Author: CRT Admin

Recently, Paul Rubin, an emeritus professor of economics at Emory University, had an important insight for moral capitalism which rests on the moral sense, published in the Wall Street Journal:

Karl Marx called his system “scientific socialism.”  Modern leftists advocate a similar ideology and call themselves “woke” to indicate that they understand the world better than the rest of us. Yet the worldview of Marxists and woke leftists alike is fundamentally primitive.

Folk economics is the economics of people untrained in economics.  It is the economic view of the world that evolved in our brains before the development of the modern economy.  During this period of evolution, the economy was simple, with little specialization except by age and sex, no economic growth, no technological change, limited trade, little capital and warfare between neighboring tribes.

Zero-sum thinking was well-adapted to this world.  Since there was no economic growth, incomes and wealth didn’t grow.  If one person had access to more food or other goods or greater access to females, it was likely because of expropriation from others.  Since there was little capital, a “labor theory of value”— the idea that all value is created by labor alone — would have been appropriate and there was little need to protect capital through property rights. Frequent warfare encouraged xenophobia.

Adam Smith and other economists challenged this worldview in the 18^th century.  They taught that specialization of labor was valuable, that capital was productive and that labor and capital could work together to increase income.  They also showed that property rights needed protection, that members of other tribes or groups could cooperate through trade, that wealth could be created with the proper incentives and that the creation of wealth would benefit everyone in a society, not only the wealthy.  Most important, they showed that a complex economy could work with little or no central direction.

Marx’s economic system was based on the primitive worldview of our ancestors.  For him, conflict rather than cooperation between labor and capital defined the economy.  He thought that the wealthy became rich only by exploiting the poor, that all income came from labor and that the economy needed central direction because he didn’t believe markets were good at self-correction.  The collapse of the Soviet Union, the largest and most expensive social-science experiment ever conducted, proved Smith right and Marx wrong.

Members of the woke left want to return to policies based on this primitive economic thinking. One of their major errors is thinking that the world is zero-sum.  That assumption drives identity politics, which sees, among other things, an intrinsic conflict between blacks and whites.  The Black Lives Matter movement and Critical Race Theory foment racial antagonism and resurrect xenophobia.  Leftists vilify “millionaires and billionaires” like Bill Gates and Elon Musk as evil and exploitative.  They should recognize them as productive entrepreneurs whose innovations benefit us all.

Dislike of the rich makes sense in a world where one can become rich only by exploiting others, but not in a society full of creativity and useful inventions.  Changing tax laws to soak the rich makes sense with a labor theory of value, but not with a sophisticated understanding of continual investment and technological change.

Recently, our colleague Jan Peter Balkenende, former Prime Minister of The Netherlands, was chosen to give a reflection the night before the king opens the new parliamentary year with a speech on behalf of the government.

Jan Peter’s remarks are a thoughtful – realistic, yet optimistic – assessment of our time.  He graciously mentions the Caux Round Table’s work in seeking to find common threads of belief, meaning and values among our different religions and wisdom traditions.

You may read his reflections here.

In the U.S., we have just experienced a moral capitalism episode with respect to the use of the internet.  It seems that Facebook’s Instagram product (or is it a service?) has negative, net impacts (externalities) on many users.

Facebook was aware that postings on Instagram made 25% of its teenage users “feel worse” about themselves.  Forty-two percent said that Instagram made them feel better.  Facebook knew that “being in a low or vulnerable state of mind means teens are more vulnerable to the content they see online.”

So what is to be done?  What should be the response of a moral business?  How should it internalize dealing with the consequences associated with use of its product or service?

One option under serious consideration in the U.S. is government regulation of what internet companies allow on their platforms or subjecting such companies to legal responsibility for misuse of the platform causing harm to others.  Another is voluntary company censorship of what is posted on its online platform.

But a third, overlooked option is setting forth ethical expectations for those who use Instagram and other platforms to communicate their thoughts, words and pictures.  Users exercise freedom to post.  They act on their own authority, for their own purposes.  Any such use of power implicates ethics and morals: is it good or bad, ethical or unethical, helpful or harmful?

Why do we not expect more of consumers of products and services?  The outcomes of capitalism, really of any system, flow from the decisions of those who use the system.  Consumers, as stakeholders of society, shape the quality of their own lives and the lives of those around them.

Can we not expect thoughtful personal assumption of responsibility as part of living in a moral society?

The path-breaking Caux Round Table Principles for Business were first proposed at a meeting in Mountain House, Caux, Switzerland in July 1994.

At the time, Mountain House was a conference center of the Moral Re-Armament Movement.  That Movement is now Initiatives of Change.

This year is the 75^th anniversary of the opening of Mountain House as a conference center.  Initiatives of Change is producing 75 stories of the important events which took place at Mountain House – one for each of its 75 years.

You can see the story of the launch of our Principles for Business here.

The website for Initiatives of Change, with information about its current global engagements, can be found here.

Merck and Ridgeback Biotherapeutics – two capitalist companies – have collaborated to create a pill with the off-putting name of “molnupiravir” to effectively treat Covid infections, saving lives and reducing hospitalizations.

The biological impact of the pill is to degrade the ability of the Covid virus to replicate itself into more viruses inside its host, thus reducing the number of viruses blindly working away, turning our cells against us. The fewer viruses in us, the less harm done to us by the infection and the less dangerous the virus to humanity in general.

Molnupiravir and similar antiviral drugs yet to be developed, promise, first, stabilization of the impacts of Covid infections and then subjugation of the global pandemic.

Similarly, the novel vaccines developed by Pfizer, Moderna and others have done more to thwart the pandemic and reduce transmission of the virus than most every regulation and order issued and imposed by our governments.

Thus, inventions made by capitalist companies have once again thwarted nature and reduced its capacity to harm civilization.

Some 250 years ago, the industrial revolution brought about by capitalist modes of production and distribution similarly manipulated nature into providing resources for human wealth creation.

The industrial revolution, now in its 4th generation of technological inventiveness, saved humanity from poverty, existential stagnation, elitist autocracies and theocracies and much suffering and brought us into enjoyment of our current standards of living – with modern medicines, electricity, the internet, longer lives, more education and all the rest of what we consume, enjoy and abuse.

Now, it must be admitted that capitalism did not do this all on its own. Public goods – law, police, market and political freedoms, roads, bridges, sewers, risk mitigation subsidies, etc. – were necessary supports for private sector invention and production. But as wealth was created by capitalism, taxes collected by governments increased so that governments could buy more public goods.

A capitalist may have invented the flush toilet, which did so much to lower death rates and extend lives, but governments or public utilities put in the water mains to bring water to our homes and the sewers to carry away our effluent.

Thus, has modern civilization been created by a virtuous circle of first, capitalism, then wealth creation, then more effective, responsible, government, leading to more fruitful capitalism, then to more wealth creation and then to more sophisticated and responsible government, which then gave rise to more…

We should, however, never overlook, nor diminish with ingratitude, the role of capitalism in bringing to us so much of the lives we live and wish to live.