Author: CRT Admin

The Russian invasion of Ukraine violates the laws and norms of the international order set forth in the Charter of the United Nations.  I am quite certain that such use of force in Europe opens up a new era in history, one that puts an end to the efficacious implementation of the idealism of the post-World War II effort to build an open, global community for humanity, respecting the individual and the rule of law.

Russia’s use of force to achieve its political goals, though, is quite in line with ancient practices. The Greek historian Thucydides reported Athenian conquerors telling the newly subjugated people of Melos: “The strong do what they can; the weak suffer what they must.”

Just as the Ukrainians now, the leaders of the island of Melos faced this choice: have their people die as free men or live on as slaves.  The Athenians had a fleet of 38 shops off the coast of Melos ready to land heavy infantry and archers.  They waited while the Melians debated what to do.

The Athenian advocacy that “might makes right” denies the alternative moral stance that right must follow the good, the true and the beautiful.  Thus, the Athenian ethical regime would have no room for the Caux Round Table’s Principles for Business or Government.

The cultural politics of social Darwinism built on the thinking of Herbert Spencer that humans, like animals, had no significant moral sense, only a will to survive and master their environments.  In late 19^th century, regimes of “survival of the fittest,” a brute capitalism, colonialism, racism and honor and prestige for those who could become masters, all gained prestige and social power.

Russia today, thus, challenges as presumptuous the Caux Round Table’s advocacy of moral standards applicable to all persons and nations.  The Caux Round Table effort, from this point of view, is to be discarded in Trotsky’s famous “dustbin of history.”

Just prior to Russia’s invasion of Ukraine, on February 4, President Vladimir Putin met in Beijing with Chinese President Xi Jinping.  The two agreed to an alliance looking towards a new world order suitable to them.

The historic precedent to this Russia/China Pact, I suggest, is the Hitler/Stalin Pact of August 1939 on the division of Poland, implementation of which started World War II in Europe.

The Putin/Xi Pact lays out, with great care and serious thought, a new regime for our world, one in which great powers with long histories and myths of ethnic superiority can do as they please.  The rest, accordingly, must suffer what they must.

The Putin/Xi Pact begins with an observation that “humanity is entering a new era:

Today, the world is going through momentous changes and humanity is entering a new era of rapid development and profound transformation.  It sees the development of such processes and phenomena as multipolarity, economic globalization, the advent of information society, cultural diversity, transformation of the global governance architecture and world order; … a trend has emerged towards redistribution of power in the world.

The Pact shrewdly honors past ideals:

Russia and China call on all States to pursue well-being for all and, with these ends, to build dialogue and mutual trust, strengthen mutual understanding, champion such universal human values as peace, development, equality, justice, democracy and freedom, respect the rights of peoples to independently determine the development paths of their countries and the  sovereignty and the security and development interests of States, to protect the United Nations-driven international architecture and the international law-based world order, seek genuine multipolarity with the United Nations and its Security Council playing a central and coordinating role, promote more democratic international relations and ensure peace, stability and sustainable development across the world.

Russia and China benevolently affirm that democracy is a universal human value, rather than a privilege of a limited number of States, and that its promotion and protection is a common responsibility of the entire world community.

…

And:

The sides [Russia and China] underline that Russia and China, as world powers and permanent members of the United Nations Security Council, intend to firmly adhere to moral principles and accept their responsibility, strongly advocate the international system with the central coordinating role of the United Nations in international affairs, defend the world order based on international law, including the purposes and principles of the Charter of the United Nations, advance multipolarity and promote the democratization of international relations, together create an even more prospering, stable and just world, jointly build international relations of a new type.

But then, Putin and Xi announce a new dispensation for world governance – universal idealism has no place in our global community.  We are to turn back to Hitler’s notion of the sovereignty of the “volk” – the ethnic or national community.

The Putin/Xi Pact proclaims:

There is no one-size-fits-all template to guide countries in establishing democracy.  A nation can choose such forms and methods of implementing democracy that would best suit its particular state, based on its social and political system, its historical background, traditions and unique cultural characteristics.  It is only up to the people of the country to decide whether their State is a democratic one.

In other words, collective will, acting through the state, determines what rights individuals have. Individuals find their meaning in the collective.

This pollical philosophy was first set forth with intellectual finesse by Jean-Jacque Rousseau in his prescription that freedom is to be found in obedience to the general will, an abstraction and that the more an individual does not align with the general will, the more force is necessary to repress such dissent.

In the 1760s, Johann Gottfried Herder advocated a “nationalgeist” or a “volkgeist.”  In Germany, the concept of volksgeist has developed in the literary field with August Schlegel and the Grimm brothers; in political history with Friedrich Hegel; in the field of law with Friedrich von Savigny and in the field of psychology or national character studies with Wilhelm Wundt.  One of the founders of modern sociology, Ferdinand Tonnies, distinguished folk communities (gemeinschaft) from modern, secular, individualist, rational/legal communities (geselleschaft).  Germans in World War I rallied behind the concept of “volksgemeinschaft” or people’s national community, which undergirded Hitler’s national socialism.

Hitler legitimated his rule over the Germans with the monopolistic principles “ein volk, ein reich, ein further.”

In the early 19^th century, German philosopher Hegel idealized the state as the source of value and rights.  Friedrich Nietzsche built on Hegel’s rationalism to argue that reason, taken to the extreme, contradicts everything, leaving us actually free to believe whatever we want and follow our will to power.  Socially and psychologically created narratives and nihilism each reciprocally empowered the other.

Today, the “volksgeist” ideal in politics and state practice is called “populist nationalism.”  As the state calls the tune, so the other social sectors must dance.

Building on this intellectual tradition, the Putin/Xi Pact raises up the “volksgeists” or the “volksgemeinschafts” of the Russian and Chinese people to world historical status:

The sides note that Russia and China as world powers with rich cultural and historical heritage have long-standing traditions of democracy, which rely on thousand-years of experience of development, broad popular support and consideration of the needs and interests of citizens. Russia and China guarantee their people the right to take part through various means and in various forms in the administration of the State and public life in accordance with the law.  The people of both countries are certain of the way they have chosen and respect the democratic systems and traditions of other States.

…

The sides note that the Charter of the United Nations and the Universal Declaration of Human Rights set noble goals in the area of universal human rights, set forth fundamental principles, which all the States must comply with and observe in deeds.  At the same time, as every nation has its own unique national features, history, culture, social system and level of social and economic development, universal nature of human rights should be seen through the prism of the real situation in every particular country, and human rights should be protected in accordance with the specific situation in each country and the needs of its population.

…

The Russian side notes the significance of the concept of constructing a “community of common destiny for mankind” proposed by the Chinese side to ensure greater solidarity of the international community and consolidation of efforts in responding to common challenges. The Chinese side notes the significance of the efforts taken by the Russian side to establish a just multipolar system of international relations.

Here, the Russian and Chinese governments are rejecting any need to subordinate their decisions to what is right for humanity to standards and decisions of the United Nations or traditional international law.

The Putin /Xi Pact directly and expressly denounces efforts by nations to impose moral and political standards on other nations:

The sides note that democratic principles are implemented at the global level, as well as in administration of State.  Certain States’ attempts to impose their own “democratic standards” on other countries, to monopolize the right to assess the level of compliance with democratic criteria, to draw dividing lines based on the grounds of ideology, including by establishing exclusive blocs and alliances of convenience, prove to be nothing but flouting of democracy and go against the spirit and true values of democracy.  Such attempts at hegemony pose serious threats to global and regional peace and stability and undermine the stability of the world order.

…

The sides reaffirm their strong mutual support for the protection of their core interests, state sovereignty and territorial integrity and oppose interference by external forces in their internal affairs.

…

The sides believe that the advocacy of democracy and human rights must not be used to put pressure on other countries.  They oppose the abuse of democratic values and interference in the internal affairs of sovereign states under the pretext of protecting democracy and human rights and any attempts to incite divisions and confrontation in the world.  The sides call on the international community to respect cultural and civilizational diversity and the rights of peoples of different countries to self-determination.  They stand ready to work together with all the interested partners to promote genuine democracy.

Here, Vladimir Putin and Xi Jinping propose to form alliances and partners with those countries (governments?) which share this volkgeist perspective.

To put a fine point on Putin’s and Xi’s adoption of the will to power as an acceptable ethic, their Pact replicates the conquest of other lands which was the objective of the Hitler/Stalin Pact:

The Russian side reaffirms its support for the One-China principle, confirms that Taiwan is an inalienable part of China and opposes any forms of independence of Taiwan.

Russia and China stand against attempts by external forces to undermine security and stability in their common adjacent regions, intend to counter interference by outside forces in the internal affairs of sovereign countries under any pretext, oppose colour revolutions, and will increase cooperation in the aforementioned areas.

In moral opposition to the principles advanced by the Putin/Xi Pact, the Caux Round Table Principles for Government affirm:

Just as the Principles for Business, these Principles for Government derive from two ethical ideals: “kyosei” and “human dignity.” The Japanese concept of “kyosei” looks to living and working together for the common good, while the moral vision of “human dignity” refers to the sacredness or value of each person as an end, not simply as a means to the fulfillment of others’ purposes or even of majority demands.

…

Power brings responsibility.  Power is a necessary moral circumstance in that it binds the actions of one to the welfare of others.

The state is the servant and agent of higher ends; it is subordinate to society.  Public power is to be exercised within a framework of moral responsibility for the welfare of others.  Governments that abuse their trust shall lose their authority and may be removed from office.

Public power, however allocated by constitutions, referendums or laws, shall rest its legitimacy in processes of communication and discourse among autonomous moral agents who constitute the community to be served by the government.  Free and open discourse, embracing independent media, shall not be curtailed, except to protect legitimate expectations of personal privacy, sustain the confidentiality needed for the proper separation of powers or for the most dire of reasons relating to national security.

Public power constitutes a civic order for the safety and common good of its members.  The civic order, as a moral order, protects and promotes the integrity, dignity and self-respect of its members in their capacity as citizens and, therefore, avoid all measures, oppressive and other, whose tendency is to transform the citizen into a subject.  The state shall protect, give legitimacy to or restore all those principles and institutions which sustain the moral integrity, self-respect and civic identity of the individual citizen and which also serve to inhibit processes of civic estrangement, dissolution of the civic bond and civic disaggregation.  This effort by the civic order itself protects the citizen’s capacity to contribute to the well-being of the civic order.

At this time, I am most vividly reminded of the words of an old song we used to sing in the American Civil Rights Movement in the 1960s, a song which was taken over from movements to organize unions in American companies:

Everybody now, which side are you on?
Which side are you on? Everybody
Which side are you on?

If our choice today is a Manichean one between the dark side or the better angels side of our natures, I choose the angelic.

It would, therefore, seem that principles for moral government and moral capitalism are needed now more than ever.  I trust you will agree with me.

Here’s the February edition of Pegasus.

In this issue, we include a very unique piece on the art and architecture of moral capitalism and another on the Yijing.

I would be most interested in your thoughts and feedback.

Our colleague, Professor Hashim Kamali, Founder and Director of the International Institute of Advanced Islamic Studies in Kuala Lumpur, has sent me an essay on the values in Islam which provide grounds for our promoting sustainable development.  Prof. Kamali is included in the 2022 list of the world’s 500 most influential Muslims.

From its inception, the Caux Round Table presumed that an ethic of responsibility in business and finance would resonate with many wisdom traditions and so could appeal to global communities for support of its aspirations.  Prof. Kamali’s essay is, to me, further proof of this profound and reassuring proposition.

You may read his essay here.

In 1999, two journalists wrote a book titled Dow 36,000.  At the time, the Dow Jones Industrial Average was a measure of the price performance of the New York Stock Exchange.  At the time, the Dow was at 8,800.  In 1994, it had been 3,400.  Two years later, the Dow was still rising and Federal Reserve Chairman Alan Greenspan worried in public about “irrational exuberance.”

Many thought: “Not in my lifetime!”

As I write this, the Dow is at 35,112.

The Dow closed higher than 36,000 for the first time on November 2, 2021.

Does this mean that capitalism really works as promised – creating the wealth of nations?  What happened?

Time and low interest rates.

Time makes it possible for compounding returns to take effect.  Here is a compound interest chart:

The higher the return and the longer the time the investment is left also to grow, the more dramatic the total return.

Secondly, low interest rates.  For various reasons, governments have put trillions of dollars in both the U.S. and the global economies since the late 1990s.  More money, lower interest rates.

Then, earnings on stocks (dividends and buybacks) and expectations of continued entity profitability outpace what can be earned in interest by investing in debt instruments.  So, rational investors put their money in stocks and keep it there.  The Dow just keeps on rising, day in and day out.

Now, importantly, wealth makes for differences in marginal utility of an additional dollar and in the consequences of risk.  Wealthy people have a lower marginal utility for each dollar they own and so can tolerate risk better.  They can put money away for the long-term in more risky investments and so earn the higher returns that go with higher risk and, thus, get more in compounding returns on their equity investments.

Poor people need to be more prudent and not take long-term risks.  They also don’t have much money to use for investments after their consumption expenditures.  They are systemically limited in being able to benefit from long-term stock investments.

A particular stock is more risky in the short and medium-term that if held for years and years. Risk-averse investors should stay away from long-term bets on equity ownership.

Secondly, the liquidity provided by governments and central banks tends to flow to the wealthy. They, in turn, have more income than they consume, so they are systemically more able to save and to keep their savings untouched.

Thirdly, the rise of huge investment funds have lowered risks for stock ownership.  The big funds diversify risk by investing in many, many companies.  Thus, they have provided a safer haven for money invested in equities, which pay more than bonds and other debt contracts.  This has attracted money into equity investments.

These economic realities have kept financial markets growing and growing for 25 years.  Here is a chart on the Dow’s performance:

 

I saw in a recent Harvard Business Review mention of an article in the Academy of Management Journal noting that “Hedge funds see high levels of CSR activity as a signal that a firm is wasteful and ripe for cost-cutting.” The researchers found that in a sample of 16,000 firms, the higher a firm’s CSR score, the more likely it would be targeted by an activist hedge fund.

For firms targeted, on average, 25% reduce CSR spending after the attack on their business model by some owners.

The article concluded that firms with CSR commitments need to find investors with similar values – the love of something other than ready money.

Larry Fink of BlackRock recently released his 2022 letter to CEO’s.

It is immodest of me, but truthful nevertheless, to point out that Mr. Fink’s understanding of capitalism is nicely tracking the work of the Caux Round Table’s founders some 36 years ago.

For example, Fink wrote:

At the foundation of capitalism is the process of constant reinvention – how companies must continually evolve as the world around them changes or risk being replaced by new competitors.  The pandemic has turbocharged an evolution in the operating environment for virtually every company.  It’s changing how people work and how consumers buy.  It’s creating new businesses and destroying others.  Most notably, it’s dramatically accelerating how technology is reshaping life and business.  Innovative companies looking to adapt to this environment have easier access to capital to realize their visions than ever before. 

…

I believe in capitalism’s ability to help individuals achieve better futures, to drive innovation, to build resilient economies and to solve some of our most intractable challenges.

Then, he gets specific about how capitalism makes the world better – brings inventions to scale for mass consumption:

Engineers and scientists are working around the clock on how to decarbonize cement, steel and plastics; shipping, trucking and aviation; agriculture, energy and construction.  I believe the decarbonizing of the global economy is going to create the greatest investment opportunity of our lifetime.

…

The next 1,000 unicorns won’t be search engines or social media companies, they’ll be sustainable, scalable innovators – startups that help the world decarbonize and make the energy transition affordable for all consumers.

So, how is all the money Larry Fink is talking about going to find the right technologies to get our world to zero net carbon emissions?

Well, we have been commenting on that process as the secret sauce of capitalism – reaching out to tech types and risking funds in the development of new technologies to commercialize.

Another such opportunity is a battery capable of powering passenger aircraft in flight.  From The Independent:

Researchers have achieved a world-leading energy density with a next-generation battery design, paving the way for long-distance electric planes.

The lithium-air battery, developed at the Japanese National Institute for Materials Science (NIMS), had an energy density of over 500Wh/kg.  By comparison, lithium-ion batteries found in Tesla vehicles have an energy density of 260Wh/kg.

The new battery can also be charged and discharged at normal operating temperatures, making them practical for use in technologies ranging from drones, to household appliances.

According to the researchers, the battery “shows the highest energy densities and best life cycle performance ever achieved” and marks a major step forward in realizing the potential of this energy storage.

“Lithium-air batteries have the potential to be the ultimate rechargeable batteries: they are lightweight and high capacity, with theoretical energy densities several times that of currently available lithium ion batteries,” according to a release posted by NIMS.

Energy density has been the biggest obstacle towards the advancement of electric planes, with 500Wh/kg viewed as an important benchmark for achieving both long-haul and high-capacity flights.

The batteries work by combining oxygen in the air with the lithium present in the anode, which comes with safety issues that the latest research was able to overcome.

Until now, electric planes have been small and incapable of carrying large numbers of passengers over long distances, with efforts typically focusing on short-distance, private aircraft.

This week, Rolls-Royce’s Spirit of Innovation electric plane was confirmed to be the world’s fastest battery-powered vehicle after achieving speeds of over 600kph (380mph).

Achieving such feats on a larger scale would not only reduce pollution from fuel-burning engines, but also eliminate noise pollution that forces airports to be located in areas with low population densities.

I once heard a biologist say why don’t we make our own photosynthesis machine – no need to rely on plants to store solar energy?  Well, an item in SciTechDaily reports on just such innovation:

A research team has developed a new artificial photosynthesis device component with remarkable stability and longevity as it selectively converts sunlight and carbon dioxide into two promising sources of renewable fuels – ethylene and hydrogen.

The researchers’ findings, which they recently reported in the journal Nature Energy, reveal how the device degrades with use, then demonstrate how to mitigate it.

“By understanding how materials and devices transform under operation, we can design approaches that are more durable and thus reduce waste,” said senior author Francesca Toma, a staff scientist in the Liquid Sunlight Alliance (LiSA) Berkeley Lab’s Chemical Sciences Division.

For the current study, Toma and her team designed a model solar fuels device known as a photoelectrochemical (PEC) cell made of copper(I) oxide or cuprous oxide (Cu₂O), a promising artificial photosynthesis material.

Cuprous oxide has long puzzled scientists, because the material’s strength – its high reactivity to light – is also its weakness, as light causes the material to break down within just a few minutes of exposure.  But despite its instability, cuprous oxide is one of the best candidate materials for artificial photosynthesis because it is relatively affordable and has suitable characteristics for absorbing visible light.

To better understand how to optimize the working conditions for this promising material, Toma and her team took a closer look at cuprous oxide’s crystal structure before and after use.

Electron microscopy experiments at the Molecular Foundry confirmed that cuprous oxide quickly oxidizes or corrodes within minutes of exposure to light and water.  In artificial photosynthesis research, researchers have typically used water as the electrolyte in the reduction of carbon dioxide into renewable chemicals or fuels, such as ethylene and hydrogen – but water contains hydroxide ions, which leads to instability.

But another experiment, this time using a technique called ambient pressure X-ray photoelectron spectroscopy (APXPS) at the Advanced Light Source, revealed an unexpected clue: cuprous oxide corrodes even faster in water containing hydroxide ions, which are negatively charged ions comprised of an oxygen atom bound to a hydrogen atom.

“We knew it was unstable – but we were surprised to learn just how unstable it really is,” said Toma.  “When we began this study, we wondered, maybe the key to a better solar fuels device isn’t in the material by itself but in the overall environment of the reaction, including the electrolye.”

To validate their simulations, the researchers designed a physical model of a Z-scheme artificial photosynthesis device at Toma’s LiSA lab at Berkeley Lab.  To their delight, the device produced ethylene and hydrogen with unprecedented selectivity – and for more than 24 hours. “This is a thrilling result,” said Toma.

The Wall Street Journal recently ran a commentary which included some observations from George Gilder on the foundation of capitalism on intangible factors – knowledge and the communitarian process of getting goods and services into the hands of others.

I include some excerpts of the commentary here.

I recall a college class where the noted scholar of identity, Erik Erikson, asked, with a note of despairing resignation, why we humans divide ourselves into what he called “pseudo-species.” By this term, he referred to lineages, clans, tribes, ethnicities, peoples, nation states, in-groups of all sorts – all the identity collectives we invent for ourselves.

In answer, I suppose, there is the Old Testament story of the Tower of Babel, where our being divided into rival groups was a punishment for our hubris in seeking to rival God, who alone should organize the cosmos.

But in the U.S., the month of February is dedicated to crossing barriers of race, given our history of slavery, Jim Crow segregation and racist disaggregating and disalignment, one with another. February is Black History Month, an opportunity to learn about the isolating history of some Americans.

A notable response to the harsh experience of African Americans was written by Dr. Mary McLeod Bethune as her last will and testament.  She, thereby, left us all the gift of pointing to our moral sense as a good way (Dao) of living.

The Caux Round Table Principles for moral capitalism and moral government rely on the very principles of moral thinking which Dr. Bethune recommended.

You may read her last will and testament here.

Much attention is currently being directed towards companies finding a “purpose” more meaningful than the making of profits, towards running companies to accomplish good ends for the environment, society and in governance (ESG) and finding a net positive balance in the totality of their impacts.

Our metric of a moral capitalism looks in that direction, as well.  Given that the Caux Round Table Principles for Business were conceived and debated by practical senior business executives, such principles seek a balance of idealism and realism.

I noticed, with some interest, a recent C-Suite Outlook survey by the Conference Board on CEO outlook for 2022.  Those responding believe that the issues having the greatest impact on their businesses are: 1) Covid related disruptions; 2) rising inflation; 3) labor shortages; 4) supply chain disruptions; and 5) changes in consumer behavior.

Ah, the tyranny of the mundane when it reigns over our hopes and dreams.

I was reminded of two lines in Robert Frost’s elegant poem on aspirations:

But I was going to say when Truth broke in
With all her matter-of-fact about the ice-storm

Frost then goes on to leave truth and dream a bit:

It’s when I’m weary of considerations,
And life is too much like a pathless wood
Where your face burns and tickles with the cobwebs
Broken across it, and one eye is weeping
From a twig’s having lashed across it open.
I’d like to get away from earth awhile
And then come back to it and begin over.
May no fate willfully misunderstand me
And half grant what I wish and snatch me away
Not to return. Earth’s the right place for love:
I don’t know where it’s likely to go better.
I’d like to go by climbing a birch tree,
And climb black branches up a snow-white trunk
Toward heaven, till the tree could bear no more,
But dipped its top and set me down again.
That would be good both going and coming back.
One could do worse than be a swinger of birches.

Yesterday, I sent around a comment on spending money on just what to remediate carbon emissions.  Today, there is a report that Bill Gates and others have spent $80 million on a technology for carbon capture.

According to Bloomberg, a Massachusetts-based startup that captures carbon dioxide directly from the air has raised $80 million from investors, including Bill Gates-led Breakthrough Energy Ventures:

Verdox has a different approach that it claims to be more efficient and therefore cheaper.  The Massachusetts Institute of Technology spinoff has developed a special type of plastic that can selectively pull out CO₂ from a mix of gas—in air or exhaust—when charged with electricity. Once trapped, a change in voltage releases the CO₂.  The startup said its material could cut the total energy used in direct air capture by 70% or more.  The startup will have to rely on low-carbon electricity to power the process.

Most other carbon capture processes use huge amounts of energy per ton of carbon captured for sequestration.

An early version of the material, developed at MIT, worked well at capturing CO₂, but it also ended up capturing oxygen.  Air is composed of 21% oxygen and only 0.04% CO₂.  But in the past year, Verdox has landed on a material that it says is 5,000 times more attractive to CO₂ than oxygen.

It will take years before Verdox can capture millions of tons of CO₂ annually, but it eventually aims to do so at $50 per ton or less.  That would be an attractive price, given carbon permits in the European Union’s Emissions Trading System have traded this year around 80 euros ($90) a ton.