Reflections on an Election in Britain in Memory of Edmund Burke

I was asked for my thoughts on Boris Johnson’s dramatic victory in last Thursday’s parliamentary election. Not in a position to discern most realistically what might have been the determining ideas in the minds of British voters as they chose candidates to elect, I thought rather of how the general result might be assessed from the critical standpoint of our vision of social justice.

Of course, the election was about Brexit – a particular concern of a particular nation state. A working majority has formed among Britons that believes that they should belong to a nation that could and would set its own course in world history, just as it has done for centuries. The majority vote was a return to the familiar, an expression of an identity which provided reassuring purpose for the collective and substance and meaning for those it inspired as members of that collective.

Our principles for business and government have little to say about the goods and bads of nationalisms. But they do reflect what I would call the laws of nature or what some call the reality principle. There are consequences of behaviors which are real and can’t be avoided, whether the U.K. is part of the E.U. or not.

Thus, markets and capitalism follow the reality principle, not our dreams and whimseys. There is less demand for higher-priced goods and services than for lower priced goods and services. Getting the same quality good or service for a lower price attracts buyers, so seeking to produce goods and services for lower costs will increase sales. Sourcing of goods and services will move to lower cost environments. Innovations will disrupt conventional business arrangements. Quantity of supply determines our marginal utility preferences and our demand curves. Those who have assets do better in the long run than those who don’t. You can tell people what to do with their lives and have them thank you for it only for so long.

So, one reflection on the election is that after Brexit, the U.K. will be more wealthy the more it participates in the global economy. As Adam Smith discerned, the ability to profit grows with the size of the market – a bigger market for suppliers lowers costs and a bigger market for customers expands gross sales. Thus, our Principles for Business hold that it is ethically responsible for a company to go international. World trade makes us all better off and expands the scope of our ability to choose.

A second reflection is that British voters seemed to have chosen a middle way in politics and economics as the formula for national happiness. They have rejected the extremes of right and left and settled on something akin to moral capitalism – private enterprise conducted with stakeholder responsibility and with government investing in needed public capitals – physical, social and human.

In Memoriam: Paul A. Volcker

Our friend and counselor, Paul A. Volcker, passed away this week at age 92. Most recall him as the determined Chairman of the Federal Reserve Board who broke the back of inflation in the late 1970s and early 1980s. Paul was an archetype of an older kind of leader – taciturn, blunt, insightful, always probing for the underlying facts and the truth of things and events. He was an idealist without starry eyes, that rugged kind of American mind which never lost sight of aspirations but, wisely, always grounded his hopes and dreams in reality.

I would visit him in his New York office from time to time to get his advice and thoughts on financial capitalism. I always left our conversations the wiser for his observations and admonitions.

He brought me up short one time. I walked in and he was slouched back in his chair behind his desk. As I was sitting down across from him, he looked me coldly in the eye and asked with a grim expression: “Steve, are you preparing the funeral of the United States yet?”

I was stunned. I had come to him for answers to my country’s problems only to find him not sanguine at all about America’s future.

I responded: “Mr. Volcker, I don’t do funerals.”

He smiled and said “Good.” And we started talking about strategic options to get more constructive outcomes from Wall Street.

Paul established the Volcker Alliance to bring together experienced and practical minds to improve two important infrastructures – public service and financial services. He had sensed that the aggrandizement of our bureaucratic state had abandoned a culture of true public service and had become too dependent on rational expertise and too absorbed with technicalities and self-righteous pedantry. Government had cut itself off from the people it was hired to serve. He wanted moral reform in schools of public administration.

He believed that Wall Street had crossed some Rubicon to inject too much speculation into financial markets. Such financialization serves financiers and those with liquidity much more than it does the real economy and middle class. Had his instincts been followed, the world would have avoided the 2008 collapse of credit markets.

I will personally miss Paul Volcker and I fear that all of us will have a harder time of it without his moral courage and wisdom pointing us in the right direction.

The General Strike Circa 2019

Years ago, while an undergraduate and hanging out with friends in Students for a Democratic Society, I read about the history of socialism and studied with the noted American Marxist scholar Barrington Moore his dismissive, even bitter, take on capitalism as intentional, systemic extraction of the surplus from peasants and workers. I remember vague references to the general strike as a tactic of institutional change where the “people” refused to participate in the elite’s system of extraction.

Last week, I was in Paris for Bruno Roche’s conference on the economics of mutuality. My time there was then diverted by the need to adjust to a “general strike” called for Thursday December 5th. The strikers were the people; the oppressor was the Macron government. I did not want to risk a trip to Amsterdam on the 4th to see colleagues there for fear that the railroads would not run in the evening for my return to Paris if the workers walked off before the official time for the strike had begun.

On the 5th, public transportation was not available; streets were empty of traffic; stores were closed; taxis were unavailable. You could walk around looking at closed shop windows until you got bored and returned to your hotel. A few stores for tourists were open near Montmartre, not far from our hotel.

An avenue near our hotel was filled with people in protest – walking, singing, carrying signs, all quite well behaved. But there I was in the streets of Paris thinking about uprisings of the past – the capture of the Bastille, the 1832 insurrection made vivid by Victor Hugo in Les Miserables, the Commune of 1871 – real instances of acting on the idealism of the “people” taking national destiny into their own hands. I realized I was in the middle of French history repeating itself. What could be academic and the stuff of fiction was an actuality.

Why a general strike? As I understood the issues, President Macron wants to reduce retirement benefits out of fiscal prudence. The age of retirement for many workers would be pushed back from age 50 and their monthly retirement benefits would no longer be the equivalent of full salary. Public transport workers object. They like retiring young and having the state maintain them quite comfortably.

Then, I was told that students also objected. They were quite visible among the strikers. They very much like the idea of early retirement for the older generation to make those jobs available for themselves. They like giving older workers incentives to retire early.

I was watching a general strike demanding entitlements, not an end to oppression. But then, of course these days, being denied what one desires is, a priori, cruel-hearted oppression on the part of those who are to pay for the entitlements, a hardship for the dispossessed not to be tolerated.

The moral question of who should be entitled to how much of what and on what terms of reciprocity – what should be given in exchange for the benefit – is a difficult one for me.

Secondly, it’s not at all clear to me how systemic entitlements can ever be provided if wealth is not created to finance them. And how can such wealth be created without enterprise and the sale of goods and services at a profit?

Letter of Congratulations from Business Roundtable

I wanted to share with you a letter we received from the Business Roundtable in Washington, D.C. congratulating us on the 25th anniversary of our Principles for Business.

We were most humbled by this paragraph:

“For 33 years, the Caux Round Table has been a leading voice for moral capitalism. The 25th anniversary of Principles for Business is an important milestone in the history of ethical business practice. The Caux Round Table has made American business better. We celebrate your success and look forward to continued moral leadership from your organization.”

We greatly appreciate their support.

World Economic Forum Jumps on the Bandwagon

Two days ago, the World Economic Forum – “Davos Man” – affirmed the vision of the Caux Round Table for Moral Capitalism’s (CRT) 1994 Principles for Business in their “Davos Manifesto 2020.”

Another domino of establishment opinion has fallen away from conventional wisdom.

I welcome Klaus Schwab to the movement and thank him for his support.

Klaus also issued a statement on Sunday explaining the reasons for more robustly affirming the approach to global capitalism advocated by the CRT.

I note that in his view, the three options open to global civilization for economic growth – social Darwinism for shareholders, nationalized socialism or moral capitalism – are the very same ones that were discussed at our Global Dialogue a couple of weeks ago.

CRT Celebrates 25th Anniversary of Principles for Business

On Friday, November 22, the Caux Round Table for Moral Capitalism (CRT) celebrated the 25th anniversary of our Principles for Business.

The Principles foreshadowed the rapidly growing awareness of the need for corporations, both public and private, to adopt – and initiate – goals to create a sustainable operation. The Principles and our call for a “moral capitalism” also helped shape the U.N.’s 17 Sustainable Development Goals. They have been cited as a model by a growing number of business leaders and politicians, such as the Business Roundtable and Robert F. Kennedy, Jr.

The 25th anniversary was celebrated with a luncheon that featured a number of presenters, including Douglas M. Baker, Jr., CEO of Ecolab, and Paul Polman, Chairman of the International Chamber of Commerce and former CEO of Unilever.

To highlight the history of Minnesota leadership, we produced a short film for the event titled “The Minnesota Legacy.” The process that led to the founding of the Principles was initiated in Minnesota by Minnesota business leaders.

“The Minnesota Legacy” can be seen here.

To view photos from the event, please visit our Twitter page.

Invitation to Brainstorm Topics for 2020 John Brandl Gathering – Tuesday, December 17th

You are invited to a roundtable discussion on Tuesday December 17, 2019, to gather input and prepare for the next “Annual Celebration of John Brandl & His Uncommon Quest for Common Ground” in 2020.

“What’s Keeping You Up At Night?” is the driving question that organizers of the annual Brandl lecture series invite you to respond to in an informal roundtable discussion from 1:00 to 3:00 pm in the Josie Johnson Community Room at the University of Minnesota’s Humphrey School of Public Affairs.

With impeachment hearings roiling now and pivotal national and state elections looming ahead determining the fate of our country for many years to come, the organizers of the annual Brandl convocation — the Caux Round Table for Moral Capitalism, Center of the American Experiment, Citizens League, Growth & Justice and the Humphrey School — reach out to you to help determine a fitting topic and frame for a 2020 gathering in the ecumenical spirit of the late John Brandl, a remarkable scholar, public servant and friend.

We’ve planned and implemented 10 years of annual Brandl gatherings. In year 11, in honor of John’s memory and his uncommon quest for common ground, we invite all people of goodwill — with open minds, firm convictions and welcoming spirits — to join us in this planning discussion.

Representatives of each group will facilitate segments of the conversation.

There is no cost to attend.

To register, please click here.

Please Give to the Max!

This year marks the 25th anniversary of the publication of the Caux Round Table for Moral Capitalism’s (CRT) Principles of Business, a groundbreaking compilation of rules that can be used to create a sustainable economic system guided by ethical values – what we call “moral capitalism.”

In the years since their publication, there has been a growing and increasingly urgent interest in how to promote sustainable business practices that will ensure a more equitable and fair economy. The U.N. drew upon our principles in composing its 17 Sustainable Development Goals. In more recent years, the call for a moral capitalism that puts the needs of a company’s full range of shareholders, including employees, the local community and the environment itself at the center of corporate responsibility, while public figures like Robert F. Kennedy, Jr., have also adopted not just the principles, but moral capitalism.

Headquartered in St. Paul, Minnesota, the CRT has chapters in several countries in Europe, Central America and the Far East. In addition to holding round table discussions, we also conduct annual global dialogues that bring together business executives, academics and activists from around the world. We also hold workshops and created Arcturus, a comprehensive way for businesses to measure and record their sustainable practices.

Despite all the effort and work, ours is neither a large nor heavily endowed organization. All of our work is supported by donations from private sources.

Would you please consider helping our efforts with a donation of whatever amount you can give for this year’s Give to the Max Day? You can donate to the CRT here.

Any amount you can give would be greatly appreciated.

Valuation in the News

Some say money makes the world go round. Saint Paul advised that “love” of money is the root of all evil. I would say that prices create transactions, transactions create markets and markets create wealth.

So, depending on price, the world gets richer and people get or don’t get what they need or want (and if prices are too high, transfer payments of one kind or another are necessary to empower those without money so that they can access goods and services).

I recently read that the Institute for Clinical and Economic Review uses a novel way to set a price for expensive drugs. It puts a dollar figure (an assumption) on a year of healthy life, calculated how much health a drug restores to a sick person and then prices the drug according to the benefit bestowed on the patient. This method, said Dave Lennon, President of a Novartis unit, brings uniformity and transparency to drug prices, reducing the rent extraction available to makers due to their IP rights. Drug company prices can be compared to the computed “benefit” price.

But, how does one put a dollar amount to a year of my life – say, at age 36 or at 55 or at 87?

The intangibles of a life well-lived seem hard to evaluate in market terms.

Secondly, the Saudi state oil company, Saudi Aramco, launched its first public offering of shares, some 2% to 5% of its total shares. What is a share of Aramco worth today? What factors should be taken into account in coming up with a cash figure? The shares will first be sold domestically in Saudi Arabi and then internationally. Saudi Arabia’s Crown Prince has valued the company at $2 trillion, but market-savvy advisors don’t agree that potential purchasers will want to pay that much per share. They estimate buyer acceptance in the $1.6 to $1.8 trillion range.

Thirdly, the value of shares in still privately held, high-tech start-up companies is uncertain. Many mutual funds which invested in high-tech start-ups saw the value of their shares drop after the companies went public. Investors did not accept the valuations previously put on the prospects of such companies by their initial owners. Multiple funds valued Uber before a public sale of shares at $56.02 per share. Its initial offering price was only $45 and its share prices dropped after that.

The collapse of the initial public offering of We Company, the parent of WeWork, was a second notable example of mispricing by early owners of the company.

Mutual funds have invested $6.7 billion in unicorn companies – privately held start-ups estimated to be worth $1 billion or more. Mutual funds carried these investments on their balance sheets at estimated values, as they have to value their holdings daily. Thus, fund managers must write down the estimates and so take a theoretical loss in the value of their holdings.

The We Company saga of misvaluation was dramatic. WeWork’s estimated value plunged from $47 billion in January 2019 to $8 billion in October. An initial owner and promoter, SoftBank’s Venture Fund led by Rajeev Misra, had to step in with $10 billion to restructure the company and so forestall greater losses. The founder, Adam Neumann, agreed to leave and give up his voting rights in return for $1.7 billion – a nice price for one man’s human capital.