When Capitalism Wasn't Always About Greed and Power
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Chapter 1: Historical Perspectives on Business Ethics
The notion that businesses should operate on principles of ethics and values is not a modern or "woke" concept, as even professors from Harvard Business School acknowledge. In Geoffrey Jones's article, "A Higher Degree Of Responsibility" (Harvard Magazine, March-April 2023), he asserts that:
"The belief that a business's primary aim is to maximize shareholder value, which gained traction in the 1980s, has never been the prevailing view historically. In fact, when viewed through a historical lens, this belief is an extreme and troubling claim."
Indeed, a prominent business scholar has labeled shareholder primacy as an extremist viewpoint. Throughout history, while greed, exploitation, poverty, and corruption have been prevalent in various economic systems, there has also been a longstanding discourse among business leaders and academics regarding the importance of virtues and responsibilities within capitalism.
Even Adam Smith, often cited selectively by proponents of free markets, introduced the idea of an "Impartial Spectator," which serves as the moral compass for business leaders and establishes a vital ethical framework.
Notably, many influential figures in U.S. industry, from Andrew Carnegie to Yvon Chouinard of Patagonia, have advocated for values and social responsibility in business, substantiating their words with actionable policies.
The decline of these ideals began in the 1970s, when Milton Friedman and his cohort from Chicago posited that satisfying shareholder greed was the only purpose of business. This assertion was presented as timeless wisdom, likely stemming more from their anti-union biases than any genuine economic principle.
Naturally, this proclamation from esteemed academic circles thrilled investors and their executive allies. With significant backing, Ronald Reagan and his administration adopted Friedman's philosophy as national economic policy during the 1980s. Consequently, the affluent and influential grew even richer, seemingly validating the concept of shareholder primacy.
However, this perspective overlooks the current global issues of extreme wealth disparity and environmental degradation.
Some critics argue that capitalism is fundamentally flawed. Yet, as Jones articulates in his article and accompanying book, the real harm arises from the distorted economic practices of the last five decades.
Many, myself included, contend that capitalism remains the most effective system we possess for fostering individual opportunities and meeting collective needs efficiently. Instead of abolishing capitalism—an impractical endeavor without a suitable alternative—let's focus on reinstating the values that once defined it. No single system or policy will resolve the issues at hand; corporate social responsibility, ESG investing, and Benefit Corporations each have their limitations. Nevertheless, collectively, they represent a positive beginning.
We can build from this foundation.
Understanding Change: Tomkillsjerry - I WASN'T ALWAYS THIS WAY
This video discusses the transformation in personal values and societal expectations over time, illustrating how perspectives can shift dramatically.