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Economy

  • by Thomas Kochan and Paul Adler
  • 6

The word "capitalism" was one of Merriam-Webster's most looked-up words of 2012. (Richard Drew/AP)

All of a sudden capitalism is in question even in places one would least expect.

Debates have been aired recently on radio talk shows, discussed at an Aspen Institute gathering of CEOs, raised in editorials commenting on the burst of protests by fast food workers around the country, and are the topic of a growing number of books.

The American economy is not working for the vast majority of citizens. Wages have been stagnant and income inequality has been growing for three decades while productivity and corporate profits have flourished.

Why all this attention now? Very simply, the American economy is not working for the vast majority of citizens. Wages have been stagnant and income inequality has been growing for three decades while productivity and corporate profits have flourished.

Remarkably there also is growing consensus among the diverse groups participating in these discussions on a root cause of the problem: American corporations are focusing on maximizing short term shareholder wealth at the expense of workers, communities, and the overall economy.

We agree with this assessment and think alternatives to this narrow conception of capitalism are necessary. That is why we chose to make “Capitalism in Question” the theme of the annual meetings of the Academy of Management, the largest professional association of management professors.

From the program of the conference:

The recent economic and financial crisis and the emergence of many protest movements around the world have put back on the agenda some big questions about the ‘better world’ part of our vision. What kind of economic system would this world be built on? Would it be a capitalist one? If so, what kind of capitalism? If not, what are the alternatives?

We were pleased to learn of a range of ideas and actions are underway that, if expanded, might help fix the problem.

Labor leaders noted there is a near perfect correlation between the decline of union membership and increases in income inequality. But they also recognized that a return to the past is not possible. Instead, they described how they are reinventing the labor movement by reaching out and forming new alliances with young workers, students, NGOs and community groups, business and labor relations academics, and progressive employers. They are using lessons learned from the use of social media in building networks and from business entrepreneurs to incubate start-ups capable of giving workers the power to rebuild the economy from the “middle out,” a theme endorsed recently by President Obama.

Health care union leaders described how they are working in partnership with leading employers to empower front-line workers and enable them to drive improvements in quality and affordability in this key industry.

A new, revitalized, and stronger labor movement built to scale from these experiments has to be part of a rebalancing of power in corporate affairs and in empowering workers to contribute to improved economic performance and share its gains.

Others noted there is nothing sacrosanct about the goals of corporations. They called for expansion of employee owned firms, cooperatives, and Benefit Corporations that explicitly build a triple bottom line — profits, good jobs, and environmental sustainability — into their charters.

Increasingly, new courses are popping up [about] how to manage business for people, profits, and the planet. All future business leaders need to learn how to manage these multiple objectives and then be held accountable for meeting them.

Even deans of leading business schools are searching for how their institutions can be part of the solution rather than part of the problem. For too long financial theories that privilege shareholder value have dominated business school teaching. Increasingly, new courses are popping up at MIT, Harvard, and other business schools that teach MBAs how to manage business for people, profits, and the planet. All future business leaders need to learn how to manage these multiple objectives and then be held accountable for meeting them.

These ideas alone will not produce a revolution among business leaders or even among those who educate, advise or negotiate with them. One can, however, hope the debates now under way will spark a broader examination of how to assure a better future for everyone. After all, isn’t that capitalism’s promise?

This piece was co-written by Paul Adler, a professor at the University of Southern California’s Marshall School of Business and program chair and president-elect of the Academy of Management.

The views and opinions expressed in this piece are solely those of the writer and do not in any way reflect the views of WBUR management or its employees.

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  • road.rep

    “Academy of Management, the largest professional association of management professors”???? What a joke! A bunch of academic professors who have never managed a business (or anything else) in their lives, is trying to pretend that they have some relevant experience in management! That’s CRAZY! Let me know when you can have an Academy of Management that includes the largest association of management PROFESSIONALS! Then we might have something more than academic drivel.

  • Geheran1958

    The same doubts about the fundamentals of Capitalism came into vogue in the 1920s and ’30s mostly as a result of the depression and the rise of Communism – a hopelessly idealist ideology Implemented by a ruthless band of thugs aided and abetted in no small way by US academics, journalists, religious and political elites (“useful idiots”: Lenin) who were sucker-punched by “Potemkin Villages” and other fiendishly clever tactics dreamed up by the Comintern and implemented by the KGB, GRU, et al. While not perfect, the fundamentals of Capitalism have stood the test of time and awaits the next onslaught of non-believers. Next up: “Civilization jihad”?

  • Richard Rabin

    The capitalist nations have also had their share of thugs and thieves: in England, the large landowners got capitalism started by expropriating land from peasants; the slaveholders in the US, England, Spain, etc.; more recently, Marcos in the Philipinnes, the dictators in Central and South America, the Shah of Iran, just to name a few – all of them supported by the US government.

  • David F

    I have long felt that the stock market is a real problem. Too many people want to make money by doing nothing. So they invest in the stock market. Then complain if the companies they invest in don’t make them enough money, sending stock prices down and cause companies to lose imaginary value.

    The value of a company should be measured by its actual holdings. It should not be determined by a bunch of lazy people who know nothing and care nothing about the company and what it produces.

    Do away with the stock market and commodities markets and capitalism will work just fine the way it was intended to work. Companies will then be able to focus on making high quality products that consumers want to buy. The consumer is who corporations should be worried about making happy, not investors.

  • PeterBoyle

    Some more lipstick and a few bandaides on this pig will not work. Capitalism, under the strict control of Keynesian economics and real government oversight can be managed for the benefit of all. Reagan gave us ‘Supply Side’ economics, deregulation, and deunionization and look at the results. Now we have compounded the problem with another legacy of Reagan; strident anti-government elected officials who refuse any compromise and the new American Taliban who decimate any who do not believe what they believe. In other words…a dysfunctional Congress and elections ruled by the big givers in corporate America. Add in an ineffective President, and out of control Homeland Security, and we have the makings of steep decline in American respect and influence in the world. We are becoming a laughingstock.

  • Concerned citizen

    I am very pleased to hear that this conversation is occurring and am not surprised by the preceding over-the-top comments. Keep pressing hard on this issue; if we just have more of the same restricted focus on shareholder value and profits, we will never fulfill capitalism’s promise or the promise of the American Dream.

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