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My thanks to the Wall Street Journal for publishing the below excerpts of a recent speech at Davos where Argentine President Javier Milei makes his case for the good to be ascribed to capitalism:

The Western world is in danger and it is in danger because those who are supposed to have to defend the values of the West are co-opted by a vision of the world that inexorably leads to socialism and thereby to poverty.  Unfortunately, in recent decades, motivated by some well-meaning individuals willing to help others and others motivated by the wish to belong to a privileged caste, the main leaders of the Western world have abandoned the model of freedom for different versions of what we call collectivism.  We are here to tell you that collectivist experiments are never the solution to the problems that afflict the citizens of the world.  Rather, they are the root cause.  Do believe me, no one better placed than us, Argentines, to testify to these two points.

When we adopted the model of freedom back in 1860, in 35 years, we became a leading world power.  And when we embraced collectivism over the course of the last 100 years, we saw how our citizens started to become systematically impoverished and we dropped to spot No. 140 globally. . . .

Since there is no doubt that free-enterprise capitalism is superior in productive terms, the left-wing doxa [public opinion] has attacked capitalism alleging matters of morality. . . . They say that capitalism is evil because it’s individualistic and that collectivism is good because it’s altruistic—of course with the money of others—so they therefore advocate for social justice.

But this concept, which in the developed world became fashionable in recent times, in my country has been a constant in political discourse for over 80 years.  The problem is that social justice is not just and it doesn’t contribute either to the general well-being.  Quite on the contrary, it’s an intrinsically unfair idea because it’s violent.  It’s unjust because the state is financed through tax and taxes are collected coercively—or can any one of us say that they voluntarily pay taxes?  Which means that the state is financed through coercion and that the higher the tax burden, the higher the coercion and the lower the freedom. . . .

Unfortunately, these harmful ideas have taken a stronghold in our society.  Neo-Marxists have managed to co-opt the common sense of the Western world and this they have achieved by appropriating the media, culture, universities—and also international organizations.  The latter case is the most serious one probably because these are institutions that have enormous influence on political and economic decisions of the countries that make up the multilateral organizations.

Fortunately, there are more and more of us who are daring to make our voices heard because we see that if we don’t truly and decisively fight against these ideas, the only possible fate is for us to have increasing levels of state regulation, socialism, poverty and less freedom and therefore will be having worse standards of living.  The West has unfortunately already started to go along this path.  I know to many it may sound ridiculous to suggest that the West has turned to socialism, but it’s only ridiculous if you only limit yourself to the traditional economic definition of socialism, which says that it’s an economic system where the state owns the means of production.

This definition, in my view, should be updated in the light of current circumstances.  Today, states don’t need to directly control the means of production to control every aspect of the lives of individuals.  With tools such as printing money, debt, subsidies, controlling the interest rate, price controls and regulations to correct the so-called market failures, they can control the lives and fates of millions of individuals.  This is how we come to the point where, by using different names or guises, a good deal of the generally accepted political offers in most Western countries are collectivist variants, whether they proclaim to be openly communist, fascist, Nazis, socialists, social Democrats, socialists, Democrat Christians or Christian Democrats, neo-Keynesians, progressive, populists, nationalists or globalists.

At bottom, there are no major differences.  They all say that the state should steer all aspects of the lives of individuals.  They all defend a model contrary to that one which led humanity to the most spectacular progress in its history.  We have come here today to invite the rest of the countries in the Western world to get back on the path of prosperity, economic freedom, limited government and unlimited respect for private property—essential elements for economic growth. And the impoverishment produced by collectivism is no fantasy, nor is it an inescapable fate.

But it’s a reality that we Argentines know very well.  We have lived through this, we have been through this because as I said earlier, ever since we decided to abandon the model of freedom that had made us rich, we have been caught up in a downward spiral as part of which we are poorer and poorer, day by day.  So, this is something we have lived through and we are here to warn you about what can happen if the countries in the Western world that became rich through the model of freedom stay on this path of servitude.  The case of Argentina is an empirical demonstration that no matter how rich you may be or how much you may have in terms of natural resources or how skilled your population may be or educated or how many bars of gold you may have in the central bank, if measures are adopted that hinder the free functioning of markets, free competition, free price systems, if you hinder trade, if you attack private property, the only possible fate is poverty.

Therefore, in conclusion, I would like to leave a message for all businesspeople here and for those who are not here in person, but are following from around the world.  Do not be intimidated, either by the political caste or by parasites who live off the state.  Do not surrender to a political class that only wants to stay in power and retain its privileges.  You are social benefactors.  You’re heroes.  You’re the creators of the most extraordinary period of prosperity we’ve ever seen.  Let no one tell you that your ambition is immoral.  If you make money, it’s because you offer a better product at a better price, thereby contributing to general well-being. Do not surrender to the advance of the state.  The state is not the solution.  The state is the problem itself.  You are the true protagonists of this story and rest assured that as from today, Argentina is your staunch unconditional ally.  Thank you very much and long live freedom, damn it.

My apologies.  I recently learned that last year, 2023 in the Christian calendar, was the 300^th anniversary of the birth of Adam Smith.  He was baptized on June 5, 1723, in Kirkcaldy, Fife, Scotland.  The Caux Round Table should have been more alert and made some comment months ago on Smith’s contributions to the well-being of humanity.

What is notable is that there has been no commemoration, to my knowledge, of the birth of that most important architect of modern civilization.

While Smith was a thinker and writer and not a doer, his theory on how the “the wealth of nations” could be created year-in and year-out, ad infinitum, provided a compass and road map for humanity to build modern economies.

Even socialisms have had to defer to Smith’s discovery of the “factory system,” with its specialization of function, division of labor, introduction of technology into the means of production, all to create from nothing but innovative thoughts increased productivity and lower per-unit costs of production.

Those socialisms, actually national socialisms or fascisms, like Pol Pot’s Khmer Rouge or Mao’s Great Leap Forward, which never mastered the factory system, were collectives of miserable peoples living in poverty and under inhumane oppression.

And we should not wonder, even for a second, why, after World War II, every nation in the world sought economic growth and “modernization,” one way or another.

As Mae West quipped in one of her movies: “Honey, I’ve been rich and I’ve been poor and rich is better.”

Here is a chart revealing what capitalism has done for humanity:

While money isn’t everything (listen to the Beatles on “Money Can’t Buy Me Love”), it’s more helpful to living well and living long than whatever else is in second place.

To give Smith his rightful due, we must never overlook his first book – The Theory of Moral Sentiments.  Smith was, first and foremost, an observing student of human nature.  He belonged to the first generation of “scientists,” those who observed first and drew conclusions second. Like Newton and the apocryphal apple falling on his head, leading him to find gravity as a natural phenomenon or the first to use telescopes to view the heavens or microscopes to see minutia or Linneas coming up with names for so many genus and species.

Smith observed how we are governed well or badly by a “moral sense” and then how a mode of production was emerging around him in his time, something new in history.  In his second book, An Inquiry into the Nature and Causes of the Wealth of Nations, Smith described the patterns of cause and effect in this new system based on “factories,” markets and steam power.

Still, as I wrote in my book, Moral Capitalism, we would be better off if our business practices and laws brought together, in one social system, Smith’s recommendations to use our moral sense, with his observations as to how best to profit from the factory system and its supporting market institutions.

My feeling on just discovering Smith’s birth 300 years ago is to say: “Thank you very much.  We wouldn’t be where we are today without you.”

Back on December 12, our Caux Round Table fellows met for their quarterly meeting over Zoom to share reflections and concerns as 2023 entered the history books.  A summary of their comments is here:

The question was asked: what happened to cosmopolitanism?  Why has particularity replaced universality?  The collective over the individual?  The volk over the human?

(For the U.S., this raises the question: is there an American volk?  Hillary Clinton denigrated about half the American people as being “deplorable.”  Was that her way of saying they did not belong to the American volk?  When the southern border of the country is open, does that illustrate that Americans have no sense of being a “volk”?)

When systems close in on themselves, lose ties to the cosmopolitan, they trigger an increase in entropy.  Entropic forces then whirl and spin and so chaos results.  Such a system stagnates, internalizes and polarizes emotions and psychic energies, losing, bit by bit, any sense of a common good, of continuity from the past into the future.

Now Americans (and many others) have no clear vision of their future.  They don’t know what to do.  They are passengers, not drivers.  They are frightened, having lost hope.  Tomorrow will be as today is and today is as yesterday was.  One senses trauma, but uncertainty over how to process distress and dis-alignment, which deepens the traumatic mode of being.

Simple answers provide comfort.  Blaming others deflects responsibility.

Resilience is needed more than ever.  Relationships need creating and tending.  Risks need to be foreseen and mitigated.  Solidarity from the bottom up, not engineering from the top down, is needed.  An engineered system is a closed one, like a steam engine.  A solidarity system evolves and invokes mutuality and reciprocity.

Whose narrative is correct?  What paradigms make the most sense and provide the best guidance?  Which are superstitions?

The fights are on to have the unchallenged word.  Globally, the fights are not really over land, but over morality, identity.

We must rebuild, taking nothing for granted and rethinking assumptions, starting with an understanding of who we are as humans – of what is our nature.

In the middle ground, there is hope, as the Buddha advised.

The current travails of Harvard University around the institutionalization of “wokeness” through rigorous diversity, equity and inclusion management metrics and with the decision of its president, Claudine Gay, to resign, reminded me of a commentary I wrote nearly three years ago (April 9, 2021, to be exact) addressing the then new question of whether moral capitalism should embrace “wokeness.”

I said “no” on the grounds that wokeness is the psycho-social expression of a Nietzschean will to power on the part of its advocates.  As such, it is destructive of the moral sense in each of us and so has no claim for inclusion in any moral capitalism.

You can read my argument against the morality of “woke” here.

(The recent trend to question the benefits and fairness of “wokeness”/DEI would seem to socially validate my argument.  A friend, William Colby, once told me after serving as director of the CIA, that if your hypothesis turns out to have predictive accuracy, stick with it.)

Back in 2021, I was sharply criticized by one senior business executive for being “racist” in my views.

I wrote back that he most likely did not know that my wife is Vietnamese.

I presumed he would be alert enough to then realize that I had lived for decades on a border between races, fully part of neither.  Too Vietnamese in thinking to be fully American white and too American white in thinking to be fully Vietnamese.

He did not respond.

I did not share with him a family story about my maternal grandmother.  Through her husband, our family descends from a signer of the Declaration of Independence and from a framer of our Constitution.  My direct ancestor, Winthrop Young, in 1776, took the association oath in New Hampshire to oppose with arms the operations of His Majesty’s armies in the North American colonies.

When learning of my engagement, grandmother said, “I can’t understand what has gotten into Stephen.  Two thousand years of WASP blood down the drain!”

However, after my marriage, she was most delightfully gracious to her new granddaughter-in-law.

So, the realities of racism in America have been part of “my truth” for decades.

If the racism implicit in wokeness and explicit in DEI discriminations is wrong and harmful, what narrative or frame of mind, then, would be a right fit for moral capitalism?

Post-racism.

If we live in a post-modern culture, then a post-racism is possible.  Post-modernism applies critical thinking to delegitimate concepts, values, cognitive biases and ideologies.  Thus, post-modernist thinking – in the right hands – can delegitimate racism, leading to a culture that would be “post” racist.

Secondly, I suggest that the moral basis for a post-racist world is friendship.

I recommend your quickly reading Aristotle and Cicero on friendship.

The recent encyclical of Pope Francis, Fratelli Tutti, adds a Christian dimension to friendship – “do unto others ….”  He takes as his ideal person the Good Samaritan, who comes to the aid of one not of his “race.”

Other readings that would open minds, expose biases and promote friendships are the Tao Te Jing and the Zhuang Zi from China.

I love the story from the Zhuang Zi that: “One night, Zhuang Zi went to sleep and dreamed that he was a butterfly.  He dreamt that he was flying around from flower to flower and while he was dreaming, he felt free, blown about by the breeze hither and thither.  He was quite sure that he was a butterfly.  But when he awoke, he realized that he had just been dreaming and that he was really Chuang Tzu dreaming he was a butterfly.

But then, Chuang Tzu asked himself the following question: was I Chuang Tzu dreaming I was a butterfly or am I now really a butterfly dreaming that I am Chuang Tzu?”

Apply that to who you are – is it really you who are dreaming that you are of the race that you think you are when it might be someone of another race dreaming that they are you?  Who are you really and who are they really?

The teachings of the Buddha on overcoming illusions would guide us to a post-racist way of living.  And perhaps the advice of Marcus Aurelius and other Stoics would also tend to confirm that it is possible for you and for me to put our minds in the right way.

Almost a year ago, I threw three coins six times and from those “heads” and “tails” derived a Yi Jing hexagram predicting what was likely to happen in 2023.

Here is a retrospective report on my predictions:

Then, in general, I predicted for 2023 that “this is not going to be a year of rest and success for narcissists and nihilists.”

Most dramatically perhaps, the October 7 aggression by Hamas against Israel did not work out well for the Palestinian residents of Gaza.

One year of Vladimir Putin’s war against Ukrainians – not close family, but more distant cousins of the Russians – did not go well.  There was retreat and static defense of a border.

The year did not go well for the very self-centered Donald Trump and Joe Biden.  Trump was attacked by his enemies with criminal allegations in the courts.  Biden’s poll numbers dropped and dropped.  By the end of the lunar year – right now – polling shows that significant numbers of black, Hispanic and younger voters have turned against him.  The economy has not gone his way.  Inflation – Bidenflation? – reduced the real standard of living for the middle class and the poor, while making it easier for the rich to make money off the higher interest rates paid on their investment portfolios.

Last February, I proposed that: “President Biden would be well advised to stop illegal immigration across the U.S. border with Mexico, as such an inflow of strangers will not contribute to reassuring ordered liberty in the American “dwelling.”  Similarly, the hexagram indicates that advantages will come in general from reducing criminality in American cities to restore the confidence of Americans in feeling “at home.””  Biden did neither and his support among the people for those failures declined and declined.

The nihilism which is critical race theory took a big hit in the last month of lunar year 2023 – January 2024 – when Claudine Gay, president of Harvard University and career-focused on the promotion of racism as the lens Americans should use in arranging their domestic relationships, resigned after her consistent use of plagiarism to boost herself up the academic pecking order was exposed to the public.

Last February, I had predicted that: “In the U.S., it may bring the peaking and then the initial decline of “wokeness” in business, education and government.  Critical race theory will continue to lose its hold over the public’s mind.  Diversity, equity and inclusion programs for differential treatment of individuals will encounter growing resistance. … Americans will become more demanding that individual merit, intellectual rigor and blindness to skin color determine success in educational institutions.  Those who teach should be teachers, not babysitters.  Those who study should be students, not coddled wards of the state.”

And for Putin, I commented that: “The year will not be auspicious for Vladimir Putin as long as his “dwelling” is in disorder and fails to provide warm radiance across the community of Russians.  The hexagram indicates that reaching peace in Ukraine and providing a good “home” for its people will be well rewarded with achievement.”

I also predicted that: “In general, it will not be a year of success for hard-fisted, dictatorial rulers who ignore the moral needs and dignity of those they rule.”  An outsider won the presidency of Argentina and the army dictatorship of Myanmar grew weaker.

As for China, I said that: “2023 may be more auspicious for Xi Jinping if he focuses on the economy, the well-being of the Chinese and gives individuals more autonomy to be dutiful to one another.”  He did not and China’s economy stagnated, with warning signs of more trouble ahead appearing towards the end of the year.  Just now, stories are in the papers about younger Chinese going on a disrespectful and counterproductive “work-slowdown” to show their disenchantment with Xi Jinping Thought.  Chinese women are resisting regime calls to get pregnant and have babies.  Later in the year, Xi purged senior generals, his foreign minister and others.  None of this is a sign of “domestic tranquility.”

Lunar year 2024 begins at midnight on February 10.  Then, I will consult the Yi Jing as to what might lie ahead for us all during the next 12 months and report my predictions and observations to you.

Claudine Gay has resigned as president of Harvard University, my alma mater.

This resignation and the reasons for it carry implications for civilized living in our times.

What are the moral and ethical qualifications for greatness in college and university education?

I would say that for decades, the examples of Harvard and Oxford were models for our world community.  Everywhere, colleges and universities were funded and enhanced to measure up to Harvard and Oxford standards.

If Harvard falls victim to narrowmindedness and prejudice, then something unexpected and untoward has happened to all of us.

These past few days, when thinking of the president of Harvard succumbing to the temptations of plagiarism in her academic writings, I wondered where in the Caux Round Table articulation of ethical principles we might find a standard to apply to Harvard in these circumstances.

First, I considered the stakeholder theory driving the Caux Round Table Principles for Business.  Harvard University is a business.  It has capital assets.  It produces products to sell.  It has customers.  It markets its services and reputation.  It hires employees and seeks investments (donations).

But what guidance does stakeholder theory provide for the governing body of Harvard University, the members of the Harvard Corporation?

Who are the owners of the business that is Harvard University?  Only the members of the corporation?

Who are its customers – students or their parents?  Who has a stake in its products?  What are its products, by the way?  Just degrees for those who pay tuition?  Who should care about the impact of its graduates on the economy, culture, politics and economy of wherever they might live and work?  Why not society at large as a customer or a consumer of what Harvard puts out to the public?

But who supplies Harvard’s business enterprise with its necessary inputs?  Who is its supplier stakeholder?  Society.  Harvard needs students to work on them and so shape them as a refined product.  What does Harvard owe society, its supplier, in the work it does in shaping its graduates?

In this business model, suppliers of students – mostly parents – pay the company to take in what it needs to succeed in the market.  The price paid by parents varies from student to student depending on scholarships provided by Harvard.

What are the externalities – positive and negative – of what Harvard produces?  What about its influence on the production of symbolic goods, such as thoughts and values?

Does civilization have a stake in what Harvard does or does not accomplish?

I would argue that Harvard has many stakeholders and must be responsible for affirmatively and constructively responding to their interests and aspirations, a tough balancing act to be sure.

Harvard’s stakeholder responsibilities demand seeking equilibrium among values and interests, not giving in to satisfy narrow rent-seeking by any one or two particular stakeholder constituencies.

In the Caux Round Table Principles for Government, we propose that those who hold power in service to society – such as universities – hold a public office and so shoulder public trust responsibilities.  This demands putting to one side personal prerogatives and intolerances in order to open-mindedly serve those who will benefit from a fair and just exercise of power.  The burden of disclosing self-seeking rests with the self-seeker holding such an office.

Further, our principles for government demand full and robust discourse as the process supporting decision-making.  Censorship and cancel culture have no place in discourse, which seeks to expose the truth without giving in to fear or seeking favor from the high, the mighty and the rich.

Former U.S. Supreme Court Justice Louis Brandeis remarked that “If there be a time to expose through discussion the falsehood and fallacies, to avert the evil by the processes of education, the remedy to be applied is more speech, not enforced silence.”

In Harvard’s case, these norms of meeting trust responsibilities and seeking truth should have long since supplanted racist prejudices and discriminations in admissions, curricula and teaching and in promotion of employees like Claudine Gay.

In a similar vein, our ethical principles for civil society institutions (CSI) hold that:

Fundamental Principle

Integrity

The actions of a CSI – whether small or large, local or global – will be consistent with its core service aspirations.  Its leadership and staff will not use their positions for personal advantage of any kind, including inappropriate, personal financial gain.  Fidelity to their trust and due care in the execution of their mission are the hallmarks of responsible CSIs.

Derived Principles

Public Benefit

A CSI will recognize that it and all its actions and endeavors reflect the interests and values of the people who fund, organize, operate or in any way support the organization, as well as the social, cultural, political, economic and environmental interests that such people seek to serve.  A CSI serves privately selected, but publicly acknowledged goals and objectives of common benefit and idealistic inspiration.  A CSI should promote a wider cause than its own continuity by seeking to achieve that which has wide social, cultural, community, environmental or historic benefit or otherwise contributes to social or natural capital.  In doing so, it must be aware of how its actions affect the peoples, communities and natural resources it seeks to promote or preserve, as well as the quality of life for society as a whole.

To sustain its status as providing quasi-public benefits, a CSI will always be open for dialogue and good faith engagement with objectivity, research and a diversity of moral and ethical points of view.

Care

A CSI will recognize that its policies and activities are a legitimate subject of public comment and analysis.  It is, therefore, willing to engage in reasoned discourse regarding its mission and objectives, values, principles, governance, actions and means used to achieve its objectives. When engaging in advocacy, a CSI will always, in good faith, present accurate facts and truthful information.  When planning its actions or executing its policies, a CSI will demonstrate enlightened care and concern for those whose interests will be affected by its contemplated actions.  In case a CSI inflicts damage upon a government, international organization, corporation or other party, it will be accountable for its actions.

On a personal note, I am both saddened by the failure of Harvard in recent years to allow its corporate culture and practices to deteriorate as they have and relieved that a crisis has occurred to bring this decline in institutional virtue to public attention.

When I was an undergraduate, the college, to me, was open, inclusive, intellectually vibrant, with your mind so often being challenged and growing every day by those you would meet willy-nilly.  My class had members from many ethnic and national backgrounds, each of whom we credibly assumed was personally up to the challenge of working hard to gain knowledge.

We never worried about saying only what others expected us to say about politics, culture, entertainment or the social need to self-censor.  If we spoke or acted without grace, compassion or intelligence, we could be challenged, but would very rarely be demeaned or ostracized.  We learned through discourse and the ups and downs of friendships.

Now, Harvard gives undergraduates an average grade of 3.8.  Back then, getting a 2 was satisfactory and the norm for many of my classmates while getting a 4 (A) – really, really, hard to do.  It’s a different place now, not one that I respect; all for show, no grit.

To be frank, I have been skeptical of the ESG movement and ESG investment funds.  I saw ESG metrics to measure company performance to be vague, vapid and superficial.  I could not find specifics on what was “social” and how to measure “governance.”

For example, would “social” include a balance sheet asset for the “social capital” provided by the company’s culture and employees or for “human capital” the value-adding capacity of its employees?  Or would “social” include a company’s contribution to the remediation of income inequality in a given community or country?  Or the size of its charitable contributions to educational institutions or churches?

It was notable to me that the ESG movement did not seek to learn from the Net Impact’s approach being developed in The Netherlands by ABN AMRO and others.

The Wall Street Journal recently reported that in the U.S., the fund management community is quietly closing ESG funds or changing their names.

During the last quarter, more sustainability funds either were liquidated or removed ESG criteria from their investment decisions than were added to the sustainability category of funds.

Investors put money into sustainability funds starting in 2019. Such investments collapsed in 2022.  So far this year investors have withdrawn $14 billion from sustainability funds.

Once again, in open markets, demand trumps supply.  The driver of business success, of capitalism, is consumption – what people want to pay for.  Goods and services that no one wants to buy will not, in fairly short order, be produced.

Goods and services that fulfill wishing and hoping are for charity or government subsidies.

Wishing, good intentions, pious hopes and idealism don’t create wealth, as Adam Smith so concisely noted.  Reality can and does.

The returns on sustainability funds were unimpressive, especially as interest rates rose.  And the U.S. Securities and Exchange Commission has adopted rules to restrict mere virtue signaling (or greenwashing) in the use of fund names.