Commentary – Page 7 – Caux Round Table for Moral Capitalism

Moral Capitalism, Coupled with Moral Government, Open Doors to Human Development Achievement

There is a very strong inverse correlation among countries between achievement and crony capitalism/abuse of elite power. The higher the achievement of a society, the lower its corruption. Corruption tends to flourish in settings of cronyism and abuse of elite power and privilege. Also, corruption tends to flourish where the rule of law is ignored.

Thus, achievement reduces corruption and attendant abuses of elite power, while corruption and attendant abuses of elite power forestall achievement – and generate emigration flows to high achieving countries.

I recently saw this correlation graph in the March 9^th issue of The Economist:

Countries which have achieved a UNDP Human Development Index score of .9 are less corrupt, as measured by Transparency International.

This, to me, is reliable proof that moral capitalism coupled with moral government provides the best outcome for human well-being.

We might, therefore, most appropriately ask exactly what are the cultural and social drivers of moral capitalism and moral government?

And we can ask, what can countries without those drivers do to incorporate them into the foundational system structures of their societies?

I found a confirming graph on Google Images:

“Th’ abuse of greatness is when it disjoins remorse from power.” – Shakespeare

In 44 BCE, Julius Caesar was assassinated in a political maneuver to remove him from power on the Ides of March – March 15.

Caesar was punished for fear that he would abuse power, become a tyrant, a king. Shakespeare wrote a play about it. As Shakespeare had Brutus explain: “Th’ abuse of greatness is when it disjoins remorse from power.”

Shakespeare, thus, conjoined morality with governance and law, just as the Caux Round Table proposes in its Principles for Government.

Government is law. Government works through law and regulation. Law is what government tells us to do. Government calls the tune and we are to dance, with punishment hanging over our heads as the cost of possible disobedience, negligent or not.

But as John Locke put it, government is a trust, not a tyranny. Not every law is necessarily just and legitimate; not every government proceeding is necessarily just and fair.

Government disciplined by the rule of law, which respects the moral agency of the people, their rights, is good government; bad government cages and disciplines the people through rule by law – again from Shakespeare: “When Caesar says do this, it is performed.”

Where is our world going?

In a recent Zoom meeting with some of our fellows, several commented in line with many opinion leaders that the post-World War II global order is fragmenting.

A parallel can be drawn between our times and the 1930s, which saw the desuetude of the League of Nations and a world becoming hostile to constitutionalism and just democracy.

Now, as then, we see the “hard” men rising and more gentle folk slip-sliding away in their capacity for leadership.

This is true in the U.S., as we lose our psycho-social moorings and, more and more, float on currents of intolerance, anti-racism racism, fear and reliance on compulsion instead of persuasion.

As I was taught by my grandfather, a lawyer and in the Harvard Law School of yesteryear, the barrier we erect against prejudice, intolerance, dictatorship, arbitrary and capricious use of state authority is the moral concept of the rule of law, a normative standard of justice by which to measure lawfulness.

I attach here a short essay on the abuses of “greatness,” which we now face, more and more, and why, therefore, we all need the rule of law – morning, noon and night.

When You Walk in Cicero’s Footsteps, You Can’t Be All Wrong

I was recently re-reading Cicero’s De Officiis (On Moral Responsibility) and in a pleasant surprise, found that Cicero had embraced an important Caux Round Table Principle for Government.

The principles 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)

The Caux Round Table 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.

How many problems do we face in country after country caused by governments that do not live up to their responsibilities of serving the common good as faithful stewards of life-giving moral capitals?

The Last Act: Age Can Be a Problem

Age can be a problem.

As Shakespeare wrote in “As You Like It”:

All the world’s a stage,
And all the men and women merely players;
They have their exits and their entrances;
And one man in his time plays many parts,
His acts being seven ages.

…

Last scene of all,
That ends this strange eventful history,
Is second childishness and mere oblivion;
Sans teeth, sans eyes, sans taste, sans everything.

The premise that justifies faith in the efficacy of morality holds that individuals 1) have a moral sense and 2) can use it to inspire and to discipline their actions and so serve a good greater than individual willfulness and personal advantage. The moral sense, as understood by Confucius, Mencius, the Buddha, Aristotle, Jesus and more prosaically, Adam Smith, is made possible by biology and psycho-social prowess.

Now, as we don’t expect robust activation of the moral sense without cultivation, we demand more from adults than from children. But what of old age? Does the moral sense weaken as our other corporal powers decline as the years pass and experience takes its toll on our happiness and optimism?

Recently, I saw a study that correlated age with less efficacious leadership in the current Harvard Business Review as depicted in this chart:

My first thought after accepting the accuracy of the correlation was of American politics – Joe Biden is 81 and Donald Trump is 77 – and each, in his own way, are stubborn, irascible and insistently self-promoting.

If our minds tend to close down as we age, then what should be our highest and best use of our mature moral sense and accumulated wisdom?

In Corporate Board Rooms – Fiduciary Duties Only, Not Effective Altruism Ever!

I want to share with you my recent comment in Directors&Boards, which contrasts what seems to me to be a superficial and self-focused “virtue signaling” now in vogue with some with actual acceptance of personal responsibility for the well-being of stakeholders.

You can read it here.

I welcome your thoughts.

Capitalism and Technology: Dr. Jekyll and Mr. Hyde

I have, for several years, been at pains to point out what, to me, is pretty obvious: 1) capitalism excels all economic and public governance systems in bringing technology to humanity, while technology brings along both public goods and at times, public bads and 2) if there is too much CO2 in our atmosphere causing global warming, let’s take CO2 out of the air.

There is a technology, which I have noted, that was recently written up on the front page of the Wall Street Journal’s business and finance section – a hybrid material of cement made with carbon which can reduce the carbon footprint of cement making and store carbon out of the atmosphere.

President Biden’s 2022 legislation provides tax credits for carbon capture, using taxpayer money to reduce a public bad and so create a public good.

To make “green” concrete, CO2 is sprayed inside the mixing drums on concrete trucks. There it reacts with calcium ions in the cement to form calcium carbonate, a mineral embedded in the construction material. The calcium carbonate reduces the amount of cement that is needed in the construction project, cutting the amount of cement produced and so cutting carbon emissions. Secondly, the CO2 sprayed in the mixing drums is sequestered away from our atmosphere.

This chart projects how much CO2 could be captured by industry sector:

It’s Valentine’s Day: I Love You America for Better, for Worse, for Richer, for Poorer, in Sickness and in Health

More and more Americans are saying to themselves – and even openly – “the country is not ok; the kids are not ok; I am not ok.”

A dysphoria seems to have taken over our culture and politics, crowding out older optimism, resilience, wisdom and self-confidence, which replacement does not bode well for the country’s future.

Actually, though many have forgotten, in July 1979, then-President Jimmy Carter spoke to the American people about their dysphoria, as he perceived it:

“I want to talk to you right now about a fundamental threat to American democracy. The threat is nearly invisible in ordinary ways. It is a crisis of confidence. It is a crisis that strikes at the very heart and soul and spirit of our national will. We can see this crisis in the growing doubt about the meaning of our own lives and in the loss of a unity of purpose for our nation. The erosion of our confidence in the future is threatening to destroy the social and the political fabric of America.”

In the February 5 issue of the New Yorker, I found a cartoon, where the cartoonist tries to capture, in a wry fashion, the dysphoria being experienced by so many Americans:

This special issue of Pegasus, “The De-Enlightening of America: The Onset of Systemic National Dysphoria”, provides readers with data on the state of the American people and their culture, politics and economy – lots of data, none of which can cheer the heart, validate old understandings of who we are as a people or provide a basis for optimism.

The issue does not attempt to provide any explanations for what the data reveals. Nor does it speculate about the future. Such insights are left for the reader to propose.

However, historical perspectives relevant to what the data might be revealing can be found in the thinking of two very serious students of history – Sir John Glubb (1897-1986) and Ibn Khaldun (1332-1406).

Sir John Bagot Glubb, British lieutenant general, estimated that the average length of greatness for a regime, people or nation is 250 years. America is 248 years old.

For Glubb, socially created polities rise and fall in these stages. First, an age of pioneers. Then an age of conquests. Then commercial success. Then affluence. Then an age of intellect and finally, an age of decadence.

Decadence is marked by defensiveness, pessimism, materialism, frivolity, an influx of foreigners, a welfare state and weakening of religion. Decadence results from too long a period of wealth and power, selfishness, love of money and loss of a sense of duty.

Ibn Khaldun suggested those stages. In the first stage, founders of an umran (dynasties) are very energetic, vigorous, aggressive, but very kind, patient and accommodative, tolerant and creative. In the second stage, rulers show less enthusiasm for those qualities, but the economy grows faster than in the first stage. In the third stage, the ruling elite becomes complacent in satisfaction with the status quo, sitting back and enjoying their privileges. Wealth is still created, but there are now bumps in the road. In the fourth stage, leaders begin to increase the extractions of rent from the people, while failing to take responsibility for the common good. The elite, more and more, depends on a few self-seeking opportunists – grifters – and the economy suffers. In the last stage of sumptuous luxury for the elite, resources – natural, human and social capitals – are squandered, while a challenger arises from the margins of society to subjugate the kingdom.

Depressing data on America – befitting the last phase of Glubb’s and Khaldun’s theories of national destiny – just keeps on coming. On January 31, after this special issue was written, there were three additional reports in the press.

One report was that total cases of syphilis in the U.S. in 2022 were over 207,000, a 17% increase and the highest number of cases since 1950. Cases of chlamydia had not increased and cases of gonorrhea had declined.

Secondly, a children’s advocacy group, Common Sense Media, released polling results. Two- thirds of youth ages 12 to 17 said things are not going well for children and teenagers. Less than half reported optimism that they would become better off than their parents. Among those polled between the ages of 18 and 26, only 15% reported being in excellent mental health. More than half the teenagers believed that public schools were doing only a poor to fair job in providing education. Only 8% believed that public schools were “excellent.”

Thirdly, America’s New Majority Project reported that Americans’ trust in various professions, from professors to members of Congress, has dropped recently.

Gallup’s 2023 Honesty and Ethics poll asked 800 respondents from Dec. 1 to Dec. 20, 2023, to rate the honesty and ethical standards of 23 listed professions. Nearly all answered negatively compared to previous years, following a downward trend in ratings since 2019:

-56% rate doctors highly, down from 65% in 2019.
-45% rate police officers highly, down from 54% in 2019.
-42% rate college teachers highly, down from 49% in 2019.
-32% rate clergy highly, down from 40% in 2019.
-19% rate journalists highly, down from 28% in 2019.
-12% rate business leaders highly, down from 20% in 2019.

Members of Congress have the lowest honesty and ethical standards, according to those surveyed:

-Only 6% rate members of Congress highly.
-Congress members were rated worse than car dealers, stockbrokers and insurance salespersons.

Where America goes from here is an open question. Let us hope for the best.

Is Capitalism Always the Road to Riches?

Two recent, small stories should give us pause when thinking of capitalism as a system of wealth creation. There are conditions that go along with success and different conditions that lead to failure. How well do we discern conditions and adjust to them? No guarantees at all that we will be astute and properly adaptive.

A once celebrated company that invested in providing flexible office spaces has gone bankrupt. WeWork was once valued at $47 billion. On November 6, 2023, WeWork filed for bankruptcy.

In August, three members of the WeWork board resigned in disagreement over governance and strategic direction. On October 2, the company did not make interest payments to its bondholders. The company has $10 billion in lease obligations due from last year through the end of 2027. The company used $530 million in cash during the first six months of 2023 and had only $205 million on hand, as of last June.

In a September call with its landlords, WeWork’s CEO asked for adjustments to its rent commitments because “the office real estate market has fundamentally changed.”

Then, the emergence of new drugs to reduce obesity has triggered enticing speculation among investors – assumptions are being made about companies which have profited from selling to obese Americans and other companies which may pivot from selling junk food to more healthy products, such as carrot sticks. Share prices for Eli Lilly and Novo Nordisk have risen more than 50% this year. Share prices for Dexcom, Zimmer Biomet and Insulet have, to the contrary, dropped from 20% to 60%.

But again, there are no guarantees in capitalism. Manias and asset bubbles have ridden the back of free investment markets since the tulip mania broke out and then collapsed in Holland 400 years ago.

When is an asset bubble based on disinformation or misinformation or just wishful thinking? When is a bubble not a bubble, but a reflection of well-considered valuation of a company’s prospects?

Caveat emptor – “Let the buyer beware” – and “trust but verify” are still sound advice when dealing with other people in open societies.

Category: Commentary