11 Oct

Slippery slope of unrestrained profit engines

This blog post at Sociological Images just firmed up something in my mind that’s been bugging me:

“I sometimes would disagree with Tommy about the talents or behavior of some celebrity — a rock star or an actor.  Today’s equivalent might be Ke$ha or a Kardashian. Tommy’s response was usually, ‘He’s makin’ more money than you’ll ever see.’  And that settled the issue as far as Tommy was concerned.  A huge income trumped just about anything.”

….

I thought of Tommy and values today when I read the transcript of a CNBC interview with Alex Pereene. Pereene has recently gone on record criticizing Jamie Dimon, the CEO of JPMorgan. That bank currently faces an $11 billion fine for having dealt in shoddy mortgage-backed securities. JP Morgan can afford it, of course, but $11 billion begins to be real money. The question on CNBC was whether Dimon should continue as its CEO.

Pareene says no. The CNBC anchor, Maria Bartiromo then says.

Legal problems aside, JP Morgan remains one of the best, if not the best performing major bank in the world today. You believe the leader of that bank should step down?

Or as Tommy Fiedler would have put it, “His bank is makin’ more money than you’ll ever see.”

(Via Is Profit the Ultimate Value? On JP Morgan’s $11b Fine » Sociological Images.)

I’m happy to live in a capitalist society, but as I pointed out to someone the other day when they said ‘profit is the *only* motive’ and goal, I asked if they then supported slavery. Much sputtering later, my point was to say that if profit is all that matters, then they’re suggesting that America transform itself into something profoundly different than it has been for the last decades. I mean, if you get rid of minimum wage and squeeze it all the way down as far as you can, you have slavery or indentured servitude.

If you believe profit is the ‘only’ important thing to focus on, then you’re on a slippery slope.

Capitalism is an engine. A powerful one. I believe it’s the most powerful. Profoundly. But the question isn’t ‘which engine is more powerful’ but ‘what are you using that engine for?’

I believe it’s powerful enough to run a society that makes decisions about where the engine is taking them.

I had a strong jolt when reading about an academic who reported on the language used by capitalists from the 1800s who were slave owners:

The research: Caitlin Rosenthal pored over hundreds of account books from U.S. and West Indian plantations that operated from 1750 to 1860. She found that their owners employed advanced accounting and management tools, including depreciation and standardized efficiency metrics, to manage their land and their slaves. After comparing their practices with those described in the account books of northern factories, Rosenthal concluded that many plantations took a more scientific approach to management than the factories did.

The challenge: Did historians get the genesis of management wrong? Professor Rosenthal, defend your research.

Rosenthal: I was surprised by what we uncovered in these account books. The mythology is that on plantations, management was crude and just amounted to driving enslaved people harder and harder. These documents show that plantations used highly sophisticated accounting practices more consistently than many contemporary northern factories, which are often considered the birthplace of modern management. In some ways the conditions of slavery permitted a more scientific approach than the factories did.

Advanced Accounting
HBR: How so?

In the factory books, you see lots of turnover. But slaves couldn’t quit. While factories were worrying about filling positions and just keeping things going, plantation owners were focused on optimization. They could reallocate labor as they saw fit. I found real quantitative analysis in their records. They were literally looking at humans as capital.

This interview is going to make people queasy. I’m already cringing.

It should make you cringe. This is not an easy topic. People tend to think about the positive with regard to management and capitalism. With our modern lens, efficiency is good. Here it was equal to the brutal extraction of labor from oppressed people. But it’s important for businesspeople to read unvarnished history, not just the happy stories.

In other words, capitalism was taken to its logical endpoint once. It was morally problematic.

The question we need to interact with more is… where are we steering this engine, and what is driving?

I face a similar dilemma when I talk to people about alternative energy. “But it’s expensive,” they say, and therefore a country’s economic engine shouldn’t be choked by the drag.

I have two reactions that response.

1) It completely indicates a lack of trust in the power of capitalism’s engine. The engine can handle the load, I believe in capitalism and its ability to factor around. We abolished slavery, capitalism made a lot of money off it. Capitalism continues to do just fine. We abolished child labor. The engine is still turning. To moan about the ‘end of capitalism’ over these things is to devalue capitalism. (i.e.: capitalism will survive Obamacare just fine, as capitalism continues to be the engine for many nations with all manners of universal healthcare).

2) If profit is the only response to alternative energy, then why doesn’t the person then demand that all cars have catalytic converters yanked out, engines spew black fumes, and coal stacks no longer filters to the point where pollution fog makes it hard to breathe? I mean, that would be cheaper for the energy producers, right?

The truth is, we get to define what’s attached to that engine because the country is not just capitalist. It’s capitalist + representative democracy. C+RD. C is the engine, RD decides what’s attached to the C.

The argument against all this (the argument for unrestrained capitalism) is that a rising tide of wealth raises all boats. But as you can easily see from the GINI coefficient of the US, the rising tide is apparently not lifting all boats because that’s just an analogy and the reality is that although the US is making lots more money, it’s not trickling down, arriving at, or showing up in the pockets of anyone outside the tip top of the pyramid.

The *unrestrained* pursuit of profit is becoming such an ideology that someone one TV literally cannot conceive of someone being a bad leader because they harmed millions of lives, and helped almost crater our economy, merely because ‘they made a lot of money.’

That’s fucked up.