Can Capitalism and Altruism Ever Co-exist?
After the $32 billion dollar collapse of FTX, the offshore crypto exchange, one has to wonder whether capitalism and altruism can ever co-exist. Must they be pursued separately lest one corrupt the other? Vox, the online magazine, has what appears a good looking series of articles on “effective altruism,” the feel good movement that partly motivated SBF (Sam Bankman-Fried) to pursue great wealth only to crash and burn in a Delaware bankruptcy court. Long before that, Milton Friedman condemned corporate social responsibility (CSR) as a socialist plot. ESG and woke corporations are the contemporary labels, but the debate is the same (except the R. DeSantis-led attack on Woke corporations is grounded in racism, not just preserving the American way, unless of course racism is the American way). Occurrences like FTX lend support to efforts to label altruism and concern for social justice as somehow dangerous to capitalism. But I have not read enough about EA or ESG yet to intelligently comment on the extent to which the morality of charity impacts capitalism. I teach tax and business, and this past semester I was dragooned into teaching Securities Regulation so I have started thinking again about whether the mad pursuit of profit is still the best way to provide the most stuff for the most people. I even wrote a short op/ed on the topic. My local newspaper declined to print it; the editor wanted me to be more strident and angry about racial strife when really I was only trying to make the point that profit-making and altruism need not be mutually exclusive. SBF has not made that mission easier.
THE WOKE CORPORATION
Recently, and at considerable risk of violating the law, my Business Law students and I debated “corporate social responsibility” (CSR). CSR is pretty much standard fare in most business law books but it makes for especially lively discussion after Florida adopted Governor DeSantis’ “Stop Woke Act.” It’s hard to say whether I was violating the law because instead of focusing on slavery, segregation, or DEI, we discussed Ford Inc.’s 1913 decision to cut car prices from $900 to $360 even though Ford was selling cars faster than it could produce them even at the higher price. “No matter,” thought Henry Ford. “We pay dividends well over $300 million dollars per year (in today’s dollars), we can be rich and still reduce the price of cars so that every family can afford one.” Wokeness is not just about Black Lives Matter. Anyway, Ford envisioned the transformation of an agrarian society into one that, through transportation and logistics, would become the world’s center of industry and wealth. Ford was sued for being woke and lost. The judge said corporations exist to make profits, not to be concerned with charity and social welfare. In the mid-1960’s shareholders sued PK Wrigley because he would not install lights around the “Friendly Confines.” Back then the Cubs lost money and games. Installing lights would surely have increased profits, though maybe not wins, because more people could attend games after work. But PK worried about tradition and ruining the north side neighborhood ambiance. PK won because the judge gave a wink and a nod to his wokeness. During the height of the Vietnam War, Business Executives Move for Peace in Vietnam (BEM) took out full page ads against the war even as the military industrial complex generated skyrocketing profits. BEM was a nationwide group of highly placed woke CEOs and business leaders. One ad stated, “we have killed, wounded or burned more than one million children” in Vietnam. A nonprofit group purchased shares in Dow Chemical, Inc. and began agitating from within to stop Dow’s manufacture of napalm. Napalm was a legal product generating incredible profit, but it had horrendously indiscriminate effects on Vietnamese women, children, and old folk. The famed economist Milton Friedman wrote a passionate condemnation of CSR that year. Like DeSantis today, Friedman argued that CSR was mere ruse to convert America to socialism. His argument was crudely articulated but his defense of amoral capitalism was not without validity. I assigned Friedman’s essay so that my students would better debate the costs and benefits of corporate capitalism, with its pursuit of profit as the best way to lift all boats. I tend to believe JFK’s mantra, that the legal pursuit of profit provides the most benefit for the most people. This despite the left’s ability to pejoratize “trickle down economics” as effectively, if not more, than the right’s continuing efforts to pejoratize “woke” today. In the 80’s corporations began divesting from South Africa in protest of apartheid, though doing so cost shareholders huge profits from cheap black labor. Today, corporations face pressure from all sides regarding ESG – business policies that consider corporations’ impact on environment, social justice, and [democratic] governance (ESG). DeSantis even attacked Disney for daring to say something about social justice when all Disney really did was “tsk-tsk” about DeSantis’ “Don’t Say Gay” law. My class vigorously debated CSR as it relates to a variety of topics, including corporations’ use of slave labor in Nazi Germany, profits from legal but lethal products like cigarettes and opioids, and yes even diversity training in the workplace. The CSR – now Woke or ESG – debate is both legitimate and nothing new. Whether corporations should stay in their profit-making lanes, pursue social justice, or engage in culture wars is a valid but old debate.
dkj