Responsible Capitalism: Moral Solutions to Economic Problems Today s Politics Won t Fix

Responsible Capitalism: Moral Solutions to Economic Problems Today’s Politics Won’t Fix
By Gary Moore

"There is one and only one social responsibility of business–to use its resources and engage in activities designed to increase its profits.” Milton Freidman, Nobel laureate Economist

“It is futile to argue, as does the American economist and Nobel laureate Milton Freidman, that a business has only one responsibility: economic performance. Economic performance is the first responsibility of a business. A business that does not show a profit at least equal to its cost of capital is socially irresponsible. But economic performance is not the sole responsibility of a business.” Peter Drucker,  Post-Capitalist Society  

  

   We’ve all heard a lot of talk recently about making America great again. A lot of it involves strengthening our economy. Before we put too much faith in politics to do so, it might be good to remember the great observer of American culture Alexis de Tocqueville predicted:

“I sought for the greatness and genius of America in her commodious harbors and her ample rivers…in her fertile fields and boundless forests. . . in her rich mines and her vast world commerce. . .in her democratic Congress and her matchless Constitution – and it was not there. Not until I went into the churches of America and heard her pulpits aflame with righteousness did I understand the secret of her genius and power. America is great because she is good, and if America ever ceases to be good, she will cease to be great.”  

   This article will therefore argue the primary reason so many believe America has lost its economic greatness is that during recent decades our mainline pulpits have grown silent about economic morality while evangelical pulpits have undermined the biblical ethic regarding the root of all evil by focusing almost exclusively on sexual morality while proclaiming so-called prosperity theology.

   That’s not to say we agree America’s primary problem is a lack of economic strength. Before he began pandering for votes, even President Trump hosted a Discovery Channel special in which he criticized those who bemoaned America’s wealth, which he estimated to be $280 trillion after all debts were paid off. While notoriously generous in his estimates of wealth, there is no question in my mind that America has long been the richest nation on earth, at least economically. Our true poverties are moral and spiritual.  

   Much of those poverties are because most CEOs and investors during recent decades have wittingly or unwittingly embraced the narrow economic ethic of Dr. Freidman. His worldview, along with the teaching of the arch-atheist and hyper-individualistic philosopher Ayn Rand regarding “the virtue of selfishness,” the title of one of her very influential books, has turned many business leaders and investors into what is often termed “homo economicus,” people who believe the moral purpose of their lives is to make money, too often without consideration of neighbor.

   Friedman’s idea has been so pervasive, the respected Wall Street investment firm GMO, which manages over $100 billion for investors, recently published a white paper on Freidman’s so-called “shareholder value maximization.” GMO called the philosophy, “The World’s Dumbest Idea.” GMO took the title from a quote from Jack Welch, the revered former CEO of General Electric. He had called Friedman’s idea “the world’s dumbest idea” in a 2009 interview with the Financial Times. Nevertheless, it has guided most of corporate America, and particularly most Wall Street investors, during recent decades.  

   Fortunately, some CEOs and investors have consciously embraced the “neighbor as self” worldview of legendary management consultant Peter Drucker by embracing socially responsible business and investing. Their numbers are still relatively small. But they have been increasing quite rapidly due to the morally “unbridled capitalism” that precipitated the Great Recession and nearly destroyed the world’s economy. The Wall Street Journal recently said twenty percent of professionally managed money now considers ethics. And the trend is so strong most Wall Street firms are jumping on the bandwagon. Even President Trump apparently believes our major corporations have a social responsibility to keep jobs in America, even if they must be bribed with tax credits to do so. While I’ve never been a fan of Mr. Trump as a businessman or candidate, he’s now my President and I wish him well, especially when advocating corporate social responsibility. Unfortunately, the thought of Peter Drucker suggests today’s politicians are again straining gnats and swallowing camels, to use a biblical phrase. 

   Those of us who care about the country our grandchildren will inherit might take that very, very seriously. Steve Forbes wrote: “Peter Drucker’s ability to prophesy, almost always correctly, was uncanny.” Peter may have been the world’s most astute observer and critic of corporate management. And he was usually politically incorrect. Politicians often need an “other” to blame for our economic problems. But Peter was far more concerned about over-paid American CEOs than low-wage Mexican laborers. When Peter wrote his book during the mid-nineties, he thought CEO compensation was like watching “pigs at the trough.” Peter didn’t think any CEO was worth more than twenty times what the average worker earned, which was how it was in America until the mid-60s.  

   It was about that time that most incoming freshmen at our colleges first told surveys they were more interested in learning how to make money than how to live a meaningful life. They are now our nation’s elites. And MBA now stands for “Me Before Anyone.” By the time Peter wrote his book, CEOs who were “down-sizing” the number of workers in American companies to increase profits for shareholders were widely reported to be earning over three hundred times what the average worker earned. Yet Peter wrote: “I believe it is socially and morally unforgiveable when managers reap huge profits for themselves but fire workers. As societies, we will pay a heavy price for the contempt this generates among middle managers and workers.”

Peter also wrote the “worship of high profit margins” was likely to damage or destroy businesses. Yet while the Protestant Reformers said earning five percent or more of interest or profit margin was greedy, corporate profit margins today are over twice that. Even as a percent of GDP, they are nearly three times today what they were during the mid-1980s. And that ratio has been rising strongly lately while wages have stagnated for decades. Yet Peter was no socialist, or more accurately no statist. He also wrote: “I am for the free market. Even though it doesn’t work too well, nothing else works at all. But I have serious reservations about capitalism as a system as it idolizes economics as the be-all and end-all of life.”

Peter therefore visualized something quite different from both what we call socialism and a capitalism unbridled from traditional Judeo-Christian ethics. He wrote the future post-capitalist society will retain most of the institutions and structures of capitalism but CEOs, of all organizations, will increasingly manage with a greater consciousness of employees, customers, communities, and the environment, as well as shareholders, rather than simply those who pay their salaries. To understand how crucial that is in the corporate arena for inequality, consider that ten percent of Americans, including myself, owned over eighty percent of our nation’s stock at the beginning of this decade. (Disclaimer: I’ve sold my over-priced American stocks and reinvested in lesser developed countries.) The primary reason is that America’s much discussed income inequality is now at levels seen just before the Great Depression but our inequality of accumulated wealth is even worse. A recent survey said nearly sixty percent of Americans cannot afford an unexpected expense of five hundred dollars. Yet many single-issue Christian voters remain concerned only with sexual issues. They might consider that our five hundred largest public companies produce over seventy percent of our nation’s GDP. If they were a country, they’d be the second largest economy on earth, after only America itself. Walmart alone has more revenue than nearly 150 countries. And there are nearly twenty thousand public American companies. Even that doesn’t include many huge private companies.

   Like our federal debt, such immense corporate wealth is impossible for most of us to comprehend. So few voters are conscious that despite Mexico’s recent growth, largely due to “trade not aid” with the U.S., the typical Mexican still earns a fraction of what we Americans do. Their wealth probably fares far worse. The Economist recently said the average human has a net worth of $2,222. Half therefore have even less. And that number includes the great wealth in the U.S. and other developed countries. Peter therefore prophesied: “The developed countries have a tremendous stake in the Third World. Unless there is rapid development there—both economic and social—the developed countries will be inundated by a human flood of Third World immigrants far beyond their economic, social or cultural capacity to absorb.” But as theologian Reinhold Niebuhr famously wrote, nationalism is. “One of the effective ways in which the modern man escapes life's ethical problems.”

   Jack Kemp, on whose advisory board I served, was a one-time GOP candidate for vice-president. He was Christian and the god-father of “compassionate conservatism.” But over breakfast one morning, he threatened to fight me if I ever used the words “rich Americans” again. Yet he knew my ministry was to help dispirited Americans feel more grateful for our economic blessings so they could deal with our real problems. But like conservative politicians since, President Trump can’t tweet about, much less seriously discuss, the many social pathologies caused by our huge and still increasing economic inequalities. Wealthy Americans invest heavily in elections and legislation favorable to themselves. These days, billionaires increasingly work in the White House.

   Small wonder tax cuts for the wealthy are at the top of President Trump’s agenda, even if it means millions more of Americans are uninsured for healthcare. That should surprise no one who’s watched the economy the past several decades. But it has long surprised me how many of my conservative Christian friends who are anything but wealthy recently ignored the fact that when God wanted men of the people to lead Israel, God looked to Moses, who was described as “the humblest man on earth” (Numbers 12:3), the poor shepherd boy David; and a carpenter’s son from the backwater town of Nazareth. They therefore also ignored Peter’s prophecies by voting against their own economic interests, thereby actually exacerbating the economic inequality at the root of so very many social pathologies, including the divorce, abortion, consumer debt and stagnation in charitable giving about which conservative Christian leaders rail.   

   That’s quite odd as Peter’s thinking was essentially a modern version of traditional Judeo-Christianity. In fact, Peter once taught theology. So he understood that when the Hebrews were nearing the Promised Land, Moses said God wanted the land to be divided as equally as possible (Numbers 26: 52-56). Knowing some would then lose their land, Moses commanded that all land should be returned to its original owner each fiftieth year, known as the Jubilee Year (Leviticus 2513-23). He thereby assured every child of God would have abundant resources to steward. That’s similar to my mentor, the legendary mutual fund manager Sir John Templeton, advocating a 95% estate tax as he’d not seen inherited wealth do any good for its beneficiaries and a high tax rate would encourage the wealthy to give their wealth to charity. Warren Buffet basically shares that philosophy.   

   Unfortunately, those who’d avoid such egalitarian ethics, particularly with nationalism, have long asked the question “Who is my neighbor?” (Luke 10:29). Jesus answered that question by telling the story of the Good Samaritan. That must have struck many of his Jewish contemporaries as it would strike many conservative Christians today for a prophetic figure to commend the good Mexican. But Jesus’ idea of neighbor wasn’t about the nice Jewish fellow who lived next door. That is a difficult reality for conservative “Bible-believing” Christians who voted for the nationalism of “America First.” Yet Christianity Today has cautioned its readers that the more we read the Bible, the more we understand it is a “left-leaning text.” I expect that’s particularly true about economics, which is why so few conservative Christians hear much, if anything, about what the Bible says about economics. Credit management, tithing and giving yes. Economics no. I’ve personally begged Christianity Today for more than a decade to broach the subject but to no avail. And like Peter predicted, our society, including many readers of Christianity Today, is now paying for that sin of omission. And probably the greater sin of religious pride.

   Conservative pastors, like televangelist Joel Osteen, often begin services by swearing allegiance to the Bible. So “Bible-believing” Christians usually think they take all the teachings of the Bible literally. But the reason most evangelical leaders, like Joel, so seldom, if ever, talk about economics is that capitalism turned many of the economic teachings of the Bible up-side-down. As C.S. Lewis wrote in Mere Christianity: “There is one bit of advice to us by the ancient heathen Greeks and by the Jews of the Old Testament and by the great Christian teachers of the Middle Ages, which the modern economic system has completely disobeyed. All these people told us not to lend money at interest; and lending at interest—what we call investment—is the basis of our whole system.” 

   Lewis went on to explain that doesn’t mean capitalists can’t be Christian. But the clear implication is that theologically speaking, even politically conservative Christians today are economic progressives. That’s particularly evident in the various shades of prosperity theology taught within evangelicalism despite the Bible’s teachings about the root of all evil and the eye of the needle. That dichotomy would cause considerable dissonance if we were aware of the “dualism,” as it’s called, in our thinking and living. But we aren’t. As I learned when exploring seminary thirty years ago, sociologists consider economic dualism a key dimension of “post-modern” life in post-Christian America. We may go to church on Sunday but it doesn’t seem to matter at work and when investing. I’ve even grown convinced that we Christians are more prone to dualism than Wall Street. Wall Street knows very well what god it serves: money. For historical reasons, things aren’t always as clear on Church Street.

   Andrew Carnegie’s Gospel of Wealth essentially convinced American Christians that God doesn’t care how we make money as long as we give it away before we die. That concept has been so embraced, perhaps most of all by our clergy, that God the Economist called the industrialist, whose steel company was nearly hell on earth to work for, America’s most influential theologian. Our religious leaders have recently seemed quite reluctant to look a gift horse in the mouth, something that Jesus strongly commended we do (Matthew 5:23). We laity have therefore increasingly given little or no thought to how we make money, particularly in our CDs, IRAs, mutual funds, and so on that are invested in public companies. Yet our giving then often goes to problems of our own creation. For example, I’ve had affluent Christians tell me they’ll make money by investing in cigarette companies but then give to the American Cancer Society. (I use that example as when I was young, virtually everyone I knew grew tobacco. A few years ago, I watched my wife’s father and mother die tormented deaths from smoking.)

   Such dualism permeates our churches and therefore our political-economy. Many affluent Christians cherish mortgage and charitable giving deductions and government-guaranteed investments while deploring welfare for the needy. Prominent religious leaders often advocate charitable relief for less-developed nations but seem to see economic development in them as a threat to us. Both dualisms virtually guarantee more poor than necessary will be with us always. For American charity is a mere drop in the bucket compared to the capital invested in the world’s companies. That is why the world’s major religions used to advocate, and should still advocate, the peace and clarity of holistic thinking and living rather than the stress and confusion of dualism. For example, Gandhi observed: “One man cannot do right in one department of life whilst he is occupied in doing wrong in any other department. Life is one indivisible whole. I do not believe that the spiritual law works on a field of its own. On the contrary, it expresses itself only through the ordinary activities of life. It thus affects the economic, the social and the political fields. All act and react upon one another.”

   Yet when I contemplated seminary, the church’s psychologist told me I was the typical Western businessperson in that I unwittingly reflected the dualism of Ray Kroc, the founder of McDonalds, whose fortune went to charity but also said: “I believe in God, family and McDonalds. And in the office that order is reversed…If any of my competitors were drowning, I’d stick a hose in their mouth and turn on the water. It’s is ridiculous to call this an industry. It’s not. It’s rat eat rat and dog eat dog. I’ll kill ‘em and I’m going to kill ‘em before they kill me. You’re talking about the American way, the survival of the fittest.”

   I actually served on the board of a major Christian ministry at the same time as Ken Lay, the founder of Enron. He was a generous giver but likely headed America’s most irresponsible corporate implosion. Dualism such as his and Mr. Kroc’s prompted Peter to write: “Business ethics assumes that for some reason, the ordinary rules of ethics do not apply to business.” So today, health care professionals are increasingly making the connections between America’s proliferating fast food companies and obesity, high blood pressure, diabetes, dementia and the expenses bedeviling America’s healthcare budget and politics. (I use that example as my doctor helped me lose forty pounds by viewing fast food as “poison.”)

   Such dualism is also deadly for our faith. Professor David Naugle has written these words about how dualism has led to America becoming church-going but post-Christian: “This mega-problem of dualism is the chief cause for the reduced, powerless versions of Christianity that are commonplace in too many Christian communities today.” While futilely trying to teach economics within evangelicalism the past twenty-five years, I’ve grown convinced economic dualism is a primary reason Christianity Today recently explained the standing of evangelicalism has declined among Americans more than any other expression of Christianity, and even non-Christian religions and atheism.   

   So let’s take a quick look at the more holistic economic worldview of early Judeo-Christianity. Most of these concepts will particularly surprise Bible-believing Christians. For as Christianity Today has also confessed: “Obviously, we live in a post-biblical era where general knowledge of the Bible cannot be assumed. But what about the church? What about the evangelical church? If it’s true that biblical illiteracy is commonplace in secular culture at large, there is ample evidence that points to similar trends in our churches.” I will only mention those concepts that might heal the deepest wounds in America’s political-economy today.    

   The bull has long been the symbol of Wall Street. My favorite Bible verse about responsible wealth creation is therefore: “If a bull gores someone to death, it is to be stoned but its owner is not to be punished. But if the bull has been in the habit of attacking people and its owner had been warned but did not keep it penned up, then it is to be stoned and its owner is to be put to death also” (Exodus 21:28). That passage can be found in the modern Good News Bible under the heading “The Responsibilities of Owners.” It clearly affirms Moses was deadly serious about socially responsible wealth management. Yes, I expect the Hebrews complained their one bull was insignificant, in the scheme of things. The most popular conservative Christian financial celebrities are argued the same during recent decades even though our mutual fund holdings are far more substantial. But Moses knew the future problems of the Promised Land would be the sum of the things that were wrong with Hebrews individually.

   Notice that Moses was realistic enough to know that while bulls can be quite dangerous, they are still essential for wealth creation in an agricultural society. He also knew such risks cannot be removed, only managed. So it was only when irresponsible behavior happened repeatedly and was ignored that it became morally irresponsible. One doesn’t have to be a theologian to understand how that might apply to the cigarette industry and other socially harmful activities.      

   Moses also understood that we worship whatever we believe provides for our future security. To the ancient Hebrews, bulls were assurances of future plenty, much as Trumponomics is to conservatives today, the Federal Reserve Board has been to Wall Street recently, and securities used to be for investors. But most of us can’t have enough economic security, even though Mother Teresa wisely observed the only true security is owning nothing anyone will steal. That’s why the Hebrews always wanted to dualistically worship both Yahweh and that little gold bull known as Baal. But Moses knew there was no security in that bull, just as we should know the presidency, the Fed and securities ae important but will never provide feelings of true security. The prophets therefore railed about the Hebrews worshipping both Yahweh and Baal more than they railed about atheism.

   The prophets knew people always worship something, be it a golden bull, a rock, governments, or money. In post-Christian America, that god for most of us is surely money and what it can buy. With the exception of Catholic nuns and Mennonites, studies and my experiences over four decades of investment counseling therefore suggest there is very little, if any, difference in how most Christians and non-Christians invest their IRAs, education funds, family foundations and so on. That’s largely due to the silence of mainline pastors and the most popular conservative Christian financial advisors, such as Ron Blue and Dave Ramsey, who have argued over the years against Christians having ethics when investing as they thought ethics would cost us money. Ironically, a recent academic review of over two thousand studies said they strongly indicate socially responsible investing produces equal or greater returns. Most studies also suggest they do so with lower risk. Still, if we only embrace ethics in order to produce higher risk/return, we’re more reflective of Freidman than Drucker. We should embrace ethics as we love God and neighbor as self.  

   Moses clearly understood more holistic economic thinking would help produce the more abundant life, as did Jesus when he said such laws are eternal. In fact, there was no asset class I can think of that Moses didn’t command the consideration of other, and particularly the needy, as self when managing wealth. He told those who owned fields to round the corners at harvest time so the poor could harvest what was left. Similarly, he told those who owned vineyards to leave the second picking for the poor (Leviticus 19:9-10). He even said if you dig a pit in which to cook or store things, you must cover it or you will be financially responsible if someone or something falls in (Exodus 21:33). He also shared the extreme law to let the land lie fallow each seventh year so it could restore itself while feeding the poor and alien (Exodus 23:10-11). Those religious leaders who’ve let politics convince them that God’s love ends at our borders might read their Bibles more closely.  

   Most importantly for our money culture, a primary ethical concern was about borrowing and lending money. In ancient times, interest-free lending (see Exodus 22:25) to the needy was actually preferred to charity. Few thought of lending to those wealthier than themselves. Interest-free lending to the needy showed confidence in the borrower that his or her need was only temporary and he or she might repay, thereby giving them greater dignity. That was detailed by the great Jewish philosopher Maimonides when discussing his various levels of economic tzedakah, or righteousness. But since capitalism developed around five centuries ago, most of us with savings rarely think about lending to the needy. Instead, we loan it to banks, corporations, and governments by investing in CDs, savings accounts, money market funds, corporate bonds and EE savings bonds. Even religious endowment funds usually choose those paying the highest rate of interest, a primary cause of the savings and loan crisis of the eighties and nineties, as well as the sub-prime mortgage crisis that ignited the Great Recession.

   Yet Moses refuted Ayn Rand’s selfish teaching that we only need to care for others after a shipwreck or other catastrophe. He said: “If there is a fellow Israelite in need, do not be selfish. Be generous and lend him as much as he needs” (Deuteronomy 15:7-11). Moses then prevented loans to the needy from becoming burdensome to them. He said: “At the end of every seventh year, you are to cancel the debts of those who owe you money” (Deuteronomy 15:1.) He added that if we didn’t loan as the year of forgiveness was near, God would deem it “evil.” Jesus summarized those teachings on the Mount when he said: “If you lend only to those from whom you hope to get it back, why should you receive a blessing? No! Lend and expect nothing back” (Luke 6:35).  Yet a very influential conservative Christian financial leader has inexplicably argued for years that all borrowing must be repaid, even if the borrower was burdened by being laid-off, incurring medical expenses and was granted bankruptcy protection. Jesus would surely be appalled that secular law too often now seems more compassionate than a cultural Christianity that is more concerned about affluent lenders than needy borrowers. 

   As government is a major factor in any economy, Moses also commanded, “The king is not to have a large number of horses for his army” (Deuteronomy 17:16). He added: “Do not mistreat a foreigner; you know how it feels to be a foreigner, because you were foreigners in Egypt” (Exodus 23:9). And King Solomon cautioned: “When the king is only concerned with money, he will ruin his country” (Proverbs 29:4).