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It is reported that Greta Callahan, head of the teacher’s union in Minneapolis, said of her union’s strike against the Minneapolis public school system was a fight “against patriarchy, against capitalism.”

This, to my mind, brings into focus a vital issue for stakeholders in our republic: what responsibilities do teachers have when working for the public?

Is not their duty to serve, not dictate thought reforms to young minds?

Indoctrination imposes their will on those under their power, a form of oppression, of exploitation of position for personal benefit, no?

Callahan’s commitment to a personal “fight” for her truth brought to mind the standard of justice in Ezekiel 34:

The word of the Lord came to me: “Son of man, prophesy against the shepherds of Israel; prophesy, and say to them, even to the shepherds, Thus says the Lord God: Ah, shepherds of Israel who have been feeding yourselves!  Should not shepherds feed the sheep?  You eat the fat, you clothe yourselves with the wool, you slaughter the fat ones, but you do not feed the sheep.  The weak you have not strengthened, the sick you have not healed, the injured you have not bound up, the strayed you have not brought back, the lost you have not sought, and with force and harshness you have ruled them.

…

Thus says the Lord God, Behold, I am against the shepherds, and I will require my sheep at their hand and put a stop to their feeding the sheep.  No longer shall the shepherds feed themselves.  I will rescue my sheep from their mouths, that they may not be food for them.

Under the Caux Round Table Principles for Government, a public office is a public trust and accordingly, being a public school teacher is a public office.

We’ve proposed an oath of office for teachers to take.

The proposed oath is:

General Principle

Teaching is an office of trust to serve society by improving human capitals and thus, contributing to the enhancement of social capital which sustains the common good of the community.  The office of teacher provides both public goods to society and private goods to individuals.  Faithfull execution of the office of teacher ethically guides the instructor.

The teacher is the overlap of two Venn circles – one is the individual, the student and the other is the community or communities in which the student lives and will live as an adult.  The teacher’s office is to keep a balance between the individual and the community.  Thus, the teacher should accurately identify and articulate the circumstances of the student and also accurately discern the context in which the student is placed.  The teacher participates in the ego-identity formation of the student, the student’s sense of self which serves as the foundation of a life well-lived and which simultaneously engages with the context, values, character and needs of the community.

As William James advised: “The community stagnates without the impulse of the individual; the impulse dies away without the sympathy of the community.”

Principle No. 1: Educate, Not Indoctrinate

As a fiduciary, a teacher places service over self.  A teacher seeks to bring out the best in students and must put their interests in achieving intellectual and moral growth first, without confining their understandings to the teacher’s personal narratives.  The teacher as fiduciary separates role responsibility from personal prerogatives.  The duty of a teacher is, from the Latin educare to “bring up, rise up, train, mold or nourish.”  A cognate Latin word is educatus – to “bring out, lead out.”

Principle No. 2: Citizenship Formation

The office of teacher seeks to form the characters of students that they may become honorable and engaged citizens.  The teacher facilitates student experience of personal agency and acquisition of self-command and self-reliance, not subservience.

Principle No. 3: Searching for Truth

A teacher introduces students to realities – simple and complex, material and cultural, natural and social.  A teacher guides them to apprehend the environments in which they live and to internalize knowledge of those circumstances, their origins and potentials.  Detachment and objectivity are required for success in the search for more certain knowledge of reality.

Principles No. 4: Empowerment 

A teacher empowers students with skills and abilities – intellectual, ethical, athletic and emotional.  The trust responsibilities of a teacher are realized through the student’s accumulation of skill and effectiveness.  Three skills supporting robust personal agency are: awareness of values, ambiguity tolerance and mediation skills consistent with a resilient ego-identity incorporating honesty and honor.

Here in Minnesota, I have been considering, with help from Tom Abeles, launching a book club to meet regularly on Zoom for the benefit of our network.

I have several alternatives in mind and would be grateful for your advice and recommendations.

First, each meeting over Zoom could review and discuss one book or material excerpts from a long one.

Or a meeting could discuss selections from several books for comparison or breadth of coverage.

I believe that there would be value in reviewing classics, in light of current circumstances – Adam Smith on the moral sentiments, for instance.

John Maynard Keynes, Herbert Spencer, Max Weber on the Protestant ethic and the spirit of capitalism, might be others.

Then, there is value in discussing current books, like those of Thomas Piketty, Paul Polman, Klaus Schwab, our own Klaus Leisinger, Mark Carney and Kengo Sakurada.

We could also devise a process for participants to recommend books to present to our network for discussion.

Please let me know what you think of such a program and your advice as to books worthy of discussion.

Years ago, when I was first with the Caux Round Table and learning my way around the field of business ethics or corporate social responsibility, as the talk was then, I asked Joe Selvaggio to meet me for coffee in Minneapolis.  A former Dominican priest, Joe had built out a remarkable program of rental apartments for low-income families – remarkable in that rents were paid on time and units were not trashed by renters.  Now, he was running another remarkable Minnesota program – the 1% club, encouraging wealthy families to give 1% of their assets to charity each year.

I was just starting to tell him about the Caux Round Table’s Principles for Business when he cut me off:

“Steve, you are wasting your time.”

I was startled: Joe Selvaggio not a believer in business ethics?

Joe explained: “Trying to get companies to do the right thing is fine.  But what are you asking of the owners?  They’re the ones who can tell the companies what to do.”

I recognized, in a flash, as they say, that Joe had made a very profound point: business ethics and corporate social responsibility classes, workshops, business school classes, articles in academic journals and books had nothing to say about the duties of being an owner, of being a wealthy person.

Believing that Joe had opened up a new perspective on moral capitalism, we reached out, pulled together some ideas and proposed a set of ethical principles for the owners of wealth.

To this day, I am unaware of any other principles like them.

Our principles for the owners of wealth are:

Preamble

Wealth comes from earning a return on capital – human, financial, physical, reputational and social.  Current wealth generates future wealth.  A necessary use of wealth, therefore, is to ensure the creation of more wealth.

Wealth is a form of capital, constituting, in particular, the flexible ability to use and deploy finance capital.  Both individual initiative and social institutions interact to produce all forms of capital, giving to capital a mixed character, subject to the authorship claims of both individuals and society.  Capital, therefore, arises out of kyosei, a process of living and working together for a common good.  Ownership of shares in companies and corporations is, of course, a primary form of wealth in the global economy.

Further, the highest and best use of any form of capital is to generate additional capital.  Capital should not be used to hinder society’s ability to create more capital for the benefit of others. Consumption is not the most responsible use of capital.

Secondly, proper use of wealth is necessary for the achievement of more gentle and happy social circumstances, for improvement of the human condition.  Possession of wealth generates envy in others, leading to cultural and social tensions.  Unequal distribution of wealth gives rise to resentment, alienation and political conflict.

Thirdly, use of capital to abuse one’s power and position or impose one’s will on others is not compatible with a respect for human dignity.

The following principles are supplemented by more specific implementation standards and guidelines.

Fundamental Principle:

The Ownership of Wealth Entails Stewardship

The ends of holding wealth encompass more than meeting self-centered desires for dominion and indulgence.  There is a fiduciary aspect to the ownership of capital.  Wealth is to be consciously devoted to meeting the needs of society, of others and the challenges of the future.  Wealth should be of benefit to society.

General Principles:

-Wealth should be used 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 generations.  When wealth is invested in the creation of additional finance capital, it should invest in those businesses and productive enterprises that adhere to the Caux Round Table Principles for Business.  In particular, the current wealth of advanced industrial countries (some US$79 trillion) should be increasingly directed towards the creation of conditions for sustained economic growth in poor, developing and emerging market nations.  Wealth should be used to enhance all forms of capital formation in nations that adhere to the Caux Round Table Principles for Government.

–The desires of owners for self-satisfaction should be balanced 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.

–Wealth must 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.

–Wealth should be invested 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.

-Private wealth should 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.

No one is morally entitled to the use and enjoyment of wealth procured by fraud, corruption, theft or other abuse of power.

Those who control such wealth should make restitution of such wealth to public bodies or civil society.  Use of private property rights to shelter such wealth is ethically suspect.

Just recently, the Sackler family in the U.S. agreed to pay $6 billion to abate opioid addictions because Purdue Pharmacy, a company owned by the family, had contributed to opioid addictions by making and selling OxyContin.  The wealth of the family is estimated to be $11 billion.

The company had declared bankruptcy in order to discharge claims against it, but the proceeding was stalled, as the Attorneys General of many states had brought before the court additional claims for Sacklers as owners of Purdue to fund opioid abatement programs and help combat a national addiction crisis.  The Attorney’s General opposed releasing the ownership equity of the company from all liability until the Sacklers increased their personal contributions to the remediation effort.  By the settlement agreement, no further claims would be made against the family.

The ethics of seeking owners to be responsible for what their company had done follows the “if you break it, you own it” rule.

This is one of the few cases where obligations of corporate social responsibility have been imposed on owners.

I believe that our advocacy of principles for owners seeking to profit from enterprise has been vindicated.

By the way, the Caux Round Table’s Principles for the Ownership of Wealth most likely apply to Russia’s oligarchs, as well.

I have just read Paul Polman’s book, Net Positive: How Courageous Companies Thrive by Giving More Than They Take, written with Andrew Winston.  To be honest, it really was as if I were reading a book about the Caux Round Table’s Principles for Business – a book about how to be a moral capitalist.  Net Positive and the Caux Round Table Principles are two sides of the same coin.

Thus, I can recommend your reading Paul’s book and buying it too.

Paul provides 5 principles which create an effective decision-making mindset.  To use the term “cognitive bias” in a positive way, Paul’s Net Positive Principles create a bias in our thinking which guides analysis and action in certain ways more than others and for the good.  His principles echo and dovetail with the 1994 Caux Round Table Principles for Business.

Paul’s Net Positive Principles are:

1. Take ownership of all impacts and consequences, intended or not.

2. Operate for the long-term benefit of business and society.

3. Create positive returns for all stakeholders (Note: these returns do not have to be only monetary).

4. Drive shareholder value as a result, not a goal.

5. Partner to drive systemic change.

In short, Paul and Andrew have opened a window to the mechanics of planning and executing stakeholder capitalism based not on speculation or wishful thinking, but on Paul’s very practical experience.

The requisite moral and intellectual framework for any work which is net positive is a sense of fiduciary duty, of stewardship, of an inner compass that transforms work into vocation, to use Christian thinking (or to life as a khalifa to use Qur’anic thinking).

In the formation of the Caux Round Table Principles for Business, a call for this special personal commitment to responsibility – the self’s orientation towards virtue – reflected 1) Catholic social teachings on respect for human dignity, 2) the Japanese mindset of kyosei or living symbiotically with one’s ecosystem and 3) Protestant emphasis on ministry in this world.

A second gift that Paul and Andrew give us in their book is a management approach to the complexity of full-service net impact accomplishment.  Achieving the good over a wide range of activities and impacts is not simple or easy.  It takes systems thinking and cross-sector collaboration.

First, consider the problem of what goods and services are to be provided by the firm: public goods or private goods?  Is our measurement of the good to be personal or communal?  What if one good conflicts with another?

Generally, firms are expected to produce private goods and services for customers who buy them and use them personally.  Economists call these private goods “rivalrous,” as they are possessed by an individual and not by many all at once.  My car is my car, not yours.  My haircut is my haircut, not yours.

On the other hand, public goods and services are called non-rivalrous, as they can be shared by many individuals.  An additional consumer does not take away from the enjoyment of previous or future consumers – consider who benefits from clean air and public safety or other benefits of law and order.

Markets work best for private goods, governments for public goods.  We buy our private, rivalrous goods with our own money and we pay taxes to the government for it to provide us with public goods.

(Now, we also pay transaction fees to the government for certain services, as if it were a private business  – highways, admission to national parks, car registrations – use of which are personal to us, so more in the form of a private good.)

Another complexity is the value notion that people are entitled to private goods, even if they can’t afford them – food, housing, a basic education, clean water, etc.  This is a matter, we say, of human rights to enjoyment of social and economic goods and opportunities.  These goods and services are called merit goods – they have merit separate from market pricing and availability.

To make thinking about impacts still more complicated, some goods and services are both private and public.  For example, education and health.  As consumers, we “own” the impacts of and personally benefit from getting educated and having good health.  But at the same time, the public benefits indirectly from our being better educated and more healthy.  In a time of Covid, our being vaccinated lowers risks for us individually and for those around us.  Covid vaccines are a private and a public good.

In addition, there are public and private “bads.”  Drinking, smoking, doing hard drugs and gluttony are ‘bad” for us individually and sometimes for those around us.  Companies which sell tobacco, guns, excessive opioids, etc. are considered public nuisances and we use law to regulate their operation of private businesses.  Pollution and global warming are cases of public “bads” arising from the production and consumption of private goods.

Now, Paul and Andrew argue that private firms should include in their thinking about their net impacts all these different kinds of goods and services.  Providing a wide range of public and private goods and avoiding public and private “bads” should be the aim of an enterprise that thinks holistically.

Now, figuring out how a private enterprise can deliver all these goods and services – for many of which there is no private market – can make your head spin and feel like giving up.  Who will pay or reward your firm for not producing a public “bad” – government, charities, your generous neighbors?

Paul and Andrew have a management approach to address the challenge of complexity in the provision of goods and services that I have not seen proposed elsewhere: collaboration.

From his experience, Paul advises enterprise collaboration with governments and NGOs/nonprofits.  Allocate work according to competence and authority – honor the remit given to each organization, as the Brits say so concisely.  He gives some examples of Unilever doing just this to help itself, its shareholders, other stakeholders, society and the world.

This is cross-sector collaboration and it works.  But it needs coordination, facilitation and forums (round tables maybe?) for the partners and collaborators to put their heads together, assign the work – division of labor, a la Adam Smith – decide on metrics and set goals.  Paul is suggesting that business can take a lead role in bringing partners to the table to each contribute as best they can to providing more “good” public and private goods and services and less “bad” public and private goods and services.

I strongly recommend that you read Paul and Andrew’s book.

Again, you can get it here.

The Russian invasion of Ukraine violates the laws and norms of the international order set forth in the Charter of the United Nations.  I am quite certain that such use of force in Europe opens up a new era in history, one that puts an end to the efficacious implementation of the idealism of the post-World War II effort to build an open, global community for humanity, respecting the individual and the rule of law.

Russia’s use of force to achieve its political goals, though, is quite in line with ancient practices. The Greek historian Thucydides reported Athenian conquerors telling the newly subjugated people of Melos: “The strong do what they can; the weak suffer what they must.”

Just as the Ukrainians now, the leaders of the island of Melos faced this choice: have their people die as free men or live on as slaves.  The Athenians had a fleet of 38 shops off the coast of Melos ready to land heavy infantry and archers.  They waited while the Melians debated what to do.

The Athenian advocacy that “might makes right” denies the alternative moral stance that right must follow the good, the true and the beautiful.  Thus, the Athenian ethical regime would have no room for the Caux Round Table’s Principles for Business or Government.

The cultural politics of social Darwinism built on the thinking of Herbert Spencer that humans, like animals, had no significant moral sense, only a will to survive and master their environments.  In late 19^th century, regimes of “survival of the fittest,” a brute capitalism, colonialism, racism and honor and prestige for those who could become masters, all gained prestige and social power.

Russia today, thus, challenges as presumptuous the Caux Round Table’s advocacy of moral standards applicable to all persons and nations.  The Caux Round Table effort, from this point of view, is to be discarded in Trotsky’s famous “dustbin of history.”

Just prior to Russia’s invasion of Ukraine, on February 4, President Vladimir Putin met in Beijing with Chinese President Xi Jinping.  The two agreed to an alliance looking towards a new world order suitable to them.

The historic precedent to this Russia/China Pact, I suggest, is the Hitler/Stalin Pact of August 1939 on the division of Poland, implementation of which started World War II in Europe.

The Putin/Xi Pact lays out, with great care and serious thought, a new regime for our world, one in which great powers with long histories and myths of ethnic superiority can do as they please.  The rest, accordingly, must suffer what they must.

The Putin/Xi Pact begins with an observation that “humanity is entering a new era:

Today, the world is going through momentous changes and humanity is entering a new era of rapid development and profound transformation.  It sees the development of such processes and phenomena as multipolarity, economic globalization, the advent of information society, cultural diversity, transformation of the global governance architecture and world order; … a trend has emerged towards redistribution of power in the world.

The Pact shrewdly honors past ideals:

Russia and China call on all States to pursue well-being for all and, with these ends, to build dialogue and mutual trust, strengthen mutual understanding, champion such universal human values as peace, development, equality, justice, democracy and freedom, respect the rights of peoples to independently determine the development paths of their countries and the  sovereignty and the security and development interests of States, to protect the United Nations-driven international architecture and the international law-based world order, seek genuine multipolarity with the United Nations and its Security Council playing a central and coordinating role, promote more democratic international relations and ensure peace, stability and sustainable development across the world.

Russia and China benevolently affirm that democracy is a universal human value, rather than a privilege of a limited number of States, and that its promotion and protection is a common responsibility of the entire world community.

…

And:

The sides [Russia and China] underline that Russia and China, as world powers and permanent members of the United Nations Security Council, intend to firmly adhere to moral principles and accept their responsibility, strongly advocate the international system with the central coordinating role of the United Nations in international affairs, defend the world order based on international law, including the purposes and principles of the Charter of the United Nations, advance multipolarity and promote the democratization of international relations, together create an even more prospering, stable and just world, jointly build international relations of a new type.

But then, Putin and Xi announce a new dispensation for world governance – universal idealism has no place in our global community.  We are to turn back to Hitler’s notion of the sovereignty of the “volk” – the ethnic or national community.

The Putin/Xi Pact proclaims:

There is no one-size-fits-all template to guide countries in establishing democracy.  A nation can choose such forms and methods of implementing democracy that would best suit its particular state, based on its social and political system, its historical background, traditions and unique cultural characteristics.  It is only up to the people of the country to decide whether their State is a democratic one.

In other words, collective will, acting through the state, determines what rights individuals have. Individuals find their meaning in the collective.

This pollical philosophy was first set forth with intellectual finesse by Jean-Jacque Rousseau in his prescription that freedom is to be found in obedience to the general will, an abstraction and that the more an individual does not align with the general will, the more force is necessary to repress such dissent.

In the 1760s, Johann Gottfried Herder advocated a “nationalgeist” or a “volkgeist.”  In Germany, the concept of volksgeist has developed in the literary field with August Schlegel and the Grimm brothers; in political history with Friedrich Hegel; in the field of law with Friedrich von Savigny and in the field of psychology or national character studies with Wilhelm Wundt.  One of the founders of modern sociology, Ferdinand Tonnies, distinguished folk communities (gemeinschaft) from modern, secular, individualist, rational/legal communities (geselleschaft).  Germans in World War I rallied behind the concept of “volksgemeinschaft” or people’s national community, which undergirded Hitler’s national socialism.

Hitler legitimated his rule over the Germans with the monopolistic principles “ein volk, ein reich, ein further.”

In the early 19^th century, German philosopher Hegel idealized the state as the source of value and rights.  Friedrich Nietzsche built on Hegel’s rationalism to argue that reason, taken to the extreme, contradicts everything, leaving us actually free to believe whatever we want and follow our will to power.  Socially and psychologically created narratives and nihilism each reciprocally empowered the other.

Today, the “volksgeist” ideal in politics and state practice is called “populist nationalism.”  As the state calls the tune, so the other social sectors must dance.

Building on this intellectual tradition, the Putin/Xi Pact raises up the “volksgeists” or the “volksgemeinschafts” of the Russian and Chinese people to world historical status:

The sides note that Russia and China as world powers with rich cultural and historical heritage have long-standing traditions of democracy, which rely on thousand-years of experience of development, broad popular support and consideration of the needs and interests of citizens. Russia and China guarantee their people the right to take part through various means and in various forms in the administration of the State and public life in accordance with the law.  The people of both countries are certain of the way they have chosen and respect the democratic systems and traditions of other States.

…

The sides note that the Charter of the United Nations and the Universal Declaration of Human Rights set noble goals in the area of universal human rights, set forth fundamental principles, which all the States must comply with and observe in deeds.  At the same time, as every nation has its own unique national features, history, culture, social system and level of social and economic development, universal nature of human rights should be seen through the prism of the real situation in every particular country, and human rights should be protected in accordance with the specific situation in each country and the needs of its population.

…

The Russian side notes the significance of the concept of constructing a “community of common destiny for mankind” proposed by the Chinese side to ensure greater solidarity of the international community and consolidation of efforts in responding to common challenges. The Chinese side notes the significance of the efforts taken by the Russian side to establish a just multipolar system of international relations.

Here, the Russian and Chinese governments are rejecting any need to subordinate their decisions to what is right for humanity to standards and decisions of the United Nations or traditional international law.

The Putin /Xi Pact directly and expressly denounces efforts by nations to impose moral and political standards on other nations:

The sides note that democratic principles are implemented at the global level, as well as in administration of State.  Certain States’ attempts to impose their own “democratic standards” on other countries, to monopolize the right to assess the level of compliance with democratic criteria, to draw dividing lines based on the grounds of ideology, including by establishing exclusive blocs and alliances of convenience, prove to be nothing but flouting of democracy and go against the spirit and true values of democracy.  Such attempts at hegemony pose serious threats to global and regional peace and stability and undermine the stability of the world order.

…

The sides reaffirm their strong mutual support for the protection of their core interests, state sovereignty and territorial integrity and oppose interference by external forces in their internal affairs.

…

The sides believe that the advocacy of democracy and human rights must not be used to put pressure on other countries.  They oppose the abuse of democratic values and interference in the internal affairs of sovereign states under the pretext of protecting democracy and human rights and any attempts to incite divisions and confrontation in the world.  The sides call on the international community to respect cultural and civilizational diversity and the rights of peoples of different countries to self-determination.  They stand ready to work together with all the interested partners to promote genuine democracy.

Here, Vladimir Putin and Xi Jinping propose to form alliances and partners with those countries (governments?) which share this volkgeist perspective.

To put a fine point on Putin’s and Xi’s adoption of the will to power as an acceptable ethic, their Pact replicates the conquest of other lands which was the objective of the Hitler/Stalin Pact:

The Russian side reaffirms its support for the One-China principle, confirms that Taiwan is an inalienable part of China and opposes any forms of independence of Taiwan.

Russia and China stand against attempts by external forces to undermine security and stability in their common adjacent regions, intend to counter interference by outside forces in the internal affairs of sovereign countries under any pretext, oppose colour revolutions, and will increase cooperation in the aforementioned areas.

In moral opposition to the principles advanced by the Putin/Xi Pact, the Caux Round Table Principles for Government affirm:

Just as the Principles for Business, these Principles for Government derive from two ethical ideals: “kyosei” and “human dignity.” The Japanese concept of “kyosei” looks to living and working together for the common good, while the moral vision of “human dignity” refers to the sacredness or value of each person as an end, not simply as a means to the fulfillment of others’ purposes or even of majority demands.

…

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

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.

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.

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, avoid 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.

At this time, I am most vividly reminded of the words of an old song we used to sing in the American Civil Rights Movement in the 1960s, a song which was taken over from movements to organize unions in American companies:

Everybody now, which side are you on?
Which side are you on? Everybody
Which side are you on?

If our choice today is a Manichean one between the dark side or the better angels side of our natures, I choose the angelic.

It would, therefore, seem that principles for moral government and moral capitalism are needed now more than ever.  I trust you will agree with me.

Here’s the February edition of Pegasus.

In this issue, we include a very unique piece on the art and architecture of moral capitalism and another on the Yijing.

I would be most interested in your thoughts and feedback.

Our colleague, Professor Hashim Kamali, Founder and Director of the International Institute of Advanced Islamic Studies in Kuala Lumpur, has sent me an essay on the values in Islam which provide grounds for our promoting sustainable development.  Prof. Kamali is included in the 2022 list of the world’s 500 most influential Muslims.

From its inception, the Caux Round Table presumed that an ethic of responsibility in business and finance would resonate with many wisdom traditions and so could appeal to global communities for support of its aspirations.  Prof. Kamali’s essay is, to me, further proof of this profound and reassuring proposition.

You may read his essay here.

In 1999, two journalists wrote a book titled Dow 36,000.  At the time, the Dow Jones Industrial Average was a measure of the price performance of the New York Stock Exchange.  At the time, the Dow was at 8,800.  In 1994, it had been 3,400.  Two years later, the Dow was still rising and Federal Reserve Chairman Alan Greenspan worried in public about “irrational exuberance.”

Many thought: “Not in my lifetime!”

As I write this, the Dow is at 35,112.

The Dow closed higher than 36,000 for the first time on November 2, 2021.

Does this mean that capitalism really works as promised – creating the wealth of nations?  What happened?

Time and low interest rates.

Time makes it possible for compounding returns to take effect.  Here is a compound interest chart:

The higher the return and the longer the time the investment is left also to grow, the more dramatic the total return.

Secondly, low interest rates.  For various reasons, governments have put trillions of dollars in both the U.S. and the global economies since the late 1990s.  More money, lower interest rates.

Then, earnings on stocks (dividends and buybacks) and expectations of continued entity profitability outpace what can be earned in interest by investing in debt instruments.  So, rational investors put their money in stocks and keep it there.  The Dow just keeps on rising, day in and day out.

Now, importantly, wealth makes for differences in marginal utility of an additional dollar and in the consequences of risk.  Wealthy people have a lower marginal utility for each dollar they own and so can tolerate risk better.  They can put money away for the long-term in more risky investments and so earn the higher returns that go with higher risk and, thus, get more in compounding returns on their equity investments.

Poor people need to be more prudent and not take long-term risks.  They also don’t have much money to use for investments after their consumption expenditures.  They are systemically limited in being able to benefit from long-term stock investments.

A particular stock is more risky in the short and medium-term that if held for years and years. Risk-averse investors should stay away from long-term bets on equity ownership.

Secondly, the liquidity provided by governments and central banks tends to flow to the wealthy. They, in turn, have more income than they consume, so they are systemically more able to save and to keep their savings untouched.

Thirdly, the rise of huge investment funds have lowered risks for stock ownership.  The big funds diversify risk by investing in many, many companies.  Thus, they have provided a safer haven for money invested in equities, which pay more than bonds and other debt contracts.  This has attracted money into equity investments.

These economic realities have kept financial markets growing and growing for 25 years.  Here is a chart on the Dow’s performance:

 

I saw in a recent Harvard Business Review mention of an article in the Academy of Management Journal noting that “Hedge funds see high levels of CSR activity as a signal that a firm is wasteful and ripe for cost-cutting.” The researchers found that in a sample of 16,000 firms, the higher a firm’s CSR score, the more likely it would be targeted by an activist hedge fund.

For firms targeted, on average, 25% reduce CSR spending after the attack on their business model by some owners.

The article concluded that firms with CSR commitments need to find investors with similar values – the love of something other than ready money.

Larry Fink of BlackRock recently released his 2022 letter to CEO’s.

It is immodest of me, but truthful nevertheless, to point out that Mr. Fink’s understanding of capitalism is nicely tracking the work of the Caux Round Table’s founders some 36 years ago.

For example, Fink wrote:

At the foundation of capitalism is the process of constant reinvention – how companies must continually evolve as the world around them changes or risk being replaced by new competitors.  The pandemic has turbocharged an evolution in the operating environment for virtually every company.  It’s changing how people work and how consumers buy.  It’s creating new businesses and destroying others.  Most notably, it’s dramatically accelerating how technology is reshaping life and business.  Innovative companies looking to adapt to this environment have easier access to capital to realize their visions than ever before. 

…

I believe in capitalism’s ability to help individuals achieve better futures, to drive innovation, to build resilient economies and to solve some of our most intractable challenges.

Then, he gets specific about how capitalism makes the world better – brings inventions to scale for mass consumption:

Engineers and scientists are working around the clock on how to decarbonize cement, steel and plastics; shipping, trucking and aviation; agriculture, energy and construction.  I believe the decarbonizing of the global economy is going to create the greatest investment opportunity of our lifetime.

…

The next 1,000 unicorns won’t be search engines or social media companies, they’ll be sustainable, scalable innovators – startups that help the world decarbonize and make the energy transition affordable for all consumers.

So, how is all the money Larry Fink is talking about going to find the right technologies to get our world to zero net carbon emissions?

Well, we have been commenting on that process as the secret sauce of capitalism – reaching out to tech types and risking funds in the development of new technologies to commercialize.

Another such opportunity is a battery capable of powering passenger aircraft in flight.  From The Independent:

Researchers have achieved a world-leading energy density with a next-generation battery design, paving the way for long-distance electric planes.

The lithium-air battery, developed at the Japanese National Institute for Materials Science (NIMS), had an energy density of over 500Wh/kg.  By comparison, lithium-ion batteries found in Tesla vehicles have an energy density of 260Wh/kg.

The new battery can also be charged and discharged at normal operating temperatures, making them practical for use in technologies ranging from drones, to household appliances.

According to the researchers, the battery “shows the highest energy densities and best life cycle performance ever achieved” and marks a major step forward in realizing the potential of this energy storage.

“Lithium-air batteries have the potential to be the ultimate rechargeable batteries: they are lightweight and high capacity, with theoretical energy densities several times that of currently available lithium ion batteries,” according to a release posted by NIMS.

Energy density has been the biggest obstacle towards the advancement of electric planes, with 500Wh/kg viewed as an important benchmark for achieving both long-haul and high-capacity flights.

The batteries work by combining oxygen in the air with the lithium present in the anode, which comes with safety issues that the latest research was able to overcome.

Until now, electric planes have been small and incapable of carrying large numbers of passengers over long distances, with efforts typically focusing on short-distance, private aircraft.

This week, Rolls-Royce’s Spirit of Innovation electric plane was confirmed to be the world’s fastest battery-powered vehicle after achieving speeds of over 600kph (380mph).

Achieving such feats on a larger scale would not only reduce pollution from fuel-burning engines, but also eliminate noise pollution that forces airports to be located in areas with low population densities.

I once heard a biologist say why don’t we make our own photosynthesis machine – no need to rely on plants to store solar energy?  Well, an item in SciTechDaily reports on just such innovation:

A research team has developed a new artificial photosynthesis device component with remarkable stability and longevity as it selectively converts sunlight and carbon dioxide into two promising sources of renewable fuels – ethylene and hydrogen.

The researchers’ findings, which they recently reported in the journal Nature Energy, reveal how the device degrades with use, then demonstrate how to mitigate it.

“By understanding how materials and devices transform under operation, we can design approaches that are more durable and thus reduce waste,” said senior author Francesca Toma, a staff scientist in the Liquid Sunlight Alliance (LiSA) Berkeley Lab’s Chemical Sciences Division.

For the current study, Toma and her team designed a model solar fuels device known as a photoelectrochemical (PEC) cell made of copper(I) oxide or cuprous oxide (Cu₂O), a promising artificial photosynthesis material.

Cuprous oxide has long puzzled scientists, because the material’s strength – its high reactivity to light – is also its weakness, as light causes the material to break down within just a few minutes of exposure.  But despite its instability, cuprous oxide is one of the best candidate materials for artificial photosynthesis because it is relatively affordable and has suitable characteristics for absorbing visible light.

To better understand how to optimize the working conditions for this promising material, Toma and her team took a closer look at cuprous oxide’s crystal structure before and after use.

Electron microscopy experiments at the Molecular Foundry confirmed that cuprous oxide quickly oxidizes or corrodes within minutes of exposure to light and water.  In artificial photosynthesis research, researchers have typically used water as the electrolyte in the reduction of carbon dioxide into renewable chemicals or fuels, such as ethylene and hydrogen – but water contains hydroxide ions, which leads to instability.

But another experiment, this time using a technique called ambient pressure X-ray photoelectron spectroscopy (APXPS) at the Advanced Light Source, revealed an unexpected clue: cuprous oxide corrodes even faster in water containing hydroxide ions, which are negatively charged ions comprised of an oxygen atom bound to a hydrogen atom.

“We knew it was unstable – but we were surprised to learn just how unstable it really is,” said Toma.  “When we began this study, we wondered, maybe the key to a better solar fuels device isn’t in the material by itself but in the overall environment of the reaction, including the electrolye.”

To validate their simulations, the researchers designed a physical model of a Z-scheme artificial photosynthesis device at Toma’s LiSA lab at Berkeley Lab.  To their delight, the device produced ethylene and hydrogen with unprecedented selectivity – and for more than 24 hours. “This is a thrilling result,” said Toma.