January 13, 2008

The economics of social justice?

Coming home from the store, I heard this story on Muhammad Yunus. You may remember him as one of the Nobel prize winners in economics for his work on "micro-lending" where instead of having to borrow large sums, poor people had access to small amounts that they could use to build a small business or do something to help their impoverished state. It reminds me of what Heifer International does with small amounts of money--helping a poor family get a goat or something that could provide subsistence and possibly some extra income or barter. Yunus' new project is what he calls "social businesses;" a concept I am not completely sure of yet. It sounds much like a non-profit except it is a business.

I am a bit tired tonight and coming off of a horrible sinus headache, so I will be brief. But his idea hits me close to home. I have always struggled with the harsh amorality of capitalism, as well as the insatiable way that it demands more and more. Especially once you get into investment capital, a business that only succeeds but does not grow--eventually doesn't even succeed. The investors demand more for their money. That has always bothered me. That and the sense that profit knows not, nor cares how, that profit was made.

Yunus seems to be getting to some idea of adding a morality back into the economic equation. And that strikes me as something worth talking about. Why does the environmental cost of a product not show up in its price? Why does a company benefit from cutting labor costs? What if a company had as one of its goals--along with profit--the sustainable employment of certain numbers of people?

Perhaps this is naive. But it strikes me that in a world where CEOs made 364 times the average worker last year, that something needs to change.

Ok. Off to bed and something for the head.

6 comments:

Elliot Lake said...

No, it's not naive. It's being done in other countries (for example the requirements in Germany, I believe, that new cars be made so they are returned to the factory for recycling instead of junking, so the parts of the cars need to be recyclable--that cost gets built in) (and the world doesn't screech to a halt, either).

Probably in this country we'll need to start small (I can remember when hometown banks were locally owned, and if you knew the owner, and he believed in you, you could get a loan). Megabanks can't possibly know their individual borrowers (well those on the small end of things anyway), and they would need to be shown the profitability of micro lending first, to allow themselves to be interested in the morality of it.

The whole investor/ stockholder/ profit above everything is of course a terrible driver in our country, making us think the country is based on capitalism (not) instead of democracy.

When you figure in the costs of pollution, industrial malfeasance (Bhopal, the Libby Mt asbestosis thing), the drain on our workforce from not getting healthcare---those are big drains on the economy as well as moral failures.

We need honest economists to point this stuff out to the leadfoots steering our economy.

Maybe we can get some Scandinavian economic development folks to come give us a clue!

steves said...

"What if a company had as one of its goals--along with profit--the sustainable employment of certain numbers of people?"

I think that would be great and it would probably attract a skilled and loyal workforce, in addition to customers. One thing that I have noticed over the years is a severe decline in company loyalty, which seems unrelated to capitalism. I can't put my finger on it, but maybe it is a change in some kind of business model. My grandfather worked for the same company for his entire career, from the 1930's up through the 1970's. I rarely seem to hear about this anymore.

"Perhaps this is naive."

I really can't tell you. I am not an exper on business and only took two econ classes in college.

"in a world where CEOs made 364 times the average worker last year, that something needs to change."

This is something that I agree with, but I don't know the solution.

I hope you feel better.

"for example the requirements in Germany, I believe, that new cars be made so they are returned to the factory for recycling instead of junking, so the parts of the cars need to be recyclable--that cost gets built in) (and the world doesn't screech to a halt, either)."

I actually think we do a pretty good job of recycling old car parts. There are thousands of dealers across the country that deal in used parts and it is pretty big business. The German model would put them out of business, so I wonder if this would be a bad thing in the long run.

Streak said...

Elliot Lake, thanks for the good comments.

What amazes me even more about our economic system is the real disconnect between some of the biggest fans of the free market and their views on morality. Religious conservatives (that I talk to anyway) are some of the bigger defenders of the free market and seem to compartmentalize the market amorality from their stance on personal morality.

Steve,

I take your point on the used car stuff, but we clearly don't build in the cost of the environmental destruction into really anything we build. Robert Kennedy has made that argument fairly well--that the market is not truly free and if all the environmental costs were actually included in powerplants or other manufacturing, that we might see the market forces manage some of that.

But at the heart, my problem is that I can't see how modern investment capitalism doesn't require a large pool of poor people.

leighton said...

One thing that I have noticed over the years is a severe decline in company loyalty, which seems unrelated to capitalism. I can't put my finger on it, but maybe it is a change in some kind of business model. My grandfather worked for the same company for his entire career, from the 1930's up through the 1970's. I rarely seem to hear about this anymore.

I've noticed this too. In addition to whatever changes there've been in worker and middle management experience, there's been a noticeable shift from the time when people in upper management would spend their entire career in one place to now, where they tend to spend a few years at one company before moving on to the next. Just from my personal work experience, this seems to have created an environment where the top decision-makers aren't actually looking at long-term interests for either their company, or the market as a whole; they're too busy campaigning for their next position. They have strong incentive to push for short-term objectives that look good on paper, at the expense of longer-term planning that would benefit the company, the workers, the shareholders and the community more over time. This has the natural result of killing company loyalty at all levels, not just at the top.

I can't say this for sure, but I wonder if this phenomenon might have as much to do with a social change in the culture of upper management (who comprise their own social class) as with purely economic forces.

In any case, it seems like the only thing we non-CEOs can really do about it is oppose it from the outside with economic power of our own, whether that be government regulation, collectively voting with our wallets, or what have you. How to accomplish this, and what should be accomplished, are both tricky questions.

ninjanun said...

One thing that I have noticed over the years is a severe decline in company loyalty, which seems unrelated to capitalism.

Perhaps it has something to do with many businesses no longer valuing their employees--i.e., no more pensions, you could be let go at any time for any reason (usually downsizing, unrelated to the actual performance of the employee), etc. When companies say, "hey, we can no longer look out for our employees well-being, we gotta look out for US, well, the employees are gonna say, "right back at ya, babe."

Streak, if you haven't already, you need to read Cradle to Cradle. I think it addresses a lot of what you're mentioning here.

Streak said...

I posted somewhere here the report that showed that America doesn't even have the social mobility that "old Europe" and other countries have. Yet the mindset here is that we are the most free, the most unencumbered by society, and have the most opportunity. That ideological belief is amazingly strong--and many Americans cling to it regardless of the facts on the ground.

Ninjanun, thanks for the link to the book. I am going to see if I can find a copy. Sounds fascinating.