Can virtuous capitalism be sustained? That is one of the questions that motivated James O’Toole and David Vogel in their discussion of the conscious capitalism. They are mostly positive — but being academics they have to have some reservations.
New Lanark And The Challenge of Sustaining Virtuous Capitalism
The authors discuss Robert Owen. Two hundred years ago in a small village south of Glasgow, Robert Owen showed how a mill could be profitable treating its workers well.
Between 1800 and 1825—the era of Dickens’s “dark satanic mills”—Owen introduced relatively short working hours, a grievance procedure, guaranteed employment during economic downturns, and contributory health, disability, and retirement plans. Owen provided clean, decent housing for his workers in a subsidized community free of controllable disease, crime, and gin shops. He took young children out of the factory and put them in a school he founded and paid for. He invented preschool, day care, and adult night school for his employees and their families. The bottom-line: Owen’s company in New Lanark, Scotland became the world’s most productive and profitable textile mill.
O’Toole and Vogel, 2011, page 63
It is fascinating to hear what was being done two hundred years ago. (Even if William Blake seems a better origin for the term “dark satanic mills” than Charles Dickens).
Just when it was going well Owen’s co-owners thought: we are getting rich but we could be getting richer. Dividends to the owners were increased too much, harming the long-term survival of the company. Ultimately, Owen couldn’t sustain his model of virtuous capitalism.
Can Virtuous Capitalism Be Sustained?
The challenges haven’t changed that much. The authors outline companies who have had great aspirations but fallen short, e.g., J&J, BP, Toyota. It can be hard to keep better business practice going.
The authors worry that Conscious Capitalism, an attempt to find a better way of business, will find it hard to become the way of doing business. This seems like a reasonable concern. John Mackey, of Whole Foods fame, seemed to me to have a healthy self-regard and may be too optimistic about his ability to radically improve the world. That said, trying has got to be worth it and O’Toole and Vogel clearly see the value of the work that the Conscious Capitalism movement is trying to do.
Virtuous Capitalism can’t solve all the problems of the world. Markets are often pretty amazing about getting products to people who have money. Still, for those who don’t have money a different solution is going to be needed. John Mackey seemed vaguely hostile to government at times. This doesn’t seem a great strategy/idea. Better forms of capitalism can only be helped by government policies that force internalization of costs, e.g., air pollution, created by the companies that aren’t voluntarily accepting their full share of the costs that they generate.
Some Cheers For Conscious Capitalism
It would be wrong to be too negative. A concern for sustainability can drive managers to see things they wouldn’t before. The dollar savings that can come aren’t just obvious to all, as many possibilities aren’t seen until the motivation to cut damage to the planet or local communities is added into the mix.
The authors offer some ideas how to sustain better forms of business. One thing they suggest is a commitment to creating employee ownership, i.e., selling the firm to the workers rather than investors who might change the company ethos.
Can virtuous capitalism be sustained? Let’s hope so, but it will require a lot of effort. This is an excellent reason to get working on it.
For more on Conscious Capitalism see Conscious Capitalism As Stakeholder Management and Agreeing And Disagreeing At The Same Time
For more on history of better business practice see Regulation And Business Responsibility and Business Ideas Change
Read: James O’Toole and David Vogel. “Two and a half cheers for conscious capitalism.” California management review 53, no. 3 (2011): 60-76.
