The dawn of Social Capitalism

A crisis in representative government could be an opening for something new and (maybe) better. In a post at Forbes I suggest that we’re living through the emergence of Social Capitalism, a new economic landscape in which social values are inextricable from branding decisions.

 

This is a world removed from older efforts to press companies to adopt socially responsible policies. Instead of appealing to companies to “be nice” even when it costs them money, social capitalism represents a change in the underlying market forces that influence profitability. Companies are no friendlier or more moral than in the past, but their alignment with social causes is increasingly tied to productivity and profit. As commerce becomes more responsive and more effective than politics as a means of expressing public values, this threatens to unleash an earthquake under the foundations of democracy.

 

I’ve alluded to this idea before, once in a piece at GOPLifer and again this past winter at Forbes, but this is the first time I’ve tried to crystalize the concept of social capitalism itself. I should mention that Umair Haque has devoted a lot of thought to a similar concept. It’s worth taking a look at his writings. Interested in your thoughts as always.

33 Comments

  1. I was badly crafting a sane comment on how the references to machines and institutions don’t get down to the root of the issue that these machines and institutions are made up of usually small groups of people who are the decision-makers.

    Then I read articles today about how trump, pruitt, et al are planning on removing protection of the water supply for 117 million people, and tossed out that sane comments for an angry, far less rational one. While Chris’ concept of social capitalism may or may not take hold on a large scale, I believe that we will see, likely sooner than later, that other people make decisions and and act on them. In today’s social climate, when people realize their lives are being threatened by specific individuals, I think we see some decision makers getting killed.

    While tyrants throughout history have usually done quite well for themselves, every now and then, small groups of determined people will inflict harm on the human infrastructure supporting these tyrants.

    We will be seeing assassinations for environmental reasons soon, I believe.

  2. I think this movement will amount to less than you think. You state:
    “Where the ballot has failed, the buck is winning.”

    But there’s the rub: even the most “socially conscious” company only does things that don’t cost them bucks. Silicon Valley firms are fine installing a few token solar panels on their roofs, but they were also busted for colluding to suppress the wages of their engineers. Salesforce.com famously threatened to move their business out of Indiana in support of gay rights. Would they do the same to support unions? Especially of white-collar workers? They may support the $15 minimum wage movement, since none of their workers would be affected. Would they support curtailing H1-B visas, something their “talent” supports even more strongly than the $15 minimum wage?

    Several years ago, WalMart made a masterful jujitsu move: when liberal groups were protesting everywhere to unionize WalMart and fine it for numerous labor violations, they announced they’d stock CFLs over regular bulbs, and replace their own lighting with energy-efficient bulbs. All of a sudden, many of those limousine liberals were celebrating WalMart’s newfound environmental consciousness. You might see that as an example of social capitalism. I see it as a cynical ploy to throw off your detractors with something that doesn’t really cost you anything (and probably actually saves them money).

    IMHO, this is one of the reasons Trump and Bernie were so popular: while everyone is engaged in culture wars, the 1st-10th most important issues for most struggling families is economics. It’s not that a coal miner hates trees. But if he has to choose between feeding his family or saving a forest from acid rain (or even himself from Black Lung Disease), he’ll choose the former every time, and resents people who choose the latter. That’s why people who boycott chik-fil-A because their owners hate LGBTQ people, but won’t boycott GM for closing a plant in Ohio, annoy the hell out of Trump supporters (and Bernie supporters like me). At least Trump browbeats GM from his bully pulpit (as ineffective as it may be).

    If social capitalism is only a way to force change in all aspects of life *except* the ones that might actually cost someone some real money and/or sacrifice, it’s not much of a movement…

  3. A very interesting read. I’m still digesting it. One observation that stands out: cell phones are quite a tool, and one that illustrates the complexities of this topic. It’s also why I agree with your conclusion that it’s too soon to judge if social capitalism is “a good thing”.

    It doesn’t take much effort to dig up how important, critical even, a cell phone is, currently, in the hands of the working poor. It can handle so many tasks that would otherwise take huge amounts of time and/or money. At the same time, cell phones themselves are produced off-shore because we closed all the factories here that used to make such electronics due to the toxicity of the chemicals and the astronomical rates of miscarriages ( https://www.bloomberg.com/news/features/2017-06-15/american-chipmakers-had-a-toxic-problem-so-they-outsourced-it ). In other words, we didn’t want to give them up, we just wanted them made somewhere else. What your piece still has me thinking about is who is the “we” here? The push-pull between corporations selling us what we want and us shouting “shut up and take my money” is sometimes tempered with knowledge and backlash against nasty business practices, but other times we don’t know or just… really want that cell phone. And I didn’t even get into what a racket cell phone plans are…

    At the end of the day, which is the greater good? We want these things, but at what cost? We can hope that innovation will catch up and safer practices will eventually take over through some magical means we can’t forecast, but by then will we already be off buying toxic, overpriced widgets from somewhere else? Do we reach a point where the social good takes the rains firmly in hand? I hope so but I don’t know.

    1. Seems to me “single payer” is a non-starter until this country can get a handle on costs. For instance, what we pay for drugs is insane! Other countries that have a national medical plan have no where near the costs we do. But to reduce costs, we would have to go against some of the biggest political contributors in the country. The pharmaceutical industry, the insurance industry, the AMA. I do not see that happening. So we are stuck with what we have!

      1. Another example of the issues exacerbated by our unrepresentative government. The exorbitant drug prices are due to the monopolistic rents extracted by the pharmaceutical industry. Though development of drugs is costly, they abuse the patent laws to prolong the period of exclusive control. Furthermore, monopolistic control is created by other means. Refer to the recent controversy over EpiPens. That technology has been around at least since the early 60’s. I was trained in the use of automatic injector syringes during Army basic training in 1963. There is no reason, except monopolistic rents, that similar injectors were not widely available.

        Like you said the pharmaceutical industry, the insurance industry, the AMA, etc. lobby and contribute heavily. If we had truly representative government this problem could at least be controlled. As an example, I recently have had problems with this myself regarding glaucoma eyedrops. I got my doctor to change the prescription to a generic, then the pharmacy substituted a brand name at higher cost. No doubt to increase profits. There might have been a “kickback” or something like that occurring. After some effort that got resolved and and I’m now getting the generic. It is very difficult for the average consumer to know enough to catch this sort of thing, due to lack of knowledge and transparency in pricing. Considerable effort and knowledge is required to research this information and then one is handicapped by lack of specialized knowledge.

  4. I’ve read your previous comments on this and concur up to a point. While I concur that some major corporations are taking into account social capital in making decisions, in recruiting top level talent and in their PR, I do not see these phenomena as making a significant difference in the major issues confronting the U.S. at this time. In addition many of the large corporations, particularly privately held ones really do not care – one that comes immediately to mind is Koch Industries. To name a few of the major issues: unrepresentative government, inadequate and overly expensive medical care, poor education, immigration, huge inequity leading to the stagnation of the middle and working classes. and the really big one, global climate change. This list does not even consider the international and geopolitical challenges.

    I feel that some major reforms are overdue in the U.S. Very likely considerable reform of our election system will be required. Perhaps this can be accomplished without the formality of amending the Constitution, but I am doubtful. I feel the dysfunction arising from our unrepresentative government is precluding any effort to even resolve some of the other grave issues.

    Though ‘social capitalism’ is a phenomenon that should have some positive impacts, I think that they will be marginal at best. All the ‘Dark Money’ circulating in our political system will overwhelm the positive effects of ‘social capitalism’.

  5. Chris, with respect to this sentence in your Forbes post:

    “It’s easy to understand how the talent market EFFECTS companies like Tesla or Intel.”

    Please change EFFECTS to AFFECTS.

    It’s driving me crazy. I apologize if I was not clear in my post below. Thanks.

  6. Just an aside about the lifetime of companies –
    Companies that actually make things in the real world need to have longer lifetimes – it takes time to develop not just a product but the process to make it efficiently
    So there are three types of operations
    (1) Information – Google, Facebook
    (2) Services – Amazon, Uber
    (3) Manufacturing – Tesla, GM,

    Each operates on a different timeframe –

  7. Sorry Chris, but I just don’t see what you describe becoming the norm. While there will no doubt be niche segments of the purchasing base, perhaps even large segments of some highly visible markets, that will be subjected to this new kind of social values capitalism, I can’t envision it taking hold large scale.

    I don’t see an exodus from Walmart (I believe there year over year dip in store sales is more about Amazon and cannibalization by other Walmarts than by shoppers making decisions on a manufacturer) because Walmart crushed small businesses and lowered incomes in hundreds of small and medium sized cities.

    I don’t see customers demanding that their utility make a massive capital investment in switching to solar while natural gas and oil are so cheap. Now, those same utilities will certainly make that decision of solar over coal for obvious financial reasons.

    I don’t see people giving up their Nikes because they are being made in ungodly work conditions overseas.

    I am a cynical guy, and have very little faith in humanity. People, on an individual basis, in general, since we have become “civilized”, have chosen the easy way out, the best personal value to them for a manufactured item or service, regardless of what impact it had on the labour involved to make it, or the impact on the environment.

    I don’t see that wilful ignorance changing anytime soon, unless you can wave a magic wand and change human nature.

    That human nature is why capitalism is the dominant economic system. And I just simply don’t see that nature changing. Unless, or course, we have cataclysmic events. And at that point, humanity has a whole set of other issues far more pressing.

    1. Companies are already responding to the social and political issues that their employees and consumers care about. Thing is, their employees and consumers don’t necessarily care about the same things you do.

      I’m not describing a utopia. I’m describing what moves in to fill the voids left by a failing democracy. You’re getting organic foods, unisex bathrooms, fair-trade commodities, investments in renewable energy, and greater corporate effort to curb abusive overseas labor practices. Those things are actually happening (some of them coming directly from Nike and WalMart) because their market requires it. They aren’t going to solve every problem, but they are already solving social ills that governments had failed to address. If you’re not seeing it happen, you may not be looking in the right places.

      http://www.businessinsider.com/how-nike-fixed-its-sweatshop-image-2015-6

      https://qz.com/669932/walmart-is-finally-catching-up-with-the-organic-products-boom/

      http://fortune.com/2016/11/04/walmart-sustainability-2025/

      1. This guy says a movement toward socialism wouldn’t be a utopia, either, but that it would allow more people to participate in defining the system they live in.

        He also says:

        “Capitalism is an economic system: a way of organizing production for the market through private ownership and the profit motive. To the extent that it has permitted democracy, it has been with extreme reluctance.”

        and

        “Capitalist and socialist leaders alike believed that the struggle for universal suffrage would encourage workers to use their votes in the political sphere to demand an economic order that put them in control.

        It didn’t quite work out that way. Across the West, workers came to accept a sort of class compromise. Private enterprise would be tamed, not overcome, and a greater share of a growing pie would go to providing universal benefits through generous welfare states. Political rights would be enshrined, too, as capitalism evolved and adapted such that a democratic civil society and an authoritarian economic system made an unlikely, but seemingly successful, pairing.

        In 2017, that arrangement is long dead. With working-class movements dormant, capital has run amok, charting a destructive course without even the promise of sustained growth. ”

        https://www.nytimes.com/2017/06/26/opinion/finland-station-communism-socialism.html

        Belief in corporations as vehicles to do good should be small. A recent article about the Yoplait yogurt company’s repeated failures to generate authenticity — think about that — should make us pause.

        We have very little access to the motivations of companies. Yes, they are required to publish some specific information. Generally, though, the only accurate assumption we can claim is their motivation to make a profit.

        I’ve been in many corporate meeting rooms in varied roles. For a significant number of years my employer would send me to Manhattan to meet with Fortune 500 companies. I also spent a summer as a field worker, worked as a waitress a couple of times, and did several stints as a data entry clerk.

        I’m telling you, the people in those boardrooms do not mention other people except en mass, as a market. Use their efforts if you think they make your point but I would never rely on them to do the right social thing in any important situation.

      2. 1) Comb back through the piece and find the place where I said that corporations care about us. Corporations are just machines. They haven’t changed. Their landscape of incentives has.

        2) Don’t make the mistake of comparing an increment to an absolute. In other words, don’t damn social capitalism for failing to solve problems that governments likewise have failed to solve. Think again about those boardrooms. How many elected officials are more compassionate, more sincerely interested in the individual needs of each constituent than the people in those boardrooms? Based on my experience, I’m gonna say 0.

        3) I’m pretty convinced that representative politics, as we have understood it since about the late 19th century, is dead. Mourn it if you must, but things change. In the world’s most successful and prosperous countries, politics is losing its centrality, moving toward the fringes of our existence. To a very large extent, this is a product of affluence.

        What comes next? Social capitalism is probably only part of the picture. Centralized, hierarchical institutions with heavy demands for expertise and engagement are dying all around us. We aren’t going to sustain them out of pure collective will, even if we possessed that will (which we don’t). We need a lighter, more ad hoc, less centralized means of organizing ourselves toward common, public goals. I’m not sure what that looks like, but its something we need to be thinking about.

      3. Chris, we keep bringing up how government and corporations don’t really care about us. If we (you, me, Bobo, all of us) became part of government or heads of a corporation, would government and corporations suddenly become caring entities? What is it about government and corporations that make caring a non-existent quality? Should more of us caring types run for office or start a company? If we succeed in getting those positions, will we eventually stop caring? Instead of seeing it as THEM versus US, maybe WE should become THEM.

        Or screw THEM. Why do we always have to look to THEM to solve all our problems? Why can’t WE just wrestle power from them and take matters into our own hands, albeit in a small scale, and take care of ourselves?

      4. Machines respond to inputs. Put me in Congress with my mouth and my opinions and my concern for substantive issues and I would either 1) change, or 2) be voted out of Congress very quickly. The machine behaves in a manner consistent with its programming.

        That machine is not all bad, but it is limited. The machinery of our representative government, for example, is slow, dumb, and almost entirely incapable of crafting expert solutions for anything. You can fill Congress with smart people, it will still be slow. It will still be nearly impossible to get things done. They will still find it nearly impossible to draft and pass complex legislation. It’s not about the people, it’s about the shape of the machine.

        Corporate machines are fast and smart, but they are solely focused on profit maximization. By the same logic, put me on the board of a corporation 25 years ago and all my concern for workers rights and the environment and fair business practices would just get me repeatedly overrulled until I was finally fired. Change would have to come from the landscape, not from cogs in the machine deciding to be nicer.

        On the business side, those changes in the landscape are actually occurring. Self-interested jerks in corporate jobs are looking for ways to reduce their carbon footprint because it enhances their bottom line. Same with business practices, diversity, labor relations, etc. That’s what social capitalism is all about, changes in the incentives impacting companies, not just changes in their attitudes.

        And its working. The US has achieved striking reductions in carbon output, far beyond any other developed countries, because the landscape of incentives has moved companies toward leaner practices. It isn’t perfect, but it’s getting better.

        We might all benefit from paying more attention to what we buy and who we buy it from and marginally less attention to who we elect. Our day to day purchase decisions might have a bigger impact on our future than anything that happens in DC.

      5. “Centralized, hierarchical institutions with heavy demands for expertise and engagement are dying all around us.”

        I’m not sure they’re dying, just being walled off from the hordes that keep attacking them. I believe your Idiocracy article is closer to the truth than social capitalism.

        We live in an age of stunning, rapid advances, which are made by exactly those types of institutions. For example, American universities are basically billion-dollar research machines. Teaching (especially undergraduate) is secondary. While they may mouth platitudes about expanding opportunity for all Americans, they’re much more class-stratified now than they were several decades ago. Which means they’re no longer really available to people outside of elite schools in large cities and suburbs.

        Healthcare advances come from businesses like massive research hospitals and pharma companies that are so huge that billion dollar revenues are considered niche markets. When PETA protests their animal research, they merely hide their primate labs in the Caribbean.

        Even capital for new businesses gets increasingly funneled through centralized venture capital firms, private equity, etc. who hire experts from the top universities to make investment decisions. The neighborhood banks of yore where a local branch manager would lend you money to hang your shingle because he lives in your neighborhood and has a good idea if it will succeed, are rapidly disappearing.

        Our lives are increasingly dependent on these centralized institutions. Except they’re increasingly walled off and untethered from the hoi polloi and their pitchforks. You can’t revolt against an institution you can’t see, after all.

  8. Chris, your comments about the growing importance of talent versus labor brings to my mind a book I’m reading now titled DEEP WORK by Cal Newport.

    In it he talks of how in this day and age, everyone’s attention is so fractured with all the new technology (social media, instant messaging, email, etc), that the ability to think deeply is now so rare that it is what currently makes an employee truly valuable in the marketplace.

      1. Creigh, the author mainly stresses the importance of focus, of undivided attention, so it’s not just about deep thinking, but also about the craftsman who works with his hands, patiently, painstakingly, and lovingly. The book is about how focus and attention lead to excellence, whatever your field.

  9. “We may miss the days when a chicken sandwich carried no personal statement about sexual freedom.”
    **********************
    This sentence reminds me of one of your anecdotes in a previous thread and brings to my mind the potentially chilling aspects of what innocently starts out as social responsibility — that an engineer in the Chicago area could have his career destroyed by simply appearing with a Chik-Fil-A bag — not because he is or may be anti-gay or anti same-sex marriage — but simply because he chooses not to participate in a boycott.

    To destroy someone’s career for not participating in a boycott is as bad as destroying someone’s career for being gay.

    1. Chris, what I found especially chilling is that you seemed to be okay with the idea that an engineer’s career prospects could be destroyed just because he was sighted with a Chik-Fil-A bag. Did I misunderstand?

      Next, people will be using their smartphones to photograph office rivals walking out of Chik-Fil-A with a frosted lemonade in hand, for the purpose of getting them fired.

      1. Well, I didn’t actually express okayness with any aspect of this. Just observed that it seems to be unfolding. Frankly, I think it’s pretty unstoppable. As with any other social/cultural trend, its merits will mostly pivot around how we adapt to it.

    2. “To destroy someone’s career for not participating in a boycott is as bad as destroying someone’s career for being gay.”

      This is a big issue, and pretty much last season of South Park was about, though I’m not sure how directly Matt and Trey knew it.

      A few years back a friend of mine contacted me through Facebook with a request. She had found some man posting racist messages or something similar, and so she was trying to rally everyone she knew to flood the guy’s wall with messages attacking him and his posts.

      I wrote back something like, “I’m not going to participate in that but it’ll be amusing to watch, in an Internet-y sort of way.” She promptly unfriended and blocked me. Nothing more came of that until a few years later when a mutual friend was saying something like, “You know how [our friend] got that thing she’s posting about?” and I said I had no idea, she blocked me ages ago for not helping her bully some racist or something, and my friend said, “Oh. OH. Actually yeah I kinda remember that. She was talking shit about you like a few days afterward or something. Anyway, so she’s always posting about this thing…”

      This was around the same time that Anonymous was first hitting headlines and people were trying to figure out what DDoS means. Also around that time came the articles about Internet bullying, and not long after that Lady Gaga started her anti-bullying thing.

      Anyway that experience lead me to conclude that the difference between Internet bullying and Internet activism is merely a matter of who you think the victim is. South Park’s latest season was basically a documentary about how far that sort of mass appeal to grievance through social networking has become a perpetuating cycle. South Park also draws the comparison to the forces that got Donald Trump elected.

      Anyway, the spillover to ‘IRL’ hasn’t happened fully yet, but … it’s getting there. It’s yet another manner in which growing up, people predicted one future and we seem to be getting the opposite. The future people predicted was that people would become so used to things like nudity, drug use, typical human ‘vices’ that they’d hit a point where they were like, “I don’t even care that this guy campaigning for President did that.” Instead, what we seem to be getting is call out culture and doxxing. If we continue down this path, the “IRL” interactions will carry the imprint of digital scarlet letters.

  10. Thought this was one of your best pieces yet Chris.

    You may have over-played the Uber example a bit (their current fall has 10x more to do with a long history of ingrained cultural issues revolving more around sexual harassment, gender discrimination and lack of internal accountability then it does to Travis’ response to the travel ban) but your overall point stands. And stands strongly.

    Additionally, I thin we will see more automation in the leverage of social capital along the lines of the app “Buycott” where you can subscribe to (or create your own!) personal issue campaigns ranging topics as broadly as “Anti-Animal Testing” to “Not buying anything owned by the Koch Bros” and use your phone to scan UPC symbols in any store to check anything before you vote/buy.

    As a second-helping of food-for-thought on the idea of markets and externalities, here is a 14-minute TED speech by Harvard philosophy professor Michael Sandel about how we should think about allowing market forces to determine civic aspects of our lives.

    https://www.youtube.com/watch?v=3nsoN-LS8RQ

    (Btw, if you have not watched his Harvard series on “Justice”, I’d urge you to do it!)

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