[back to archive]
P H I L O S O P H Y F O R B U S I N E S S ISSN 2043-0736
Issue number 69
13th October 2011
I. 'Harnessing Enterprise and Risk in The Era of 'Political Economy''
by Sean Jasso
II. Review of Marvin T. Brown Civilizing the Economy: A New
Economics of Provision by Rachel Browne
III. CFP: Henry Kaufman Conference on Religious Traditions and
The contributions in this issue reflect the difficult economic times.
Sean Jasso argues that national governments have all-too easily fallen
into the trap of responding to the public clamour that 'something
needs to be done' about the economy with hasty, ill-thought out
measures that merely result in further loss of investor confidence.
We need to give entrepreneurs and businesses space to breathe and do
what they do best.
Meanwhile, Rachel Browne in her review wholeheartedly agrees with
Marvin T. Brown's case for a more radical approach to the economy
than any Western governments have yet dared to take. The philosophy
of Adam Smith was fatally compromised by his support of slavery. The
focus of economic activity should be provision for all, not merely
increase in wealth for the relative few at the expense of third world
poverty and exploitation. Yet the reader might well ask how this
differs from the old discredited Socialist idea of the planned
Perhaps the answer is that we need to look again at the truism that
business is all about making money. That's like saying that chess is
all about checkmating the king. That's true, but that merely defines
the game. What is wealth, after all? We are all in this together, and
the case has been repeatedly made by contemporary business ethicists
that companies that recognize this will ultimately be the ones who
Also in this issue is a Call for Papers for an interesting looking
conference at the Robert H. Smith School of Business, University of
Maryland on the role of religious ideas in business behaviour.
As it happens, I was asked the other day by a Rabbi what I thought of
Dostoyevsky's infamous remark, 'If God is dead, everything is
allowed.' Capitalists have often been accused of behaving as if
everything is permitted. My response is that all manner of
evil-doing, including, most infamously, the institution of slavery,
has been done under the firm belief that 'God is on our side'.
I. 'HARNESSING ENTERPRISE AND RISK IN THE ERA OF 'POLITICAL ECONOMY''
BY SEAN JASSO
When the shallow critics denounce the profit motive
inherent in our system of private enterprise,
they ignore the fact that it is an economic support
of every human right we possess and without it,
all rights would soon disappear.
Dwight D. Eisenhower
The U.S. and global economies are telling us something -- allow
markets the freedom they need to create enterprise and manage risk.
Economic indicators in the U.S. reveal a continuing slow recovery of
real economic growth of just above 1.0%, yet with projections upward
of 3.0% throughout 2012. Inflation has now reached 3.8% and the
unemployment rate remains 9.1%. Other realities include continuing
global stock market volatility, ongoing European sovereign debt
crises, slowing growth rates in China and India, Japan's negative
growth rate and revolving door of prime ministers, and continuing
high inflation in Brazil and Russia. The simple questions for the
astute investor are quite simple -- why is much of the world behaving
like a political economy and not like a market economy?
Political Economy -- Reactive Policies, Tentative Markets
At the end of the day, does it matter if Greece defaults on its
national debt requiring yet another EU loan? It does if you own Greek
debt which many countries and foreign banks do. Does it matter if the
U.S. federal government received a point downgrade from S&P due to
its rising national debt capturing the attention of foreign bond
holders? It does when the primary reason the U.S. debt position is
now equal to that of GDP is mostly constrained by political and not
economic policy. Does it matter that significant national economies
are tied to global economies? It does when your supply chain is
interdependent on global markets and distribution.
Globalization, to be clear, is a near universal economic strategy
that depicts the reach around the world by firms and nations for
resources, efficiencies and capital. Without debate, globalization
has added to the sharp rise in prosperity of nations for decades --
just think of China's and India's economic progress due to their
global reach. What is now conventional is the dynamic and immediate
connectedness, particularly information, associated with
globalization such that for the first time in generations,
international investors, for example, can watch in real time the Dow
Jones Industrial Average, traditionally the leading thirty stocks
with historical ability to weather volatility in the economy, lose
300 points or more in a single day and then regain its losses within
days. Global economic markets don't behave this way, but global
political markets do.
Blue chip stocks don't lose value in a single moment because of their
management ineffectiveness or strategic incompetence. Quite the
contrary -- rather, the uncertainty caused by increasing levels of
political risk combined with the globalization of markets has begun
to heavily influence interconnected economies by way of reactive
emergency government policies intended to infuse economic growth,
reduce inflation and unemployment, protect domestic jobs, smooth
interest rates, inject capital, inflate or deflate currency, and even
'invest' in selected industries in hope of priming innovation and
competitiveness. The results of these policies both in the United
States and abroad have produced little to negative growth, higher
national debt burdens, embarrassing default crises, and, more
directly, increased levels of economic risk. The anemic results of
this political economy indicate that a revival of economic
fundamentals is central to restoring the more productive results of
private enterprise, where history reveals that markets impelled by
competitive firms make rational decisions that more effectively
balance employment, production, prices and, in due course,
sustainable economic growth.
'Political Economy', the eighteenth century study of economic state
policy behavior eventually was replaced by the term we know today --
economics, where both individuals, households, firms and
international trade represent the economy of modern society. Within
the last few decades 'political economy' resurfaced as a field
analyzing the political efforts of states to shape economic policy
primarily through monetary, fiscal and a wide range of distributive
instruments to stabilize, cure, correct, and expedite economic
growth. Furthermore, political economy evolved beyond an academic
discipline becoming public policy ideology for many Western mixed
economies that balance capitalism within the apparatus of a welfare
state -- the U.S. among the largest 'political economies'.
Private Enterprise -- Strategic Policies, Competitive Markets
What we are witnessing throughout much of the world is governments
working feverishly to bolster consumer and capital markets with all
measures of reactive monetary and fiscal policies, while
simultaneously working to no end to reduce over extended national
budgets with onerous austerity programs. This combination under the
scheme of government as savior to enterprise is demonstrating widely
that a political economy is not just ineffective and inefficient,
but, moreover, incapable of strengthening economic growth by no other
reason than government and enterprise serve different functions within
society. What exasperates the investor today is the inability to plan
for the future due to the unceasing wave of national and
international economic policy initiatives proven to be divisive among
the electorate, impulsive in their design, costly in their
implementation, and overtly political in their intent. Economic
fundamentals affirm that equity markets respond favorably when
investors have a sense of certainty and stability in the economic
fundamentals that have been the cornerstone for the creation of
Investors are empowered by rational incentives namely profits and
losses of competitive firms working efficiently to allocate their
resources where the production and delivery of superior value is
rewarded with customer loyalty, which builds brand equity and
translates into long-term projected profitability -- more simply,
success. When the state is obliged to intervene into the market the
better policies have been those aimed at protecting against criminal
behavior and not protecting against unfavorable economic results.
When public policy becomes reactive instead of strategic, no matter
how well-intentioned, as the general economy and political
environments are now demonstrating, these policies infect the natural
ebb and flow of competitive, private enterprise, and we begin to see
investors become naturally anxious, short-term in their thinking, and
their confidence in the fundamentals erode. Investor uncertainty can
then influence management decisions of the actual companies' people
own and executives, still driven by rational value creation, begin to
hold cash, freeze hiring, delay capital expenditures, push further for
global markets and resources, and, at last wait through the same
uncertainty impacting their shareholders.
However, even amidst this era of global 'political economy' there is
no evidence of political, economic or social apathy in dealing with
the immense challenges around the world. Any rational, moral
politician in a parliament, palace or congress is trying diligently
to shape public policy to improve the status quo. In fact, with the
help of global media technology, no politician can shirk from the
task. Yet, evidence does reveal that well-meaning politicians are
impeding the natural current of corporate capital and investment risk
by their very ambition to save the day. At last, it is the voters
among legitimate democratic electorates that steer the course of the
nation. What we do know is that the natural current of human endeavor
is to allocate time and talent toward productive, profitable means.
This implies that the individual -- the entrepreneur -- from the
one-person enterprise to the family firm to the large multinational
corporation when given the breathing room can generate lasting value.
We must remain committed to economic fundamentals where entrepreneurs
drive innovation and harness risk. Moreover, well managed public
corporations responsible for profitable income statements and
pristine balance sheets more consistently impel capital to its most
productive and efficient use within the rivalry of a competitive
market. Therefore, resolute confidence can assure investors that the
political economy attempting to breathe life into the market economy
of late will veer toward policies that allow the markets to breathe
life more accurately into themselves. This timeless philosophy will
ultimately prevail as political economies accountable to electorates
evoke the power of market economies accountable to nothing other than
the creation of value and, in the end, the wealth of nations.
(c) Sean Jasso 2011
Sean D. Jasso, Ph.D.
Faculty in Economics
Graziadio School of Business and Management
II. REVIEW OF MARVIN T. BROWN CIVILIZING THE ECONOMY: A NEW
ECONOMICS OF PROVISION BY RACHEL BROWNE
Civilizing the Economy: A New Economics of Provision
Marvin T. Brown
Cambridge University Press, 2010
Marvin T. Brown teaches business and organisational studies in the
Philosophy Department at the University of San Francisco and on the
Organizational Systems programme at Saybrook University. Brown's
previous books have been on ethics in the workplace. Civilizing the
Economy is a highly ambitious, well researched and successful work.
It explains what is wrong with a property-based economy and suggests
a new way of thinking of economics: The economics of provision.
This is a wide-ranging work, beginning from the idea that we should
learn from experience and look at what has gone wrong with economies.
It goes on to look at ownership, the nature of land and money,
stakeholdership and suggests structures which can improve the economy
and increase the satisfaction of the individuals who inhabit these
The economics of provision is based on the precept that one can and
should take a moral stance towards the economies. It holds that we
all have a stake in the economy and that the proper purpose of an
economy is to make provisions for families and communities. The
proper purpose cannot morally be to make the rich richer and the poor
poorer, while the rich dominate the economy through property ownership.
As we currently live in a world which has been globalised, Brown asks
how 'current free-market thinkers seem unable to see the misery of the
sweatshop, the destruction of the biosphere, or the suffering caused
by oil wars' (p.22). His answer is that we have to ignore such things
in the name of progress. This answer arises from looking at the
history behind the writing of Adam Smith's The Wealth of Nations.
Adam Smith was a free market thinker who thought the market was
self-regulating. Brown points out that this is not so. The market is
not a natural phenomenon and so requires regulation. This is also so
for corporations. Brown describes anthropological studies in support
of early man as having been the hunted rather than the hunter. As
such, naturally, families and communities stuck together, to provide
and protect. We have evolved to live in a world in which the
self-interested accumulate money and power for themselves, yet the
vast majority of people in the world find this unfair.
Something is seriously wrong, Brown claims, when large pharmaceutical
companies in the USA spend millions of dollars on lobbying Congress
when the money should properly be directed to research on the
medications (p. 172).
Given recent corporate scandals, the global financial crisis and the
destruction of the biosphere, where the earth is treated as a
commodity from which to extract in order gain wealth, we need to know
where we went wrong.
Brown blames Adam Smith. He relates the history behind The Wealth of
Nations, which is possibly the all-time great scandal, in that this
book has influenced economics for hundreds of years. Yet behind this
book was a great deal of intellectual dishonesty. This is quite
surprising given that Smith was a professor of moral philosophy.
Against the background of Smith's book was the vast increase in
wealth which came to Glasgow, based on the growth of the tobacco
industry. This industry relied very heavily on slave labour in
America. Smith belonged to a political and economic discussion group,
along with three of the wealthiest tobacco merchants in Glasgow. These
merchants would be behind Smith's idea of free trade and how it leads
to progress. The tobacco industry received shipments of tobacco,
produced in quantity only due to slave labour and, with the
increasing growth in the demand for tobacco in Europe, this became
Glasgow's main export. And Glasgow flourished.
Yet in formulating his ideas on the economy, Smith omitted to look at
the fact that his idea of flourishing was a result of slavery, where
people themselves were treated as property. He had to ignore this
because he was committed to the idea of progress, given that he was
personally surrounded by it. This is the state of affairs which
enables current free-market thinkers to be blind to the misery of the
sweatshop and the misuse of the world's resources.
So Brown accuses Smith of working with a 'narrative', and of creating
a fabrication. Brown shows that our current economic thinking is based
on falsehood. If anything lends support to switching from current
economic free-market thinking to a new economics of provision, this
But yet more intellectual dishonesty is pointed out. Smith is quoted
(p.23) as saying 'though North America is not yet so rich as England,
it is much more thriving, and advancing with much greater rapidity to
the further acquisition of riches. The most decisive mark of the
prosperity of any country is the increase in its number of
Brown points out that Smith does not mention that increase in the
population of the US was due to the increase in the slave population.
Perhaps in Smith's defence, given a probable lack of polls, a large
part of the rise in the population could have been optimistic
immigration to the 'New World'.
Even so, our free market economic thinking is based on falsehood and
dubious propositions. Much of the thinking of an iconic economic text
has behind it three tobacco merchants who overtly influenced Smith's
Brown argues that given the falsity behind our current beliefs about
the value of progress, it is important to think in new ways or,
indeed, to start thinking.
Brown turns to Aristotle's idea of a civic society for help, as well
as many more recent writers on the economy. Aristotle's idea of
flourishing or progress does not focus on the merchant and commerce,
as does Smith's. Aristotle's idea of flourishing was quite different.
Instead of believing that flourishing is about commerce, where the
wealthy treat the workers as commodities to enable them to increase
their wealth, Aristotle argued that it is essential to talk about the
good life and to be in conversation about this as citizens and
Looking at more recent writing, Brown work proposes the fundamental
requirements for flourishing and civilising the economy where this is
grounded in ethics, both the inter-relational and deontic.
The inter-relational ethic is that as global citizens we should treat
one another AS citizens. To speak of 'citizens' we assume most people
are the same, though there is individual and cultural variation. For
Brown, this is to adopt the Golden Rule, of 'do unto others'
reflected in Kantian ethics of universalising a principle of action.
For Kant, to be ethical is to treat others as autonomous beings,
where we are face to face as agents, not categorised as wealthy,
poor, the boss or the worker.
In line with this ethic, further principles are discussed which will
sustain 'balanced social arrangements' (p.87). Brown takes his
argument to be in line with John Rawls' argument (John Rawls: A
Theory of Justice) to the effect that while we might not all be
equal, economic and social arrangements should be to the benefit of
everyone. Everyone should have a voice. This a bit unrealistic and
idealistic but, at least through being able to vote for those who
represent our interest, the work of trade unions, through social
discussion as well as discussion within organisations, we can try to
work towards this end.
Since Adam Smith's time, the time of the Scottish Enlightenment, we
are now seeing governments creating regulations for businesses and
there are non-governmental guidelines, conferences, papers and
journals on business ethics.
This hasn't actually helped the economy in the West as most of our
economies appear to be collapsing. What we learn from the book is
that we haven't been treating others as global citizens. There has
been no functional global ethics, so there has been no functional
global economics, but rather 'aggressive global competitiveness'
which is moving us more and more towards the destruction of the world
in which we live.
It is interesting that in a very early edition of this journal,
Philosophy for Business, Geoffrey Klempner spoke of the 'business
arena' and that this adhered to different rules to those which hold
socially. Brown quotes from Frank K. Knight, a founder of the Chicago
School of Economics. Knight drew an analogy between economic activity
and competitive sport, which takes business out of the normative
This competition/ sport/ arena idea is analysed neatly. If business
is a sport or takes place in an arena, it is only for the wealthy and
privileged. For most of the business and market economy there is no
sport, or no arena in which we compete. Most of us in the market
economy, as consumers, or workers in organisations are just
struggling to survive. Brown says that to overcome this 'business
leaders at all levels must see themselves also as citizens --
citizens who identify with the civic norms of moral equality' (p.104).
Karl Marx is quoted in relation to the view that a person at work is
not his authentic self. He is not voluntarily in labour and that work
is alien to his person. If the workplace was more of a community,
where there was discussion rather than control by managers, and
workers could engage in the design of the workspace, and be listened
to as moral beings, there would not be such alienation.
In response to this, Brown turns our current thinking on its head:
The workers do the work... workers need coordination to
ensure that their work is productive and successful. That
is the job of their supervisors. Supervisors work for the
workers, rather than the workers working for the
As citizens, what should be the relationship between an
employer and an employee? They have equal moral rights. One
is doing the work and the other is watching, monitoring,
perhaps advising, but in many cases the worker knows more
about the work than the employer. (p.185)
So the question arises 'Who should have the most say in organising
the workplace?' Brown suggests that workers should be represented on
boards. When the worker is properly involved, instead of being
alienated from his work he can become involved in it to greater
satisfaction, as a member of that work community.
A question was raised by Charles Handy in the Harvard Business
Review: 'What is a Business For?'
Brown makes the point that 'What are businesses good for?' is a
different question. This is a much less abstract question because we
assume they should be good for citizens. So another answer to the
alienation problem is that if a business contributes to the
flourishing of citizens as a whole, people involved in businesses
will be more likely to identify with it. Looking at a business in
terms of it's value for flourishing, we are no longer talking about
profit making but how the business contributes to a wider system.
So part of the progress in changing the economy from using people as
commodities, to making provisions and flourishing, belongs to work
that can be done by the business organisation. It seems that
capitalism might not survive unless changes to our thinking are made
and this books suggests a way forward for change. It is not all
pessimistic about our current practices. Looking at the provision of
food, transport and housing, Brown notes that,
Most business are responsive to public opinion and do seek
to maintain the good will of the communities in which they
serve. Their practices reflect the attitudes and
aspirations of their owners, and business people are just
as likely to fulfil their civic obligations as any other
group of citizens.
This is perhaps true for small to large businesses, but until we have
full globalisation and we are all citizens, the sweatshop will remain
a problem. Exploitation and the plundering of the earth's resources
will continue until we realise that we are all in this together and
that the earth is where we live. Destruction of the biosphere will
not lead to enhanced flourishing.
While the global economy appears to teetering on the brink of
collapse and unrestrained capitalism has been shown to suffer
fundamental flaws, this book is timely. Brown's call for a type of
Neo-Marxist economic revolution would be music to the ears of those
who are unemployed, those living in constant fear of redundancy or
simply those who are suffering falling living standards.
(c) Rachel Browne 2011
III. CFP: HENRY KAUFMAN CONFERENCE ON RELIGIONS TRADITIONS AND
Call for Papers
This conference explores two central questions in the relationship
between the world's major religious traditions and the business
behavior of adherents to those traditions:
First, what do the world's major organized religious traditions --
Protestantism, Catholicism, Islam, Hinduism, Buddhism, Judaism --
proscribe about business and financial ethics and behavior?
Second, how and why have business and financial actors seriously
compromised the leading religious traditions of their cultures?
By interrogating these two core questions, the conference will yield
insights valuable to contemporary business and religious leaders
about abiding questions such as:
¥ Do the scriptures and doctrines of these religions appear to have
had a marked effect on financial behavior?
¥ Does religion appear to be a more potent or less potent influence
than business ethics courses in fostering sound, ethical, and
socially responsible financial behavior?
¥ How can religion best be promulgated to make financial behavior
more sound, ethical, and socially responsible?
Authors are invited to submit papers related to the questions listed
The deadline for submitting papers is February 1, 2012. Please submit
completed papers as e-mail attachments to
Note: When submitting a paper, please include a title page with an
abstract, names of authors/ affiliations, and contact information for
the submitting author. Scholars will be invited to participate in two
discussion sessions in College Park, MD, prior to the Spring 2013
conference. Further instructions will be communicated to the scholars
at the time of proposal selection.
For more information, contact:
Henry Kaufman Fellow in Business History
Center for Financial Policy
Robert H. Smith School of Business
Center for Social Value Creation
Robert H. Smith School of Business