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Since the dawn of the industrial age, critics of its reliance on capitalism for continuous innovation and growth have pointed accusing fingers at systemic aspects of private property, free markets and limited government regulation for capitalism’s many unequal outcomes and power imbalances.

But what if the root cause of the shortcomings of capitalism are not in its architecture but in the minds and hearts of those who make use of its structure for their own purposes?

Recently, I read an essay on Thucydides’ History of the Peloponnesian War. Two insights from that first Western historian would incline us not to blame systems but rather look for causes and offsetting remedies elsewhere.

Thucydides thought that “…the usual thing among men is that when they want something, they will, without any reflection, leave that to hope, while they will employ the full force of reason in rejecting what they find unpalatable.”

Markets generate wants, as honey draws flies. Is it any surprise, then, that people in markets cling to hope when they should not and rationalize away what is inconvenient or unsettling in their transactions, especially any personal responsibility for doing good to others?

Thucydides also said: “War is a stern teacher … it brings most peoples’ minds down to the level of their actual circumstances.” War throws “the ordinary conditions of civilized life into confusion; human nature, always ready to offend even where laws exist, show[s] itself proudly as something incapable of controlling true passions, insubordinate to the idea of justice, the enemy of anything superior to itself.”

Many have pointed out the supposed similarities between war and markets: dog eat dog competition; to the victor belong the spoils; survival of the fittest; no empathy for losers. So markets, like war, expose the rawness of human nature, bloody red in tooth and claw.

There is something to the comparison. People do not lose their human natures when they go to market. So when market realities – no free lunch, prices too low or too high – bring them down to actual circumstances and sow confusion in their framing of expectations and aspirations, their passions take over and become insubordinate to justice. They consider their own interests paramount and not subordinate to the concerns of others.

So in a sense, it is a system that creates our disappointments, a natural system, if you will. But the market system of our own devising for production, finance and consumption, at times, brings forward human nature in the raw – untrammeled, unpolished, un-burdened by virtuous sentiments, unadorned by beauty.

The solution: reform the market system or change our natures?

The Interim Australian Royal Commission report on abuse of marketing by financial firms was released last month. The executive summary of the report can be found here.

The techniques for enhancing firm revenues brought under scrutiny do not measure up to standards of moral capitalism. Once again. I s such taking advantages of customers inescapable in capitalism as a function of a human nature which is programmed to deviate towards selfishness or can market incentives be arranged to offset that propensity with more ethical fidelity?

Noel Purcell, Chairman emeritus of the Caux Round Table for Moral Capitalism who worked on CSR for WestPac Bank in Sydney, has submitted a response to the Royal Commission’s interim report, which can be found here.

In Noel’s distinctive and distinguished fashion, his response is short and forceful. I urge you to read it and let me know your thoughts.

One hundred years ago today, the fighting in World War I ended in an armistice agreement. An old order disappeared and our modern era began. The work of our Caux Round Table for Moral Capitalism (CRT) has evolved to challenge the darker sides of our modern temperament by providing ideals and standards for constructive globalism and just social orders.

Thanks to World War I, an imperial age evaporated. Russian, Ottoman, German and Hapsburg empires collapsed. The British Empire, though triumphant on the battlefields of Europe and the Middle East, was financially wounded and spiritually subverted. The 2,000 year Chinese empire in Beijing, in the process of collapse, would be replaced first by warlordism, then by civil war and then by an ideological, one-party dictatorship. The Japanese attempt to create a new empire in East Asia and the attempt by Hitler to build a similar empire in Europe would both fail. The United States emerged as a first among equals with a determining role to play in building a new international political and economic order.

The new norm for the global community became the self determination of peoples. Each “people” was thereafter entitled to a sovereign nation state, a legal order derived from the 1648 European Westphalian compromise between church and secular powers. To protect nation states, aggressive war was outlawed. This norm was incorporated into the League of Nations and today’s United Nations. To check the powers of such national sovereignties, international law on human rights was created and multilateral organizations were established.

But the definition of who a people entitled to its own state might be was left vague. Today, conflicts among “peoples” are a source of contention and violence. What is the proper status of the Scots, Catalans, Palestinians, North and South Koreans, Uighurs, Tibetans, Kurds and the Ukrainians? What is the proper balance of power between the peoples of the European Union and the Union’s central administration? Does China have sovereign territorial rights over the South China Sea or the Senkaku Islands? Are the Taiwanese a “people?”

The end of World War I ushered in modern culture with its angst and distempers of nihilism and narcissism. In Europe, history was abandoned as having led to failure of systems. Architecture abandoned classicism and turned to modernism with its clean horizontal and vertical lines and its ideal that form should follow function. Philosophy under Dewey and Wittgenstein embraced rational skepticism. Law turned more and more to legal positivism and instrumental response to contemporary values and policy needs. Music replaced symphonies with Jazz and syncopation. In literature, Joyce, Proust, Kafka and Hemingway set forth new modes of writing and chose new subjects for reflection. Innovation, embracing whatever was not old, became the common currency of culture. The marginalization of religion began. The spirit of the age became what Pope Francis calls “anthropocentrism” – humankind taking over from both God and nature.

Modernity was thus unsettling and still is. Reaction set in, perhaps most importantly under Hitler in Nazi Germany.

In economics, after World War I, socialism took on new power to displace capitalists as a ruling elite. Our economic order is still unsettled by the conflicting claims of capital and labor. Governments evolved a welfare state ideology to balance and compromise the respective interests of finance, production, workers and communities. The collapse of the Soviet Union and the shift to “socialism with Chinese characteristics” in China under Deng Xiaoping solidified a modern approach to economic growth and social justice which blends private goods and the common good on terms mediated by the state.

Thus, the CRT’s principles for business, ethical government and ownership of wealth address the central problem of our time.

Our need to move beyond the fears and power imbalances of today can be met by finding common cause in fundamentals so that the “upsettingness” of modernity becomes both constructive and comfortable for all.

Inscribed on his grave is Karl Marx’s Thesis Eleven on the philosopher Feuerbach: “The philosophers have only interpreted the world in various ways; the point, however, is to change it.“ And on David Livingston’s burial market in Westminster Cathedral are his last written words: “All I can add in my solitude, is, may Heaven’s rich blessing come down on everyone, American, English, or Turk, who will help to heal this open sore of the world.”

As I stood on the back of our Capital in Washington, D.C. on Friday, January 20th, 1961, I heard our new President John F. Kennedy urge: “Don’t ask what your country can do for you. Ask rather what you can do for your country.” Today, I would amend that to replace country with “world.”

One hundred years after the Great War – the War to end all wars, the War to make the world safe for democracy – ended, our task remains to act to ensure that modernity reflects the better angels of our nature.

Swiss bank UBS just released its 2018 report on the world’s billionaires. A few factual highlights I thought would be of interest to you:

• Globally, billionaire wealth increased by USD 1.4 trillion to USD 8.9 trillion in 2017, its greatest absolute growth ever, with China minting 2 billionaires a week.
• Billionaires have driven almost 80% of the 40 main breakthrough innovations over the last 40 years. Approximately 70% are technology-related and 80% of the companies behind them are based in the Americas.
• A new cohort of Chinese entrepreneurs is challenging Silicon Valley amid rising tensions over trade and intellectual property. With 50 unicorns produced in China and 62 in the U.S., the Chinese are proving restless innovators and disruptors.

A short comment on rent-seeking:

It may be that the most thoroughgoing distortion of free markets and capitalism is rent-seeking – consolidation of firms to give commodity pricing and market dominance to a few, benefiting from favorable government privileges and regulations (also obtaining market privileges through the prevention of regulation), cronyism of all sorts, agreements in restraint of trade,…

We should not, therefore, blame capitalism or those in finance and enterprise for the sins of rent-seeking, only those who engage in rent extraction.

I noticed recently in The Economist a claim that in the U.S., rent-seeking through special tax benefits is profitable. The money spent on lobbyists who arrange for the special tax advantages to be adopted by the Congress or through administrative interpretation of regulations earns a return for companies of 22,000%. Secondly, American financial firms which spent the most on lobbying benefited disproportionately from bank bailouts after the 2008 financial crisis.