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The New Masters of Capital

When the elite of capitalism met in Davos for the 2012 World Economic Forum, the world did not stand still, tongue-in-cheek, but a vision or special revelation of some kind was expected if only because of their self-elevated status. However, the accolades for the event go to the Occupy movement, to the Arab Spring, and to hundreds of thousands who protested in the streets of capital cities this past year because… the elites heard their message! The World Economic Forum in Davos was all about the legitimacy/credibility/future of capitalism, including special conclaves questioning the sustainability of their livelihood, their essence, and their affluence.

The grandiosity of the forum at Davos, a gilt-edged affaire of the blue-blooded, came face-to-face with its own future, but, in the final analysis, the none-to-subtle message that came forth is capitalism has suffered a loss of innocence of days past in concert with its political underpinnings, i.e., statesmanship of the body politic and stewardship by business leaders are passé, resigned to an age of innocence of an America circa 1950s.

According to Klaus Schwab (German economist, b.1938), Founder and Executive Chairman of World Economic Forum, the 42nd Forum (2012) in Davos, attended by 2.600 elites, the forum experienced an intensity of debate about the future of capitalism, questioning whether capitalism, because of excesses, still measures up as the economic standard of the world. The key determinate to the forum’s dialectic was whether capitalism serves or undermines a free market system. Schwab’s response: “The subject of intense debate in Davos, was not, therefore, the end of capitalism as an ideology, but the issue of how capitalism’s technical components—which have come off the rails— can be reformed.” And, herein lies the heart of the issue, and it identifies, in a very general way, the bane of capitalism, which he refers to as ‘coming off the rails’.  And, as time goes by, this phenomenon becomes ever more apparent with capitalism’s penchant for crashing with more, and more, frequency, which is what happens when the wheels come off the rails!

In all respects, it is refreshing that the founder of the premiere conference for the capitalist elites of the world opened the assembly with an address that headlong confronted the languid condition of capitalism, and he even went so far to suggest capitalism take the Nordic route, meaning a course similar to the Scandinavian countries’ experience when resolving their banking crisis in the 1990s “… by reforming regulations and social welfare systems that embrace flexible labor and capital markets that are compatible with social responsibility… it is no coincidence that these countries are now among the most competitive economies in the world.”

It is very much worthwhile quoting the final words of Mr. Schwab because, in the most direct of terms, he pleads for a socially responsible capitalism:

“… to ensure that this capacity for development is fair, better regulation and safeguards are required — above all for capital markets — which also necessitate global coordination. In this sense, capitalism is now called upon to make the necessary adjustments for it to remain a key pillar of our free market economic system, but also for it to adapt to today’s circumstances and to be the servant rather than the master of a socially responsible market economy.”

“Ultimately, it is a question of returning to the ‘stakeholder principle’ which I developed and presented in a book published in 1971 and which is now undergoing a renaissance under the name of “shared value creation” thanks to Harvard professor Michael Porter. In an age when social networks are enabling greater participation and transparency, companies will only be able to achieve economic success if they can generate long-term benefits not just for their shareholders, but also for the common good.”

Schwab’s ‘communitarian’ aspirations whereby enterprises work to the betterment of society with socially conscious business leaders adhering to his 40-year-old “stakeholder” theory has unfortunately withered to nothingness these past four decades. His theory is, in fact, in shambles. The idea being: the management of the enterprise acts as a trustee for all stakeholders, including shareholders, creditors, employees, customers, suppliers, the nation-state, and the society at large. The problem, according to Schwab, is the enterprise has transformed from a ‘purposeful unit’ into a ‘functional unit’ that is only interested in maximizing profits in the shortest time possible to maximize shareholder value to benefit the select few.

Thus, capitalism should now be viewed as a money machine for its closest beneficiaries and not advocating the common good for all.  In Schwab’s words: “In this context, the enterprise is no longer an organic community; it becomes a functional “profit-generating machine. All parts that do not fulfill the purpose are replaceable: managers, employees, products, locations,” A Breakdown in Our Values, by Klaus Schwab, The Guardian, Jan. 2010.

Now that the master of capitalism has spoken, the question becomes: what should be done about capitalism? Schwab’s answer is a call for a return to his stakeholder theory, but here’s guessing Schwab’s influence has the same impact in business that statesmanship does in American politics today with statesmen tossed aside in favour of expediency. A statesman is a woman or a man experienced in the art of government, a wise and respected leader, and an impartial promoter of the public good. A statesman combines vision and virtue to do the right thing in service of the public interest. This is what Schwab so desperately wants for business, similarly for politics, in order to provide guidance for the public good.

Senator Richard Lugar (R. IN) is a prime example of how statesmen are regarded in today’s politics. In May of this year Senator Lugar, the GOP’s 36-year career elder statesman, lost his re-election bid in Indiana’s Republican primary. He was ousted by state Treasurer Richard Mourdock, whose campaign was backed by the Tea Party Express, the anti-tax Club for Growth, the NRA, and the Tea Party-aligned Freedom Works {led by Dick Armey, Republican House Majority Leader 1995-2003, whose 501(c)(4) is out to abolish government} with an exclamation point submitted by Sarah Palin. These groups invested $4.5 million, plus Palin’s sweat equity (maybe she was paid, who knows?) to oust their own party’s elder statesman… an astonishing transition!

In a written statement of concession, Senator Lugar admonished Mourdock’s partisan mindset and warned he will achieve little unless he changes his strict conservatism on governing. In response, Mourdock, referencing his victory over the esteemed senator, replied, “It is about the direction of the Republican Party.”  Whew!!!

Capitalism has lost its soul, defeated from within by corporate looters, but democratic capitalism is winning big time at the reservoir of enrichment and special entitlement in the political arena as politicians of the old school, who compromise to reach statesman-like consensus, are replaced by a mean-spirited winner-take-all mentality that prides itself by selfishly (Ayn Rand’s dictum) feeding into a similar-minded business community. This deadly combination of politics and business proves toxic for the future of democratic capitalism because it fosters strict social Darwinism, which is antithetical to every word uttered by Klaus Schwab, the dean of capitalism.

In America, this new breed of political candidates like Paul Ryan are pure and simple social Darwinists with a smile, a boyish grin, auspiciously promising a bright future in relief from a dreary recent past, but underneath the affable, cordial surface exist a fierce abhorrence for the likes of political traditionalists like Senator Lugar and for statesmen who strive for a higher purpose, in the best interest of the country; rather, their pathway is the narrow self-interest of the Ayn Randian few, a view that is growing in  predominance in American politics.

Can democratic capitalism survive social Darwinism or must it morph into an oblique, or authentic, form of statism for survival? It is doubtful a democratic nation-state in today’s America can support the principles of social Darwinism without high definition statism because, combined with the toxicity of neoliberalism’s off-shoring of business operations to the lowest bidder, how will the country support, and control, the hordes of underemployed unless by the sword?

Thus, with politics emphasizing social Darwinism and business emphasizing profits at any costs, the two fuse together into a torrentially powerful force of capitalism like a massive thingamabob that destroys all obstacles in its pathway. These obstacles are the Great Society of LBJ and the legacy of FDR. Already, the 1933 Glass Steagall Act has been reversed, and the new political agenda has its sights set on Social Security Act of 1935, and Medicare as established in 1965 by LBJ under Title XVIII of the Social Security Act. America’s guiding principles under its two greatest presidents, FDR and LBJ, are under attack by an unrelenting force that is determined to reverse time in the name of libertarianism, adhering to Ayn Rand’s dictum of selfish interests as the best course for nation-building.

It is fair to assume Mr. Klaus Schwab recognizes the Clash of Classes fomenting across the world as a result of maniacal capitalism, which is nurtured by Darwinist politics. His words plead for compassionate “for the common good” capitalism. This is the highlight of his speech and thus, obviously a void that he recognizes in today’s society. Now that the founder of the World Economic Forum admits to capitalism’s incongruities, the whole world is privy to what ails society. He laid it out for all to see, but it is as if his words effervescently evaporate in midair as soon as spoken because his ‘stakeholder’ principle is a foreign concept nowadays, superseded by a defiant crony capitalism, and respect for statesmanship in politics is tossed aside like a bedraggled doll, witness the fate of Senator Lugar.

Labeling the current political climate as extreme right wing is so bloody obvious that it is insulting to even mention; however, it is indeed worthwhile contemplating the alliance of ingredients, within politics and business, that point in the direction of a complete breakdown of democracy leading to high definition statism in the form of totalitarianism. Republican Senator Lugar has already seen the power of its force.  Ironically, the people who crushed the senator’s re-election preach free market capitalism, liberty in politics, and individual freedom in society, but their brutal policies, in harmony with crony capitalism, by undercutting the livelihood of the middle class, compels the merciless hand of authoritarianism in order to maintain social order. This new socio-political order is already underway via the Patriot Act and with the soon-to-open state-of-the-art National Security Administration massive data center in Utah that will monitor the electronic signals of the entire world, bringing Nineteen Eighty-Four smack-dab into living rooms. After all, Paul Ryan voted ‘yes’ on making the Patriot Act permanent, and he advocates a 8.5% Business Consumption Tax instead of taxing profit. Thus, the hands of elitist business interests and authoritarian governmental policy are conjoined as securely as they were during the Third Reich. Back then, who would’ve known… until it was too late!

In reality, these libertarians are statist wolves in freedom’s clothing. “Beware of false prophets, which come to you in sheep’s clothing, but inwardly they are ravening wolves,” Gospel of Matthew 7:15, King James Version.

Robert Hunziker earned an MA in economic history at DePaul University. He lives in Los Angeles.

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Robert Hunziker lives in Los Angeles and can be reached at rlhunziker@gmail.com.

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