolution of capitalism required is more dramatic than we yet understand. The challenge of the 21st century.

    “The success of a high-private-investment strategy depends upon the continued growth of relative needs to validate private investment. It also requires that policy be directed to maintain and increase the quasi-rents earned by capital – i.e., rentier and the entrepreneurial income. But such high and increasing quaisi-rents are particularly conducive to speculation (emphasis added), especially as these profits are presumably guaranteed by policy. The result is experimentation with liability structures (emphasis added) that not only hypothecate increasing proportions of cash receipts but that also depend upon continuous refinancing of asset positions (emphasis added). A high-investment, high-profit strategy for full employment – even with the underpinning of an active fiscal policy and an aware Federal Reserve System – leads to an increasingly unstable financial system, and an increasingly unstable economic performance. Within a short span of time, the policy problem cycles among preventing a deep depression, getting a stagnant economy moving again, reining in an inflation, and offsetting a credit squeeze or crunch. Financial instability and business cycles, which are so evident historically, once again loom on the horizon.”

    – Hyman Minsky in John Maynard Keynes, written in 1975

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