My brief essay “Innovative Dynamism Allows All to Flourish” was posted yesterday to the Oxford University Press Blog.
Category: Capitalism
“Openness to Creative Destruction” Discussed on Power Trading Radio
John O’Donnell interviewed me at 6 PM 11/8/19, about my book “Openness to Creative Destruction” on his weekly Friday show on Power Trading Radio. (In the screen capture above, Merlin Rothfeld is on the left and John O’Donnell is on the right.)
“To Be Profitable, You Have to Have a Purpose”
(p. F2) When a group of the nation’s largest companies said last month that they had changed their mission strictly from making profits to also include benefiting “customers, employees, suppliers, communities and shareholders,” it was generally applauded as an important step in the right direction.
. . .
Treasury Secretary Steven Mnuchin in his first public comment on the topic, flatly told me: “I wouldn’t have signed it,” stunning a room of policymakers and business leaders in Washington at last week’s DealBook DC Strategy Forum.
His explanation was nuanced: “To be profitable, you have to have a purpose. I think it’s not as simple as saying we either have a purpose or we have profits. I think the problem with creating a simple answer is it doesn’t fully explore the issues.”
He added: “I do think companies should be long-term oriented. I don’t think companies need to necessarily be focused on quarterly profits and hitting Street earnings numbers. But I think, ultimately, a business’s job is to deploy the capital correctly and to make profits.”
Stephen A. Schwarzman, the co-founder and chairman of Blackstone Group and one of only a handful of members of the Business Roundtable who declined to sign the document, also went public with his explanation in a conversation with me earlier this week: “I know why we’re in business: because people give us money to manage. They want us to earn a lot of money to give them back or else they would give us nothing.”
He said “the idea that business should be concerned” with employees, customers, suppliers and the community should be a given. But, he said, he objected to the idea in the Business Roundtable statement that profits should be listed as simply equal to the other four issues.
“I have trouble managing when I don’t know what I’m supposed to be doing,” he said, suggesting the statement gives managers too many masters. “I know what I’m supposed to be doing, which is making good investments, safely, and making a great contribution to these pension funds and regular people.”
For the full commentary, see:
(Note: ellipsis added.)
(Note: the online version of the commentary has the date Sept. 18, 2019, and has the title “Profits or the Public Interest: The Debate Continues.”)
Boston Brahmins Invested in Western Industrialization
(p. A13) One of history’s ironies is that, even though New England birthed the abolition movement, many of Boston’s most prominent families offered less than total support for freeing the slaves. Their prosperity required a steady supply of cotton to feed New England’s growing textile industry. Even after slavery ended in 1865, wealthy Bostonians were reluctant to abandon their traditional business. Henry Lee Higginson, 30 years old and freshly discharged from the Union Army, bought with his partners a 5,000-acre plantation in Georgia with the goal of turning a profit by growing cotton. But the 60 former slaves living on the plantation thought the wages and terms offered to be grossly inadequate; the land they had worked in chains for generations, they believed, should belong to them. The enterprise soon collapsed.
As similar episodes played out across the South, Boston’s business elites looked for new places to invest their money. “They began to reenvision American capitalist development, not in modifying and salvaging the arrangements of earlier decades but in a far more ambitious program of continental industrialization,” Noam Maggor writes in “Brahmin Capitalism.” “They retreated from cotton and moved into a host of groundbreaking ventures in the Great American West—mining, stockyards, and railroads.”
. . .
Especially representative of the Bostonians’ transformative influence was Higginson’s next enterprise. Far removed from Georgian cotton, his interests landed on a copper mine in northern Michigan’s remote Keweenaw Peninsula. Copper had been discovered there 20 years earlier, but extraction had been small-scale and labor intensive; the high cost per unit meant that mining was profitable only for veins that contained at least 40% copper. In a short time, high-yield mines in the area began to show signs of depletion. But with Higginson’s capital—alongside investments from other Brahmins—large-scale copper extraction could take place as a continuous operation, making mining profitable on belts that contained only 2%-4% copper. In this way, Higginson’s Eastern capital transformed Western mining and launched a career that would make him one of Boston’s leading financiers.
For the full review, see:
(Note: ellipsis added.)
(Note: the online version of the review has the date June 25, 2017, and has the same title as the print version.)
The book under review is:
Maggor, Noam. Brahmin Capitalism: Frontiers of Wealth and Populism in America’s First Gilded Age. Cambridge, MA: Harvard University Press, 2017.
“For This Hong Kong, We Fight. We Shall Never Surrender.”
(p. A6) HONG KONG — Thousands of black-clad antigovernment protesters demonstrated at Hong Kong’s international airport on Friday [Aug. 9, 2019], taking aim at both a global transit hub and the city’s closely guarded reputation for order and efficiency.
. . .
The airport protest began in the early afternoon, as demonstrators in black T-shirts and face masks nearly filled the cavernous arrivals hall, chanting “Hong Kongers, keep going,” a rallying cry for the two-month-old protest movement.
“You’ve arrived in a broken, torn-apart city, not the one you have once pictured,” read a pamphlet that protesters offered to arriving travelers. “Yet for this Hong Kong, we fight. We shall never surrender.”
As of Friday night, the demonstration remained peaceful, and there had been no reports of arrests or disruptions of flights. Protesters were careful to leave a path clear for travelers, some of whom recorded the demonstration on their phones or helped themselves to pamphlets.
. . .
Miki Ip, a real-estate agent who attended the demonstration, said she came partly to refute unproven claims by the Chinese government that the civil disobedience had been led by foreign forces who wanted to undermine Beijing’s authority.
“China has told us so many lies, and we lack a government that really works in our interests,” Ms. Ip, 38, said in the arrivals hall. “The living conditions facing youngsters nowadays are harsh, and they feel a lack of ownership over their hometown, both economically and politically.”
For the full story, see:
(Note: ellipses, and bracketed date, added.)
(Note: the online version of the story has the date Aug. 9, 2019, and has the title “Hong Kong Protesters Descend on Airport, With Plans to Stay for Days.”)
Gig Jobs Benefit Workers by “Cutting Out Corporate Bosses and Rent-Seeking Middlemen”
(p. C4) An astounding 94 percent of American jobs created between 2005 and 2015 were for “alternative work.” Slow and steady growth used to be a cardinal virtue for the big American corporation. Now leanness and flexibility are prized, and nobody is spared. “In the end,” Hyman writes, “even white men were not protected from this new reality.”
Hyman, a labor historian at Cornell, argues that the common explanation for what happened — mainly, that our current dispensation was foisted on us by technological and economic change — is self-serving and inadequate. He says that human choice, including a palpable shift in values, played an essential role. “Temp” traces how, for corporations and government policymakers alike, “the risk-taking entrepreneur supplanted the risk-averse, but loyal, company man as the capitalist ideal.”
. . .
His ending, about the gig economy, is weirdly upbeat. He believes that it’s still possible for work to be rewarding — maybe even more possible, now that apps and online platforms offer the promise of (leaving in place a few rent-seeking technocapitalist billionaires, of course). Individuals can sell their labor directly to one another.
For the full review, see:
(Note: ellipsis added.)
(Note: the online version of the review has the date Aug. 22, 2018, and has the title “BOOKS OF THE TIMES; How the ‘Temp’ Economy Became the New Normal.”)
The book under review, is:
Hyman, Louis. Temp: How American Work, American Business, and the American Dream Became Temporary. New York: Viking, 2018.
“Rand’s Entrepreneur Is the Promethean Hero of Capitalism”
(p. B1) Few, if any, literary philosophers have had as much influence on American business and politics as Ayn Rand, especially now that Donald J. Trump occupies the White House.
President Trump named Rand his favorite writer and “The Fountainhead” his favorite novel. Secretary of State Rex W. Tillerson has cited “Atlas Shrugged” as a favorite work, and the C.I.A. director, Mike Pompeo, said the book “really had an impact on me.”
. . .
(p. B2) In business, Rand’s influence has been especially pronounced in Silicon Valley, where her overarching philosophy that “man exists for his own sake, that the pursuit of his own happiness is his highest moral purpose, that he must not sacrifice himself to others, nor sacrifice others to himself,” as she described it in a 1964 Playboy interview, has an obvious appeal for self-made entrepreneurs. Last year Vanity Fair anointed her the most influential figure in the technology industry, surpassing Steve Jobs.
. . .
“Rand’s entrepreneur is the Promethean hero of capitalism,” said Lawrence E. Cahoone, professor of philosophy at the College of the Holy Cross, whose lecture on Rand is part of his Great Courses series, “The Modern Political Tradition.” “But she never really explores how a dynamic entrepreneur actually runs a business.”
. . .
“Mention Ayn Rand to a group of academic philosophers and you’ll get laughed out of the room,” Mr. Cahoone said. “But I think there’s something to be said for Rand. She takes Nietzschean individualism to an extreme, but she’s undeniably inspirational.”
As the mysterious character John Galt proclaims near the end of “Atlas Shrugged”: “Do not let your fire go out, spark by irreplaceable spark, in the hopeless swamps of the approximate, the not-quite, the not-yet, the not-at-all. Do not let the hero in your soul perish, in lonely frustration for the life you deserved, but have never been able to reach. Check your road and the nature of your battle. The world you desired can be won, it exists, it is real, it is possible, it’s yours.”
For the full commentary, see:
(Note: ellipses added.)
(Note: the online version of the commentary has the date July 13, 2017, and has the title “COMMON SENSE; As a Guru, Ayn Rand May Have Limits. Ask Travis Kalanick.”)
Ayn Rand’s magnum opus, quoted above, is:
Rand, Ayn. Atlas Shrugged. New York: Random House, 1957.
Democrat Warren Buffett Admits to Being “a Card-Carrying Capitalist”
(p. B1) The most prominent face of capitalism — Warren Buffett, the avuncular founder of Berkshire and the fourth wealthiest person in the world, worth some $89 billion — appeared to distance himself from many of his peers, who have been apologizing for capitalism of late.
“I’m a card-carrying capitalist,” Mr. Buffett said. “I believe (p. B3) we wouldn’t be sitting here except for the market system,” he added, extolling the state of the economy. “I don’t think the country will go into socialism in 2020 or 2040 or 2060.”
There is something oddly refreshing about Mr. Buffett’s frankness.
. . .
Mr. Buffett’s moral code is one of being direct, even when it is not politically correct. In his plain-spoken way, Mr. Buffett, a longtime Democrat, acknowledged that the goal of capitalism was “to be more productive all the time, which means turning out the same number of goods with fewer people or churning out more goods, with the same number,” he said.
“That is capitalism.” Two years ago at the same meeting, he bluntly said, “I’m afraid a capitalist system will always hurt some people.”
. . .
. . . at his core, he believes that the pursuit of capitalism is fundamentally moral — that it creates and produces prosperity and progress even when there are immoral actors and even when it creates inequality.
. . .
One prominent chief executive I spoke with after the meeting said he wished he could speak as bluntly as Mr. Buffett. He said in this politically sensitive climate, he often has to tiptoe around controversial topics and at least nod at the societal concern of the moment.
Therein lies the truth of the particular moment that the business community faces and one that, at least so far, Mr. Buffett, at age 88, may be immune from.
And so while Mr. Buffett may have missed an opportunity to use his perch, he comes to his views of a just business world honestly.
For the full commentary, see:
(Note: ellipses added.)
(Note: the online version of the commentary has the date May 5, 2019, and has the title “Warren Buffett’s Case for Capitalism.”)
Australia’s 28 Years With No Recession Challenge Business Cycle Cliches
(p. 6) I had flown 16,000 miles . . . to study . . . the remarkable resilience of the Australian economy, which has gone nearly 28 years without a recession.
. . .
America is on the verge of its own economic milestone: The current expansion is on track to reach its 10th birthday this summer, which would also put it on record as the nation’s longest streak without a recession.
During the decade I’ve spent chronicling that growth as an economics writer, a persistent whisper has been: How long can it go? The run has been uneven, underwhelming and repeatedly on the verge of unraveling, including scary moments in 2010, 2015 and this past December. Seemingly every commentator without a good cliché blocker has referred to it as “long in the tooth.” Continue reading “Australia’s 28 Years With No Recession Challenge Business Cycle Cliches”
“Seek Truth from Facts”
(p. A15) . . . 2019 . . . marks the anniversary of the result of a . . . defiant protest—one that will receive little attention in or out of China, even though it launched the economic reforms that kick-started the country’s rise.
Forty years ago this spring, corn farmers in Xiaogang village, in the central province of Anhui (where Pearl Buck set “The Good Earth”), reported a grain yield of 66 metric tons. This single harvest equaled the village’s total output between 1955 and 1970—but for once the figure was not exaggerated. In fact, villagers underreported their actual yield by a third, fearing officials would not believe their record haul.
What caused this massive spike in production? A new fertilizer or hybrid seed? Better equipment? A catchy, rhymed propaganda slogan? No; Xiaogang’s farmers were starving. After taking power in 1949, China’s Communist Party had effectively abolished private land ownership, grouping farms into “people’s communes” subservient to the state. By 1978 villages were crippled by quotas that seized most of what they grew for redistribution.
“If You Write a Best-Selling Book, You Can Be a Millionaire, Too”
(p. A14) WASHINGTON — Senator Bernie Sanders, whose $18 million fund-raising haul has solidified his status as a front-runner for the Democratic presidential nomination, said Tuesday [April 9, 2019] that he would release 10 years of tax returns by Tax Day on Monday and acknowledged that he has joined the ranks of the millionaires he has denounced for years.
. . .
Reminded that he is a millionaire, he did not shirk from the description.
“I wrote a best-selling book,” he declared. “If you write a best-selling book, you can be a millionaire, too.”
For the full story, see:
(Note: ellipsis, and bracketed date, added.)
(Note: the online version of the story has the date April 9, 2019, and has the title “Bernie Sanders, Now a Millionaire, Pledges to Release Tax Returns by Monday.”)