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Ethics and the Profit System: Global Change of Values Necessary
by Conrad Schuhler
Email: marc1seed (nospam) yahoo.com
15 Oct 2016
Profit-making is not profit-maximizing. From the magic word profit-mongering is derived the absurd unequal distribution of wealth, the cheating of consumers, the exploitation of workers and ultimately the abolition of democracy. An invisible hand ensures that the personal success of the businessman becomes the best for everyone, the common good, as Adam Smith said.
ETHICS AND THE PROFIT SYSTEM: GLOBAL CHANGE OF VALUES NECESSARY
By Conrad Schuhler
[This essay published on September 25, 2016, is translated from the German on the Internet, http://isw-muenchen.de.]
In his Dresden address, Ingo Schulze set out in search for the "magic word" to disclose the nature of capitalism. Joseph von Eichendorff, the singer of romanticism, once wrote in the sense of modern romanticism:
A song sleeps in all things
and they dream on and on
The world begins to sing
if you only say the magic word.
The magic word that Ingo Schulze found is profit-mongering. From it, he derives the absurd unequal distribution of wealth in our country, cheating of consumers, the exploitation of employees and ultimately the abolition of democracy that has to be a market-conforming democracy according to the words of Ms. Merkel. Shouldn't we have democratic market conditions? Schulze asks.
The writer of Dresden contrasts the capitalist economy with ethics and moral standards where the morally decent is right. The organizers of today's exchange see this opposition between ethics and the profit system and plead for a global change of values.
ADAM SMITH: RUTHLESS SELF-INTEREST BECOMES THE GREATEST COMMON GOOD OR PUBLIC INTEREST
Capital and its propagandists in academia and the media do not allow this opposition. This already began with the primal father of free enterprise theory, Adam Smith. What was his main vocation? He was a moral philosopher, an expert in both disciplines, the moral life and profit-making. The professor at the University of Glasgow was later a toll agent of Scotland and thus knew the reality of economic life very well. Overall social well-being is completely indifferent to sheer self-interest. But that is the main attraction of the capitalist theory of the market economy. The ruthless pursuit of self-interest is said to lead to the maximum of total well-being.
In "The Wealth of Nations," his main work, Adam Smith writes: "We do not expect what we need to eat from the goodwill of the butcher, brewer and baker but from their pursuing their own interest. We depend on their self-love, not their human kindness or charity. We even speak of their advantage, not of their own needs." An "invisible hand" ensures that this personal success of the businessman becomes the best for everyone, as Smith formulated. Businesses that want to be permanently successful must do justice to the interests of their customers. So businesspersons out of self-interest are concerned for the interests of general public. The effect of the "invisible hand" is manifest here. The Homo oeconomicus seeking and optimizing his own advantage in ruthless conduct toward people and nature becomes the indispensable benefactor for his society.
What I present here is the official propaganda of the German Employees Association, not a dusty or antiquated theory from the time of the capitalist formation. Under the heading "economy and ethics do not form a contradiction," they proclaim: successful businesses make an important and irreplaceable contribution to the overall well-being. A business can only create and secure jobs through profit and invest in further training and innovations. Therefore profits are necessary and by no means morally reprehensible. At the same time, they are a signal that businesses are following the right strategy and set up in a sustainable and future-friendly way. Responsibility for a successful economy and responsibility for society promote and do not exclude one another. The economic success of a business is the prerequisite for all further social action.
To prove their thesis – the correspondence of economic success and social responsibility -, employers emphasize that over 96% of businesses with more than 500 employees are socially engaged. The nature of their social engagement is not mentioned. The $150 million for Hillary Clinton paid by big Wall Street banks and hedge funds in the last two years falls under the rubric "social engagement." In fact, businesses use their profits to interfere in society and to change and stabilize the social order in their interest. Colin Crouch coined a term "post-democracy" for this condition where the manipulation of the profit machine sets the tone and rational argument and the interest of the majority do not prevail. That mammoth capital is socially engaged is evidence for its ability to influence social opinion and not for its social quality.
THE TRUTH: PROFITS NEVER HIGHER AND OVERALL WELL-BEING AT A NEW LOW
Let us first stay with the promises of Adam Smith and the interpretations of his followers in employer associations. The higher the profits, the greater the well-being, we read. The profits in the last year were never so high but the national and global well-being slipped to new lows.
Graph 1 depicts the core of the economy of the last decades on the basis of the development of profit rates. From 1960 to 1980, we had a phase of first high and then falling profits. Simultaneously, we experienced relatively high profit- and asset taxes and a high but declining share in net investments… All this changed dramatically with the year 1980. Neoliberalism was accepted with these consequences that are clearly quantified in the graph:
The rise of the share of profit income in the national income – from 25% at that time to 32% today.
The average rate of profit and wealth taxes was over 20% up to 1982. Since the middle of the 1990s, the profit rate has shuttled between 15-20%. The net profits rose more intensely than the gross profits.
But what happens with these profits that are allegedly the source of growing well-being? They are not going to national investments that could be the basis for further economic growth. Rather investments in the real economy tend toward zero. Instead, the growing lion's share of the profits is used for the consumption of businesspersons and investments in the financial system. In the largest OECD countries, only 10% of the profit income on average is used for net investments. In the periods before 1980, they were 80% and more. Today, we witness a rapid swelling of financial resources that are concentrated in the hands of the rich.
The OECD, the Organization for Economic Cooperation and Development in which the leading 25 western industrial states are organized, evaluates the arising problems this way: "Capital incomes and incomes from independent activity are distributed very unequally and the disparities have intensified in the last ten years. These trends are two main causes of the increasing income inequality."
Thus profits gallop but well-being does not gallop with them. Rather wealth concentrates at the top and poverty at the lower end.
The richest 0.1% - around 40,000 households in Germany – possesses 16% of the total wealth. The richest one percent possesses 32%. Germany's poorer half – 50% of the total population – own 1% of the totals wealth. The poverty base in Germany remains stable and even grows.
The unemployment rate fell from 10.8 to 6.7% from 2006 to 2014 while the poverty rate rose from 14 to 15.4%. Wealth grows at the top and poverty grows below where people remain poor despite work. The self-interest of entrepreneurs that Smith and his like regarded as the foundation of well-being already proves to be the real fatality in the distribution of income and wealth.
THE DEVELOPING COUNTRIES: FIRST VICTIMS OF GLOBALIZATION
This is not only true for Germany but to a worse extent globally.
While the rich countries have 300% of the national income on a world average, the developing countries altogether have only 60% and sub-Sahara Africa only 20%. The inequality of incomes and wealth also rises with the advance of capitalism in these countries. According to the statistics of the UN and the World Bank, a third of the world population now lives on less than two dollars a day. 800 million people, ten times Germany's population, are regarded as absolutely poor and have less than $1.25 per day. Thus we do not carry on any debate about abstract questions on equality and justice. Life and death are involved very concretely.
The unscrupulous conduct of capitalist entrepreneurs seriously damages nature, not only people. The ecological footprint left behind by industrial countries is dreadfully greater than that left by the rest of humanity. OECD countries emit so much CO2 that the annual climate damage amounts to $570 billion. Led by the US and Germany, industrial countries still refuse to pay into an international climate fund. The much-invoked business consciousness of responsibility in Corporate Governance rules proves to be absurd hypocrisy in view of the exhaust gas scandals of the auto-industry and the Monsanto strategy of ruining local-regional seed in favor of its own monopoly products.
These are not excesses of individual irresponsible companies. The general policy of the industrial countries is involved. The countries of the South are integrated into the global economy so they lose their provision independence. Their agriculture is oriented in exports and they now depend on food imports. With the EPAs (Economic Partnership Agreements) of the EU with African countries, these poor countries are forced to a radical market opening for EU imports. Africa alone loses annually around $20 billion in export revenues. The EU has signed agreements on the use of fishing grounds with 16 countries in Africa, the Caribbean and in the Pacific. The mammoth trawlers of the Europeans destroy the local fishing industry and are subsidized with a billion euros from the EU.
This global exploitation system that leads to billion-fold misery and destruction of nature is enforced militarily with increasing brutality. Germany almost always joins in the war deployments. There are now 13 so-called foreign operations of the German army. These military engagements and wars are urged in the new whitepaper of the Ministry of Defense.
Ingo Schulze is right in identifying capitalism as the last cause of the existential problems of humanity. Max Horkheimer, one of the founders of the Frankfurter School, said on Nazi Germany: Whoever does not want to talk about capitalism should be silent about fascism. Today we could say: whoever does not want to speak about capitalism should be silent about poverty and misery, destruction of nature, wars and the danger of war. A global change of values is necessary, away from the profit system and to humanity and nature.
WHY CAPITALISM CANNOT ACT RESPONSIBLY – TOWARD HUMANKIND OR NATURE
Agreement exists on this urgently necessary change of values even in the think tanks of capitalist academia and propaganda. The Bertelsmann foundation courts very intensively "responsible entrepreneurial conduct." It has developed a CRI – Corporate Responsibility Index – and rates the current results for Germany: "German businesses have a considerable catch-up need to realize social responsibility strategically and practically. In 73% of businesses, the board of directors and management support such activities. Only 39% of the firms integrate corporate responsibility measures in their business processes and value-creation chains. The motives for CR-activities are marked by economic interests… Businesses want to stand out from their competition and improve their own image."
Apart from the restricted nature of the Index for Responsible Corporate Conduct of the Bertelsmann foundation – it always remains focused on the primacy of profit maximization -, businesses remain intent on their unscrupulous profit-orientation. In reality, the propagandistic gesture of an ethically responsible capitalism makes a fool of itself. This is also true for the discipline of philosophy that is intensively concerned with the question of "ethics and economy." Then a ranking of values is attempted. The basic democratic values like freedom, equality, and justice would be at the top. Moral values come in the middle. There are three categories of them: individual values like self-determination, friendship and so forth, social values like solidarity, peace, and tolerance and ecological values like careful relations with nature. Economic values could include market economy and acquisitive striving.
Annemarie Pieper proposes the imperative in the Bucerius Law School, another enterprise for the moral elevation of capitalism: "Human dignity must be the basis of human conduct." That is a pleasant longing. The basic right of Article 14 is also likable where it says: "Property should serve the well-being of the general public." Why does reality look so different? The simple truth is: capitalist ownership in a capitalist market structure does not allow this. The highest profit is the criterion for capital. Therefore no possibility remains for humane, ethical demands on capital.
Where and how should the demanded change of values originate in the world economy? The capital elites themselves obviously do not see any reason to correct their line but press for an intensification of the prescriptions.
Politics in this "market-conforming" democracy refuses to support mass demand despite continuing low growth – the IMF formulates: Too long too low. Instead, it inflates the money supply that drives up assets – real estate, stocks, and securities of all kinds – without igniting any real economic growth and fuels more economic inequality.
The refugee question – today over 60 million are in flight and a hundred million in a few years. They escape war and misery and destruction of the natural foundations of their existence. By moving to western industrial countries, they come to the causal agents of their distress. Instead of laying down programs to integrate these people, the West develops a program to screen against migrants and many thousands of refugees drown in the Mediterranean or are shot at the Rio Bravo border between Mexico and the US.
The general economic crisis, refugees, the increasing concern of ever larger parts of the population before further social and economic system crash leads to a further pull to the right among the ruling elites, not to concepts with more democracy and more social justice. In the US, this can be seen in the election campaign of Donald Trump, a hybrid of foreign hatred and triumph capitalism. In Germany, it appears in the increasingly rightwing positioning of the CSU, the CDU, and the SPD and in France in the sustained ridge of the Front National.
It would be wrong to think the turn to the right is only a tendency of the elites. It is supported by a growing "mass mood" that is expressed in the election results of AfD. For a long while, we have had a base of 20% racism and hostility to foreigners and authoritarianism in our society that now appears openly. This rightwing authoritarian moment becomes stronger in the reactionary parties and movements and also attracts attention in the programs and activities of conservative and social-democratic formations.
WHERE SHOULD THE CHANGE OF VALUES ORIGINATE?
In summary, the project of bringing about a global change in values toward social justice and sustainability is not in a boom season. On the other hand, there are a growing number of movements and groups that turn against the problems starting from capitalism and press for a social change. Their initiatives, the coordination against Bayer dangers, bears witness to that. These initiatives are not agreed in their goal but in their different ways recognize the opponent, the cause of evil.
David Harvey, one of the most important leftist authors in the US, listed the following groups in this context:
The NGOs, the non-governmental organizations, that want to follow and take them up in their promise on almost all fields of politics,
the autonomous base-oriented opposition;
the movements that concentrate on self-realization in serving others;
the workers' movement and the political left;
the multitude of social and ecological movements;
and emancipatory movements on identity questions like women, children, and gays, racist, ethnic and religious minorities.
While these currents are quite different, a few general guidelines exist or can be produced relatively quickly on unity. Harvey's "co-revolutionary" theory that has similarities with the concept of the mosaic left identifies the common interests:
Respect for nature;
Radical equality in social relations;
Institutional arrangements based on a certain sense of common interests and collective property;
Democratic administrative experiences (in contrast to the existing corrupt frauds);
Work processes organized by the immediate producers;
An everyday life as free liberal inquiry of new social relations and life arrangements;
Spiritual notions that concentrate on self-realization in service to others;
And technological and organizational renewals that serve the general well-being instead of military power, surveillance and entrepreneurial greed.
The challenge queued up is to bring together these currents that wrestle for social changes and form an anti-capitalist movement agreeing in its fundamentals.
We have arrived at a turning point in the history of capitalism. Capitalism must now be put in question as a social system. The profit-economy is the ultimate cause of crises, misery, war and destruction of nature. Continuing the capitalist growth economy would be the end of the reproductive ability of our planet. Overcoming this capitalism is the essential prerequisite of a solidarity society committed to humankind and nature.
[Address at the meeting of "ethecon – Ethics and Economy Foundation" on 9/24/2016 in Hamburg]