EIGHT

THE DANGERS OF NARROW SELF-INTEREST

Capitalism is an economic system that’s largely rooted in the idea of individualism and individual rewards. People should be free to pursue their own dreams and build their own lives in a free marketplace. They shouldn’t depend on the government or its handouts or even be beholden to public opinion on what is right or wrong.

Former Federal Reserve Bank Chairman Alan Greenspan put the question this way: “Do we wish a society of dependence on government or a society based on the self-reliance of individual citizens?” I would challenge his question and ask why we can’t have a system of self-reliance as well as a system of community caring for families that need help. What is the best balance between the two?

THE CASE FOR INDIVIDUALISM AND SELF-RELIANCE

The extreme exponent of the individualism view was novelist and philosopher Ayn Rand. She wrote two famous books about her philosophy, which she calls objectivism. Her 1943 novel, The Fountainhead, portrays a young, strong-willed, and creative architect named Howard Roark who refuses to design buildings in the old historical styles.

He prefers obscurity to compromising his personal and artistic vision. He is a contrast to Peter Keating, another architect, who copies historical styles and joins a prestigious architectural firm where he uses flattery to rise quickly to a partnership in the firm. At one point, Peter Keating gives a commission to Roark to design a building for him. Roark agrees, provided the building is built exactly as he designed it. Roark later returns from a long business trip and finds that the building is finished, but it has been compromised. Roark dynamites the structure because it’s not the building he designed. He faces a trial for his “crime.”

Another character in the book, Ellsworth Toohey, is constantly critical of Roark’s independence. Ayn Rand regards Toohey as the personification of evil, someone who embodies the spirit of collectivism, but actually uses it to gain power over others. Rand is against the ideals in Toohey’s ethical altruism and uses the novel to make her case for ethical egoism (i.e., rational selfishness). Her hero, Howard Roark, is an uncompromising individualist who is bigger than life and worthy of hero-worship to Rand. Roark says: “I can find the joy only if I do my work in the best way possible to me. But the best is a matter of standards—and I set my own standards. I inherit nothing. I stand at the end of no tradition. I may, perhaps, stand at the beginning of one.” Much of today’s libertarian philosophy goes back to this idea of the free and creative individual whose enemies, namely socialists and collectivists, try to bridle and corrupt him.

Ayn Rand’s second book, Atlas Shrugged, published in 1957, centers on a vision of a society in which its most productive citizens refuse to be exploited any longer by increasing taxation and government regulations. Business leaders, such as the steel leader Henry Rearden and the oil leader Elias Wyatt, shut down their respective industries and disappear. They join John Galt, the leader of this rebellion, to demonstrate that the destruction of the profit motive will lead to the collapse of society. Only if Galt, who represents reason, individualism, and capitalism, returns to society might the economy have a chance to be restored to its former energy and growth.

Rand attributes the destruction of society to the “looters and moochers.” Looters take away the property belonging to the producers through force, such as by pointing a gun. Moochers, who create no value, take away the property of others by taxation, by demanding others’ earnings on behalf of the needy.

Atlas Shrugged was an instant success when published and it stood on the New York Times bestseller list for twenty-two consecutive weeks. Although popular, it drew its share of critics, including Gore Vidal, who described the book’s philosophy as “nearly perfect in its immorality,” and Helen Beal Woodward, who felt that the novel was “shot through with hatred.”

The late Ayn Rand to this day has a huge number of followers who see a pitched battle between those who value the individual and those who want individuals to submerge their interests to those of the greater community.

Rand’s philosophy is somewhat captured in the 1987 movie Wall Street, when Gordon Gekko (played by Michael Douglas), the CEO of Teldar Paper, gives his famous “greed is good” speech: “Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed . . . has marked the upward surge of mankind.”

Let’s turn to less extreme examples of individualism to understand its origins and rationale. Individualism is the doctrine that values independence and self-reliance and believes that the interest of the individual takes precedence over the interests of the state or a social group. The concept of the individual arose in the Age of Enlightenment, which rejected authoritarianism, obedience to kings, oppressive government, hereditary status, established religion, and rigid dogma. The philosopher John Locke is credited with clarifying liberalism as a philosophy that “no one ought to harm another in his life, health, liberty, or possessions.” Much later, the American Declaration of Independence was written. It includes the words (which echo Locke) that “all men are created equal; that they are endowed by their Creator with certain unalienable rights; that among these are life, liberty, and the pursuit of happiness; that to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed.”

At the same time, in 1776, Adam Smith published his famous book The Wealth of Nations. He presented the case for the critical role of self-interest in driving an economy’s growth. He was careful to call for “enlightened self-interest.” Remember, Smith also wrote The Theory of Moral Sentiments, where he said morality and decency are prerequisites to capitalism. He would have dismissed the version of capitalism calling for “animal spirits” (a phrase made popular by British economist John Maynard Keynes) to lead the charge.

Among economists in the twentieth century making the modern case for individualism are Ludwig von Mises, Friedrich Hayek, and Milton Friedman. Von Mises was a leader in the Austrian School of Economics. He wrote Liberalism (1927) and said approvingly of Ayn Rand: “You have the courage to tell the masses what no politician told them: you are inferior and all the improvements in your conditions which you simply take for granted you owe to the efforts of men who are better than you.”

Friedrich Hayek built partly on the work of von Mises and wrote The Road to Serfdom (1944), pointing out the danger of capitalism slipping into fascism in trying to avoid socialism. He was awarded the Nobel Memorial Prize in Economic Sciences in 1974. Milton Friedman wrote of Hayek, “There is no figure who had more of an influence . . . on the intellectuals behind the Iron Curtain than Friedrich Hayek. His books were translated and published by the underground and black market editions, read widely, and undoubtedly influenced the climate of opinion that ultimately brought about the collapse of the Soviet Union.”

As for Milton Friedman, who received the Nobel Prize himself in 1976, he became the major exponent of individualism and free markets through his books Capitalism and Freedom (1962) and Freedom to Choose (1979).

THE CASE FOR COMMUNITY

Geert Hofstede is a well-known international scholar who classified different countries according to four cultural dimensions, one of which was “individualism vs. collectivism.” He said in a collectivist society, such as Japan, the self-worth of an individual is rooted more in the social order than in individual achievement. A Japanese person would not want to stick out; if he does, he will be hammered down. “Shame” more than “guilt” operates in Japan and other collectivist societies; individuals must present a good “face” to others in their community. Community-oriented societies would include Confucian, Islamic, and Middle East societies to some extent. They all put a high value on social harmony, even to the extent of curtailing some individual rights.

Communism was one extreme. Countries that came under the communist philosophy held that action will be judged for its impact on the welfare of the masses, not on the freedom of individuals. The state was all important in making sure that greed and self-serving behavior didn’t become the norm. Communism sought to own all the state’s productive resources and all workers worked for the state.

Less extreme is the economic system known as socialism. Socialism emphasizes the “common good,” allows private property and privately conducted economic activity, and strongly protects democratic institutions and elections. Sweden, France, and even Britain would call themselves socialist societies to different degrees.

I’d like to emphasize a difference between calling a society “collectivistic” and calling it “community-minded.” The problem with an individualistic society is that many individuals will give little or no thought to the impact of their behavior on others in the society. They either ignore others in their decision making or don’t care about others beyond their immediate family and friends. Individualistic thinking can lead to ignoring pollution, poverty, and other social ills, even though they ultimately affect the same individuals.

The other criticism is that individualistic values can result in many people in society experiencing anomie or alienation. In his book Bowling Alone (Simon & Schuster, 2000), Robert Putnam wrote about many people who bowl by themselves in a game that is supposed to be social. Although the number of people who bowl increased during the period he studied, the number bowling in leagues decreased. He laments the decline of “social capital” and points to other trends showing that Americans are less politically and civically involved, as indicated by low voter turnout, decreased participation in political parties, and an unwillingness to serve on committees. He believes that some of these trends are a result of more women moving into the workforce, which leaves them less time to do community service, and family members spending more time at home watching television or working on the Internet. Putnam laments the decline of social capital as posing a threat to the continuation of democracy.

The reaction to hyper-individualism has created growing interest in communitarianism. Its roots go back to the Hebrew Bible, the New Testament, and more recently socialist and union movement doctrines about worker solidarity. It can be found in Sidney and Beatrice Webb’s concern for getting the British public to pay more attention to the poor and the working class. As a 2014 article pointed out, “The British government introduced free school meals for needy children in 1906, old-age pensions in 1908, funds to fight poverty in 1909, and national health insurance for the sick and unemployed in 1911.”¹ The more individualistic United States did not move to welfare ideas until the 1930s.

The issue can be seen as making a choice between oppressive but nurturing communities (Gemeinschaft) and liberating but impersonal societies (Gesellschaft). Amitai Etzioni, a long-time professor of sociology at Columbia University, held that nurturing communities don’t need to be oppressive. Etzioni founded the American communitarian movement in the early 1990s, which emphasized the importance of affect-laden relationships among groups and a shared set of values, norms, history, and meanings coming from a culture. Small towns have this type of community and involvement but larger cities, regions, and nations are likely to lose some of this “community” feeling.

Communitarians stress that individuals who are well integrated into communities are better able to reason and act in responsible ways than isolated individuals. Communitarians admit that there is a downside in that there may be high social pressure to conform and this can undermine the individual self. Individualists favor a neutral framework of rules where there may be a multiplicity of moral values, whereas communitarians might favor a more clear and shared set of rights, such as to universal health care, a free education, and a safe and clean environment. Communitarians were among the first to encourage people to support environmental causes, which they felt individualists ignored. Individualists would object by saying that environment protection violates their negative right to not have their private property taxed to support these causes.

Communitarians hold that neither individual rights nor the common good should take precedence over the other. The “good” society crafts a balance between liberty and social order, between individual rights and social responsibility. Communitarians reject the extremes of liberal individualism, on the one hand, and authoritarian collectivism, on the other. They say that a major function of the community is to preserve a “moral voice” as to what is right and good for individuals and the community. But they also stress that they do not want to return to traditional communities with their major faults: authoritarian power structure, stratification, and discrimination against minorities and women. Responsive communitarians seek to build communities based on open participation, dialogue, and truly shared values.

THE CONCEPT OF CORPORATE SOCIAL RESPONSIBILITY

Today, most companies are engaged in giving money to good causes. There are three rationales for this activity.

First, companies have received a lot of benefits from society, such as the roads, bridges, ports, and other infrastructure that helps them be profitable. Therefore, they should return something to society. Second, corporate social responsibility (CSR) helps improve the company’s reputation as a good citizen. CSR will win over more customers and help employees feel better about their company. Third, giving to charity offsets the wide impression that companies care only about profits and about accumulating wealth.

There is a larger rationale called moral obligation. R. Edward Freeman made this point: “How are we going to make this company an instrument of service to society even as we fulfill our obligation to build shareholder wealth? . . . This country has been too steeped in materialism and self-centeredness. Companies need a soul.”²

When a company decides to be generous, it must still decide who should get the donations. One possibility is to respond to the many good-cause solicitations that come from the community and other stakeholders, such as suppliers and dealers. The other possibility is for the company to choose an important cause and direct most of its donations to that cause. For example, Avon chose the cause of supporting research and treatment of breast cancer, an extremely important issue to women. In this way, Avon’s reputation is strengthened for supporting a cause that most of its customers care about.

I am inclined to favor this focused approach to donation-giving. Nancy Lee and I studied this question by interviewing business leaders from twenty-five well-known multinational companies—among them IBM, Johnson & Johnson, Microsoft, American Express, Starbucks, Ben & Jerry’s, Timberland, McDonald’s, Motorola, Hewlett-Packard, and British Air—and asking them several questions, including: How did you decide on your cause? How do you measure the impact of your gift to know how much good it is doing for the receiving group? How do you measure how much your giving is doing for your reputation and attracting new customers and keeping present customers?

We published our results in our book Corporate Social Responsibility: Doing the Most Good for Your Company and Your Cause.³ Here is a sample of companies and their causes: Kraft (reducing obesity), General Motors (traffic safety), Levi Strauss (preventing AIDS), Motorola (reducing solid waste), Shell (coastal cleanup), and Starbucks (protecting tropical rainforests).

Most of the companies paid active attention to measuring how the donations helped the recipients. The task of measuring the return to the company—in terms of stronger customer and employee results—remains more difficult because so many other variables also affect the company’s reputation. In the end, one might say that helping others is a good enough reason and doesn’t always have to be measured in dollar terms.

Our 2012 study called Good Works!⁴ distinguished six ways in which a company can manifest its CSR: cause promotion, cause-related marketing, corporate social marketing, corporate philanthropy, community volunteering, and socially responsible business practices. For each of the six ways, we illustrate what exceptional companies, such as Starbucks, Whole Foods, Patagonia, Panera Bread, and others, are doing.

Another book of mine, Market Your Way to Growth: Eight Ways to Win,⁵ describes how companies can use CSR as one of the eight winning growth strategies.

Simon Anholt, who developed a journal called Place Branding and Public Diplomacy, raised the question: Which countries contribute the most to the common good of the rest of the world? To answer this question, he researched and developed a Good Country Index made up of a country’s standing on seven indices: science and technology, culture, international peace and security, world order, planet and climate, prosperity and equality, and health and well-being. Putting the data together from the United Nations and other international organizations, he scored countries to show whether they were a net creditor to mankind, put a burden on the planet, or fell somewhere in between. Here are the nine highest-scoring countries on his index (in order): Ireland, Finland, Switzerland, Netherlands, New Zealand, Sweden, Norway, Denmark, and Belgium. The United States stood at 21. At the other extreme of low “goodness” were Russia at 95 and China at 107. He drew the following conclusion: The more your country is good for the rest of the world, the more investment and confidence it will attract, the more it will collaborate with others, and the better it will compete and do well.⁶

*   *   *

It can’t be said that capitalism intrinsically favors individualism over communitarianism, primarily because there are so many types of capitalism. American capitalism favors individual rights and the free market. European capitalism leans more to a communitarian position, as do Japanese and Chinese capitalism.

My own belief is that individual rights must be preserved and have a better chance of being preserved if they are accompanied by social responsibilities. In a world laden with major social problems—poverty, pollution, climate change, rising energy costs—individuals and companies need to show their concern by organizing to reduce these problems, lest they end up destroying the planet or bringing about violent revolutions. This is called by some “the Third Way” rather than favoring one philosophy over the other.

Yet the communitarian view is shared by only about 20 percent in the United States, according to a 2011 Gallup survey.⁷ That poll reported that other Americans fell into the following groups: 17 percent expressed conservative views, 22 percent expressed libertarian views, 17 percent expressed centrist views, and 24 percent expressed liberal views. The U.S. public continues to carry a divided view over what is primary to a “good” and productive society.