Each Requires the Other

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.