Category: Commentary

Asset valuation, not profit, is the heart and soul of free market capitalism.

Short-term profit is just a waystation on the journey to create wealth.

The precise goal for making a profit is not taking in money, but making a “net” profit – money which is yours, which you can keep as an asset and add to your capital.  One can take in cash – “make a profit off sales” – but at the end of the accounting period, still end up worse off as total expenses were more than the gross profits earned.

Coming out ahead in the profit and loss statement demands good judgment about contingencies and risks.  It presumes hard-headed calculations of stakeholder circumstances.  First, is your product or service something that somebody wants to buy?  Secondly, will they pay you enough to cover your costs and leave you with a net profit?  Thirdly, will your calculated costs include taking appropriate care of your employees, investors and enhancing or at least protecting your brand appeal?

Then too, the capital value of your firm depends most on expected future net profits.  Making money today, but losing your market next week, is not the road to success in business.

Valuation analysis is the calculation of what “asset” value your firm now has in its expected ability to earn profits in the future.  Roughly speaking, valuation analysis speculatively estimates what your future profits will be and what risks are associated with that expectation. If your present expectations are subject to unpredictable future events, your realistic estimated value is low. You may dream about a rich and glorious future and your dreamy, unrealistic, expectations may come true, but most likely they will not.

In the U.S., a recent judicial opinion on the realism of Donald Trump’s past evaluations of his “assets” exposes the uncertainties of valuation analysis.

What was Trump’s ownership worth in present dollars?  How much would you pay to buy his business “empire” and use it to generate future income for yourself?

In an opinion of September 26, 2023, Judge Arthur Engoron of the Supreme Court of the County of New York, State of New York, harshly criticized the Statements of Financial Condition (SFC) filed on behalf of Donald Trump as false and misleading.

The judge came to this conclusion in the belief that valuation of asset values is a reliable assessment of objective reality.  That belief may well be an illusion.  Value, being an intangible personal preference, varies from person to person.  Some like it hot.  Others like it cold.  “Beauty is in the eye of the beholder.”  “One person’s trash is another’s treasure.”  De gustibus non est disputandum – “One can’t logically prove that one person’s taste is better than another’s.”

Preferences or, as economists call them, “supply and demand curves” and “utility curves,” come in many formats.  Price in money, as a measure of value, will be different for different sellers and buyers depending on the slopes of their utility curves.  I might sell low, but you might hold out to await a different buyer who has a different demand curve and will pay more for the same good or service.  I may need the money now, while you can afford to wait and try your luck.

An objective reality about value only comes into being in a transaction.  When the seller and the buyer have a meeting of minds about price, then that price is a social fact, a non-subjective number.  Yet, what those two people agree to as correct monetary value to place on the good or service may not be acceptable to others.

Valuation methodology, therefore, must be made to happen in an ecosystem of uncertainty.

Valuation is an approximation, a guestimate, of what an average person, one with an expert opinion or just a reasonable person, might think is a correct judgment as to worth.

Actually, the SFC filed on behalf of Donald Trump affirm the obvious.  They contain the following warning to those who will rely on the statements:

Assets are stated at their estimated current values and liabilities at their estimated current amounts using various valuation methods.  Such valuation methods include, but are not limited to the use of appraisals, capitalization of anticipated earnings, recent sales and offers and estimates of current values as determined by Mr. Trump in conjunction with his associates and in some instances, outside professionals.  Considerable judgment is necessary to interpret market data and develop the related estimates of current value.  Accordingly, the estimates presented herein are not necessarily indicative of the amount that could be realized upon the disposition of the assets or payment of the related liabilities.  The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated current value amounts.

In other words, Trump’s valuation experts disclose that their work is open to second-guessing, that it is not “true” like a statement of an uncontested fact, which would be either “true” or “false.”

Valuation paints a picture.  It is not photography.  And as an artistic construct, an SFC is more impressionist than scrupulous in its attention to every small detail or possible contingency.

But there are limits.  The range of reasonableness can have some scope, but not everything that might be said about the ‘value’ of something can be unquestionably reasonable or fully trustworthy.  You can’t treat a valuation opinion as actual money in your hand.  Valuation, to be useful in capitalism, needs standards of due care, credibility and integrity to bring it as close to money as possible.

Then again, to be realistic, what is the value of money?  Is it as good as gold?  Even the price of gold goes up and down.  How well will your dollar bills hold their market value?

Here is a chart on the real value of a dollar over time:

Supply and demand still do drive values.  Spanish police arrested 12 people suspected of stealing 74 tons of olives in the Spanish province of Seville, mere weeks after 6,000 liters of olive oil was stolen in Malaga.  Heatwaves and drought ruined this year’s harvest in Spain, the world’s largest producer.  As a consequence, the price of olive oil at origin has risen 112% since last year.

The purpose of valuation is to facilitate and encourage transactions which produce wealth and increase satisfactions, to reduce risk of failure and imbalance between the parties to a transaction and to promote trust in society and the economy.

Valuations which are unreasonable, though not intentionally fraudulent, are still dysfunctional. They should not be facilitated or accepted.

Judge Engoron, in finding some of the SFCs filed on behalf of Donald Trump to have been unreasonable, beyond the pale of sensible practice and so without sufficient integrity for a fair and transparent capitalism, pointed out details which were in-credible.

For example, from 2012 to 2016, Trump submitted SFCs claiming that his residence in Trump Tower, New York City, was 30,000 square feet in area when, in fact it only had 10,996 square feet.  Use of the larger number led to a calculation of total value which was overstated by some $114-207 million dollars.

Similarly, when the highest sale price for an apartment in New York City was $88 million, Trump’s SFCs reported the value of his property at from $180 million to $327 million during the years 2012-2016.

Now, to be fair to Trump and his valuation specialists, it is within the bounds of cosmic possibility that some buyer might pay those higher prices or close to them for the apartment for who knows what motivation.  But it is not within the bounds of reasonable probability that such a sale would ever be closed in Trump’s lifetime.

Trumps’s SFCs for the years 2011 through 2021 listed the Trump Park Avenue building as one of his assets.  In that building were unsold condominium units.  A number of these units were limited by New York City’s rent control laws in the amount of rent they could charge to tenants.  One valuation appraisal of those units with limited profit potential estimated a value of $62,500 for each such unit.  In Trump’s SFCs, the value of those units was much, much higher, a capitalized value of future income which would never be realized as long as the rent control laws were in force.

Trump’s renown club property in Florida – Mar-a-Lago – was assessed by the local property tax collector as worth between $18 million and $27.6 million between the years 2011 and 2021 as the capital value to be taxed at the legal rate.  In those years, Trump’s SFCs valued the property at between $426,529,614 and $612, 110,496.

The judge relied on a previous court ruling that “[where] the expert’s ultimate assertions are speculative or unsupported by any evidentiary foundation, however, the opinion should be given no probative force …”  In other words, the expert’s opinion is pure hokey or delusional from the viewpoint of the law.  From the law’s perspective, there is no expertise to support such a statement as to market value.  The supposed expert is just telling tall tales to entertain some audience.

Judge Engoron then focused on other not credible conclusions as to the value of Trump’s assets. The lack of credibility which he objected to arose not from theory but from factual discrepancies between legal rights and assumptions as to the value of those rights in the future, the assumptions being not logically supported by the limited nature of the rights owned.

With respect to several golf clubs, Trump had agreed to assume an obligation to pay refundable membership deposits. But his SFC’s from 2012 until 2021 valued that liability at $0 when in fact it was a liability in the millions of dollars.

Another discrepancy attached to Trump’s 30% limited partnership interest in a realty trust which owned office buildings in New York City.  The terms of his limited interest in the trust prevent his use or withdrawal of funds held by the trust.  Trump’s SFCs, however, classified his 30% limited interest as a “liquid/cash asset.”  The judge concluded that it was false and misleading for Trump to indicate that he had access to between $14 some million and $93 some million in liquid assets when he did not.

Trump used the valuation statements for his advantage.  Having property with high valuations is a strategic advantage in capitalism.  You can borrow more and put those funds to work on your behalf and people will credit you with achievement, which reputation can be turned to your practical advantage.  Valuations have consequences that drive market transactions.

A big conceptual mistake which many smart people have made over the last 260 years is to conflate money with capitalism and capitalism with money, to misperceive that they are two sides of the same coin, joined back-to-back 360 degrees in the round and so conjoined like Siamese twins.

Money and its more generic category of economic dynamism – financial liquidity – are part and parcel not only of capitalism, but of all human socialized economic systems.

Ancient societies had money.  Feudal aristocrats used money and got into debt.  Stalin’s classic communist regime had currency.  None of these systems was capitalist.

Inflation – when money loses its value – is pernicious in its effects on social equality.  Under conditions of inflation, the rich get richer more easily and the middle class and the poor see their purchasing power decline.

But is inflation – the creation of too much money – inherent in capitalism?  No.

Rather, inflation and its opposite – deflation – turns capitalism away from fulfilling its promise to optimize wealth creation for all of a society.

Here is a chart on the declining real value of the U.S. dollar:

In what sense was American capitalism responsible for this?

Real median American household income after taxes fell 8.8% to $64,240 from 2021 to 2022 and the poverty rate after taxes, as measured by the Supplemental Poverty Measure (SPM), increased 59% to 12.4%.

In the U.S., from 2021 through mid-2023, prices have increased more than wages.

Here is a chart on growing inequality between the rich and the poor:

In the U.S., the share of national income going to those who provide labor, not capital, has been declining, exacerbating the effects of inflation on real wealth creation for most Americans.

How Inflation Eats Away at the Promise of Capitalism

Inflation works through money and other forms of liquidity.  As the supply of money/liquidity grows, the value of each unit of money/liquidity is worth less and less.  Simple supply and demand.  If ten dollars are in circulation, each dollar is worth 10% of the total pie.  If one hundred dollars are in circulation, each dollar is worth only 1% of that pie.

Now, under conditions of inflation, the poor and middle classes have limited opportunity to increase their incomes.  Most of what they earn, they spend.  They don’t have enough to save.  As prices rise in money terms – one ear of corn costs more in currency than it did – the poor and the middle classes must reduce consumption.

For the rich, it is different.  As Hemingway once retorted, “They have more money.”

They have enough to spend and to save.  As they save, they benefit from rising interest rates, which usually accompany inflation.  Their savings mostly go into financial markets, where they earn money on money.

The important point is that the private sector and markets do not create currency and other forms of money.  They do pass some of their money around as loans, but they don’t manufacture paper dollars or metal coins.  That is illegal.

While inside the capitalism system of private sector economic activity, thought financial institutions trade in money and liquidity.  The production of money is a government function.  The manipulation of interest rates and loan opportunities in the private sector is also a government function in a modern market economy.

So, where inflation is concerned, government can act at variance with social justice ideals.  The same is true when government policies in contracting the money supply can result in a recession or depression.

Now as money/liquidity circulates in an economy, it tends to flow from consumers to producers and sellers of goods and services.  Thus, those who are in business and finance gain a disproportionate share of the money/liquidity in circulation.  Those who have assets see the nominal value of those assets rise with the growth of money/liquidity.  They can borrow against those assets and thus, grab hold of more money with which to invest.

The Wall Street Journal just reported that interest rates on 30-year bonds issued by the U.S. government rose to 4.55%, the highest rate since 2011.  The yield on 10-year debt obligations of the U.S. government is now 4.479%, the highest rate since 2007.

We can ask with the Roman Judge Lucius Cassius: “Cui bono?” – “Who benefits?”
Not poor inner-city families living in subsidized apartments and on welfare.  Not the middle class paying more for gasoline with declining real incomes.

The total debt to be paid by the U.S. government is now $33 trillion.

That is a lot of liquidity sloshing around.  The bigger the government debt and the higher the interest rate, the more cash the government must come up with to pay interest and then retire the principal.  The payment obligations increase the government’s annual budget.  Since tax revenues are not enough to pay all of such budget increases, the government will run deficits – government money going out as expenditures to fuel more inflation – with more debt accumulating for higher outlays down the road.  A doom loop?

And private sector capitalism is responsible for this?

Inflation is not the only way in which money can cause disequilibrium in capitalism, interfering with its ability to optimize the production of both private and public goods.  Both debt and asset bubbles, which frequently are interlocking, divert capitalism into misapplication of investment and misuse of wealth.  Too much debt – too much borrowed cash in hand – coupled with too little prospect of repayment, leads to enterprise collapse or personal loss of assets.

Too much money, often borrowed, spent on assets with the hope (often illusory – “irrational exuberance”) of appreciation in asset value in the minds of potential purchasers raises the market price of assets above what long-term demand will support.  At some point, short-term demand evaporates, as long-term demand sets market prices.

My alumni magazine from Harvard University came recently.  By chance, it included two short articles, each of which supported the conclusion that we human persons have a moral sense, whether we want to or not.

The first article reports that Harvard professor of biological anthropology, Joseph Henrich, argues that human intellectual brilliance emerged from generations of sharing information in communities and networks.  We humans, he says, are uniquely able to engage in collective information processing.

We can do this because we are moral creatures.  Aristotle made this point centuries ago, calling us zoon politikon – creatures driven by social and political needs for association and mutual understanding.

The threefold expansion of the size of our brains over the last two million years was driven, Professor Henrich says, by the need to acquire, store and organize cultural information.  From this, he concludes that societies which best capture and transmit inherited culture enjoy greater success.  Successful cultures facilitated specialization and intergenerational transfer of intelligence and skills.

Specialization, with its creation of a demand for cooperation and intergenerational interdependencies, depend on morality in the mind of individuals, tied together by those relationships and reciprocal responsibilities.

The second article reported on research identifying who are the best team players.  Professor David Deming at the Kennedy School ran simulations of team collaboration looking for clues as to who most enable success for the team.  A measure of teammate strength was developed to generate data for analysis.  The data led to identification of those better at teamwork.  Then, the researchers looked for traits those more proficient teammates had in common.

The most interesting commonality was a high score in the Reading the Mind in the Eyes Test (RMET).  This is a test for social intelligence developed to test for autism and Asperger’s.  The subject is shown photographs of human eyes and is asked to identify the emotions revealed by those eyes.  Being able to correctly infer another’s emotions just from looking at their eyes is a skill that leads to excellence in working with others in a team.

But that skill, in turn, is made possible by a mind that has moral awareness of others and of emotions.

The most common and universal skepticism about the possibility of a moral capitalism is that people can’t be trusted to be responsible for others that, as Herbert Spencer and other social Darwinists believe, we human persons are thoroughgoing egoists without any moral sense or at least with only very intimidated ones.

If, on the other hand, we are each born capable of developing a robust moral sense, as Adam Smith believed, then moral capitalism is a very practical alternative economic system.

Recently, I read the following pessimistic assessment of the state of humanity:

“In the future, …. we will surrender ourselves to our entertainment. We will become so distracted and dazed by our fictions that we’ll lose our sense of what is real. We will make our escapes so comprehensive that we cannot free ourselves from them. The result will be a populace that forgets how to think, how to empathize with one another, even how to govern and be governed.” – Megan Garber, “We Are Already Living in the Metaverse,” — The Atlantic, March 2023

I was re-reading Cicero’s De Officiis (On Moral Responsibility) after our recent Global Dialogue.  I trust you have received a copy of the statement of participants in those dialogue discussions on the immediate need to promote responsibility across cultures and sectors, from individuals to organizations.

Our Caux Round Table Principles for Government rest on a premise of responsibility using the concept of office as a trust.

I was reading Walter Miller’s translation from the Latin and was quite surprised to see, for the first time, that Cicero had advocated the same moral vision for those in government as does the Caux Round Table.

Cicero wrote:

For the administration of the government, like the office of a trustee, must be conducted for the benefit of those entrusted to one’s care, not of those to whom it is entrusted.  Now, those who care for the interests of a part of the citizens and neglect another part, introduce into the civil service a dangerous element—dissension and party strife (Book I, XXV, 85).

Our Principles for Government start with this standard of conduct:

Fundamental Principle: Public power is held in trust for the community.

Power brings responsibility.  Power is a necessary moral circumstance in that it binds the actions of one to the welfare of others.

Therefore, the power given by public office is held in trust for the benefit of the community and its citizens.  Officials are custodians only of the powers they hold.  They have no personal entitlement to office or the prerogatives thereof.

Holders of public office are accountable for their conduct while in office.  They are subject to removal for malfeasance, misfeasance or abuse of office.  The burden of proof that no malfeasance, misfeasance or abuse of office has occurred lies with the officeholder.

The state is the servant and agent of higher ends.  It is subordinate to society.  Public power is to be exercised within a framework of moral responsibility for the welfare of others.  Governments that abuse their trust shall lose their authority and may be removed from office.

It is reassuring to discover that our approach has an excellent precedent.

I have forwarded, from time to time, mention of new technologies which can reduce the threat of excessive global warming.  My thought has been that there is a special genius in capitalism to seek out and scale-up in use technologies which meet human needs and aspirations.

I read recently of a new invention at Harvard to radically change the technology of air conditioning (I am a bit sheepish at touting something from Harvard, as I have two degrees from that university).

Current air conditioning technology uses a lot of energy and uses chemicals which have an amazing capacity – far more than CO2 – to warm up our atmosphere.  It is said by some that between now and 2050, installing air conditioning to keep pace with warming temperatures will require 10 new air conditioning units every second for the next 30 years.  It is also predicted that by 2050, countries such as Indonesia and India will use as much as 75% of their current energy consumption on cooling.  But a multi-disciplinary team at Harvard has thought up a very different approach.

Rather than shuttle a refrigerant between liquid and vapor modes in order to remove heat and moisture from incoming air, they built, as I understand it, a large flat device about the size of a window containing tubes inside a terracotta housing.  Some of the tubes are coated, but cooled by adjacent tubes, where water evaporation has lowered the temperature.  Fans blow air into the coated tubes to cool it down, but with no absorption of water moisture.  The room on the other side of the unit cools down with little use of electricity, no humidity to remove and no use of refrigerant (How the physics work is above my pay grade, but you have a general sense of how the inventors have, once again, put natural laws to work on our behalf).

Now, a pertinent question is: if this technology really works and can be manufactured at scale for a reasonable cost, who is most capable of turning a lab experiment into a viable consumer product?

Donald Trump’s indictment is historic and implicates the Caux Round Table Principles for Government.  We should not remain on the sidelines of such a development with global implications.

But I’ve had trouble finding the right voice or context for linking the two.  When I saw the article on the Times/Siena poll on class antagonisms, I thought it provided sound understanding of what is going on in this country.

Here is my commentary for your review.

I recently read two commentaries in the editorial pages of the Wall Street Journal that speak to a common, global conundrum: immigration.

The conundrum, as far as I can tell, is who needs to respect whom – the immigrants vis-à-vis their hosts or the hosts vis-à-vis the newcomers from different cultures?  Or both simultaneously?

What do good, civilized, human ethics require?

One commentary discussed the financial burden placed on the taxpayers of New York City to provide free housing and other services to those illegally in the U.S. and living in their city.  The second one, by the noted thinker Bernard-Henry Levi, spoke with passion about the “mad wind” of rage and intolerant destruction which drove the recent “counter-cultural” riots in France.

Antagonisms between normative collectives – religious communities, ethnic identities, races, higher and lower systemic group situations in a society’s structure of power and advantage – seem to have been the norm for humanity for eons.  In-groups and out-groups; my group and your group; your language and my language; my preferences and your preferences in belief, food, dress, behavior.  Which is better, more refined, more “true,” more deserving of respect?

For our 2018 Global Dialogue in St. Petersburg, Russia, I drafted a concept paper on the ethics of immigrants and host nationals.  Five years ago, I proposed:

The calling of the human person is to community.  No one is an island unto themselves.  Each is part of the main.  Our special destiny, opportunities unlike those given to any other and our individual gifts is and are in relationship with others, from our birth until we leave this life.  Trust and responsibility set us apart as worthy of consideration.  Showing respect for others brings us respect and honor in return.

Our character reveals our values and our courage to live for ourselves and for others in the right proportions and with grace and dignity.  Citizenship in community makes justice triumph over evil.

This is especially true for democracies, societies that depend on the quality of their citizens for their success and prosperity.  George Washington concluded that “Of all the dispositions and habits which lead to political prosperity, religion and morality are indispensable supports. … It is substantially true that virtue or morality is a necessary spring of popular government.”

It is an insight common to all religions that we are called to rise above mean selfishness and act for higher purposes.  We always live by our values – be they good or bad – but it is better for us and for those whose lives we influence that we live by good values.

Sovereign nation states are inhabited by citizens and residents.  Citizens have a legal right to residence and other rights, privileges and benefits under the laws of the sovereign.  Residents either have permission from the sovereign to remain in the territory or they do not.  Immigrants to a nation state either have permission to reside in the territory or they are trespassers.  Immigrants may choose to become citizens under the nationality laws of the nation state or they may choose not to or do not qualify for becoming citizens.

The laws of citizenship and residency do not discuss the ethics of living in a national community. Ethics references how we use our powers and authority with respect to others.  Ethics arise from the moral sense and conditions how we act freely.  The ethics of community within a nation state are not ordered by law, international or domestic, but are habits of the heart for both citizens and residents.

The Ethics of Citizens

Not every citizen shares commonalities of language, ethnicity, religion, gender, sexual orientation, political views, social status and more attributes ascriptive or achieved, with other citizens.  Some nations are very homogenous.  Others are very pluralistic and multicultural.  But the status of citizen is common to all, regardless of other identifications and personal preferences.

The primary ethical obligation of a citizen is to contribute to civil order by going beyond the letter of the law to build the social capital of a community.  In Christian terms, this reflects love of neighbor with neighbors to include all citizens, to some degree, and to do unto other citizens as we would have them do unto us.

Public power constitutes a civic order for the safety and common good of its members.  The civic order, as a moral order, protects and promotes the integrity, dignity and self-respect of its members in their capacity as citizens and therefore, avoids all measures, oppressive and other, whose tendency is to transform the citizen into a subject.  The state shall protect, give legitimacy to or restore all those principles and institutions which sustain the moral integrity, self-respect and civic identity of the individual citizen and which also serve to inhibit processes of civic estrangement, dissolution of the civic bond and civic disaggregation.  This effort by the civic order itself protects the citizen’s capacity to contribute to the well-being of the civic order.

Public power, however allocated by constitutions, referendums or laws, shall rest its legitimacy in processes of communication and discourse among autonomous moral agents who constitute the community to be served by the government.  Free and open discourse, embracing independent media, shall not be curtailed, except to protect legitimate expectations of personal privacy, sustain the confidentiality needed for the proper separation of powers or for the most dire of reasons relating to national security.

Therefore, citizenship is an office of service to the public weal.  The honor which comes from being a citizen lies in fidelity to duty and responsibility.  Entitlements may accrue to individuals for personal enjoyment, but duties are the price paid for membership in the national community. To hold a share of power in the civic order is to assume a status, to have the dignity of positional responsibility above and beyond personal preferences and desires, angers and delights.  As must any agent or other fiduciary, the citizen has an obligation to consider the good of others as a check on each and every personal interest or prejudice.

Accordingly, the first duty of every citizen is to use discourse ethics in the resolution of community difficulties and the promotion of community wellbeing. A citizen must not act from petulance or any other tyrannous instinct.

A citizen should make the following commitments:

–I will learn.  I will read and study to know the past and plan the future.  I will find good values and seek to know the fundamental and the important as best I can.  Though I seek conviction, I will be open minded to new learning and experience.

–I will reflect and deliberate on what I have learned.  I will not jump to conclusions, be hasty with others and give in to prejudice or emotions.  In this way, I will find where to best use my skills and abilities.

–I will tell the truth about what I know.  Integrity and sincerity will be important to me in all my relationships.

–I will not hide my ideas and feelings.  I will not be afraid of debate and discussion.  I can influence others with my opinions, just as others have a right to share their ideas and feelings with me.  What we all do together, many times, is more important than what I can do alone. Listening is a valuable skill that I will learn.

–I will use my powers wisely.  I will try to leave the world a better place for my having been alive.

–I will try hard to make the most of my life.  I am nobody’s fool and nobody’s victim.

–I will not be afraid.  I will learn self-control and come to be self-reliant.

–I will care about others.  There is already enough hurt in the world.  I will not add more, if I can help it.

–I will find happiness not in money, but in doing what is right.  Money is only a convenience.  Doing what is right makes me a real person.

–I will be thankful for all the good that I experience and brave in times of difficulty and frustration.  Happiness doesn’t come every day.  Bad things happen more than we want, but there is good to receive and to appreciate as a reminder that our lives are not lost or hopeless. Despair, however, undermines our ability to do good and to be happy.

Thus, a citizen is self-empowered to be a friend.  The office of a friend is most necessary for the well-being of community.  It is the bond that sustains relationships through strife and adversity. The capacity to be a friend provides for the internal moral vindication of each person and thereby sustains, in psychological comfort, each person, as they confront the ups and downs of fortune.  Aristotle considered that friendliness is the most robust form of justice, balancing judgment and grace.  The best friendships bring forth love and trust, which promote the highest quality of community, where simultaneously and reciprocally, individuals are honored for who they are and community efforts thrive.

For the self, forms of friendship which do not impose serious obligations of reciprocity and so are a lower form of office are based on the utility to one of the other as a friend and the pleasure one takes in being with another.  Friendships based on utility and pleasure are more easily dissolved.  Their partnerships are potentially very vulnerable to dissolution, as are friends on Facebook.

Aristotle advised that goodness comes from good people (Nicomachean Ethics, Books 8, 9).  He proposed that friendship is a kind of partnership, one with another, for better or worse.

Friendship is sustained by character.  When a friend’s character changes or the depths of that person’s character are revealed, the office of friendship may terminate.  Aristotle proposed that we each “ought to strain every nerve” to avoid wickedness and try to be a person of good character, “for in that way, one can both be on good terms with oneself and become the friends of somebody else.”

In addition, citizenship requires contributions to the common good, such as:

1. Using wealth to enhance other forms of capital: finance, physical, human, reputational and social.

First, wealth should be used to sustain and improve the institutions that permit the creation of wealth.  Accumulated over time, wealth can influence the future.  Wise use of wealth avoids immediate consumption and invests in the creation of better outcomes for future

2. Balancing the desires of owners for self-satisfaction against society’s need for robust accumulation of new capital in all forms.

Philanthropy is incumbent upon those who possess wealth.  The social function of wealth is to finance a greater good.  Those who are to inherit wealth should be expected to assume the fiduciary responsibilities of stewardship that accompany the possession of wealth.

3. Using wealth to support the creation of social capital.

Social capital – the reality of the social compact incubating successful wealth creation and permitting the actualization of human dignity – is created, over time, by governments and civil society.  From the rule of law to physical infrastructures, from the quality of a society’s moral integrity and transparency of its decision-making to the depth and vitality of its culture, social capital demands investment of time, money, imagination and leadership.  Wealth should pay its fair share in taxes to support public programs enhancing social capital and should invest in the private creation of social capital through philanthropy.

4. Investing one’s wealth in institutions enhancing human capital.

Education and culture can be funded from public budgets on a consumption basis, but wealth should shoulder the principal responsibility in a society of providing permanent endowments for institutions of education and culture.

5. Using private wealth to supplement public expenditures for the social safety net.

Private charity and philanthropy should respond to the health and human services needs of the less fortunate.

Thus, citizenship looks towards assumption of the office of being a good host to those who come to live in the national community.

With respect to non-citizens, the ethic of citizenship are those of a host, reciprocating the good will and respect of a guest who accepts the responsibility of honoring the customs and beliefs of the host family.  The office of a host is to provide hospitality, respect and welcome.

The Ethics of Residents

Residents (including immigrants) are subjects of the sovereignty.  Unlike citizens, they have no role in sovereign decision-making.  But as residents, they share in the fortunes of the national community.  Thus, as recipients of benefits and privileges provided by the government, society and culture, residents assume ethical obligations in return.  These obligations are to assume the office of a friend as much as possible and to be gracious and charitable in the office of a guest.

Resident as a Guest

The status of guest comes with its own special duties of showing goodwill and thanks of honoring the host with appreciation and never imposing on those who have welcomed us into their homes.

Here are some quite ordinary ethical recommendations for guests:

1. Arrive with a gift.

Your hosts have gone out of their way to prepare for your arrival — cleaning the house, making the beds, hiding their naughtiness — so the least you can do is arrive with a gift to show your gratitude.

2. Buy your own groceries or be responsible for your own needs.

When I’m staying with friends or family, I buy my own groceries for two reasons: 1) I’m a picky eater, so it’s unlikely that they’ll have much that I like and 2) it’s rude to eat your guests out of house and home.  Bring your own toiletries.  Make your bed and clean up after yourself.  Keep your bathroom clean: wipe up any ring in the tub, shaving cream residue in the basin, hair on any object or surface or dirt on soap.

3. Conserve linens and towels or be reasonable in what you demand from your hosts.

At home, I use only one towel a week.  When I’m done drying off after a shower, I hang it on the back of the bathroom door so it can dry properly.  When I’m traveling, I do the same.  A good host will provide you with a towel or two, which is plenty, so don’t abuse it.

4. Ask about house rules.

When guests come to my home, I have three rules: 1) don’t get locked up, 2) don’t get locked out and 3) don’t burn the place down.  Otherwise, my guests are free to come and go as they please and make themselves at home.  However, not every host is as lax as I am.  Some don’t want you making a frozen pizza at 3:00 am on a Sunday night, when you’ve just come home from the bar. To avoid offending your hosts, ask about general policies and rules.  Should the door be locked when you leave?  Is it OK to put silverware in the dishwasher?  Would you like me to let the dog out if you’re not home?  Most people have certain ways they like and do things, so it’s best to ask before you step on any toes.

5. Give the host personal space.

While your hosts are happy to see you (hopefully), they don’t want to spend every minute of every day with you.  Respect that.

6. Lend a hand where necessary.

Is your host slaving away in the kitchen preparing a delicious feast?  Ask if he or she needs a hand.  Does the dog need a walk?  Volunteer to take the pooch for a stroll.  Does somebody need to go on a beer run?  Offer your excellent (and sober) driving skills to accomplish the task. Whatever the case, let your guests know that you’re happy to help out where you can.

7. Keep common areas clean.

Mind your Ps and Qs when staying with friends and family.  Whatever you would do in your own home, don’t do it at your hosts’ home.  Put the toilet seat down.  Wash your dishes by hand or put them in the dishwasher.  Make the bed.  Turn out the lights when you leave a room.  There’s nothing worse than following guests around the house, picking up after them.  Your hosts probably won’t say anything to you regarding your messiness or lack of consideration, but you can be sure that you won’t be invited back because of it.

8. Treat the hosts to a nice meal.

If you’re a whiz in the kitchen, prepare your signature dish (and wash the dishes afterward).  If you’re not so hot at culinary art, ask your hosts what their favorite restaurant is and treat them to a nice meal.  This is a time when you can all be at the same place at the same time to catch up. Conflicting schedules considered, this might be the only chance you have.

Here are things a good houseguest should never do:

1. Expect their host’s undivided attention 24/7.

2. Expect their host to be their daily tour guide.

3. Assume that room comes with board.

4. Expect their host to accommodate their picky eating.

Whatever diet you adhere to is your business.  But if you aren’t prepared to eat what’s served, ask where the nearest supermarket is and go pick up the things that you want to eat. A guest who proselytizes about “their” diet is rarely attractive.

5. Open drawers to find things or start helping themselves to food in the pantry without asking first.

Some hosts have a “make yourself at home” attitude.  But think twice before you start poking around in the medicine cabinet, looking for the aspirin.  Respect your host’s privacy.  And do not use your host’s phone, computer or any other equipment without asking, says the Emily Post Institute.

6. Hog the shower when your host needs to leave for work.

Be proactive and ask about the best time to use the bathroom for showering.  It’s a small thing, but it ranks high on the stress-o-meter.

7. Ignore basic common sense.

We all do things differently and as a guest, the rules you should be following are those of your host.  If you are given a key, don’t forget to use it.  Lock the door when you leave.  Don’t make a lot of noise when you get home and if your host is asleep, maybe heating up smelly leftovers at 2:00 am isn’t such a great idea.  Ask before you assume where the fragile wine glasses go in the dishwasher and yes, you probably should use your towels more than once.

Oh, and practice the rule made popular by Benjamin Franklin: “Guests, like fish, begin to smell after three days.”  Don’t push your expiration date.

Resident as Friend

The ethics of friendship, noted above for citizens, are not limited to those who already have citizenship.  Residents are participants in the national community.  They too, therefore, should carry out the office of friend towards citizens and others alike.

Resident as Prospective Citizen

Some residents intend to become citizens and thus assume the duties of citizenship.  They may prepare for enjoyment of this status with its privileges and obligations by incorporating into their behaviors the traits of good citizens, as noted above.

Immigrant as Prospective Citizens, Friends and Guests

Immigrants – refugee, asylum seeker, worker, student, retiree, etc. – become residents of a nation state with the intention of making a life as part of that community.  As such, they have the status of prospective citizen, learning how to assume the privileges and obligations of citizenship and the status of friend, obligated to perform the office of friend in their new homeland.

In gratitude for receiving permission to become a resident and then, perhaps, a citizen, immigrants should be particularly alert to being a gracious guest.

Conclusion

These ethical standards for the offices of citizen, friend and guest can be placed in the context of great wisdom traditions.  They invoke the principles of human dignity, solidarity and subsidiarity of Catholic social teachings.  Under Protestant social teachings, they stand on the moral goodness of finding a vocation for self to sustain God’s created realm of common grace.  They embody the paramitas of Buddhist teachings: generosity, proper conduct, renunciation, insightful wisdom, effort, forbearance, truthfulness, resolution, goodwill, equanimity.  They reflect Qur’anic guidance to make of yourselves a community that seeks righteousness and enjoins justice and to follow the counsels of only those who enjoin charity, kindness and peace among men.  These ethical standards fully comply with the wisdom of Confucius that “reciprocity” is an ideal which will serve us all life long and the commitment of Mencius to only guide us towards humanness and mutual engagement.  The relationships of citizen, friend and guest embody the Japanese ethic of kyoseior symbiosis.

Participants at the Global Dialogue then drafted a statement on comity between immigrants and host nationals.  This statement is still quite applicable to the contradictions facing many in the U.S., France and other countries.  You may find the statement here.

We have, in recent months, responded, as best we can, to the current levels of distemper in our world, thinking more about social and human capitals as foundations for moral outcomes – social, political and economic.

The outcome of better social and human capitals, on an individual level, is more effective agency for individuals.  Agency, we might say, is the manifestation of human dignity, moving it from norm to fact.  It also provides each of us with the capacity for freedom.  Without agency, how inert would we be?

Individual agency, in fact, is the cosmos’ way of bridging between norms and facts.  Human agency possesses norms and thoughts and at the same time, lives with facts.

I recently read that in the state of Mississippi – long derided for having the lowest achievements in education and the most child poverty among all the 50 American states – over the past decade has committed its educational system to having every child able to read by the end of third grade.  As a result of this community effort, Mississippi children no longer test at the bottom of all American children.  They now demonstrate abilities closer to the average, no matter their family’s economic circumstances.  Among poor families, Mississippi children are now tied for best performers in the nation on one standard test for reading, while ranking second in math.

The abilities of high school graduates have also grown.  In 2011, only 75% of students graduated, 4% below the national average graduation rate, but in 2022, 88% of Mississippi students graduated high school, when the national average for graduation was 87%.

The lesson to be learned from this is that poverty is not an insurmountable obstacle to developing our agency capabilities.  It is the person incubating the divine spark, not life circumstances, which can make all the difference for the quality of our life outcomes.

Does that fact not argue for setting high standards for ourselves and others and persevering in living by them?

Robert Browning insisted that a person’s “reach should exceed his grasp, or what’s a heaven for?”