Capitalism considered

In 1919,  it was stated in Michigan Supreme court that “a business corporation is organized and carried on primarily for the profit of the stockholders. The powers of the directors are to be employed for that end.” [1] and in 1986, Delaware chancery court similarly opined: “It is the obligation of directors to attempt, within the law, to maximize the long-run interests of the corporation’s stockholders.”

As the law evolved, corporate altruism began to be seen as proper so long as it was likely to provide direct benefits to the corporation and its shareholders. In 1953,a New Jersey court stated that “modern conditions require that corporations acknowledge and discharge social as well as private responsibilities as members of the communities within which they operate.” Shareholders’ long-run interests are often served by decisions that appear harmful in the short-run.Sometimes consideration of nonshareholder interests is consistent with long-term shareholder interests [2] but businesses are not always incentivized to consider externalities such a corporation’s relationship to the environment, employee well-being, community involvement, and social justice. [3]
triple b ottom lineThis last point brings us to the term coined in the late 1990s by the influential business thinker and consultant, John Elkington; the ‘triple bottom line’. It captures a very neat idea, namely that a modern organisation has three broad areas of impact: economic, social and environmental. Yet, as the three are often measured in quite different and incommensurate ways, and the financial bottom line will always dominate a commercial entity, it is virtually impossible for any manager to to optimise the three bottom lines. Maximising financial return will never minimise environmental impact and is unlikely to generate unqualified social good. [4]

We must ask what a modern corporation is, what capitalism is and what our planetary society and ecology entail. Some talk of ethical capitalism, others feel capitalism cannot continue as the world economic system.

Immanuel Wallerstein’s first work was published in 1974. He is recognised for introducing the main concepts and intellectual building blocks of world-system theory. [5] In a 2008 talk he explained that capitalism is worn out. The three basic costs for capitalists: personnel, input, and taxes  have steadily increased as a percentage of sales prices over the last five hundred years, until the current point where they’re so high that it is not possible to accumulate capital to any significant degree, which makes the game not worth the candle. This means capitalists are no longer interested in capitalism because it doesn’t work for them anymore. They are therefore already looking around for serious alternatives in which they can maintain their privileged position in a different kind of system.   Wallenstein introduces two hypothetical, alternative routes the world could move towards. One new world-system (presumably favoured by the existing capitalist elite) … will replicate certain basic features of the existing system but not be a capitalist system. It would still be hierarchical and exploitative. The other direction would be to create an alternative system that is relatively democratic and relatively egalitarian. [6]

In Wallerstein’s earliest works he envisioned the emergence of a socialist world-government, which he believed to be the only-alternative world-system that could maintain a high level of productivity and change the distribution, by integrating the levels of political and economic decision-making. [5]

after capitalismHans Baer, author of Global Capitalism and Climate Change would say that capitalism “systematically exploits human beings and the natural environment”. Further , environmental destruction is inherent to capitalism because it thrives only on “profit-making” and “continued economic expansion”. Unable to jump off its “treadmill of production and consumption”, the system must continue to generate ever higher levels of waste and consumption, even though this threatens life on the planet in the long run. He concludes we need “a vision of an alternative world system, one based on two cardinal principles – namely social equity and justice and environmental sustainability.”

Baer also cautions that technological change alone cannot overcome the anti-ecological drive inherent in capitalism. There must be “a shift to a steady-state or zero-growth global economy if we are … to circumvent the Jevons Paradox [which says efficiency gains tend towards greater overall consumption] associated with global capitalism and its need for constant economic growth.”

His proposed  “democratic eco-socialism” would require

  • economy oriented to meeting basic social needs
  • a high degree of social equality
  • public ownership of the means of production
  • representative and participatory democracy
  • environmental sustainability

because “humans live on an ecologically fragile planet with limited resources that must be sustained and renewed as much as possible for future generations.”[7]

stewards

 

 

[1] http://www.professorbainbridge.com/professorbainbridgecom/2012/05/the-relationship-between-the-shareholder-wealth-maximization-norm-and-the-business-judgment-rule.html

[2] http://www.professorbainbridge.com/professorbainbridgecom/2012/05/case-law-on-the-fiduciary-duty-of-directors-to-maximize-the-wealth-of-corporate-shareholders.html

[3] http://www.innov8social.com/2011/06/who-said-corporations-have-to-maximize

[4] https://theconversation.com/explainer-what-is-the-triple-bottom-line-22798

[5] http://web.mit.edu/esd.83/www/notebook/WorldSystem.pdf

[6] http://iwallerstein.com/wp-content/uploads/docs/THYTLK13.PDF

[7] http://climateandcapitalism.com/2013/03/05/global-capitalism-and-climate-change/

 

 

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