John Mackey is the co-founder of Whole Foods Markets, which has grown from a single store in Austin, Texas in 1978 to a group of 343 stores in the United States, Canada, and the United Kingdom. The Harvard Business Review Press has just published a book by John Mackey and co-author Raj Sisodia entitled Conscious Capitalism. Chapter 1 of the book is entitled “Capitalism: Marvelous, Misunderstood, Maligned,” in which the following appears:
“Business is good because it creates value, it is ethical because it is based on voluntary exchange, it is noble because it can elevate our existence, and it is heroic because it lifts people out of poverty and creates prosperity. Free-enterprise capitalism is one of the most powerful ideas we humans have ever had. But we can aspire to more.” 1
This brief blog post is not a book review, but rather an appreciation of the elegance of the foregoing quotation, which epitomizes some of the ideals expressed by Andrew Galambos and Jay Snelson in their lectures and in the presentation of their ideas for which this website was created.
One need only visit the urban slums and rural backwaters of an undeveloped, so-called third world country to see in what abysmal poverty much of humanity lives and suffers. In contrast just about everybody in America–even those considered poor by American standards–lives in wealth that is unimaginable to the 1.3 billion very poor people in other parts of the world who must try to survive on less than the equivalent of US $1.25 per day. 1.3 billion people constitute more than one in six out of the world’s population. 2
To such truly poor people the amount an American spends to fill his car’s gas tank would be enough to finance profitable work that would lift them out of poverty. This has been demonstrated by Mohammad Yunus, professor of economics at Chittadong University in Bangladesh. Yunus innovated the idea of organizing a bank dedicated solely to micro-lending to the poor, loans as small as $25, described in his book Banker to the Poor: Micro-Lending and the Battle Against World Poverty (1999). 97% of such loans are to women and the repayment rate is 99%. For this humanitarian and capitalistic work Yunus was awarded the Nobel Peace Prize in 2006.
Americans generally do not appreciate how completely we owe our relative prosperity to free enterprise, to capitalism—to the capitalism envisioned in the18th century laissez-faire philosophy of the age of enlightenment. We do not owe our prosperity to the sort of crony capitalism of that part of American business that has always sought to use the state for special favors, subsidies, bailouts and protection from competition. Crony capitalism is an impediment to, rather than a means of achieving greater progress and prosperity.
A prominent example of crony capitalism is the revolving door that exists between the large financial firms known as “Wall Street” and the corridors of power in the federal state, as illustrated by the two recent U.S. Treasury Department chiefs who came from one of the largest Wall Street firms to the Treasury, then returned to renewed riches on Wall Street. In that crony capitalist culture a man could lead a large bank into the death spiral of bankruptcy and still be rewarded with many millions of dollars of pay, after being fired, while the taxpayers footed the bill to bail out the company he presided over as management made decisions that caused the company’s bankruptcy. 3
The book Conscious Capitalism sets forth the authors’ ideas for ways in which business can further improve the human condition. They stress the need for profit, which is capital, and that capital is property created, not consumed, but is reinvested to produce still more property. That is how Whole Foods grew from one store to 343 stores in little over thirty years.
The authors assert that profitability should not be the only goal of business–that entrepreneurs should create value not only for investors in and the managers of a business, but should also aspire to create added value for employees, whom they refer to as “team members,” for customers, suppliers, and for everyone else with whom a business deals.
We just learned of this book; it was a gift from this writer’s younger daughter. The gift was timely, because there is in preparation for publication in the book portion of this website a chapter to be entitled “Why Is Capitalism a Dirty Word in America?” This writer looks forward to reading all of Conscious Capitalism but could not wait to share with readers of this blog the inspiring quotation above.
- Quoted from chapter 1, page 21 ↩
- “The World Bank has estimated that as of 2005 there were an estimated 1,345 million poor people in developing countries who live on .25 a day or less . . . 455 million Indian citizens, or 40 per cent of its 1.2 billion population, live on less than .25 a day.” Quoted from “Earning .50 a day not poor enough in India,” by Rick Westhead, Toronto Daily Star, October 8, 2011, http://www.thestar.com/news/world/article/1067091–earning-1-50-a-day-not-poor-enough-in-india
In China, “the number of people living on less than $2/day is approximately 468 million, or 36% of the population, according to 2009 estimates,” http://en.wikipedia.org/wiki/Poverty_in_the_People%27s_Republic_of_China
In Mexico, in 2010, 52 million, 46.2% of the population, live in poverty, 11.7 million, 10.5% of the population, live in extreme poverty. The Mexican state defines poverty as monthly earning in urban zones of less than $6 a day and extreme poverty is less than $2.80 per day. Source: “Poverty grew in Mexico to nearly half the population, study finds,” By Tracy Wilkinson, Los Angeles Times, July 29, 2011. ↩
- That kind of pay for failure was awarded to Charles Prince, CEO of Citicorp after he was fired during the financial crisis of 2008. ↩