Capitalism Isn’t A Love Story: Noreena Hertz & The New World Order
by Latoya Peterson, originally published at Jezebel
Latoya’s Note: This one is off-topic. We do racial analysis here, but sometimes it spins off into other conversations about concepts that influence racial inequality. Capitalism is one of them, and something we have not discussed at length here. I originally published this on Jezebel, but I am curious to see the reactions from this audience. – LDP
“We have to tolerate the inequality as a way to achieve greater prosperity and opportunity for all,” says Brian Griffiths, Goldman Sachs International Economic Adviser. But when does the inequality end? Noreena Hertz, rogue economist and capitalist reformer, says now.
To my amusement, the Fast Company profile must have originally been named “Cassandra’s Revenge” judging from the URL. In the heavily gendered article (Hertz is described as “seduc[ing] Bono;” being “teacup-size”; having a “waifish figure” and is spotted with “pink fishnets” and a “hot pink blackberry”) Danielle Sacks describes exactly why Hertz is causing an international sensation:
Few academics have leaped from the critical fringes to the role of prophet as adroitly as Hertz. Wielding her contrarian message — that markets need to serve the interests of people as much as they serve companies or shareholders — Hertz has been campaigning for the past decade against the mantras of mainstream economists, urging a more ethical form of capitalism. But her message isn’t some yoga-infused spiritual quest. As she explained in her 2001 European best seller, The Silent Takeover, it is about the unsustainability — environmentally, socially, and economically — of laissez-faire capitalism and the idea that markets are stable. If the surge of corporate power was going to leave governments relatively impotent, Hertz argued, then those corporations themselves needed to fill the void. “She moved the conversation from what corporations can do to be socially responsible to a much more profound examination of the boundaries of corporate behavior and public behavior and where they have failed,” says Debora Spar, who was a dean at Harvard Business School for nearly two decades and is now president of Barnard. “She’s much more radical.”
Hertz — part activist, part detective — argues that both economics and business need to be put back into the human social context. “Over the past 30 years, economics became a narrow field completely out of touch with reality,” says Hertz, 41, who sees the discipline as a jigsaw puzzle. “I don’t believe you can reduce the world to a mathematical formula. I start with the world, assume it’s complicated, and ask where can I get help from a whole range of disciplines.” Drawing on subjects as diverse as anthropology, physics, geopolitics, and neurology, Hertz’s economic vision is at once eclectic and holistic, which may explain her apparent ability to foresee dangers and opportunities others do not. It is also relentlessly pointed, serving an explicit agenda — making corporations realize that they can no longer operate in their Adam Smith — designed bubble. “I really believe in a globalist agenda, but globalization isn’t just allowing companies to trade freely all over the world. It’s about what types of rights and responsibilities come with that,” Hertz says. With inequality surging, resources diminishing rapidly, and the earth’s very future in question, capitalism-at-all-costs is no longer an option, she insists: “I have problems with this very extreme form of capitalism where the pendulum has swung so far in one direction, where the focus is completely on the short term, and no one is thinking about the consequences.”
Can I get a hell yeah?
Hertz has since devoted her career to debunking economic myths. After a year, she quit her World Bank job and spent another four years in Russia while getting her PhD in economics and business at Cambridge. Hertz published a book indicting the World Bank and the IMF for imposing American-style capitalism on Russia without contemplating the social cost. “It was never about being anti-capitalist,” she says. “I realized that how an economy functions is not just about a market anonymously distributing things but also the way people relate to each other, their beliefs, the way power is distributed. All of that was being ignored.” She points out that life expectancy in Russia has fallen by 15 years since the early ’90s. Says punk fashion designer Vivienne Westwood, a fan of Hertz’s work: “Noreena looks at economics from the other side. From the people it suppresses. This is what punk is all about.”
The punk economist spent years honing her ideas, railing against “Gucci Capitalism” since the 1990s. The premise of her work is simple: our systems are broken, and social equality will pay a major role in forming this new economy.
Hertz says that even though many necessary shifts — like caps on banker pay — haven’t happened yet, there are already indications that challenges to laissez-faire capitalism are taking shape. Anglo-American market dominance, she says, will be contested by emerging economies like those of Brazil, China, and India, whose votes are likely to be given greater weight by the World Bank and the IMF. At the same time, some countries are starting to question the notion that mere GDP defines success. France, based on recommendations from Nobel Prize economists Joseph Stiglitz and Amartya Sen, recently announced it would de-emphasize GDP in favor of other factors such as quality of life and the environment. (Hertz points out that a country’s “health” most often correlates with its levels of inequality, now at an all-time high in the United States.) To shake up the old boys’ networks, countries such as Norway and Spain have passed legislation that will require company boards to have 40% women. Hertz, too, is helping to drive these developments: She’s working with banks like ING to unite investors, environmental NGOs, and other groups in a dialogue about the thorniest global problems.
As Hertz points out repeatedly over the course of the piece, Smith style “consumption above all else; the market will fend for itself” philosophies are laughably out of date. Interestingly, Adam Smith is always the fall guy for consumption based capitalism, but that wasn’t his original intent. As Muhammad Yunus writes in World Policy Journal:
The need for reviewing the basic structure of capitalism has seemed appropriate on many occasions, but never so clearly as it is today. Indeed, in light of the current global economic crisis, there is strong support for a major overhaul of the system. In my view, one major change in the theoretical framework of capitalism is necessary-a change that will allow individuals to express themselves in multi-dimensional ways and address the problems left unsolved or even intensified by the existing conceptual framework. And although my proposal may be viewed as a significant change in the structure of capitalism, it is actually very consistent with what Adam Smith elaborated so brilliantly in his Theory of Moral Sentiments in 1759. [...]
Even if we can overcome the immediate crises we face, we will still be left with fundamental questions about the effectiveness of capitalism in tackling such unresolved problems as persistent poverty, lack of access to health care and education, and epidemic diseases. In my view, the theoretical framework of capitalism that is widely accepted today is a half-built structure-one that prevents Adam Smith’s “invisible hand” from operating as he believed it should, transforming the pursuit of individual gain into general social benefit through the workings of the marketplace.
In a sense, we have chosen to disregard half of Smith’s message. His landmark book, The Wealth of Nations, has drawn all the attention, while his equally important Theory of Moral Sentiments has been largely ignored. The present theory of capitalism holds that the marketplace is uniquely for those who are interested in profit only. This interpretation treats people as one-dimensional beings; but people are multi-dimensional, as Adam Smith saw so clearly two and a half centuries back. While we have a selfish dimension, we also have a selfless dimension.
The prevailing theory of capitalism, and the marketplace that has grown up around the theory, makes no room for the selfless dimension of people. If the altruistic motivation that exists in people could be brought into the business world, there would be few problems we could not solve.
Yunus then maps out everything that is wrong with the current system:
The financial system has broken down because of a fundamental distortion of its basic purpose.
Credit markets were originally created to serve human needs-to provide business people with capital to start or expand companies. In return for these services, bankers and other lenders earned a reasonable profit. Everyone benefited. In recent years, however, the credit markets have been distorted by a relative handful of individuals and companies with a different goal in mind- to earn unrealistically high rates of return through clever feats of financial engineering. They repackaged mortgages and other loans into sophisticated instruments whose risk levels and other characteristics were hidden or disguised. Then they sold and resold these instruments, earning a slice of profit on every transaction. All the while, investors eagerly bid up the prices, scrambling for unsustainable growth and gambling that the underlying weakness of the system would never come to light.
Let’s be clear here. What we are currently practicing isn’t capitalism. It’s a perversion of the original system, designed within a rigged system, set to benefit a few. And innovators like Yunus and Hertz are primed to lead us into a brave new market – or they would, if we were willing to listen.
(Image Credit: Josh van Gelder for Fast Company)
Goldman Sachs’s Griffiths Says Inequality Helps All [Bloomberg News]
How an Economist’s Cry for Ethical Capitalism was Heard [Fast Company]
Economic Security for a World in Crisis (PDF) [World Policy Journal]
Carmen Van Kerckhove is co-founder and president of
Deaf Indian Muslim Anarchist wrote:
This is a great post, very informative. Shit, I don’t know anything about economics and I never heard of Hertz, but now I’m glad I did.
I hope Racialicious will continue to have interesting articles like this.
Posted 04 Nov 2009 at 11:32 am ¶
atlasien wrote:
I agree 100% with Hertz and Yunus.
I’ve got an MBA. I know a fair amount about the stock market… and I know a lot of other people like me who are horrified at the way things are going.
I think the hardest part of the battle is trying to fight against the insane level of capitalism worship in the U.S. and in the world.
Capitalism isn’t evil. It isn’t good. It’s just a very powerful self-replicating structure that is totally indifferent to the happiness and long-term future of human beings. So many people have an irrational belief that if you worship it, and propitiate it, it will take care of you.
I just can’t believe how irrational it is. It’s like the most naive form of sun-worship. Logic: “the sun gives us warmth and light. The sun is the source of all that is good. As our form of worship and gratitude, let’s lie in the sun until we get cancer and stare into the sun until our eyes burn out.” That’s where we’ll end up if we don’t make some serious changes. Human beings need to take control of their own destiny and not just passively accept the current structure.
There are also huge connections with race because race makes it easier for economic equities to exist. And modern capitalism simply doesn’t work without massive inequities. You have to have cheap labor in some parts of the world in order to keep the engine running.
Posted 04 Nov 2009 at 11:50 am ¶
rosmar wrote:
“Let’s be clear here. What we are currently practicing isn’t capitalism. It’s a perversion of the original system, designed within a rigged system, set to benefit a few.”
I was with it up until that point. Capitalism started during colonization and slavery, and out of the remnants of feudalism–what’s the “original system” that wasn’t rigged and set to benefit only a few?
Posted 04 Nov 2009 at 11:52 am ¶
Latoya Peterson wrote:
@rosmar –
A lot of people seem to focus there. I suppose a better word would have been “ideal” or “designed” instead of original.
Posted 04 Nov 2009 at 11:54 am ¶
atlasien wrote:
@rosmar: I think getting into the “original system” is tricky, because there are so many definitions. The Marxian definition is that it’s primarily a historical stage, so there really is no such thing at all as pure original capitalism.
However, the basic concept of “capital” is not necessarily exploitative. In it’s most basic form, it can even be pre-feudal. For example, let’s say a merchant wants to trade seashells from village A for rare fabrics from another village B. They get a group of villagers in A to gather resources together for the journey, in exchange for a cut of the fabrics when the journey is complete. Those resources are the capital. Without this kind of structured risk/reward setting, trade would be almost impossible and higher forms of technology wouldn’t develop. So “capital” in itself is not bad.
Posted 04 Nov 2009 at 12:00 pm ¶
Slush wrote:
Who cares if what we are practicing is the real capitalism or not? If it is, then it still sucks, for all the above-described reasons.
And I don’t care whether this is all exactly what Adam Smith wanted, or whether we missed his message entirely. He’s not the messiah.
Yunus should realize that he himself knows as much or more about capitalism and markets than Smith did, and should challenge anyone who brings Smith into it on why what Smith ideally wanted matters at all, not whether or not they have the correct interpretation.
Anyway, great article. I hope that Hertz (maybe she already is) can also push back on the very idea of “economic rationalism,” and the mentality that money-based decisions are inherently more realistic or important than humanity-based decisionmaking. When we can look at people who raise financial arguments for human problems like they are out of touch and naive, the same way human rights activists get treated now, then that will be a serious victory.
Posted 04 Nov 2009 at 12:28 pm ¶
Latoya Peterson wrote:
@Slush –
And I don’t care whether this is all exactly what Adam Smith wanted, or whether we missed his message entirely. He’s not the messiah.
No, he isn’t – he’s just one economist. But what is fascinating is how much Smith is used as a justification for current practices, when evidence points to him having a completely separate idea than what is often ascribed to him.
Posted 04 Nov 2009 at 12:38 pm ¶
Gavin wrote:
The goal of capitalism is to produce profit, plain and simple. It still does that today. Off the miseries of the majorities, as it has always done. “Free markets,” “ethical/green capitalism” — this is an dress-up game of ideologies to make the system seem other than what it has always been: a system of exploitation of the many for the benefit of the few. It’s disturbing when people on the left think “creative solutions” consist of blithe reforms that hinge on “convincing corporations” to be nicer to their poor, helpless subjects that rely on them for survival. Real creative thinking would be looking for a way to change the whole rigged game.
Posted 04 Nov 2009 at 12:40 pm ¶
SDG wrote:
Excellent read. I’d love to see more articles like this in the future. The article highlighted so many things I was already thinking. The system needs to be changed.
Posted 04 Nov 2009 at 12:49 pm ¶
atlasien wrote:
@Gavin: “Real creative thinking would be looking for a way to change the whole rigged game.”
So what are your suggested tactics? Strategies? Organizations? Got links to them, and cases of real-world applications?
I’m pretty open-minded on that end; I also don’t like dismissing any sort of solution — radical or reformist — out of hand.
Posted 04 Nov 2009 at 12:51 pm ¶
Kandeezie wrote:
@atlasien – You made me laugh out loud about the sun-worshiping! So true!
I just can’t believe how irrational it is. It’s like the most naive form of sun-worship. Logic: “the sun gives us warmth and light. The sun is the source of all that is good. As our form of worship and gratitude, let’s lie in the sun until we get cancer and stare into the sun until our eyes burn out.” That’s where we’ll end up if we don’t make some serious changes.
Posted 04 Nov 2009 at 1:23 pm ¶
Evan wrote:
There are different approaches to fighting the abuses in the market economy. First, I don’t think it is feasible to remove the capitalist economy from society. Capitalism itself is a reflection of human behavior and the system appeals to our greed, our envy and our insecurities.
We need a much stronger civil society to counter corporations. I can think of one example pertaining to race. There should be a national organization devoted to fighting mortgage-lending abuses against African-Americans. A significant number of middle-class African-American families were pushed into taking high-risk, exotic mortgage packages. As a result, families are seeing their mortgages increase at double-digit rates; in some cases, the ARM rate hikes have caused a wave of foreclosures in African-American households. A new group should be formed to lobby Congress, federal regulators and to institute educational awareness campaigns.
This national disgrace is at Hell’s intersection of rapacious capitalism and racism.
As citizens, we must elect political representatives who will promise to make substantial labor and environmental reforms. Plus, greater government oversight and enforcement of the financial and insurance industries. We need to elect officials who will promise more review of free-trade treaties. Donate money and campaign like hell for the reformers–no matter what the odds.
Boycott corporations that have committed labor and civil rights violations. This is harder than you think because the clothes you wear and the food you consume were probably tied to a corporation cited for labor or environmental abuses.
This is just for starters. I can think of more radical measures.
Posted 04 Nov 2009 at 1:34 pm ¶
Gavin wrote:
@atlasien Well I can’t prescribe a panacea for all the world’s problems. But maybe start looking at the labor movement, past and present a bit? Organizing unions, strikes, occupations of workplaces? There are very interesting things happening at universities suffering under the crisis in California and Michigan, and more are sure to follow as higher ed is continually dismantled. To start with, the fact that so few people — smart people! — can imagine a world without capitalism is a huge ideological hurdle to be overcome.
What are the “real-world applications” of our fashion-plate reformist here? More laws? Corporations, by law, must pursue profit for their shareholders — it is called fiduciary responsibility. They have no legal responsibility to anyone else. Overturning corporate personhood would be a start in the right direction, but these ideas are met with the same old criticisms, either “too extreme” or “it will never happen.”
What if someone had similar proposals for other naturalized systems of oppression, like patriarchy and white supremacy? That they’re good, they’re just malfunctioning? (Well, actually, plenty of people did say that and still do. They are often critiqued on this very website.) The blinders are the same: that removing those systems would cause disaster and social chaos, an upending of the natural order of things. But when the “natural order” is so manifestly unjust, how can we do anything else?
Posted 04 Nov 2009 at 1:41 pm ¶
atlasien wrote:
@Gavin: I don’t have any problems with the solutions you’re advocating. I think supporting unions and unionization, especially across international borders, is absolutely crucial. Overturning corporate personhood is also great.
I just don’t see how those solutions and paths conflict with the paths mentioned in this post. Why does doing the one necessarily take away from the other?
I don’t think your analogy to white supremacism works. Yes, the idea is to move away from it entirely! But to get from point A to point Z you have to go through B, C, D and so on. You can’t just close your eyes, tap your toes and make it go away. White people and POC both have a lot of work to do to first SEE white supremacy and then just start to TRY to unlearn it. There are a lot of intermediate steps along the way.
A long time in the future I hope we’ll eventually end up in a non-capitalist society. I think this is going to be aided by positive technological and social developments. But I have no doubt capitalism is going to be around for at least the next 50-100 years at least, so we should try to work with what we have in the short-term, while also thinking about the long-term.
Posted 04 Nov 2009 at 2:14 pm ¶
Pickly wrote:
When people are describing “capitalism”, what exactly do they mean? (It seems a lot of people have slightly different systems in mind when they talk about “capitalism”, or at least, very fuzzy opinions about what they are talking about, with a lot of ideas blended together, and end up arguing past each other.)
Posted 04 Nov 2009 at 2:29 pm ¶
refresh_daemon wrote:
Personally, I find that most modern “capitalist” minded types offer suffer from a terrible short-sightedness, thinking too much about immediate gains rather than long-term sustainability and profit. Granted, I’m not a capitalist, but even if I were to embrace that theoretical framework, I think the way that the principles of capitalism are presently applied will inevitably lead to the implosion of the structures that are built by it. I do believe that capitalism can work, even as I do not abide by its modern framework, but it takes the kind of wisdom and sacrifice that humanity on the large does not seem to have the patience or desire to apply. There is a reason why our storytellers and mythmakers, our prophets, tell more stories of a dystopian future than a utopian one.
Posted 04 Nov 2009 at 4:26 pm ¶
Montclair Mommy wrote:
“Can I get a hell yeah?”
Yup. You sure can. I wish more economists thought like this. I just read The Big Squeeze and I was floored by how our corporations have changed since the first half of the 20th century. It seems that all companies are out to do lately is make money. There are so few corporations that make their employees lives a priority: providing affordable health care (my SIL’s company provides full benefits for FIVE DOLLARS A MONTH…but its a Dutch owned company. Of. Course.), providing a living wage to all employees, providing opportunities for flexibility in working hours and work/life balance, providing security in your position and the ability to move up if you work hard (this is so huge right now with such a pro-employer work environment)…its just so sad to see that these qualities in a company are not praised anymore. Its all about the bottom line. Kudos to France for thinking about quality of life. Sadly, I think the U.S. is so partisan in its thinking that many of the policies that help France to have “quality of life” would never fly here. Sigh.
Posted 04 Nov 2009 at 5:18 pm ¶
Pickly wrote:
As for the actual article:
Even from doing some basic economics in college, plus random reading of various books and such, it does seem that there are some assumptions in the theories behind why things work the way they do that should be examined more carefully. (For example, I do hear occasionally about behavioral economists studying finance, but it seems worthwhile to study how certain behaviors influence other sections of the economy, and how people determine the value of things. It does seem that a lot of times the “value” of something is based on status competition, fitting into groups, or something along those lines, and these situation don’t seem likely to produce new value for the resources used. Access to information seems to be one of the big problem also.)
“Higher profit=better for society” does seem a miscommunication or distortion from the economic theories as I’ve heard them, (The idea as I’ve picked it up is that people overall try to maximize “value”, which could include any number of concerns, and doesn’t necessarily have any connection to the money price it has, so it is entirely possible that something’s expected price and profit would be low, but the overall value high.)
On capitalism as a system overall, it is hard for me to say anything specific, since as mentioned above there seem to be a lot of different concepts people have in mind, but it does seem to me that a lot of assumptions have come into play as to how a economy should be organized, that don’t necessarily have to be applied. (Businesses organized into hierarchies, with promotion as a reward, as opposed to other ways of organizing ownership and work, fixed wages as opposed to other systems of payment, for example.)
“Free markets,” “ethical/green capitalism” — this is an dress-up game of ideologies to make the system seem other than what it has always been
Other types of economic systems that have been tried, that don’t include a good amount of “free market” type elements, don’t tend to work well either. (there’s been exploitation for/by political power, militaries, etc.)
Posted 04 Nov 2009 at 9:08 pm ¶
Nate wrote:
Even some of the more ‘forceful’ advocates of lassiez faire recognise that the law works as a minium and maximum bound on companies.
Take my example, I run a small business. I don’t pay my employee (as the grunt work is pretty unskilled) any more than the minimum wage. Is it a living wage? Nope. Are there plenty of people with the skills I want who will work for the going rate? Yep. Do I recognise a trade union within my work place. No.
Why – because going over the minimum amounts will reduce the profit I’m trying to a make to a point where I can get a better return just whacking my capital in the bank. And the other point being – the people who use my service (a creche) aren’t willing to a rate that reflects a reasonable profit plus the costs of paying folk a living wage (which, to be honest, is at least double what the UK minimum rate). I also make a point of hiring people without ‘recourse to public funds’. Again, to lever my control over my workforce. No access to welfare, no union rep, helps means a compliant team and lets me bust out anyone getting too bolshy pdq.
Now, is all of this ethical? Absolutely not. Am I replicating the behaviour of, say Nike, on a micro level. Completely. Is any appeal to my social awarenses (and awareness of my hipocracy) gonna change how I run my business and make a buck. Probably, not as the tanglible benfits (a great margin, school fees, the college fund, that nice little farmhouse near st malo I want to get in few of years and being able to afford a domestic staff or two) outweigh any qualms (and to be honest, I don’t have really have any) about being a functional capitalist.
Whats goining to change how I run by business is action by the state, the local community (peer group pressure, being dissed at my church, maybe a bit of shunning, folks getting together and sorting out a co-op and competiting directly) and organised labour. That’s what’s going make buisness, on both the local and global level, temper the drive for a 30% margin and a disposable workforce. Trust me on that.
Posted 05 Nov 2009 at 6:12 am ¶
Lili wrote:
No “hell yeah” from me, sorry. Reforming capitalism to serve the interest of the people rivals a slave master inviting the slave to the Christmas party. I’ll pass.
Posted 05 Nov 2009 at 7:03 am ¶
Pickly wrote:
@Lili
Ask asked earlier, what elements do you think of as making up “capitalism”, and what alternatives do you propose that is supposed to make it better?
Posted 05 Nov 2009 at 10:51 am ¶
RCHOUDH wrote:
Great and informative post! While I agree that capitalism has run amok, my question is how can we change this? It was mentioned that humans possess both selfish and selfless tendencies. In this current day and age, where people are made to believe that relishing in materialism will make their lives happier, human tendencies such as greed, selfishness, and dishonesty are praised and glorified in various ways. Meanwhile selflessness is also praised (like celebrity charity) but not to as great an extent as those other tendencies. Without the nurturing of selfless qualities, human beings will continue to pursue economic/political/social policies that value short-term gain over long-term stability. While I admire the work of the two economists mentioned above, my question is how do we get more people to think like them and change their previous way of thinking?
Posted 05 Nov 2009 at 11:23 am ¶
atlasien wrote:
@Lili: well, the idea is that you’re not allowed to pass. No one is. We’re not playing Monopoly; we’re the pieces trapped inside the Monopoly board.
Posted 05 Nov 2009 at 11:55 am ¶
Slush wrote:
@Nate – Great example.
I would argue that if economists didn’t craft their study to reinforce the reasoning you just employed, then that would also affect the way you make your decisions.
Because it has been widely agreed upon that this is the way business operates – and that is reasonable, because it maximizes profit in the most narrow financial sense – then this is what you do and what everyone expects from you.
That right there is the triumph of capitalism, to have convinced so many people that this is the way they should operate. (Unless, as you pointed out, required to do otherwise by law.)
What I think (hope?) Hertz is trying to prove is that that type of reasoning is not the only way to do economic calculus and not the only logical path. It presupposes that your ultimate goal is to maximize individual intake of cash, essentially. Well that’s one possible goal, but as Hertz says, people are a little more complex than that.
You were arguing basically that your interests as a business are in fact not any more complex than that. Our economic models and financial advisors tell us that other concerns are naive. They tell you you’re stupid if you don’t behave exactly as you are currently doing. But what if your employees were family members? What if you paid higher wages and thus gained much more long term and reliable employees, and so you could leave more to them and spend more time playing with your kids, or singing in your local choir, or whatever?
Capitalism tells you that people’s relationships aren’t as important as money. That’s what’s wrong with it.
And meanwhile, it’s entirely possible that you could make different choices and still achieve the same financial assets or security you are seeking. However, any financial advisor or economist will tell you that’s wrong, because you’re not squeezing the most you can possibly get out.
Well do you actually need that most you can possibly get? And how have the combined forces of popular economic theory and consumer culture affected your answer to that question?
Posted 05 Nov 2009 at 12:05 pm ¶
A.D. Nix wrote:
@ Pickly
I just worked on a project with Dan Ariely and his research definitely directly addresses value formulations down to a consumer-in-the-grocery-store level. Highly recommend (though don’t always agree with) his book ‘Predictably Irrational.’
Posted 05 Nov 2009 at 1:44 pm ¶
Aaron wrote:
The latter part of the article seems to be arguing for a shift in social values from strictly “rational self-interest”, to being at least to an extent more community based.
I find this to be the crux of the issue. I see no way capitalism can survive in a community based value system. And I see no way community based values can flourish under capitalism. We see it time and time again. People and corporations that put community first, and indulge their selfless dimension in the marketplace are routinely destroyed by the more ruthless, selfish players.
We must somehow fundamentally alter the values of the western world to be community based, and to shun “rational self-interest” as exactly what it is, selfish and childish.
Capitalism cannot be reformed.
Posted 05 Nov 2009 at 3:04 pm ¶
rosmar wrote:
Capitalism in the social sciences means an economic system based around profit. Which means a lot more than it may look like it does, as Nate’s example above shows.
There will be ways to find niches where people will be willing to pay more to be socially responsible, and so some socially responsible companies will be able to make a profit. But so long as most people are paid at or below subsistence wages (I’m talking globally here), most people will not have the luxury of buying socially responsible goods or services.
Posted 05 Nov 2009 at 6:10 pm ¶
Pickly wrote:
@ Aaron:
Depending on what your “community based value system” is, I wouldn’t agree with you on that.
What seems to happen in a lot of “community oriented” groups, is that the people within the community loose interest in outside groups (us. vs. them type of mentalities), competition between groups within the community rather than individuals, etc. Plus other forms of hierarchies tend to emerge as well (Most likely based on social ability and such rather than money, but they still occur.)
Posted 05 Nov 2009 at 7:10 pm ¶
Pickly wrote:
@A.D. Nix:
Thanks for the suggestions, I’ll be sure ot check it out.
Posted 05 Nov 2009 at 7:13 pm ¶
gatamala wrote:
Aaron what “rational self-interest” means is something I have been kicking around lately.
On a macro level, it may be in our (US) self-interest to ensure that we don’t have a failed state on our border. At some point, it may be in DC’s rational self-interest to not have 28% unemployment in Ward 8. I’m not making any particular argument here, just trying to wrap my head around how broad this concept can be.
Posted 10 Nov 2009 at 11:48 am ¶
Jeff Mowatt wrote:
Another influence, which incidentally came in behind Harvard and the Defense Enterprise fund in Russia, is P-CED which launched with a 1996 paper for a more inclusive economic paradigm:
http://people-centered.net/Capitalism.aspx
Posted 19 Nov 2009 at 6:32 am ¶
XiaS wrote:
Very interesting article, but I don’t see Hertz and Yunus as all that radical. Yunus is famous for founding the Grameen bank and really popularizing microcredit, and mircofinance more generally, as a poverty-alleviation strategy. Uma Narayan put it much better than I ever could when she said that we need to remember that credit is synonymous with debt. It’s all part of neoliberal governmentality which makes us think that giving people debt will lift them out of poverty.
Now, I understand that what people are getting out of microcredit is capital. But the assumption is that people are nothing more than rational economic actors. Wendy Brown, a feminist political theorist, has a really useful essay on this, “Neoliberalism and the End of Liberal Democracy” in which she shows how what is different about neoliberal governmentality from classical liberal democracy is that the market rationality penetrates all areas of life, not just the market: states begin to function in terms of cost/benefit, public and social policies, civil society, even individual subjectivity. People become entrepreneurs and are expected to act as such to improve their own conditions and compete with others. What “ethical capitalism” has lead to is people like Yunus and microfinance–not that Yunus should be demonized, because I am sure he has helped a lot of people, and of course he is part of a movement for more ethical application of capitalist principles for civil society. But the reality is that many studies, especially of Bangladesh, show that microcredit can lead to domestic violence, incredible pressure from lending groups, and defaulting on loans because of unforseen medical problems, etc. which is a real problem for people with no other access to capital and no assets to serve as a backup. But even more devastating is, like Narayan says, how microcredit strategies that target women specifically (as well as the general trend of some Western feminisms, and development orthodoxy to focus on women) make poor Third World women into objects of intervention, and essentialize them as more likely to care for their families and communities than poor Third World men, who will go and spend the money on beer or a TV (see Nicholas Kristof).
That being said, Hertz makes a lot of good points, like when she says “I realized that how an economy functions is not just about a market anonymously distributing things but also the way people relate to each other, their beliefs, the way power is distributed. All of that was being ignored.” And she is more likely to get heard than, say, Uma Narayan or Inderpal Grewal who make much more scathing critiques of microcredit, “ethical” capitalism, and neoliberalism.
Posted 20 Nov 2009 at 7:13 pm ¶