The Start
In January of 2013, Harvard Business Review published the first edition of a book “Conscious Capitalism: Liberating the Heroic Spirit of Business. The book’s central premise was that, while free-enterprise capitalism is the most powerful system for wealth and human progress, the potential for business to lift even more people out of poverty and create even more prosperity is possible — if we could aspire to a higher level of consciousness about the interconnectedness of all stakeholders impacted by our businesses. “Conscious Capitalism” was co-authored by John Mackey, co-founder and CEO of Whole Foods Market, and Raj Sisodia, then a Bentley University professor.
Traditional values of capitalism have been prevalent since the start of the Industrial Revolution, and those values are supported by the linear model of extracting abundant resources while not considering the waste or the larger impact. We understand that capitalism is an essential force that powers the global economy, but there have been many examples of that power being misused and even causing harm to society. Circularity in the above picture emphasizes the importance of the overall health of systems and stakeholders so that the economic aspect of business does not hurt social and environmental aspects. What we desperately need is a shift to a more thoughtful and relevant form of capitalism that is sustainable in the long-run. Stakeholder capitalism shifts corporations into refocusing on purpose, instead of profit.
Brutality of American Capitalism Started Slavery on the Plantation
The New York Times magazine reported the following articles: In the United States today, the richest 1 percent of Americans own 40 percent of the country’s wealth. In United States, a larger share of working-age people (18-65) live in poverty than in any other nation belonging to the O.E.C.D. The capitalism in the United State has been brutal to many of its citizens and workers for centuries.
Founded by the Dutch as New Amsterdam in 1625, what would become the City of New York first imported 11 African men in 1626. The Dutch West India Company owned these men and their families, directing their labors to common enterprises like land clearing and road construction. After the English Duke of York acquired authority over the colony and changed its name to New York, slavery grew harsher. As the historian Leslie Harris has written, 40 percent of New York households held enslaved people in the early 1700s.
In the early 1700s, slaves were the dominant collateral in South Carolina. Many Americans were first exposed to the concept of a mortgage by trafficking in enslaved people, not real estate, and “the extension of mortgages to slave property helped fuel the development of American (and global) capitalism,” the historian Joshua Rothman told. The large-scale cultivation of cotton hastened the invention of the factory, an institution that propelled the Industrial Revolution and changed the course of history
Historians have tended to connect the development of modern business practices to the 19th-century railroad industry, viewing plantation slavery as precapitalistic, even primitive. When enslaved workers grew ill or old, or became pregnant, they were assigned to lighter tasks. The American South rashly overproduced cotton. With an abundance of cheap land, labor and credit, consumer demand couldn’t keep up with supply, and cotton prices fell as early as 1834 and plunged to become the panic of 1837.
In 1991, construction workers uncovered an extensive 18th-century African burial ground in Lower Manhattan, the final resting place of approximately 20,000 people.
Anti-Capitalism: The Communism & Socialism
Among critiques of capitalism are accusations that capitalism is inherently exploitative, alienating, unsustainable, and creates massive economic inequality, inhumane, and even erosive of human-rights. Early communist/socialist thinkers rejected capitalism altogether, attempting to create socialist communities free of the perceived injustices of early capitalism. In 1848 Karl Marx and Friedrich Engels released “The Communist Manifesto”, which outlined a political and economic critique of capitalism based on the philosophy of historical materialism. Pierre-Joseph Proudhon, was another critic of capitalism and called himself an anarchist.
By the early 20th century, myriad socialist tendencies had arisen based on different interpretations of current events. Governments also began placing restrictions on market operations and created interventionist programs, attempting to amend market-economy’s shortcomings like Keynesian economics and the New Deal.
Following the events in Russia in 1989, many of these Communist states adopted market economies. Capitalism has been criticized for establishing power in the hands of a minority capitalist class that exists through the exploitation of a working-class majority; for prioritizing profit over social good, natural resources and the environment; and for being an engine of inequality and economic instability.
Statistics of the Bureau of Internal Revenue reveal the following amazing figures for 1935: “Ownership of corporate assets: Of all corporations reporting from every part of the USA, one-tenth of 1 percent (0.1%) of them owned 52 percent of the assets of all of them”.
The Collapse of the Communist Soviet Union
Gorbachev’s decision to loosen the Soviet burden on the countries of Eastern Europe created an independent, democratic momentum that led to the collapse of the Berlin Wall in November 1989, and then the overthrow of Communist rule throughout Eastern Europe.
On December 25, 1991, the Soviet hammer and sickle flag was lowered for the last time over the Kremlin, and replaced by the Russian tricolor. Earlier in the day, Mikhail Gorbachev resigned his post as president of the Soviet Union, leaving Boris Yeltsin as president of the newly independent Russian state. People all over the world watched in amazement at this relatively peaceful transition from former Communist monolith into multiple separate nations.
It is interesting to know why the leading communist country collapsed. While there are many theories flying all over the world, no one can pinpoint the exact cause. My interest goes to Chinese analysis because China is still continues with the Communist system today.
Chinese Communist Party (CCP)
The CCP was founded in 1921 and the establishment of the People’s Republic of China on October 1949. It controls the country’s armed forces, the People’s Liberation Army (PLA). According to CCP constitution, the CCP adheres to Marx-Leninism, Mao Zedong Thought, Socialism with Chinese Characteristics etc. Simply put, the CCP has been following Soviet era principles and past to present Chinese leaders ideas. After Mao’s death, Deng and his fellows reformed CCP policy and introduced the ideological concept of socialism with Chinese characteristics by opening China to the world’s markets. In reversing some of Mao’s “leftist” policies, Deng argued that a socialist state could use the market economy without itself being capitalist. In 1997, the Deng Xiaoping Theory was included in the CCP constitution.
While the CCP claims that China is in the primary stage of socialism, party theorists argue that the current development stage “looks a lot like capitalism”. Certain party theorists argue that “capitalism is the early or first stage of communism.” Some have dismissed the concept of a primary stage of socialism as intellectual cynicism. CCP even reiterated Deng’s mantra at the 14th National Congress that it was unnecessary to ask if something was socialist or capitalist, since the important factor was whether it worked.
It is interesting to note that Chinese policy-makers believe that the main reason for the dissolution of the Soviet Union was its stagnant state ideology. That is why the CCP believes that their party ideology must be dynamic(change) to safeguard the party’s rule. They think that the Communist Soviet Union collapsed due to Soviet ideology becoming “rigid, unimaginative, ossified, and disconnected from reality.”
As CCP is adopting multiple lines of thoughts altogether, foreign watchers have stated that the CCP lacks a coherent ideology. CCP still identifies as a communist party. Foreign observers of the CCP comment that the party organization likes that which is pragmatic and is interested only in what works even if it is a typical capitalist policy; although the CCP insists that they are communists.
Idea of Conscious Capitalism
In the summer of 2019, 181 chief executives from the Business Roundtable – a lobbying organization that represents many of USA’s largest companies like Apple, JPMorgan Chase, Pepsi and Walmart – got together to try and redefine the role of business in society. They stated “the purpose of a corporation”, noting that companies should no longer advance only the interests of shareholders. Instead declaring that they must also invest in their employees, protect the environment and deal fairly and ethically with their suppliers. The companies also vowed to “protect the environment by embracing sustainable practices across our businesses” and to “foster diversity and inclusion, dignity and respect.”
This is currently the new trend in the world of capitalism. Reflections made from the bitter conflicts between capitalists and workers and examples of US slave history, today’s capitalism is different from even one generation ago. Like the CCP tries to modify rigid Communist policy in order to survive in current market economy, capitalism has been learning how to survive in a fast-changing market and unforgiving competition in the world.
While making money is essential for sustainability of a business, it is not the only or even the most important reason a business exists. Conscious businesses focus on their purpose beyond profit. They recognize that, without employees, customers, suppliers, funders, supportive communities and a life-sustaining ecosystem, there is no business. Conscious Business is a win-win-win proposition, which includes a healthy return to shareholders. The key is “for long term” view.
It is interesting to note that Conscious Capitalism was born in the United States. In my eyes “historical and cultural difference” plays a big part in capitalism. Brutal American capitalism had to change toward a more mild and humane way to make everybody happy. The reason for the birth of Communism by Karl Marx itself was capitalist brutality. In my view, if capitalist brutality toward everybody is softened, the need for Communism-Socialism shall disappear.
The Issues of Communism
The Communism-Socialism combination has too many problems. Experiment of Soviet Union ended with a failure making tens of millions of people miserable. China has been trying to change the course of Communism by even adopting capitalist policies. They openly state that they take from capitalist policies and call it “socialist with Chinese characteristics.” In addition, Communist policy restricts people’s freedom and when Soviet Union collapsed, not a single citizen came out to defend Communism. Under Communism people simply become unhappy. I wonder how many happy people there are in China.
The picture of “pure capitalism vs. pure communism” has been circulating in the human heads. However, anything pure is not a good fit in this practical world. Conscious capitalism is the vector toward making everybody happy. Never be fooled by “scientific and logical theory.” It too has many faults.
Discussion on the concept of conscious capitalism will continue in my next blog.