Latest from Issues and Ideas

Big Box store checkout

One Less Problem to Worry About

March 1, 2019
The crises we choose to elevate, the problems we choose to solve and the way we propose to solve them reveal all about who we are as humans.

There is a crisis in capitalism, according to a well-credentialed business professor and former CEO, reacting to the recent outrageous example of a very large corporation writing off its losses — essentially handing investors and stockholders a $15.7-billion bill for their own miscalculations. In this case (there are many to choose from…) it’s KraftHeinz, an improbable mega-organization crammed together in 2015 – not some historically well-recognized enterprise, you’ll note, but an opportunistic scheme to drive competitors out of the packaged foods business. Recently the company disclosed its accounting practices are being investigated by the U.S. Securities and Exchange Commission. That news tanked the stock – meaning all the gains achieved by consolidating their operations are history. Investors who rode the wave are sunk.

Bill George, of Harvard Business School, writes: “Responsible capitalism provides well-paying jobs for its employees, complete with health-care and retirement benefits; offers customers high-quality products with great value; bolsters communities by supporting local education, health care, and infrastructure; and ensures steady returns to its shareholders.”

Is that “responsible capitalism” or responsible corporate governance? Or is it, really, the idealistic vision of someone who knows a lot but does not know (or no longer knows) all the tensions and liabilities that prevail on a business. KraftHeinz management would surely have promised all those things to shareholders and regulators — and probably made similar assurances to the SEC and stock underwriters when it proposed the combination four years ago.

There are a lot of problems in the world and a lot of problems related to “capitalism”, but redefining what capitalism is in order to offer some vague proposition of a serene and uncomplicated economic order does not begin to address these problems.

George is not alone in identifying a problem with capitalism. One can find comparable ponderous approaches going back decades, even centuries. In the present age we have thinkers and critics, and politicians, identifying the various problems with capitalism’s effects: an alarming number of the latter want to reinforce the regulatory tools of federal and state governments in order to improve the outcomes of Capitalism. Some even boldly propose theoretical alternatives to the whole issue, meaning Socialism.

I’m sure that Socialism is an alternative to capitalism: we can look at the ongoing misery of Venezuela to see such an alternative, or to any of the other varieties of Socialism that have been tested or are being enforced in the world now.

But showing what Socialism is or is not does not demonstrate what capitalism is or should be. To be clear, capitalism is a very poor “ism” because it is not written or codified anywhere. It is an agreement on other principles, namely individual rights of conscience and autonomy, representative government, fairly derived and applied rules of law, and reliable appeals to justice. These principles are available in various places, but not all, and the places that uphold them are not the same and not otherwise unified.

Seeking to define and implement all these things in a universal way would be disastrous – and frequently it has been so. Universal solutions are simple to devise and nearly always terribly unsuccessful. But the misery for individuals living under universal solutions begins long before the failure is obvious.

Capitalism is not universal – but it comes as close as is humanly possible to imagine because it is universally available. Capitalism emerged as something of an antibiotic to universal philosophies, as populations gradually learned to fix and maintain their own problems before imposing their solutions on others, and to resist the next wave of universal solutions.

The problems that created the KraftHeinz collapse (and many before it) were not a result of capitalism but of more fundamental human deficits: greed, in seeking to float an idea beyond its value in order to gain investors’ confidence (and cash); sloth, in failing to diligently uphold the promises made to stakeholders when undertaking such an obligation; and finally pride, in supposing a universal brand could impress investors and dominate the grocery aisles, and thus stay always steps ahead of the liabilities that follow from such preeminence.

The crises we choose to elevate, the problems we choose to solve and the way we propose to solve them reveal all about who we are as humans. Capitalism is not in crisis because some capitalists are irresponsible people, and it will continue to prosper us if we responsibly avoid their solutions.

About the Author

Robert Brooks | Content Director

Robert Brooks has been a business-to-business reporter, writer, editor, and columnist for more than 20 years, specializing in the primary metal and basic manufacturing industries. His work has covered a wide range of topics, including process technology, resource development, material selection, product design, workforce development, and industrial market strategies, among others. Currently, he specializes in subjects related to metal component and product design, development, and manufacturing — including castings, forgings, machined parts, and fabrications.

Brooks is a graduate of Kenyon College (B.A. English, Political Science) and Emory University (M.A. English.)