Christmas Stockings and the Morality of Capitalism

A somewhat off the wall article in the Wall Street Journal makes a case, by accident, for the value of capitalism.

The article was a short note on the history of Christmas stockings, part of the Christmas holiday ritual developed in the 19th century in Europe, especially in England.

One part of the innovative middle class celebration of Christmas was for children – Santa Claus, who brought gifts to children who had been nice, not naughty, during the year, then ending. Small gifts were put in stockings, hung from a mantle over the fireplace.

Stockings used for that special purpose evolved from stockings made for daily wear.

The first modern stockings were knitted by hand and by a machine invented in 1589 called a stocking frame. Foot-powered stocking frames evolved over time. By the mid-18th century, England had some 14,000 stocking frames. Stockings were no longer only for the aristocracy. Very ordinary people could acquire such status coverings for their legs.

In mercantilist France, stocking frames were restricted to protect hand workers.

In 1758, Jedediah Strutt invented a way of incorporating the purl stitch into the making of the fabric, resulting in ribbed stockings. With his profits, Strutt financed the first spinning mills built by Richard Arkwright, whose invention of the water frame transformed cloth making from a low-productivity craft to an industrial product. Arkwright’s invention took only minutes to make enough wool yarn to make a pair of knee socks, when previously that task would have taken five hours.

Cotton hosiery, more desirable than wool, was one of the first consumer products made from the newly abundant thread. What could be produced in quantity could profitably be sold at lower prices and so could become more affordable to more people and so also more abundant in the lives of the many.

And Christmas stockings, too, could become part of most every English family’s Christmas celebration.

Thanks to the capacity of capitalism to evolve technology, expand and expand productivity, new wealth, including ownership of stockings, was created, which could more inclusively devolve to the people.

Your Support is Most Appreciated

Our thanks to those of you who recently contributed to the work of the Caux Round Table during the Give to the Max special day of fundraising for non-profits here in Minnesota.

During the last two weeks, I have surprisingly received many emails from all kinds of organizations asking me for a personal contribution.  These requests seem here in the U.S. to be a new part of our holiday season, perhaps encouraged by increased use of Zoom and internet relationships over these past 18 months.

It is the end of our fiscal year and so I presume on your goodwill and concern to ask again for your financial support, particularly to defray the costs of our monthly newsletter, Pegasus.

From its inception in 1986, the Caux Round Table has provided its thoughts, reflections, principles, metrics and commentaries to the global public domain without charge.

We rely upon donors to contribute with hope and courage in the midst of trials and disappointments.

You can contribute by PayPal, check or wire transfer (for wire transfer instructions, please respond to this message).

Our mailing address is 75 West Fifth Street, Suite 219, St. Paul, MN 55102.

I wish you all the best in the New Year.

Is the World Turning Towards Nuclear Power at Last?

One of the surprises to me about the otherwise predictable and pedestrian meeting of leaders to “save” the world from global warming was the emergence of a new alternative or rather, the coming in from the cold of a well-known, but controversial technology for generating electricity.

As I have written, humanity’s mastery of technological innovation to generate power has brought about our current climate challenge and so reverse technological innovation is needed to get us out of the difficulties we are in, so I’m open to consideration of all new technologies, even those using nuclear fission.

Dan Byers, Vice President for Policy at the U.S. Chamber of Commerce’s Global Energy Institute, recently wrote for the Real Clear Energy website:

Walking the halls of COP26, one can’t go far without bumping into young activists in bright blue shirts emblazoned with a simple request: “Let’s Talk About Nuclear.”  Their accompanying social media hashtag—#NetZeroNeedsNuclear—speaks for itself and is indisputable: achieving net-zero global emissions is simply not realistic without significant deployment of expanded nuclear generation.  The activists and their allies seem to be getting their message across.  As the conference winds down and we take stock of the most meaningful outcomes, strengthened support for nuclear energy is likely to emerge as a major COP26 success story.

This stands in sharp contrast to prior meetings, where nuclear has long been ostracized, despite its role as the world’s leading source of emissions-free energy.

“This COP is perhaps the first where nuclear energy has a chair at the table, where it has been considered and has been able to exchange without the ideological burden that existed before,” according to Rafael Mariano Grossi, the head of the International Atomic Energy Agency, a U.N.-affiliated body responsible for promoting nuclear generation and safety.  Just two years ago in Madrid, Grossi attended the annual COP (Conference of the Parties) “in spite of the general assumption that nuclear would not be welcome,” but now he says the tide is clearly turning.

Enthusiastic support from the Biden Administration has provided a major boost.  Here in Glasgow, Energy Secretary Jennifer Granholm has evangelized for nuclear at event after event, describing nuclear as a “holy grail” climate solution thanks to its ability to provide dispatchable, clean power around the clock.

The bullish rhetoric has been accompanied by numerous announcements, such as the Nuclear Futures Package, under which the State Department will partner with Poland, Kenya, Ukraine, Brazil, Indonesia and other countries to support capacity building for expansion of nuclear power.  

In another important announcement, Oregon-based NuScale signed an agreement with Romania’s Nuclearelectrica to help deploy the first small modular reactors (SMR) in Europe.  The State Department hailed the agreement as a “pioneering step” that “will build significant momentum for reducing emissions across Europe.”  They continued, “with 30 coal power plants in the region, including seven in Romania, SMRs are ideally suited to replace this baseload power and employ many of the same workforce.”

In addition, on November 9th, the U.K. awarded Rolls Royce 210 million pounds to pursue design and regulatory approval of SMRs in the U.K.  SMRs offer unique features and design advantages relative to traditional multi-billion-dollar, gigawatt-plus size light water reactors and efforts by the U.S. and U.K. governments to promote the technology represent the next step in the intensifying global race to deploy nuclear to advance climate and energy goals. Competition from Russia and China is significant—both have numerous SMR facilities under development, while China has announced plans to build at least 150 new reactors (both large and small) in the next 15 years—more than the rest of the world has built in the past 35 years, according to Bloomberg.

Elsewhere in Europe, a coalition of 12 countries are calling for nuclear to receive a “green” designation under the continent’s forthcoming sustainable finance taxonomy, thereby enabling cheaper build costs and E.U. economic support.

While Germany continues to oppose the designation as it inexplicably works to close its remaining reactors over the next year, advocates remain optimistic.  An E.U. industry representative recently commented that … “we have more and more member states recognizing that, in order to achieve the decarbonization goals, we need nuclear in the mix…But also [because of] the recent energy crisis, I think more and more people are starting to recognize the risk of depending on imports.”

Add it all up and the conclusion is clear: while the case for nuclear power has always been strong, growing political support from governments, businesses and environmental interests alike is making it stronger.  To reach our ambitious global climate objectives, we need every tool in the toolbox to reduce emissions and including nuclear energy needs to be a priority.  Of course, COP26 is just a brief moment in time and momentum will need to be sustained.  So, pass it on: #NetZeroNeedsNuclear. 

His report deserves our attention.

AI and Socially Responsible Business

Henry Kissinger, along with Eric Schmidt, who was then the Executive Chairman of Google, have teamed up with the Dean of the MIT Schwarzman College of Computing, Daniel Huttenlocher, to write a trending new book, The Age of AI.

Belinda Luscombe of TIME Magazine writes: “The book argues that artificial intelligence processes have become so powerful, so seamlessly enmeshed in human affairs and so unpredictable, that without some forethought and management, the kind of “epoch-making transformations” they will deliver may send human history in a dangerous direction.”

Thus, the negotiator, the tech tycoon and the professor make the point that AI needs ethics.

Last year, the Caux Round Table asked around for inputs to a set of principles for AI, seeing that there was not yet a general set of guidelines for use of that technology.

You may read our proposed principles here.

Please let me know your thoughts on this draft.

Social and Human Capitals Pay Real Dividends

The Caux Round Table has recently tried to draw more attention to the contributions of social and human capitals to the success of wealth accumulation of individuals, firms and communities.

The most recent issue of the Harvard Business Review, by coincidence, has several articles which substantiate that thesis.

One article proposes that success in business negotiations is enhanced by certain human capital skills: the ability to recognize that “the gains to be shared are the additional value the agreement creates over and above the sum of the two sides’ best alternatives.  This negotiation pie should be divided equally because both sides are equally essential to creating it.”

A second article proposes that innovation is enhanced by the application of decision-making skills.  “Businesses need to strengthen and speed up their creative decision-making processes by including diverse perspectives, clarifying decision rights, matching the cadence of decisions to the pace of learning and encouraging candid, robust, conflict in service of a better experience for the end consumer.”  Such a decision-making process is a form of social capital, resting on specific human capital skills and dispositions.

On the individual level, a third article points out that people who transition to new roles in the organization or in a new organization often have a hard time doing so successfully.  Successful transitions employ five ‘fast mover’ practices: surge rapidly into a broad network, generate “pull” by energizing new connections, identify how to add value and who can help them fill skills gaps, use the network to expand impact and prioritize relationships that enhance their workplace experience.”

A fourth article proposes that innovation can be enhanced by avoiding certain psychological traps that arise from fear: “consult your future self; use red flags as teaching moments to refine your ideas; dissect causes of failure after setbacks; reframe rejections – focus on what was not negative or left unsaid; don’t get distracted when the time for action arrives; do what you are good at and leave the rest to others.”

Capitalism and the State

Three news items in yesterday’s paper bring to mind the ever-present question of the relationship of capitalism to the state.

One is the decision of the U.S. Department of Justice, in line with the Biden Administration’s concern for the concentration of market power in fewer and fewer hands, to prevent Penguin Random House from buying Simon & Schuster publishers.  The resulting merged company would have unprecedented control and outsized influence on what books would be published and how much authors would get paid for their works.

The market power of such a merged company would limit the ability of authors to get books published and bargain for their share of sales revenue.  The limitation of competition could also bring about censorship of works which the publishing staff did not like and so limit public understandings and discussions.

Of course, with the advent of new technologies for self-publishing on Amazon and the use of social media to promote books, there still is some room for authors disfavored by a major house to sell their books.  But self-publishing is a lonely enterprise, with no marketing support to attract buyers or place printed books in bookstores.

Secondly, the Dow index closed at over 36,000 for the first time.

Now, please ask yourself if that could have happened without governments creating trillions of dollars of liquidity in the global economy in recent years.

Thirdly, Yahoo is pulling out of China, leaving a huge market and customers, foregoing profits because of obstacles in serving customers created by the Chinese Communist Party and its government with policies and laws regulating social media.  Microsoft’s LinkedIn had previously ceased business operations in China.

October Pegasus Now Available!

Here’s the October edition of Pegasus.

In this issue, we include excerpts of an article on the Japanese concept of kyosei, written by Ryuzaburo Kaku, former Chairman of Canon and one of our participants, and how it relates to employees.

Secondly, we include our reaction to a recent article in the New York Times on black capitalism.

Lastly, we close with a piece on how moral capitalism could help alleviate the suffering of future pandemics.

I would be most interested in your thoughts and feedback.

Human Ingenuity and Climate Change – Interdependencies?

As world leaders gather in Glasgow for the COP26 conference on how to offset the measurable warming of our planet, what might we think about the role of a moral capitalism in sustaining our earthly home and our civilization?

I have been thinking recently, in this connection, with the effects of human ingenuity and its empowerment of us to become “masters” of nature.  Such ingenuity has passed into our lives through technology – steam engines, paper money, steel, electricity, the telegraph, oil wells, automobiles, railroads, airplanes, cell phones, atomic bombs and nuclear power stations, to name a few of our inventions.

It seems certain that the human contribution to global warming has been 1) securing more and more energy by inventing and using technologies which release CO2 into the atmosphere and 2) using technologies to create a modern economy which, over the last 300 years, has raised our living standards to remarkable global levels of comfort and enjoyment compared to past millennia.

My question, then, is if our ingenuity and technological innovations have brought us to where we are today, then why can’t they get us out of our present predicament?

In my view, the incentive to conceive of, successfully develop and bring to scale the technologies supporting modern civilization was a product of capitalism and the financing of such inventions and their introduction and adoption on a global scale was also a product of that social/economic/cultural system.

We might pause to reflect on our current affliction from the SARS-CoV-2 virus on the point that our hopes for besting the virus lie most with vaccines developed by private companies, new technologies which could be taken up by government and widely distributed to peoples.

The material and technical side of communism and socialist governments were, with negligible exceptions, copied from capitalist economies.

Thus, the challenge of a moral capitalism is how best to encourage the conception, invention, development and production of those technologies which can establish a better balance between our civilization and its impacts on our environment, particularly our atmosphere.

We could, apparently, produce supercapacitors which can release large amounts of electric energy quickly, but can’t store as much as a battery.  A supercapacitor, coupled with a battery, could double the range of an electric car, allowing it to be driven some 500 miles on a single charge.  The new device could be recharged in five minutes to 80% of its capacity.

Some propose “dynamic charging” so that vehicle batteries can be recharged while the vehicles are in motion by wireless transmission from under the road pads to receivers on the bottom of the vehicles.  Roads, however, must be connected to the grid for this to happen.

Dr. Wang Zhong Lin at the Beijing Institute of Nanoenergy has proposed a device to ride on ocean waters and use the motion of waves to generate electric currents.  His device, a paddle, can generate electricity with large waves, but also from small waves which, in the aggregate, can generate considerable electricity.  He uses a novel technique – not passing a coil of wire through a magnetic field – but friction, like getting static electricity from rubbing a balloon.

Plants with the C4 gene for photosynthesis, mostly grasses, remove more CO2 from the atmosphere than other plants which don’t have that gene.  If human ingenuity could engineer the modification of other trees to include the C4 gene in their genome, forests could be grown in many countries to remove CO2 in large amounts from the atmosphere for sequestering in wood.

The use of hydrogen as a source of energy has its advocates, but as of now, is not practical. Hydrogen use is carbon free.  Hydrogen fuel cells produce as by-products only water vapor and warm air.  The challenge is how to acquire hydrogen in large amounts at a reasonable cost which is acceptable to consumers.

Nuclear power plants could be used to produce hydrogen by using steam and electricity to split water atoms and separate the hydrogen.

BP is experimenting with using wind power to produce hydrogen.  A 50-megawatt electrolyzer will split water into hydrogen and oxygen.  When excess electricity is generated by wind turbines, it can be used to make hydrogen, which can be stored for later use in producing useful energy.

A Canadian company, Planetary Hydrogen, proposes to take carbon out of the atmosphere and convert it into an antacid for mixing in ocean water acidified by absorption of too much CO2.

Airlines might use cooking oils, animal fats, agricultural crops and wood as biofuels for jet engines.  Today, biofuels cost up to 4 times more than conventional jet fuel.  Aviation drives 3.5% of human made greenhouse gas emissions.

Another possible jet fuel could be made from hydrogen combined with carbon monoxide.

Smithfield Foods is planning to sell methane to burn with shale gas, a byproduct of natural gas extraction, in home heaters.  Methane produces some 20% of greenhouse gas emissions and is 25% more potent than CO2 in trapping the earth’s heat.  Hog manure lagoons are being converted to capture methane emissions.  But such methane can’t compete on price with shale gas, so its production must be subsidized.  And manure lagoons need to be connected with gas pipelines, an expensive capital investment.

Sierra Energy has a prototype refinery in California which processes 10 tons of garbage a day into a ton of hydrogen.  The trash is blasted with 4,000-degree Fahrenheit steam and oxygen to break it down into hydrogen and carbon monoxide.  Garbage buried emits methane into the atmosphere.

Hydrogen could be used in the production of steel replacing coking coal.  Steel making accounts for about 8% of greenhouse gas emissions.  Hybritt, a Swedish industrial coalition, delivered the first ton of “green” steel last August.  Hydrogen can also replace the hydrocarbons of natural gas in other manufacturing processes, demanding high temperatures like chemical reactors, cement kilns and glassmaking.

Those who want to invest in the technology of using hydrogen for energy generation need to feel secure that others will produce enough hydrogen day-in and day-out at a predictable and acceptable cost.  Reciprocally, those who want to invest in the production of hydrogen need to feel secure that others will want to buy their production as a predictable price covering the costs of production, plus an acceptable profit.  The risky part of capitalism, moral or otherwise, is the alchemy of aligning a critical mass of consumers in timely fashion with a critical mass of producers.  Markets can do this, generally incrementally and not always easily or seamlessly.

Hydrogen is produced from electrolyzers.  Today, the world has about 3 gigawatts of electrolyzer capacity (a gigawatt is the capacity of a nuclear power plant).  Scaling up generating capacity would lower the cost of adding additional capacity.  On October 10, Andrew Forrest, Australia’s richest man and owner of Fortescue Metals Group, announced plans to build the world’s largest factory for making electrolyzer machines.

As a result of new generating capacity coming online, the cost of hydrogen made from renewable sources is dropping.  Chevron has made a big bet on producing hydrogen.  Some 350 large projects are globally underway to produce clean hydrogen, distribute hydrogen or to use hydrogen in industrial plants.

People, especially in urban centers, spend hours of the day in under-ventilated buildings.  Such conditions support headaches, fatigue, shortness of breath, coughs, nausea, irritation of eyes, nose, throat and skin.  Covid has drawn attention to the quality of indoor air.  Technology is needed to improve indoor ventilation.

With respect to food production, kernza is a perennial wheat with deep roots that help protect ground water supplies from nitrate pollution, stores more carbon in the soil and reduces erosion.  General Mills is interested in making its Cascadian Farms cereal from kernza wheat.

Technology is needed to protect kelp beds from sea urchins.  Kelp beds sustain fish and absorb carbon.  But warming waters have promoted the growth of sea urchins which eat kelp.

Our demand for meat has given rise to widespread use of land for farms and pasture. Industrialized food production is also energy intensive and consumes great quantities of pesticides and fertilizer, with negative impacts on the environment.  Now, new technologies are being explored to change food chains.  Yeasts are being programmed to grow proteins which can make a soy-protein patty that looks and tastes like beef.  Cells taken from living animals can be used in bioreactors to grow meat.  A bacon substitute is being made from mycelium, a network of fungal fibers.  Inland saline aquaculture can bring seafood to people living miles away from oceans and forestall overfishing.  Vegetables are being grown in shipping containers in cities just blocks away from the consumers who will buy and eat them.  In San Francisco, there is a “vertical” farm with some 8,000 square meters in production.

The company, Beyond Meat, earned $406 million in net revenue in 2020.  Having gone public in 2019, it now has a market value of $7 billion.  In 2020, plant-based cow milk substitutes accounted for 15% of America’s milk market.

The Judeo-Christian Bible and the Qur’an tell us that we are made in God’s image or with his spirit.  We, therefore, have both the capacity to create worlds and the moral obligation to let creation flourish.