The Parallel Parliament

by Glen Pearson

Tag: profits

Putting Community Back Into Capitalism

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IT WAS THE GREAT REVERSAL THAT WASN’T.  Following the Great Recession there was lots of buzz about the financial community’s failures and the reforms that would be required to ensure such an economic calamity, like that of 2008, didn’t occur again. Stories of corporate greed, massive unemployment, bankruptcies, and mounting debt were everywhere. But what wasn’t sufficiently present in corporate or government communities was the actual desire to bring about the reforms. What people believe to have been a hopeful time of looking at our society in new ways eventually became the same-old, same-old.

American economist, Gary Becker, picked up the signs of decay early and went on to note:

I think you are not going to see a huge increase in the role of government in the economy. Economists will be struggling to understand how this crisis happened … but it will be nothing like the revolution in the role of government and in the thinking that dominated the economics profession for decades after the Great Depression.”

He proved to be correct, in large part because the governments of developed nations remained vulnerable to the hard lobbying of a financial system that just wanted to get back to business as usual. Or as New York Times writer Paul Krugman put it: “Powerful political factions find that bad economic analysis serves their objectives.” Right again.

Yet “business as usual” is how you could also describe the public’s response to both business and government – increasingly negative going into the recession and even more intense following the so-called recovery. Every instinctive politician now senses less trust from the electorate and it becomes clear that unemployment or environmental degradation show no signs of serious improvement.

That same instinct is making its presence felt in the business and financial communities as well. Just as politics attempts to talk about the middle-class as a means of recovering legitimacy, corporations refer increasingly to the importance of the customers and their lifestyles.

There is an outside chance that all this might be unlocking the key to a new capitalism in coming decades. Yes, it will about profits and the bottom line, but it will also be about increased investments in sustainability and social good. There is a sense where capitalist leaders comprehend that they live in a world of concentric circles unless they can broaden their connection with citizens, communities, and the planet in general. In other words, there is an emerging view, presently only in its fledgling stage, which reasons that success in the future must be a shared win between companies and communities.

The narrow management policies and short-term thinking have inevitably divided communities, countries, and the world in general. Citizens and their communities want back in, desire a share of the wealth that is supposedly being created but which seems to have passed them by. They look for wealth with jobs, profits with people, sales with sustainability, and capacities linked to community. Naturally, the overall financial order and manic culture of modern capitalism will press firms to continue with business as usual, but now communities are willing to fight and stand alongside those firms that will push back against this mindset.

It is always time to consider what value creation really means, never moreso than now. Social awareness is now expanding at a rapid rate and takes in that vast array of challenges each of our communities face. The days of the pitted battle between capitalism and community must be brought to within manageable limits if we are to work our way out of our present difficulties together.

Last month I wrote a London Free Press column on Tima Bansal, a professor at London’s Ivey Business School and Canadian Research Chair in Business Sustainability. You can read it here.  Tima travels the world encouraging the business leaders of tomorrow to actually think about tomorrow – forego the short-term thinking and build your business as though the future really matters for everyone and not just investors or shareholders. People just like her are emerging from within the business/corporate ranks and are cultivating expanding relationships with community and societal leaders to forge a new consensus over what our combined and collaborative future could look like. It’s the Timas of the world that might help us to close that tortured gap between productivity and community.

Each Requires the Other

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U.S. HOUSE BUDGET CHAIRMAN PAUL RYAN is attempting to have it both ways and he just can’t. His footwork is fancy, his rhetoric lofty, but in the end he can’t reward the rich and help the poor at the same time. It’s a lesson that has broader ramifications for capitalism.

The former Vice Presidential nominee has been pretty serious and occasionally sincere in his reflections that those struggling in low-income situations should get more targeted help. He has frequented many drop-in centres, shelters, even food banks, and concluded the some serious problems are afoot that require an equally serious approach. At times he calls for an enhanced social safety net as a response.

Ryan’s difficulty is that, as House Budget Chair, he is calling for balanced budgets within ten years to be accomplished by annual cuts and no increased taxes. He is calling for increased military spending at the same time as he wishes to freeze spending on Medicare and Social Security. He is also calling for a steadily declining tax rate for corporations and the wealthy.

In other words, Ryan’s budget would undercut the very things the poor require, especially over the long haul. This is ever the dilemma every modern government faces: by pandering to the rich it undercuts the poor. The longer that practice continues, the wider becomes the gap between the two.

And it’s not just a political problem. For modern capitalism itself the rationale is much the same and overall result has been a growing resentment towards both politics and the world of finance. It’s labeled “compassionate conservatism” in politics and can be just as easily called “compassionate capitalism” in modern finance. Both continue to slip in public confidence towards near record levels. 

In recent decades, larger businesses have rarely approached societal issues from a true value perspective, but have preferred to treat such things as peripheral and primarily the responsibility of community alone. It’s a rationale that is tearing apart communities as they come to terms with the reality that profits are increasingly coming at the expense of the very places in which companies operate. Reports that companies are once again benefitting from larger profits since the Great Recession hardly console the average citizen who is forced to face high unemployment, declining public investment, and an overall drop in expectations as a matter of course. The knowledge that community services are under increased pressure only causes deeper frustration.

By attempting to satisfy shareholders and targeting only a select group of customers, businesses have overlooked other opportunities that could both expand their rewards and rebuild communities at the same time. The corporate vision has been overly focused and the result has been too narrow a vision for the future of capitalism and communities both.

With all the emphasis on profits, shares, or in the limited field in which companies compete, one essential element has been overlooked: location. Communities themselves have far more to offer modern companies that profits and labour. Some forward thinking companies and their leaders are beginning to reason that improved company value can only be discovered by enhancing the communities that surround their businesses and the citizens whose loyalty they seek. By better linking their companies with community improvement, they reason that it opens up new opportunities to serve broader needs, gain profits, distinguish themselves from their competitors, and expand markets.

Modern societies in both the developed and developing worlds have created huge spectrums of problems and needs – better health and housing, improved nutrition, assistance for an aging population, greater financial security, less environmental damage, and improved opportunities for the younger generation. These don’t just represent problems for any society, but also an opportunity for business to make a concrete difference and the capturing of citizen loyalty at the same time. In other words, such challenges aren’t just problems, but opportunities for those companies to not only do the right thing but to also expand into new fields of vision.

Companies have lost sight of that one great question every business should ask itself: Are our products actually good for our customers on a societal level? They likely would have never stopped asking that question had they continued to place their priority upon community life and the ultimate measure of their customer base. But overall they haven’t because they forgot the fundamental lesson of location, location, location.

Business guru, Peter Drucker, loved to say that, “the purpose of a business is to create a customer.” That was in the days before rampant globalization. Now a new truth is emerging and it can be just as profitable: a company’s purpose should be to empower the community in which it operates. Like Paul Ryan, it must learn that it can’t become rich by impoverishing communities. Each requires the other. Those that understand it will find their reward. The success of capitalism in the future will be determined by how quickly this lesson is learned and if there is enough time to implement it.

Dreamless Sleep

girl-reflected-in-windowSo it’s out.  No, not about the use of crack cocaine, or a new revelation on the Senate scandal.

Following months of preparation, food banks across Canada have produced their annual HungerCount report.  Some in the media say it’s good news, that with the economy turning a corner we can finally see a decline in poverty.  That’s quite a stretch, and fortunately most of the media reported it for what it was: another indication of the entrenchment of poverty in the Canadian context that refuses to go away regardless of the state of the economy.

The report concludes that food bank use has declined 7% in the last year.  However, much of that is regionally slanted, with many food banks facing continual increases.  Food bank use went up 25% in the past five years says the report, but in London, Ontario that number is just shy of 50%.  While some food banks might have welcomed a slight decline, London’s numbers increased 3% over the same period.

Food banks have lived through three recessions since their presence on the Canadian scene, and following each recovery usage never returned to pre-recession levels.  Their greatest challenge has been faced in the last few years.  While some economists remind us that we are on the road to recovery, food banks numbers remain stubbornly high and will remain so for the foreseeable future.

Increasingly, Canadians are asking why this is so.  Why is it, for instance, that when corporations say that because of competition they are required to slash wages and spending, they are also achieving profits that are at an all-time high?  When such companies say they can’t afford higher wages or the infrastructure costs to run more environmentally sustainable activities, how do they square that with their flushed coffers?  Such success clearly makes it possible to pay workers better and remain in the black, so what’s holding them back from benefitting their community in such a fashion?  These are fundamental common sense questions for which no one is getting an answer.

The HungerCount report provided one very troubling reality.  Of the almost one million people who frequented food banks, 36% were children.  Many continually claim that they sympathize with children in developing nations because the adults and leaders of those nations permit their youngest members to exist in such a state.  They are correct when stating that leaving children in poverty is a systemic problem characterized by a lack of will.  How do Canadians respond to a similar trend in their own country?  Regardless of our ideologies or preferences, none of us desires a future of poverty for our children.  Why then do we permit a situation where kids remain hungry?

Yes, there are numerous solutions being bandied about to provide programs and incentives for low-income families, but wouldn’t it make more sense to take on that one great task that might have the greatest effect: protect and enhance the middle class?  A number of well-intentioned initiatives designed to lift children out of hunger and poverty could never measure up to this one great endeavour poised before the Canadian people, their businesses, and their governments.

It has been said that poverty, once experienced, becomes a prison, a trap from which one can’t escape.  But surely that can’t be so because at one point in our journey as humans we were virtually all impoverished.  Over centuries, we developed mechanisms – legal, economic, ethical, and social – that began the great process of freeing the human race from oppressive poverty.  The largest part of that adventure remains unfinished.  Poverty, regardless of its oppressive circumstances, is mostly a state of mind that refuses to create the conditions necessary for the economic liberation of the greatest number of citizens or simply mindlessly acquiesces to the status quo.  We can’t keep blaming the politicians alone, regardless of what we are enduring at present.  A country’s dreams are established in its people, not just its leaders, and the fact that we continue to accept poverty in such high numbers is merely a sign that we have instead fallen into a dreamless sleep.

Coffee as Currency

This week I tweeted that I’d be heading out to the ElectroMotive line to stand with the workers in their well-publicized dispute with Caterpillar Inc. It wasn’t my first time attending and it won’t be my last. Then something unusual occurred. Adam Green, owner of Red Roaster in London, asked if I would swing by to meet him on my way out. To my delightful surprise he was ready with a huge container of coffee, along with all cream/milk containers required. “Just let them know I am thinking of them during what must be a tough time.” He then added, “I’ll keep helping.” Good guy.

When my friend Josh and I arrived at the line a short while later the workers clapped when they saw us carrying the container. We were quick to remind them it had nothing to do with us but was a generous contribution from Adam. For a bunch of workers standing out in the cold for hours on end it was recognized for what it was – an act of encouragement and support.

As we watched the chilled ElectroMotive employees line up for their hot drinks, it struck me that coffee had become the new currency. How do average citizens who support the workers who have been so badly maligned by Caterpillar express their sentiments? By far the most common avenue has been the steady line of people dropping off coffee, along with donuts or bagels. In such a setting a cup of coffee transcends its usual role of just being a beverage. It is a gift, a symbol of encouragement and solidarity. Who ever thought that a cup of coffee could take on such an important role? And yet that’s exactly what is transpiring each and every day in east London.

Something’s happening in our town – I can feel it. So far, and against all predictions, support hasn’t waned and Londoners are still expressing their concerns for the workers in ways that are meaningful. At the world economic summit in Davos, Switzerland yesterday, news has emerged that even top business leaders are acknowledging things are not peaceful in the employer/employee relationship. One corporate leader even acknowledged that today’s form of capitalism no longer fits the world around it – a significant admission of a reality that Londoners are already feeling.

And then suddenly yesterday, a bold move. The city’s three TSC stores announced they were removing all Caterpillar products from their shelves in support of the workers. Instead of losing interest, it now appears that some in the business community are willing to forego certain profits in an effort to rebalance an economic equation that is so clearly hurting average families. That’s turning capitalism on its head – or maybe returning it to its former balance. The elite corporate types, remote and removed from such local developments, might scoff at TSC’s innovative move, but what they are witnessing are smaller firms redefining capitalism in real-time – promoting community partnership as opposed to distant oversight. Here were two businesses – one a coffee franchise, the other an outdoor equipment supplier – taking a hit for people they didn’t even know. That is exactly how an effective community is supposed to work. Hats off to both.

Just remember that if you choose to drive by Oxford Street East with some coffee for some obviously struggling workers that there’s a lot more in that cup than just a hot drink. It’s the sign of a citizen awaking to a greater responsibility. For some like Adam or TSC there’s a certain loss in profit that comes with such a gift. In many ways that’s how progressive capitalism used to work – moving the bottom line upwards to spread wealth across a community.

To the workers I only ask that you recognize that coffee for what it is – a citizen struggling to know how to assist but responding to an inner sense of urgency to do something. And to all those citizens out there who have such a yearning but have not as yet acted upon it, just remember, sometimes the best kind of compassion can come wrapped in the size of cup.

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