Managing Leadership^®

Capitalism gets a bad rap these days - even from people who believe in it, or who, at least, acknowledge the pointlessness of denying its fundamental veracity as a means of explaining and predicting human economic behavior. The Karma Capitalists, whose thinking we have reviewed and critiqued over the past several posts, are only one of a panoply of attempts to rectify the presumed shortcomings of capitalism. As it happens, these efforts all typically fall short, themselves, in two ways. A clue to both of these is hidden in one of the purpose statements of Karma Capitalism (please see the 02NOV06 post):

The key point is to put purpose before self. This is absolutely applicable to corporate leadership today.

There are several problems in this statement, but the two key ones for our purposes here both reside in the word “self.” Let’s take them in turn.

Self-interest

A principal criticism of capitalism is that it posits the idea that individuals are selfish, and motivated only to satisfy selfish ends. The capitalist system built on this belief, it is argued, promotes and perpetuates a pursuit of greed that is characterized by the unscrupulous scramble for money, unmediated by moral considerations. In other words, the system gives individuals not just the excuse, but the need (given that everyone else is doing it) and the ability to abandon normal ethical behavior in pursuit of narrow self-interest.

But self interest is not a narrow term. There are two important things to note about it:

First, it does not refer strictly to the selfish needs of the individual, but to those things that are of interest to him or her. That may in fact be the accumulation of wealth, but it may also be the protection of family, preservation of community, the promotion of the arts, sciences, or a particular profession, or the propogation of a product, service, or idea held in high regard by the individual. The range of this self-interest radiating from the individual may indeed extend no further than that individual, but it may also span the community, the nation, the international community, or even the globe itself.

The central character of the concept of self-interest isn’t greed, it is simply that individuals will organize their behavior around what they believe will redound to their self interest, however narrowly or expansively (or, even, altruistically) they may choose to define that.

The capitalist tenet of self-interest neither extinguishes nor distorts moral development or ethical behavior - it provides a venue for their development and a release for their expression. Who could object to this? Those who disapprove of what all of these selves are interested in; and, perhaps, of the moral and ethical systems they represent.

Which brings us to the second item: self interest originates from the self - not from the state, a priesthood, or a revolutionary or progressive vanguard. That people, left to their own devices, would naturally pursue their self interest cannot reasonably be argued. The problem for some is that the capitalist system allows them to actually do so.

There is a subtly illiberal cast to many of the imprecations against capitalism that suggest an oppressive atmosphere of superiority. It is disturbing that so many arguments against economic or political liberty and freedom of expression begin with the suggestion that the critics are smarter than the rest of us, better people, or know better than we what is good for us. This will be the subject of a longer essay in the near future.

Self control

As mentioned in the 02NOV06 post, the Karma Capitalists seem to be directing their evangelical attention to managers as though there were no need to consult owners. And indeed, particularly in the US, there is a widespread sense (and not only among managers themselves) that this is a fair statement of the case.

But it isn’t the case. Owners own capital, and only owners can direct its use. Managers, as important as they are, are hired help. We will not enduringly improve the practice of management until we acknowledge that and place it at the forefront of our thinking in theory and practice in the field. The corporate scandals and shortcomings the Karma Capitalists mean to address come from the failure to give meaningful expression to this key tenet. The specific behavioral shortcomings of managers themselves, as these theorists seem to insist, are not the fundamental problem; they are merely superficial symptoms of the true problem.

But for all that, the world has done remarkably well by classical liberal capitalism. Its practitioners, its most vociferous critics, inhabitants of parts of the world where it is unacknowledged - all live longer, healthier lives which are more individually and socially productive because of it. Please see here for a discussion of this.

Thank you for your indulgence in this series of posts. I look forward to hearing your thinking.

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Please be sure to see all the posts in this series:

1. Management as a priesthood
2. Same faith, new robes
3. To the devil with the details
4. Fire and Brimstone
5. Salvation without the sermon

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