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In my classes, I like to make the point that discussion of business ethics, CSR, sustainability, stakeholder capitalism and moral capitalism are relevant to real business decision-making and profitability.

Here’s an example of this:

Howard Schultz, the founder of Starbucks – very successful and very wealthy – is returning to the company as its CEO – for the second time, his third term at the helm.  Why?  Can’t a profitable company just keep on making money?

The news report mentioned challenges in its Russian and Chinese markets and rising costs.  My guess is that it is a third challenge or rather, threat, which had brought the founder out of retirement to again revamp the business model.

This third challenge is unionization of employees.  When baristas are union members, what will happen to the quality of Starbuck’s product – not coffee, but shopping experience?

Schultz said, “I know the company must transform once again to meet a new and exciting future where all of our stakeholders mutually flourish.”

Institutional investors worry that the unionization campaign has the potential to cause reputational damage – i.e. loss of customers and pricing pressure.  They will have more confidence in the company with Schultz back at the helm and so keep its stock price up.

The lesson here is that employees are a capital asset, not just a cost.  They are social and human capital contributions to profitability and need to be appropriately compensated, tangibly and intangibly.  Starbucks needs to offer an alternative to whatever a union might offer employees, otherwise, employees will vote for a union and the company will suffer from the entropic forces so often associated with union shop stewards.

The CEO is also a human capital asset.  Unlike dollars or euros, CEOs are not fungible, one replaceable by another.

Moral capitalism is all about the conjunction of social and human capitals with financial capitals.

It takes more than money to make money.

I just ran across a global map (mercator projection) of countries ranked for their levels of “happiness.”  The distribution of levels of perceived “happiness” is very interesting for what it implies as to the sources of “happiness.”

Here is the map:

Now, the inference I make is based on older survey results which showed that “happiness” scores across humanity do not vary directly with money.  As I recall, up to a point, more money leads to feelings of being happier, but after a point (about $10,000 US), more money does not lead to more happiness. These results track with Abraham Maslow’s theory of human needs rising from a foundation of security and survival needs up to the intangible of self-actualization.

The conclusion is that much of happiness results from social and psychological/emotional factors, such as trust in self and others.  So, the acquisition on an individual level and the accumulation on a social level of social and human capitals will lead to more happiness.

The work in Bhutan on Gross National Happiness as a more meaningful measure of success than GDP works on a similar understanding of the human.

Therefore, one might be tempted to conclude that building out moral capitalism and moral government will result in more happiness or as Jeremy Bentham advocates, “The greatest good for the greatest number.”

Advocates for private firms (capitalism) to produce “public” goods to solve common problems, like global warming, often seek an “incentive” for firms to produce what they can’t sell at a profit to private customers.  One incentive more and more recommended is the reward provided by private investors to private firms which deliver benefits and outcomes valued by those investors.

For example, last November, at the COP26 gathering of leaders, a major announcement was the pledge of the Glasgow Financial Alliance for Net Zero – a global coalition of over 450 finance firms across 45 countries, jointly managing $130 trillion – to align their financing activities to achieve net-zero emissions by 2050.  Those asset managers, in theory, would provide financial capital to firms working to achieve net-zero emissions or deny financial capital to those firms not working to achieve net-zero emissions.

Our colleague in The Netherlands, Herman Mulder, with his colleagues at the Impact Economy Foundation, has long been thinking seriously and successfully about how metrics can shape the business models of private firms.

Recently, he shared with me a short essay of his published by the Bretton Woods Committee on how finance could be a game changer in shifting private sector impacts to net positive.  You can read it here.

So much of the rejection of capitalism for 200 years now has turned on a perception that it is only an oppressive system of rent extraction, whereby labor is exploited; governments are corrupted; wealthy elites marinate in social injustice; greed is promoted over altruism; middle class lifestyles and aspirations are tawdry and self-absorbed; and most people are unhappy with their lot.

While this perception was shared by many, including Charles Dickens and utopian socialists, the font of anti-capitalism was the writings of Karl Marx and Friedrich Engels.  Both, in The Communist Manifesto of 1848 and Marx’s later treatise on the essence of “capital” – Das Kapital, capitalism – was described and analyzed as pretty much a despicable and irredeemable system for humans.

But what if Marx was wrong about capitalism?  What if it was not essentially systemic rent-seeking and rent extraction?

Socialism and communism would then have to be debunked and rejected as not supported by truth.

Capitalism would then have to be seen anew with a view towards keeping its advantages and minimizing its disadvantages.

In this special issue of Pegasus, I take more than a few pages to deconstruct Das Kapital, quoting extensively from the text in order to give Marx his due and then to provide an assessment of capitalism, warts and all, from the perspective of wealth creation and enhancement of individual agency.

This is a long read, but the analysis is new and, I hope, powerful in changing one’s opinion of Marxism.

I recently read a review of a new book on the 19^th century writer Henry James.  The book is The American Scene, written by James on his return to his homeland after twenty-some years in England.  In this travelogue, James writes despairingly of America as a cultural and moral wasteland, due to its hopelessly middle class values and ideals.

I did not know of this book and had learned of Henry James, famous for his novels which turned the eye of a social elitist on his less refined countrymen, as a snobbish Anglophile scorning the “colonials.”

But when the reviewer pointed out that James saw American democracy as dedicated to “eligibility,” which can be made good only through acquired wealth, not “equality,” I associated his dissatisfaction with America with the many critiques of capitalism and the bourgeoise banality and mindless, self-satisfaction which elites had so frequently imposed on those in the middle class.  The derivative disdain of the middle class, which the 19^th century avant-garde inherited from aristocratic antecedents.

I wondered if it is fair to so associate capitalism with the cultural limitations of the middle class.

Is it not more insightful to associate the middle class with opportunity?  Opportunity denied by aristocratic, landlord, rent-extracting societies?  Opportunity afforded by enterprise?  By middle class employment?  By saving accounts, share ownership and buying houses?  By public education, made possible by rising levels of GDP, generating taxes for governments?

My grandmother Morris, middle class by birth, but culturally seeking what James dismissed as merely “eligibility,” once told an English duke that in middle class America, more people went to symphony concerts, used libraries and visited art museums than in many of the old, high culture nations of Europe.

James was writing of an America newly industrialized, newly adorned with a very wealthy commercial and financial elite, the America of the Gilded Age of nouveau riche.  The culture of that era largely followed the sociology and advocacy of Herbert Spencer’s social Darwinism – survival of the fittest – championed by men such as Andrew Carnegie.  That cultural narrative and turn of mind presumed that we homo sapiens do not have much of a moral sense to guide us. Rather, we have mostly the will to power, to prevail, to survive and best those who cross our paths.

Change the presumption and your middle class might display more admirable ambitions and habits of mind and heart than the tawdry seeking wealth to finance “eligibility” for inclusion in proper society.

If Adam Smith and Mencius are correct about our human nature having powerful and elegant moral sentiments, then especially those in the middle class can aspire to moral excellence and cultural elegance.