The enlightened capitalists

I have written columns on the “failure of capitalism” and explained that the rise of populism can be attributed to the revolt against income inequality. After all, everybody has to be shocked at the fact that 67 individuals own as much wealth as the bottom 50 percent of the world’s population. Only 67 persons have as much wealth as 3.6 billion people. I have decided that Pope Francis is completely justified when he wrote in one of his encyclicals that “trickle down“ has never worked.

The “trickle down” theory is the primary justification for capitalism. It says that as the rich get richer, their wealth will trickle down all the way to the masses. Therefore the best way for the poor to become prosperous is for the rich to enrich themselves more by maximizing profitability of their enterprise. 

Today, the world has the most number of billionaires in the history of humankind. Today, the world has the highest gap between the rich and the poor. In fact, the biggest gaps are in the richest countries like the United States, EU, Hong Kong and China.

It was, therefore, a pleasant surprise when I saw the book The Enlightened Capitalists: Cautionary Tales of Business Pioneers Who Tried to Do Good by Doing Good by James O’ Toole published in 2019. I thought that I might even be wrong about capitalism when I read the book description on the blurb the inside cover page. It said:

“An expert on ethical leadership analyzes the complicated history of businesspeople who attempted to marry the pursuit profits with virtuous organizational practices – from British industrialist Robert Owen to American retailer James Cash Penney and jeans pioneer Levi Strauss to modern day entrepreneurs  Anita Roddick and Tom Chappell. 

In The Enlightened Capitalists, James O’Toole tells the largely forgotten stories of men and women who adopted forward thinking business practices designed to serve the needs of their employees, customers, communities and the natural environment. Rejecting philanthropy as ineffective, these innovators wanted to prove that executives didn’t have to prove that executives didn’t have to make trade offs for profit and virtue.“ 

I decided to buy this 545-page book especially because it promised true to life stories of enlightened capitalists. I was still looking for possible alternatives to the growing belief that business must be regulated because businessmen cannot be trusted to reform themselves. After all the three leading economic philosophers of capitalism – Adam Smith, John Maynard Keynes, Milton Friedman – all preached that profit was the sole purpose of a business firm. For many years, I was a devoted follower of Keynesian economics. 

Keynes wrote not just economic theories but also against business virtue. In his 1930 essay “The Economic Possibilities of our Grandchildren,” he said that the day would come when everyone would be rich and when that day comes ”...once more value ends above means and prefers the good to the useful....”However, he believed that until that day comes: “But beware! The time for all this is not yet. For at least another hundred years we must pretend to ourselves and to everyone that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precautions must be our gods  for a little longer still. For only they can lead us out of the tunnel of economic necessity into daylight.” This is a vigorous defense of the “trickle down” theory.

In his book, O’Toole, writes about men and women who took the greater challenges of addressing social problems through their business activities. Among the stories he wrote about were James Cash Penney ( JC Penney); Milton Hershey (Hershey’s Chocolate; Levi Strause (Levi Jeans); Michael Marks (Marks & Spencer); Ben Cohen and Jerry Greenfield (Ben & Jerry’s ice cream). 

These few enlightened capitalists differed from the vast majority of businessmen in the following significant ways.

• They developed fully fleshed out philosophies of business which identified higher purposes for their enterprise than simply making a profit. Significantly, they were not philanthropists: the good they attempted to do was an integral part of their business practices.

• Strong ethical companies guided their decision making with regard to meeting the diverse needs of their constituencies: customers, employees, shareholders, suppliers, host communities, the broader society and the natural environment.

• Their primary ethical value was respect for people.  Whether that value was rooted in the Bible’s Golden Rule or in the humanistic values of the Enlightenment, these business leaders tried to use their organizations as vehicles for the aspect of human development that Thomas Jefferson called the “pursuit of happiness.”

• They each maintained a commitment to their values through good times and bad times. They also attempted – if too seldom successfully – to create sustainable business models buttressed by strong corporate cultures that institutionalized virtuous behaviors. 

The author has a warning that in these enlightened companies he studied, very few have maintained their good practices. At some point, after the enlightened capitalists died, retired, forced out of office or sold their companies, their successors abandoned the very practices that made them financially successful and publicly admired. In the 1980s O’Toole pegged two dozen American firms as being leaders in the adoption of enlightened corporate practices. Before the century ended,  only three of these companies continued those practices. 

The title to the book’s introduction is very apt: “Why It Is Hard To Do Good”. 

Creative writing classes for kids and teens

Young Writers’ Hangout on March 21 with Roel SR Cruz on setting, “From Middle-Earth to MCU and Back” (1:30 pm-3 pm; stand-alone sessions) and on March 28, a workshop on Writing Children’s Stories with Mailin Paterno at Fully Booked BGC. For details and registration, email [email protected].

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Email: [email protected]