Transforming Capitalism?

So our Taoiseach, Enda, says the cause of Ireland’s economic woes was that ‘people went mad borrowing’. While the opposition got all in a lather about his ‘insensitivity’, he does have a point. Unsustainable levels of private debt went through the roof in the ‘boom’ years.

Under pressure, he later rightly nuanced this a bit by talking about incompetent government, unregulated and out of control banking, unrestrained greed of property developers etc. This is why we are one of the worst ‘PIGS’ – not only due to inept government, but a corrupt political class within Fianna Fail and a cosy cartel of bankers and developers that operated in a bubble of arrogant invincibility.

Everywhere in Ireland today there are stories of people struggling – long term unemployment; unpayable mortgages; anxiety over the future; rising rates of suicide; businesses going bust; public services under pressure; huge company restructuring (i.e. redundancies); rising taxes and charges; a wave of emigration¬† …

And a huge factor in all this was Fianna Fail’s response to the crisis in socialising the debts of those out of control banks – Anglo-Irish above all.

But the global financial crisis is much bigger than Bertie and his cronies and their failure to govern.

It goes to the nature of modern turbo-Capitalism itself.

I’ve ranted about discussed all this from time to time. And while I’m no economist, but it’s worth stating the obvious – that the whole fiasco was preventable and unnecessary. It is a human created problem. It did not have to happen.

Humans sin. Greed is intrinsic to the human condition. Elites will profit from power. Raw capitalism has no inherently ethical basis, it needs boundaries and ethics. Values and morality (or the lack of them) lie at the heart of the Global Financial Crisis.

Christians should know these things. But for a Christian response to the crisis to be credible it needs to be thought out both theologically and practically.

What does an ethical reform of ‘turbo-capitalism’ look like? What needs to happen?

This is the question that Michael Schluter and Jonathan Rushworth have tried to address in TRANSFORMING CAPITALISM FROM WITHIN: A Relational approach to the purpose, performance and assessment of companies.

I’ve had the pleasure of meeting Michael and he’s a great storyteller. But he has been thinking and speaking about reforming Capitalism for years – way before the crash. He has serious street cred on this issue.

His big idea is to reintroduce ‘relationships’ into an impersonal, distant and often inhuman system. It is exactly this distance and feeling of impotence that is the source of outrage and injustice across Europe. No-one seems responsible, just the faceless system.

Schluter is arguing for limits on turbo-capitalism: through accountability by shareholders; by putting people before the system; by limiting pay differentials within a company (how much more is one person worth than another?); of a company having social responsibility to its employees, suppliers and the wider community where it operates.

If implemented this is revolutionary stuff. But if the there is one thing the present crisis is revealing, it is the desperate need of such reform within Capitalism, if the idol of mammon is to be dethroned and replaced by a human face.

So let me recommend downloading and reading the whole report here. And here are 10 bullet point summaries of the main arguments for a Relational Business Charter:

The Ten Points of the Relational Business Charter:

A company will be recognised for the purposes of the Charter as having a relational ethos and operating in a relational manner if it has the following characteristics:

1. Set relational goals. The company includes a Relational business objective in its constitution, and demonstrates commitment to implement it, providing appropriate training to investors, directors and employees.

2. Create stakeholder dialogue. Dialogue is promoted among all significant stakeholder groups, through regular face-to-face meetings and, where that is not possible, through regular on-line communication.

3. Demand shareholder transparency. There is direct and transparent (named) ownership of a significant proportion (perhaps 25%) of the shares by individuals (or family trusts).

4. Encourage long-term ownership. A high proportion of the shares are owned on a long-term basis (which may be incentivised by issuing additional shares to long-term shareholders).

5. Safeguard work-life balance. There is evidence of management having respect for the interests of employees (e.g. with regard to length of working hours, atypical hours, and other employment conditions).

6. Lower pay differentials. The dignity of all employees is respected by minimising remuneration differentials within the business (taking, for example, a 20:1 ratio between top and bottom as a benchmark)

7. Build supplier partnerships. Suppliers are treated fairly and with respect, paid promptly, and given support to develop their businesses.

8. Respect customers & communities. Customers and the local community are treated fairly and their concerns are respected (e.g. with regard to service provided and payment terms).

9. Promote financial stability. The risk of company financial instability is minimised to protect the company and its stakeholders (assessed with reference to debt:equity ratios and/or levels of interest cover).

10. Fulfil social obligations. Obligations to wider society are fulfilled, assessed with reference to the percentage of profits paid in tax in the country where those profits are earned and also the percentage of profits spent on corporate social responsibility.

What do you think?

9 thoughts on “Transforming Capitalism?

  1. Is it not true that these proposals would be no good if not applied across the whole world? Price drives success does it not? and if these were to be implemented whatever good that is done would mean a rise in costs. Take that with the reality of other countries with the same type of capitalism but less ability to regulate ( or less desire) and you have a good case for not doing anything.

    Am i off the mark?

  2. but could it ever be reformed? Is it not sort of like Roman slaves and people enslaved to the Roman empire wishing that the Romans should be nicer to them and their countries?
    I don’t know….. guess that there is more than just humans involved as well in enslaving people as wel if our fight ‘isn’t against any physical enemy: it is against organisations and powers that are spiritual.’..

  3. Sadly greed trumps relationship in the secular world otherwise the Relational Institutes material would have found a much larger acceptance.
    Is there a place in Christian activity for civil disobedience when the cause is neither on behalf of the disadvantaged of this world or freedom for Gospel preaching?
    Can the gross mismanagement and greed of the few represent such an injustice to the rest coupled with the absence of any law which would bring the offenders to book ever justify the Christian seeking redress in this way?
    Have the Greeks got a word for it!?

  4. Guys, I’m sure you’re right that change won’t come out of some altruistic ideal. Schluter has been arguing for this sort of stuff for years; the crisis has I think proved him right. I think a lot of people are agreeing that reform is needed exactly because the system as is has been a disaster for business and has been shown to be self-destructive …

  5. Hi George … us Irish seem a docile lot – maybe so pessimistic / fatalistic about politics (and the legal system) here actually being able to deliver justice?

  6. I guess I just don’t believe that it could ever be reformed….and I’m not sure that the crisis has been bad for all business, like in the UK Asda, McDonald’s and Subway all said last week they were creating more jobs…so they’ve obviously been doing alright. What reason does somewhere like Asda or McDonald’s have if they’re winning?….but hey, don’t listen to me. I’m glass half empty (maybe even less) type of fella!

    • every system will be imperfect and unjust – but I admire people like Michael Schluter for working hard to make the imperfect and unjust system a little more humane and perhaps a little more just ….
      it would be interesting to know what difference the Jubilee Centre and Relationships Global have actually made to actual policy …. I do remember him saying that some big companies had adopted his approach …

      • Have a look at
        In the Report of the Irish Penal Reform Trust It said that the criminal justice system was focused on less serious crime and failed to address larger scale, so-called ”victimless” social harm that may arise through white collar, regulatory and other crimes of the wealthy.
        And boy do we have “social harm”!
        Perhaps we should encourage the Trust to put some of the “social harmers” away before the next lot of Bankers/Developers heartened by the present life style of the current generation, set about creating the next “golden circle”.

  7. I wonder if the reason Seanie Fitz and other top bankers haven’t been charged with anything 4 years after the crash is that everyone was complicit in the ponzi scheme at the top – the regulator, the politicians, the developers, the bankers – and to start putting people on trial will be far too messy and uncomfortable for far too many of the golden circle … to enquires go on for years with no progress. Hence no political will for much to happen ?

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