Capitalism Under Siege — Part II
The Only System That Provides The Freedom For the Development of One’s Potential Is At Risk
In Part I of Capitalism Under Siege, attention was restricted to the various proposals, new corporate purposes, pending bills, etc. focused on watering down corporate governance even more than it already is. Part II will offer a look beyond the narrow world of corporate governance at the broader arena of the state of capitalism.
The Financial Times’ Rana Foroohar with her fellow FT columnist Edward Luce, author the FT newsletter Swamp Notes. In the July 22, 2019 edition Ms. Foroohar writes about her lunch with Edmund Phelps. Dr. Phelps is the Director of the Center on Capitalism and Society at Columbia University and the 2006 winner of the Nobel Prize in economics. Ms. Foroohar states, “His book, Mass Flourishing, which I am reading with great interest, argues that the decline in growth and entrepreneurial zeal we’ve witnessed in recent years in the US, the UK, France, Italy and several other developed countries isn’t about secular stagnation, financialisation, or any number of other popular and somewhat technocratic theories. He argues it’s about values.”
Ms. Foroohar goes on to write, “Phelps argues that the decline of innovation in Europe and America comes not from a lack of profitable investment opportunities, or a lack of public sector involvement in them, but from a decline in the modern values that sparked the desire to innovate in the first place — he’d include in that list vitalism [emphasis added]. ‘Do Americans love to compete as much as in the decades from, say, the 1850’s to the mid-1960’s?’ he asks. ‘Or are they fixed on the tweets coming in by the hour?’ I think we know the answer to that question.”
“Phelps also notes a rising dread of uncertainty, and an inwardness that is reflected in our arts. ‘Where are the Horatio Alger stories? Where are the young people asking the Horace Greeleys where to go?’”
Phelps’s views are strongly supported by recent research on the opinions of capitalism catalogued by generation. In an October 2019 piece in Axios the results of a YouGov survey are provided. The generations responded as follows as to somewhat/very favorable of capitalism:
· Silent Generation — 77%
· Boomer Generation — 63%
· Gen X — 58%
· Millennials — 50%
· Gen Z — 49%
In this same survey, the generations were polled as to the likelihood of voting for a socialist candidate. The somewhat/extremely likely responses were:
· Silent Generation — 33%
· Boomer Generation — 36%
· Gen X — 44%
· Millennials — 70%
· Gen Z — 64%
These results are a clear reflection of the point that Phelps makes in the phrase “a decline in the values that sparked the desire to innovate in the first place.”
One of the greatest joys I have had as a capitalist has been to see people in the companies in which I have been involved rise to levels of performance and accomplishment beyond what they previously thought possible. It has also been extremely gratifying to see how alive and happy these individuals become when they push past previously self-imposed barriers.
Those of you who have read my previous articles will recognize the following story, but it is worth a condensed retelling in the context of the topic of this piece: A number of years ago, I became non-executive chairman of company that was teetering on the edge of bankruptcy. The board of this company was completely restructured and a turnaround professional installed as interim CEO. Once the company was somewhat stable, a permanent CEO was brought who in turn replaced the COO and CFO. The underperforming bottom third of the salesforce was terminated and the bloated corporate headquarters staff was significantly reduced. New and highly innovative arrangements were made with the company’s major product suppliers resulting in materially above average revenue growth. Over the next four years, the company moved from the worst in its industry to having set new standards for key metrics as measured in annual industry studies by KPMG. Several years into the improvement of the business, in my capacity as chairman, I received a letter from one of the company’s vice presidents. She had written on behalf of the management and employees to thank me and the rest of the board for engaging the current CEO several years before. In the letter she said in reference to the CEO “He is the toughest SOB that any of us have ever worked for. Yet, he is able to lead us to perform at levels we did not previously believe possible. The company is doing better than at any time in the past and we (all management and employees) are happier here than we have ever been.”
The above anecdote is not an isolated incident; I have seen it time and again in companies whose boards had a governing objective of maximizing shareholder value. In other words, these boards were capitalist in nature. You do not get “happier than we have ever been” employees by “taking care of them.” You get this by challenging them to outdo themselves in the context of a clear and measurable set of objectives. And, you do not thrive in an environment such as this if you do not grasp and celebrate capitalism and all that that entails.
Perhaps the most fundamental, but little understood, virtue of capitalism is that it is the only system that allows for the full development of an individual’s potential, not just in business, but in any endeavor. But, it concurrently demands personal responsibility (polar opposite of victimhood, America’s leading disease), self-reliance, mental toughness, full accountability and yes, vitalism, for that potential to flourish. It also demands the awareness that seeking equality of outcomes is anathema to the natural state of humanity. (In the real world, one does not receive a trophy for participation — only for excelling).
The current attacks on capitalism from various sources are putting this country at extreme risk. But this risk is not just economic. It is also deeply personal because if capitalism is diluted to the point that it is unrecognizable or slides down the slippery slope all the way to some form of socialism then it is not just the economy that will suffer. It is imperative that the current trends as noted by the surveys are reversed. If not, the most devastating result will be a system that denies the freedom to pursue dreams and develop one’s full potential. That is a travesty worth waging war against.
