Category: Commentary

Iranians just observed the 40th anniversary of the establishment of a theocratic state by the Ayatollah Khomeini. What lessons are there for us in this social experiment so at odds with the trend of modernity?

The Ayatollah and his followers and admirers practice Shi’a Islam, which originated among the Arabs as a consequence of arguments over who should lead the community of Muslims after the death of the Prophet Muhammad. But it seems to me the Shi’a faith found its deepest roots among the Iranians, an Indo-European people who over many centuries expressed themselves in the Persian Empire and successive regimes. Persian influence spread into what is now Iraq, where the Shi’a faith first grew into importance.

So perhaps it is not a coincidence that there are striking similarities between Indo-European Zoroastrianism, practiced in Persia for centuries, and Shi’a beliefs. The similarities pose a challenge to my understanding of ethics and right-minded, decision-making in a pluralistic, human community where human frailty and error are the norm.

Pluralism denies enforcement of any claim to possession of absolute truth and to the associated right to compel others to submit to such truth on pain of punishment or death.

Human frailty and error raise doubts as to the accuracy of any person to his or her claim to possession of the single, absolute truth.

Modernity, with its rationality and privileging of critical analysis, has pretty well exposed assertions to the possession of ultimate truth as pretentious. Nihilism is the current foundation of our authority to assess faith-based beliefs, leaving us intellectually in a live-and-let-live world community.

Perhaps as early as the second millennium BCE, Zoroaster, in what is now Iran, wrote poems (the Gathas) setting forth his perception of truth and reality. He believed there was a created cosmos, a divine order, which was good and true (Asa) but that there were oppositional forces (Druj) of ignorance and evil thinking which threatened that order with chaos. There was good in the world but he believed that it could be corrupted. Experienced life for him was a struggle between the tendencies towards good and right order and the tendency towards evil and chaos.

Humans had free will but were fallible. Our lot was to choose between either of two irreconcilable extremes: truth or lies; good or evil.

For Zoroaster, there was only one true path. All others were inferior. That path was to think good and do good, to be a co-worker with the spirit of Asa and so refresh creation.

In Shi’a faith, there is a conviction about ismah – that there are those without fault who are free from error and only they can show us to the right path with its right thought and right deeds.

Refusing to follow the path aligns such a reprobate with evil forces, with Satan. Thus, for the Ayatollah Khomeini, the United States was the “Great Satan” in the world, deserving unrelenting opposition until its power was fully suppressed for the good of creation.

Secondly, there is a calling among the Shi’a to direct others towards the good and away from evil.

Shi’aism points us towards a bipolar reality of only good and only evil, where toleration gives in to corruption and evil and compromise is impossible. Such a vision of life can easily justify violence against and oppression of those who are not seen as good.

It is not at all obvious to me that such bi-polarity is fundamentally good. It exacerbates our deeply rooted human tendencies to fear, despise and marginalize others.

But such bi-polar antagonisms between good and evil seem to be congenital to modern revolutions, from the Jacobins on down. When a revolution seeks to bring society back (to re-volve) to unquestionable first principles, it sets up a reign of oppression of free will, even of terror, in the name of virtue.

In the French Revolution, at the foot of the guillotine which was about to take her life, Girondist Madame Roland cried out “Oh Liberty, what crimes are committed in your name!”

Whoever or whatever created our cosmos and us did so leaving us imperfect creatures, condemned to live within limits and frustrations but also giving us a moral sense and the freedom to use it to link ourselves to others and to our surroundings in constructive and life-giving ways.

Reading the Qur’an has encouraged me to think that one can hold to an absolute truth, if at the same time one does not tread far from humility. Qur’an guides us to avoid Shirk, or making of ourselves, or anything else for that matter, the equal or partner of God.

The Old Testament book of Micah instructs us “to act justly and to love mercy and to walk humbly with your God.”

Aristotle thought that finding the Mean was the basis of ethics and that we needed inner strength (virtue) to do just that.

In the Confucian tradition, we find the Doctrine of the Mean, which advised us to keep to the balance of the Tao. And Buddha taught us in his first sermon to avoid extremes and find the middle path.

Our colleague Klaus Leisinger, by coincidence, just sent me this quote from Dietrich Bonhoeffer:

“Responsible action is no longer fixed from the outset and once and for all but is born in the given situation. It is not a matter of implementing a principle that ultimately breaks with reality but of grasping what is necessary, what is ‘commanded’ in the given situation. It must be observed, weighed, evaluated, all in the dangerous freedom of one’s own self.”

At the Caux Round Table for Moral Capitalism, we seek to follow this wisdom – to find principles of the good which must be applied in life in context where a humble, open-minded consideration of conditions avoids extreme judgmentalism and inflexibility.

U.S. Representative Joseph Kennedy III has picked up “Moral Capitalism” as his program for the U.S. He called asking for my help, which I said I would give him.

Last week, he gave a talk on the subject at Harvard Law School, which you can read here (PDF).

A commentary in Bloomberg by Harvard Law Professor Cass Sunstein notes Kennedy’s attachment to Moral Capitalism.

This adoption of Moral Capitalism is a compliment to the authors of our Principles for Business and to the Minnesota heritage they brought forward.

I saw recently in the Wall Street Journal this anecdote (PDF) about a “boss” looking out for an employee.

It reminded me that even in the throws of making a living, we can make life better for those around us, especially those who can rise or fall thanks to our powers and decisions made as to how we use them.

In many of our discussions here in the U.S. about capitalism and our shortcomings as a nation, the example of Sweden and Nordic welfare-state capitalism is often raised as a better model for us to follow.

Thus, I thought it telling when the Wall Street Journal, no friend of socialism, recently published a commentary on stealth capitalism in Sweden titled “How Sweden Overcame Socialism.”

Two new books make the case for moral capitalism irrefutable. According to two students of human evolution, it turns out that integrating social calculations into real world strategies for living well is what we humans are designed to do.

Therefore, being moral with the use of private property and with free-market entrepreneurship is feasible. We can expect those in capitalism to listen to “the better angels of their natures” because such angels can really be a compelling part of their natures.

Richard Wrangham has a new book titled The Goodness Paradox: The Strange Relationship between Virtue and Violence in Human Evolution and Michael Tomasello has a new book with the title Becoming Human.

Wrangham argues that as humans evolved physically out of their original primate bodily configuration, they turned from wild creatures to domesticated ones with their bodies changing shape as evidence of such growing socialization.

Tomasello argues that human children display “joint intentionality” with their caregivers to better succeed in cooperative living.

In other words, just as Aristotle postulated in the pre-scientific age, humans are social animals. In his Politics, Aristotle wrote:

“Man is by nature a social animal; an individual who is unsocial naturally and not accidentally is either beneath our notice or more than human. Society is something that precedes the individual. Anyone who either cannot lead the common life or is so self-sufficient as not to need to, and therefore does not partake of society, is either a beast or a god.”

Wrangham and Tomasello use science to validate the thinking of: Confucius, Mencius, Buddha, Jesus, the Qur’an, Saint Thomas Aquinas, Martin Luther, John Calvin and Adam Smith when he wrote on the moral sentiments in 1759 and today’s Catholic Social Teachings.

We would be fools not to follow what has been taught to us over so many centuries.

For ten years now, we have listened to Professor Doran Hunter, now a member of our board of directors, on the constructive lessons to be learned from evolutionary biology and neuro-science.

Because we are social animals, we can set expectations for each other to be ethical and responsible. Ethics and responsibility, duty that we use our powers thoughtful of the consequences, are part of human nature.

Social Darwinism, which is used by some to justify brute capitalism (think of Wall Street in the run up to 2008) – the Hobbesian law of the jungle where only the fittest in tooth and claw are said to survive – is inconsistent with our deepest needs as human persons.

As Harvard psychologist William James affirmed:

“The community stagnates without the impulse of the individual. The impulse dies away without the sympathy of the community.”

The implication of what Wrangham and Tomasello are telling us is that we cannot be well unless we are social. But as society is a reciprocal arrangement among the one and the many, society has its corresponding duty to keep us well as individuals.

But how we have evolved leaves us with decisions to make daily: do we listen to the “better angels of our nature” or do we behave as brutes do, or alternatively, seek to be Gods liberated from all obligation and moral sense?

The infusion of morality, ethics and the acceptance of personal responsibility into our decision-making is leadership. We must learn to lead by activating our moral sense.

Thus, as I wrote in my 2004 book Moral Capitalism, it can’t happen on its own; it must be made to happen, by us.

I received a Christmas card from one of our colleagues, a Christian who has a substantial business in the Middle East.

He chose for his message a poem by Ibn Al-Arabi who lived in Andalusia, Spain from 1165 to 1240 C.E. I had not known of his poetry before but found his sense of the spirit compelling for our times of distrust and hard-edged competition.

He wrote:

A Garden Among the Flames

My heart is capable of wearing all forms.
It is a pasture for gazelles and a monastery for monks,
A temple for idols and the Kaaba for the pilgrim.
It is the tablets of the Torah and it is the book of the Koran.
I profess the religion of love, wherever the destination of it caravan may be.
That is the belief, the faith I keep.

Happy New Year.

A while back, I ran across several academic papers pointing to a causal connection between increased concentration of market power and stagnation in wage gains. The correlation was that rents obtained through market power were disproportionally shared with managers and owners and not with employees.

I also ran across several charts showing increased concentration of market power in American business sectors. Here are a few:

The special report in the November 17th, 2018 issue of The Economist pointed to the need for de-concentration of market power as the next revolution in capitalism. Anti-trust limitations on company market power would, said the editors, reduce rent extraction (a technical term economists use to point out returns to market power and not quality of product or service or fair pricing in open markets).

Take Google, for example. It has bought up some 200 small companies – potential competitors.

Amazon has just bought a software firm which manipulates data on individual health conditions and a company which sells drugs over the internet. Put the two together and fund them with Amazon cash and you re-structure the health care market to Amazon’s advantage in giving its platform greater market share.

Rent extraction – the result of successful rent-seeking – is the antithesis of moral capitalism and even of Adam Smith’s invisible hand capitalism. Smith excoriated monopolies and mercantilism for the unfairness of its rent extraction propensities. Rent extraction is an economic system using political power of some kind to obtain cash income. It is the basis of aristocracies and landlord regimes, of warlord societies and political hegemony and most of the crony capitalism and self-serving autocracies in the world today.

If profits in America were at historically normal levels, says The Economist and private sector workers got the benefits, real wages would rise by 6%.

The Economist pointed out that in America, the free cash flow of companies is 76% above its 50 year average, while real incomes for workers and the middle class have been largely stagnant for several decades. Is it, therefore, any wonder that so many non-elite Americans voted for Donald Trump in 2016?

The Economist also calculated that the global pool of “excess” profits is $660 billion, of which more than two-thirds were extracted in America.

The Economist recommends: 1) let individual users of tech services take their information anywhere they want; 2) outlaw many barriers to entry such as non-compete clauses in employment contracts; and 3) modernize anti-trust jurisprudence to take into account more than short-term consumer benefits, including consideration of competitive health of markets and excessive returns on capital.

In several commentaries and articles last year, I suggested new examination of the big internet firms for buying excessive market power. It’s nice to have The Economist supporting our recommendation.

Recently, we have been wondering at the emphasis in capitalism placed on income earned rather than on asset value. Not marking the value of assets is particularly odd because it does not account for vital assets such as social or human capital, which contain moral qualities or for natural capital, which is subject to degradation.

I recently saw a story that in the U.S., a credit rating agency for individuals will add to its consideration of one’s “asset” potential to support a loan one’s habits of paying cellphone and utility bills. Timely payments indicate a person of more “worth” as a capitalist.

I am, thus, reminded that a person’s credit is a reflection of their asset value, not just their earning capacity. A good credit is a worthy asset. And one’s credit does not depend on one’s income but more on one’s character and good judgment.

A good credit rating is a capital account in some important way, standing us in good stead through the vicissitudes of material ups and downs.

The great Wall Street tycoon J.P. Morgan was once asked: “Is not commercial credit based primarily upon money or property?”

Morgan answered: “No, sir; the first thing is character.”

Untermeyer: “Before money or property?”

Morgan: “Before money or anything else. Money cannot buy it.”

This is from Morgan’s testimony before the U.S. House Committee on Banking and Currency in December, 1912.