I am so at home in Dublin, more than any other city, that I feel it has always been familiar to me. It took me years to see through its soft charm to its bitter prickly kernel - which I quite like too.

Greed or Good?

John Fanning

Woke, Inc.: Inside the Social Justice Scam, by Vivek Ramaswamy, Swift Press, 368 pp, £10.99, ISBN: 978-1800750937
The New Political Capitalism: How Businesses and Societies can Thrive in a Deeply Politicised World, by Joe Zammit-Lucia, Bloomsbury, 288 pp, £20, ISBN: 978-1472990211

Four years ago, I wrote an essay for the drb reviewing two books dealing with the growing number of businesses adopting radical social causes through their brand marketing communications and advertising. Businesses owners have been associated with progressive causes in the past: Joshua Wedgwood, who founded the eponymous pottery brand in 1759 was a prominent anti-slavery campaigner. The first decade of the twenty-first century saw a trickle of businesses using societal issues as a mark of differentiation for their brand advertising but it became a flood in the 2010s, exemplified by Nike’s campaign featuring the black American footballer Colin Kaepernick, who controversially knelt during the national anthem, incurring the displeasure of his employers, who fired him. The campaign featured the stirring headline “Believe in something: Even if it means sacrificing everything.”

A wide range of businesses have since joined the cause-related bandwagon, eager to parade their ESG (environmental, social, governance) credentials, often engaging in identity politics with initiatives on race and gender issues ranging from Ariel’s “share the load” campaign in India, encouraging men to help out with washing clothes to SK11’s campaign in China encouraging women to disregard official advice by following their own career ambitions rather than concentrating on finding a husband. Most of these campaigns seem to have had some success in shifting opinion towards desired societal goals while at the same time enhancing the value of their brands, but there have been some notable flops. Pepsi’s attempt to join the Black Lives Matter bandwagon using one of the Kardashian family was widely derided for being opportunistic and crass, while Gillette’s recent TV advertising campaign designed to reduce toxic masculinity, while well-meaning, came across as forced and having no particular relevance to the product. Some campaigns have managed to combine a societal objective with increasing sales and adding to the gaiety of the nation, like the Danish travel business which in an effort to reverse the country’s declining birth rate offered free baby food to couples who were able to prove they had conceived while on one of their holidays.

Inevitably these campaigns attracted criticism from the more hairy-bacon capitalists, who adhere to Milton Friedman’s famous 1970 declaration that the only valid objective of a business is to maximise shareholder revenue: executives spouting nonsense about social responsibility are the “unwitting puppets of the intellectual forces which have been undermining the basis of a free society”. This view was memorably celebrated in Gordon Gecko’s “greed is good” diatribe in the film Wall Street.

Not surprisingly the most virulent attacks on businesses that deviated from the Friedmanite doctrine has come from America, where the fractured political climate combined with the shouty language of the digital age encourages extreme views. A recent book, Woke Inc, by Vivek Ramaswamy presents a comprehensive and trenchant defence of the maximising shareholder value argument but is infused with the anger and bitterness that characterises contemporary US political debate regarding the increased social activism of business as “the defining scam of our time”.

The author was born and raised in the US, but his parents were immigrants from Kerala in India and Vivek was a high-achieving student, graduating with flying colours from Harvard and Yale Law School. He became a successful healthcare and tech entrepreneur and is now a regular political commentator. He manages to make a number of telling points about the dangers of business leaders straying too far from what he regards as their traditional role of maximising profits. The first is that corporate executives are not competent to make decisions regarding the future of society, where moral rather than business judgement is required. He argues that democratically elected officeholders, not business leaders, should be making decisions involving societal issues and points out the difficulty of measuring the effect of societal interventions, unlike the more straightforward task of assessing business profitability.

His second objection to increasing societal activism is that it is hypocritical and often cynically opportunistic. A good example is the uneven treatment of perceived injustices in different markets. If it is all right to highlight the treatment of black communities in the US, what about the far worse treatment of the Uighur community in China. Any attempt by businesses to influence this debate would undoubtedly incur the wrath of the Chinese authorities, and few companies would want to risk being barred from such a lucrative market. As the world retreats a little from globalisation, this is becoming an increasing problem not only for businesses but for governments. All parties must tread warily, and unfortunately a certain amount of hypocrisy appears inevitable.

But Ramaswamy’s main argument is that democracy and capitalism are the twin pillars of what makes America the “shining city on the hill”. He believes that these two concepts are in creative tension and must be kept separate and that this ideal is subverted by businesses trying to affirmatively enact their own conception of the good. If businesses want to improve the world, they should concentrate on providing great products and services and leave the question of what kind of society we want to democracy and the political process.

Ramaswamy writes from a strictly American perspective and believes that Europe is different because of what he refers to as “the long-established tradition of businesses working with governments where the role of the corporation was to be one among many societal institutions tasked with the betterment of society at large”. I’m not so sure all European businesses would agree with this analysis but there is little doubt that the differences between the two continents are increasing. The author reserves particular scorn for the new tech titans, whom he accuses of exercising monopoly-type power by abusing their market position and limiting debate. He even suggests that they have influenced public debate by favouring lockdowns during the recent pandemic because it was good for their businesses.

Joe Zammit-Lucia’s The New Political Capitalism was published a few months after Woke Inc but takes a completely opposite view. The author argues that politics and business are inseparable and that although the relationship between them is complicated it is becoming ever more relevant to sustainable business success. The author shares some characteristics with Ramaswamy: a distinguished academic career followed by a successful business one, leading to a position as public intellectual and regular commentator on current affairs. Zammit-Lucia argues that the idea that the only value that matters in business is one that can be measured in financial terms is long past its sell-by date and that the economy of the future will essentially be a mixed one where both public and private sectors will play a role.

In this context he puts forward an interesting schema tracing capitalism from its feudal origins in the Middle Ages to industrial capitalism from the seventeenth century followed by financial capitalism in the late twentieth century. He now predicts that we are entering an era of political capitalism. If this is to be the case then obviously business cannot avoid becoming involved in the resulting “geo-political economic” world. He then introduces a subject that is at the heart of this debate; if the purpose or focus of a business is not to maximise shareholder revenue what exactly is it? What is the reason why businesses exist? His answer is refreshingly direct: “business exists to better people’s lives and to be an active and integral player in creating the sort of society in which people want to live”. I suspect that no one would disagree with the first part of that answer but those in the Ramaswamy camp are likely to have problems with the second part. Zammit-Lucia argues that businesses are essentially social institutions, whose success is ultimately determined by the success of their relationship with a wider range of interests than just those of shareholders.

He implies that these wider relationships had been neglected by business during the ascendancy of the “greed is good” era, which came crashing to a halt in 2008 but that now an increasing range of voices ranging from business academics in Harvard and at the London Business School to the editorial pages of the Financial Times are calling for capitalism to be reset to take account of a wider range of societal interests and concerns. He also deals in some detail with the contentious subject of globalisation, which he identifies as an important factor in declining public trust in business and partly responsible for the  resentment of the global political and business elite which resulted in, among other upheavals, the election of Donald Trump and Britain’s withdrawal from Europe. The big mistake that globalists made, he argues, was “to mistake people’s natural desire to enrich their lives by looking beyond their local cultures with a belief that they were aspiring to replace their local culture with a globalist culture”.

The one subject on which both authors are aligned is on the role of social media platforms. Zammit-Lucie doesn’t like them any more than Ramaswamy, arguing that they have “degraded the concept of truth and the basic civility between people who hold different views”.

The obvious question after reading both books is which of the two very different scenarios on the role of the business corporation is likely to triumph in the immediate future. Before trying to answer that question, I’d like to make the point that we are only at the very early stages of a debate on changing the relationship between businesses and the wider communities in which they operate. The ESG movement referred to earlier involves an acceptance that all businesses are deeply intertwined with the communities in which they operate and should therefore ideally make an annual report on their performance under these three headings in addition to their mandatory financial performance reporting. The more headline-making initiatives involving support for racial and gender inequality which have dominated media attention because of accompanying creative marketing communications campaigns represent only the “”’ in ESG. Both societal intervention initiatives and the whole ESG movement have been under attack recently, which would indicate that Ramaswamy’s arguments are gaining the upper hand.

The company most prominently associated with societal activist campaigns, Unilever, has been heavily criticised by leading fund managers for alleged financial under-performance and more recently ESG has been castigated because the global banking group HSBC has been caught overestimating the amount of assets invested in ESG funds. A good example of the resulting glee from financial journalists was a report in the Sunday Business Post claiming that ESG was imploding before it had properly begun and that the whole concept was so imprecise that it constituted a “three letter wheeze”. This particular report then trotted out the familiar put-down to the effect that the world should not be looking at businesses to solve all its problems since only governments and multilateral institutions have the authority and capacity to do this. But that’s the equivalent of saying: don’t give any money to the Vincent de Paul because the government are more competent when it comes to alleviating poverty. As we’ve seen, some businesses have always intervened to solve societal problems and the disorientating times we live in make this type of intervention more likely than at any time in the recent past. Today’s younger generations, the so-called millennials and generation Zs, are more left of centre politically than their predecessors.

September 15th, 2008, the day Lehman Bros filed for bankruptcy, was the day the music died for an entire political and economic philosophy that had reigned supreme for the previous four decades. A generation raised during the subsequent austerity was unlikely to have a dewy-eyed view of unfettered capitalism. For them the belief that tomorrow will be better than today has withered. They have a strong preference for working with and buying products and services from businesses whose values align with their own.

Our lack of historical perspective can sometimes mislead us into thinking that the maximising shareholder revenue, greed is good era was longer than it actually was, but it only lasted for forty years, mainly the last decades of the twentieth century. Before that the majority of businesses were content with slow steady growth and many were also involved in improving living conditions in the societies around them. Unilever, a business that has come under attack in recent years from short-sighted financial analysts, traces its origins to William Lever, a nineteenth century retailer in the northwest of England who was so appalled by the poverty of the time that he set up a factory making soap to provide people with employment, and then built a town to house them. The town was Port Sunlight and Sunlight soap was the first of many Unilever brands. For these reasons Joe Zammit-Lucie’s views and predictions are more likely to prevail in the immediate future than Vivek Ramaswamy’s.

1/9/2022

John Fanning lectures on branding and marketing communications at the Smurfit Business School in Dublin.

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