Can Capitalism Care About People?
“There is one and only one social responsibility of business,” wrote economist Milton Friedman in 1962, “—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game.”
Smithfield Foods is an American company with operations in the United States, Mexico and Europe. Its pork-processing plant in Sioux Falls, South Dakota, is the ninth-largest such factory in the United States, employing around 3,700 people. At full capacity, it turns nearly 20,000 hogs a day into a variety of food products.
Early in the COVID-19 pandemic, when many businesses were forced to close temporarily to stem the spread of the virus, Smithfield remained open; as a food supplier, it was deemed an essential service. But the Sioux Falls plant had a problem.
On March 26, 2020, as cases on the East Coast were surging, the local Argus Leader reported that there was a confirmed case of COVID-19 at Smithfield. Despite this, management decided to keep the plant open and offered employees a bonus. But the newspaper reported on April 9 that “workers say they don’t feel safe, and they don’t feel a $500 ‘responsibility bonus’ . . . is sufficient compensation for risking their health or, potentially, their lives.” Many employees, particularly those working almost shoulder to shoulder on the production line, were on the lowest socioeconomic levels and enjoyed little financial security. Understandably, they believed they faced a stark choice: their health or their jobs.
By April 2, 19 cases had been confirmed at the facility, after which Smithfield implemented a more robust testing protocol. But by April 11 Smithfield’s single case had ballooned to 369, according to a CDC report. Throughout that period, the plant continued to function, though on April 12 it began scaling back production and then closed down altogether while the South Dakota Department of Health and the CDC conducted an investigation. Between March 16 and April 25, labs confirmed 929 cases of COVID-19 among employees (25.6 percent of the plant’s workforce), and another 210 cases among their direct contacts.
Smithfield’s reluctance to take immediate, meaningful action was echoed across many areas of the world. Part of this was inertia, as well as a general lack of clear available information, but there were also serious economic motives at work. Removing a key cog in the food production chain like Smithfield impacts many others, from those who produce food for pigs to those who buy pork as food for the table. While it would have been possible to stay open while protecting all parties, that would have come with a hefty price tag. Smithfield appears to have prioritized profit. Their dilemma lay at the intersection of two competing impulses: making money versus caring for others.
This is a conflict that applies to businesses in every field and in every nation. The key questions are easy to express but difficult to answer: Who or what should a business care about most? Its customers, its employees, or its shareholders (that is, its profit margin)? Should a corporation be ethically responsible? Should it consider the health of employees and of society when making decisions? When disaster strikes, such as the COVID-19 pandemic, what should be its first priority?
It’s a quandary at the heart of the capitalist system that we all engage in, wherever we are in the world. And there are no easy answers.
Corporate responsibility was the focus of the Business Roundtable (a nonprofit association comprising CEOs of major US companies) when it issued an update to its Principles of Corporate Governance in August 2019. Reversing the stance they’d held since 1997, they now concluded that a corporation’s purpose should no longer be primarily to maximize profit for shareholders but also to benefit other “stakeholders”—namely employees, customers and citizens.
This is an astounding and dramatic change. The view that businesses should concentrate on more than profit margin repudiates decades of free-market capitalist dogma. Viewed soberly, it seems unlikely that this public statement will actually change anyone’s behavior, but the fact that it was said at all is remarkable. It’s worth asking what it would mean to a free-market system that is now truly global.
“While the statement is a welcome repudiation of a highly influential but spurious theory of corporate responsibility, . . . the only way to force corporations to act in the public interest is to subject them to legal regulation.”
Classic free-market thinking holds that a business must focus solely on making money for its shareholders, to the exclusion of all else. A company, so the theory goes, must put all its resources into maximizing profit. Doing otherwise, as American economist Milton Friedman wrote in 1962, would “thoroughly undermine the very foundations of our free society.” As a result, jobs and wages are cut to a minimum, working hours are increased, and employees are hired and fired according to their cost and productivity. It also means that other factors, such as environmental and ethical impacts, the transparency of company statements, and employee health (as in the case of Smithfield) must take a back seat.
The core principles of capitalism have been around a long time, in differing forms. People have nearly always wanted to acquire, but it is only relatively recently that the free-market system we have today came to be. In the 18th century, Scottish political philosopher Adam Smith’s famous description of the system made the groundbreaking claim that we all benefit from self-interest. “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner,” he wrote in Wealth of Nations, “but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.” The baker wants to make money, so he produces bread (which we want) to sell; we, in turn, engage in our own self-interest to produce goods or services to sell.
Free-market capitalism, which is built on this principle, is a system of getting. We wouldn’t provide for others’ needs if we didn’t stand to benefit from it.
Freedom of Movement
Capitalism has another characteristic that also merits attention: the free market requires movement. It must continually move. We must buy and sell, we must generate and accumulate and subsequently redeploy wealth, and we must not stop. The butcher, brewer and baker must daily produce and sell in order to survive. Stagnation is death. Goods, services and labor must “move, move, move” (to borrow Henry James’s memorable description of early-20th-century New York) in order to benefit all. The importance of movement is most apparent when there is an enforced pause, such as during a recession or pandemic; in such a situation, the market’s initial reaction is often panic.
Friedman wrote from the other side of the coin; instead of talking about a compulsion to move, it was freedom to move that he most desired. He argued that capitalism is perfectly aligned with the concept of freedom, which he identified with pre-20th-century liberalism. From that earlier liberal perspective, he wrote, the market’s ideal objective “is to preserve the maximum degree of freedom for each individual separately that is compatible with one man’s freedom not interfering with other men’s freedom.”
For Friedman, the importance of freedom meant that restriction of any sort—by governments, corporations or other authorities—was utterly undesirable beyond a necessary bare minimum. What he most abhorred was any restriction against the economic movement of goods, services or workers.
“What we were told by the free-marketeers—or, as they are often called, neo-liberal economists—was at best only partially true and at worst plain wrong. . . . The ‘truths’ peddled by free-market ideologues are based on lazy assumptions and blinkered visions.”
The appeal of freedom and unrestrained movement is undeniable, and this form of capitalism has been a key philosophy for many leading figures in recent decades. US president Ronald Reagan spoke in awe about it: “There really is something magic about the marketplace when it’s free to operate.” For some, it’s the only viable way to live. Author and journalist Thomas Friedman wrote in 1999 that “the free market is the only ideological alternative left,” while Milton Friedman, presenting lack of restraint not only as an economic protocol but a life philosophy, declared, “Freedom is a rare and delicate plant.” In 1990, at perhaps the apex of Western libertarian hubris, rock act Primal Scream sang, “We wanna be free to do what we wanna do.”
It all sounds so wonderful, and capitalism’s simple appeal has been enormously popular; but what has emerged in recent years is a morass of unwelcome consequences that we would do well to pay attention to.
An Irony and a Dilemma
Decades of free-market capitalism have produced enormous wealth (albeit spread unevenly) but rather more meager results in terms of human relations. At its starkest, capitalism is a brutal master, and a cynical one too. It does not encourage altruism and views people functionally, to be used and moved according to the will of the market.
Russian-American author and theorist Ayn Rand perhaps put it most blatantly. According to her, “no creator [no thinker, artist, scientist, inventor] was prompted by a desire to serve his brothers. . . . The creator served nothing and no one. He had lived for himself.”
Economist Ha-Joon Chang sardonically expressed the inherent irony in that idea: “The market beautifully harnesses the energy of selfish individuals thinking only of themselves (and, at most, their families) to produce social harmony.” While he disavowed the underlying callousness of such a view, its application would not be unfamiliar in a south Asian sweatshop, a multinational delivery service, or any company employing zero-hours staff. It’s not that capitalism is blind to qualities such as honesty and integrity; it merely sees them as essentially selfish functions whose primary utility is to maximize profit.
“There is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game.”
On the more positive side, the theory also argues that the market diminishes humanity’s excesses. For instance, companies cannot overcharge for a product, because a competitor will undercut them; workers cannot slack off, because they know they can be easily replaced. This may be true, though it is arguable whether a world of blunted self-interest is a particularly desirable outcome.
German sociologist and political theorist Max Weber wrote at the beginning of the 20th century about the clear potential for “the spirit of capitalism” to be reduced to utilitarianism, by which “honesty is useful because it assures credit; so are punctuality, industry, frugality, and that is the reason they are virtues. A logical deduction from this would be that where, for instance, the appearance of honesty serves the same purpose, that would suffice, and an unnecessary surplus of this virtue would evidently appear . . . as unproductive waste.” In this view, moral virtues are mere raw material for profit.
It is a callous perspective and, as Weber acknowledged, one under which humans often suffer. It’s easy to see how the loss of an employee to sickness—such as Smithfield’s first COVID-19 patient, or a professional athlete suffering a concussion—might be viewed as merely an unproductive cog requiring replacement.
In Smithfield’s case, the dilemma was as thorny as it was real. If a sick employee stays home, the company’s profitability may be reduced. The prospect of a total factory shutdown magnifies that monetary loss enormously. More than that, as one of the biggest employers in the region, Smithfield is a factor in the area’s wider economic and social health. Further, closing a plant may threaten the viability of others up and down the supply chain.
Should a corporation’s focus be purely on profit? To what degree should they regard the impacts their decisions have on so many others, not least their employees? Employees are both human beings and, in an economic sense, mechanisms that generate profit (in this case, in the form of pork chops, spiral-sliced hams and similar products). Their abilities as humans—to work, to produce, to innovate—are tied up in this, but so are their security, mental health, sense of self-worth, etc.
It is these latter traits, which don’t form an immediately obvious road to profit, that companies are belatedly beginning to notice.
Compulsion to Work
In practice, there are certainly many softer, less cynical approaches across the world. Capitalism in China is different than in the United States, which in turn is different than in Sweden. But when it comes to the crunch, the priorities of the system become quickly evident. When we are trained in self-interest, when we are “forced” (to use Weber’s term) to live in this way, a self-focused survival instinct kicks in; people want to preserve their jobs, to eat, to feel secure. In the capitalist system, that means looking after Number One; and from a corporate standpoint, “Number One” has historically been profit. As a result, concerns such as employee care, charitable giving, environmental stewardship, public education and even the livelihood of small-scale competitors are sidelined as apparently less important.
It’s worth asking whether we have devoted our world to a system that is fundamentally antithetical to caring for one another.
Capitalism’s indifference to health goes beyond the physical; its focus on profit also has serious consequences for mental well-being. High anxiety and stress are inextricably linked to our working lives. So many of us nowadays talk about how busy we are, while every day we operate such time-saving devices as mobile phones, washing machines and digital printers. It’s a paradox, but it’s possible that at the heart of it is the capitalist system’s compulsion to move.
Likening capitalism to a religion, German philosopher Walter Benjamin wrote that “there is no day which is not a feast day, in the terrible sense that all its sacred pomp is unfolded before us; each day commands the utter fealty of each worshipper.” There is no rest, no respite. Time is money; every moment is one that might, and indeed should, be devoted to further acquisition and profit. He went on to say that “capitalism is probably the first instance of a cult that creates guilt, not atonement”—“a vast sense of guilt that is unable to find relief.” This sense of guilt resonates with the anxiety that seems so prevalent today.
Weber, too, was astounded by the relentless craving of capitalism, marveling that it drives people to endeavor to acquire more than they legitimately need.
“. . . This ethic, the earning of more and more money . . . is thought of so purely as an end in itself, that from the point of view of the happiness of, or utility to, the single individual, it appears entirely transcendental and absolutely irrational.”
We see this compulsion everywhere in capitalist society, from the culture of working long hours to relentless investment by the superrich. This is not to say that capitalism created our desire for more, but rather that it encourages it—with unwelcome consequences for the quality of our lives. Could it be that capitalism is anti-happiness and anti-joy?
As an example, despite promises to the contrary, worker pay in the United States is no higher today (in inflation-adjusted terms) than in 1970. Some argue that employee benefits, such as employer-provided health insurance, have increased and that real pay has therefore increased. But the fact that many employers pay the lion’s share of family health-plan premiums that now average more than $21,000 a year, per employee, doesn’t help workers in terms of day-to-day purchasing power. This has encouraged many households to take on more than one job.
According to capitalism, this is great: if every household has two jobs, and then has to employ another (for example, for childcare or other domestic duties), then unemployment figures drop, and productivity and the market grow. But the actual picture is much murkier, and the consequences of it—for instance, in reduction of leisure time, in the upbringing of children, and in the nurturing of marriage and other relationships—are perhaps yet to be fully appreciated.
The free market also influences confidence and self-worth, which the system directly links to pay and productivity. The enormous salaries of top CEOs, according to free-market theory, are justified because they produce that much more value to the company. Chang described it this way: “If the CEOs are paid 300 times more than the average worker, they say, it must be because they add 300 times more value to the company.” In fact, that’s pretty much how Milton Friedman saw things. Addressing disparities in living conditions internationally, he argued that “if the Japanese worker has a lower standard of living than the American, it is because he is less productive on the average than the American.”
The giveaway here is “on the average”; the notion is sketchy anyway but is only viable if the enormous disparity between rich and poor is ignored. Quite apart from its oddness (one commenter sarcastically asked: “Have you ever considered the possibility that [Amazon CEO] Jeff Bezos just works 130 billion times harder than you?”), the concept presents challenges to the self-worth of employees, especially those on lower socioeconomic levels, and completely ignores other factors, such as the environment.
“I am not disputing that some people are more productive than others and that they need to be paid more—sometimes a lot more. . . . The real question is whether the current degree of difference is justified.”
Financier Warren Buffett is widely quoted as having said, “If you stick me down in the middle of Bangladesh or Peru or someplace, you’ll find out how much this talent is going to produce in the wrong kind of soil. . . . I work in a market system that happens to reward what I do very well—disproportionately well.”
It turned out well for Buffett, but for employees who work extensive hours for minimal pay and with limited job security, and who have no realistic hope of changing that situation, how should they view themselves? The social-mobility idea that free marketeers champion—that, as Chang describes, everyone accepts these conditions because “their own children could be the next Thomas Edison, J.P. Morgan or Bill Gates”—is a fantasy that even a free-market idyll could not sustain. Not everyone can be rich. Inequality is imbedded in the capitalist system. Indeed, it is probably true to say that inequality is capitalism’s most successful product.
The Best There Is?
In short, the single-minded focus on profit, and trust in the beneficence of self-interest, works against humanity in so many ways. Yet many continue to champion the system. Even Chang, who is critical of its many excesses, “believe[s] that capitalism is still the best economic system that humanity has invented.”
Changing its priorities, as the Business Roundtable suggested, would not be easy, not least because capitalism seems to be a logical extension of the principles and ideals that our societies value most. Weber, for instance, had much to say about the “rational” aspects of modern capitalism as it developed throughout the Western world since (and largely as a result of) the Protestant Reformation and the work ethic it spawned. Milton Friedman saw the market as the obvious logical conclusion for any free-thinking human: “It permits unanimity without conformity; . . . it is a system of effectively proportional representation.” Rationality and democracy; is that not what Western society prizes most?
And yet the results of the free market have been so disappointing. Wealth inequality, to take an example, is staggering. At the end of 2019, according to the 2020 Credit Suisse Global Wealth Report, “millionaires around the world—which number exactly 1 percent of the adult population—accounted for 43.4 percent of global net worth. In contrast, the 54 percent of adults with wealth below USD 10,000 together mustered less than 2 percent of global wealth.”
Despite politicians’ promises, the riches have not trickled down, and the dream of social mobility seems increasingly distant. This has had tremendously damaging effects on emerging markets, for instance in Russia and across Africa. Its impact on our mental well-being is immeasurable, so it’s perhaps no surprise that, instead of enjoying the fruits of a system that supposedly creates maximum benefits for all, we currently live in what some call an age of anxiety and outrage.
“Across 34 countries surveyed, a median of 65 percent of adults said they felt generally pessimistic about reducing the gap between the rich and the poor in their country.”
It seems inescapable that capitalism has wildly misjudged (or perhaps ignored) the needs of humanity, and the Business Roundtable, among others, is beginning to realize it. Even so, their 2019 statement was quickly doubted and even criticized.
Should businesses be socially responsible, should they provide for the needs of their employees, should they respond to public needs and demands? Should they, to put it bluntly, care about people? The trend is swaying toward “yes,” contradicting the free-market theory that has been in place for so many decades. Ironically, it’s the market that has influenced them to do so; the media, both traditional and social, has forced corporations to change policies. For instance, Smithfield’s COVID problem likely would not have become known as early as it was without media pressure.
A more caring approach may well bring benefits, though it seems doubtful that it will be sufficient. After all, as already noted, capitalism is closely tied to some of the most important values in today’s world, from democracy to rationality. It’s hard to think of an activity in the Western world that doesn’t have capitalist principles in its DNA. Even in traditional Christianity, which you might expect to discourage self-interest, certain popular branches promote a “prosperity gospel”—that wealth and good health are guaranteed for all who have sufficient faith, as demonstrated in part by financial donations to that denomination or preacher.
Indeed, over the years many have seen something like religious faith in capitalism’s most fervent supporters. Academic Eugene McCarraher has written of capitalism as “the religion of modernity” and of “the gospel of wealth and its promise of a gilded redemption.” Walter Benjamin argued that “capitalism is a purely cultic religion,” while journalist Naomi Klein wrote of it in terms of a “free market religion” and a “fundamentalist faith.”
But it’s worth saying that it is not a religion that the Bible would support. Philanthropy notwithstanding, capitalism isn’t known for championing what the Bible calls “the second greatest commandment,” the imperative of putting others and their needs on a par with our own. Many of capitalism’s core principles are, in fact, contradicted in the Bible: that wealth equates to success; that self-interest benefits everyone; that profit should be maximized to the nth degree; that charity is merely optional, not necessary; or that material acquisition should be life’s primary focus. Indeed, those very pages warn of the ultimate destruction of a system of buying and selling that seems indicative of the capitalism we know today.
The worrying consequences of the free market should certainly give us pause. It’s clearly not a system that works for the benefit of all. Smithfield was in an inextricable bind, torn between free-market principles, on which it bases its success, and the interests of employees. Its predicament has been similar to thousands of others worldwide during this pandemic.
The question we must ask is: Should we look for something better?
McCarraher thinks so. He wonders what might happen if society turns against the system: “What if the market’s losers refuse to accept its decree . . . ? What if they blasphemously reject the edicts of the Market and its erratic, unaccountable will?” British author, journalist and critic Rebecca West harbored similar doubts about the system, writing in Black Lamb and Grey Falcon (1941), “Surely [capitalism] is nothing like as good as what we want for ourselves, surely it can only be regarded with disappointment.”
As McCarraher notes, capitalism, as a secular religion, has “transform[ed] the world into a business” and convinced us that there is no better alternative. To that end, it has executed “a blitzkrieg against utopian speculation, a mission to sabotage the capacity to even dream of a world beyond capitalism.” Still, the system’s critics do dream. Klein hopes for “a new civilizational paradigm.” McCarraher envisions a time when “work would not constitute money-grubbing toil in pursuit of a rapacious enlargement of ‘productivity’ but rather the care and cultivation of people.”
No doubt we will one day see the end of capitalism; no humanly devised system can last forever. In fact, the vision that these critics of the current system describe sounds very much like that “second great commandment” in action: a world where the needs of all are in the forefront of people’s thinking, and where, as a result, profit-making won’t be the driving force. Such a day cannot come too soon.