American capitalism is a symbol
of economic strength and power, of unprecedented wealth and productivity, the
strength which has built a nation that is today the envy of the world. However,
according to Milton Friedman, the term ‘capitalism’ has a drastically varying
and highly relative meaning - To some it is a term of opprobrium, signifying
the oppression of small modest entities by ruthless gargantuan monopolies; to
others it is a term of hope, signifying the freedom of men to shape their own
economic destinies, the unleashing of human ingenuity and energy to raise the
standard of living of the masses. ‘The Walmart Effect and a Decent Society’
very elaborately describes the actions of mega-corporations and brings to light
the positive and negative impacts of their actions on stakeholders. Citing
Walmart as the epitome of American capitalism, it utilizes specific examples
coupled with astounding data and facts to fuel an intriguing yet tantalizing
question – “How do we assure that American capitalism creates a decent society
for all of us in the era ahead?”
It is critical
to first establish what H. Lee Scott eludes to, when he uses the term ‘decent
society’. A rather reputable school of thought would define it as a
civilization characterized by a high quality of life with superior purchasing
power and ideal economic conditions, initiated by successful sustainable
corporations which display great ethical standards and constantly transcend the
limits of corporate social responsibility to benefit their local communities.
Such a society would simultaneously be competitive, productive, progressive, balanced
and free of social evils. The stalwarts of such a society, whilst pushing for
constant development and growth, will also strongly advocate community welfare.
Such an advanced society will, for instance, consistently strive to create
employment and banish inferior products as well as those manufactured in an
illegal manner. Business entities operating in such a society will be subject
to rigorous measures of corporate governance. The efficiency of government
policies pertaining to anti-trust laws ensure that monopolies never develop or
exist.
If the
above is truly an example of an ideal society, it is pertinent to measure where
modern day U.S. society stands in comparison. The results are alarming – The
U.S. is dominated by large corporations like Walmart, which have the power to
influence an entire nation’s consumption patterns, decisions and thereby its
economy and very culture. While these giant organizations bring many benefits
to modern society in doing so, quite often, the decisions they make have
detrimental effects as well. What is even more baffling is that in a
capitalistic economy, the decisions are made by the people who own or manage
the basic productive resources, and that is in contrast with decisions which
are conformed to in a larger plan made by the state under non-capitalist forms
of enterprise. People, as consumers, also make choices that inevitably favor
such corporations, effectively making them almost monopolistic in nature as witnessed
in the case of Walmart. While an actual monopoly can never really exist in a
competitive capitalistic landscape, since it is largely governed by the laws of
supply and demand, it is nonetheless possible that corporations can grow to
gigantic scales and thereby exert relentless pressure on other institutions
with devastating consequences. For instance, this can drive them to establish
whatever conditions they so please on suppliers, be it maintenance of confidentiality
terms or exertion of imbalanced bargaining power. These actions contradict the
very laws of American capitalism.
How
might this issue be resolved to ensure that capitalism creates benefits for
society while keeping its negative effects in check? In effect, the American
legal system failed to recognize that corporations would grow large enough to
dominate the economy itself. The
U.S. government is currently vying to attain 2% inflation in order to boost the
nation’s GDP by maintaining consistent demand in the economy, but
mega-corporations like Walmart have policies that advocate lower prices, thereby
hindering this progress. Reforms in government regulation is therefore, one of
the means through which such concerns can be addressed and artificially low
prices can be extinguished. In an effort to protect investor and stakeholder
interests, corporate governance reforms need to be periodically reviewed to also
account for issues like child labor, low wages, employment of illegal
immigrants, and the use of questionable raw materials.1
Another
more subtle means of ensuring that capitalistic mega-corporations conform to
ethical standards put forth by government, is by building on the premise that
ethics is a critical concern in all societies and that large corporations have
a responsibility to maintain high standards of ethics in their business operations.
This ideology essentially builds expectations among stakeholders for businesses
in an ethical society and even advocates that abiding by these practices
enhances a firm’s profitability. This acceptance of capitalism as the best
economic system and the incentive of greater profitability can compel mega-corporations
to comply.2
An
organization’s approach towards its stakeholders is also a significant aspect
in this struggle. In the past, the mind-set required to rise to the top of a
large corporation has run counter to adopting a stakeholder perspective in the
process of value creation. Capturing sustainable value requires the large
corporations of today to see stakeholder value as essential to the growth of
their companies. Stakeholder
power is now a reality in the new global business environment. Business leaders
who fail to adopt a new mind-set risk putting their companies and careers at
risk. It is thus pivotal that the leaders of today’s mega-corporations
understand the distinction between the
old and new mind-set of stakeholder value, and its repercussions on their
businesses to initiate a requisite course of action.3
In
conclusion, it is vital to note that this is, for the most part, a public
policy issue that will need some form of government intervention. Partly, the
tightening up of anti-trust laws is imminent but in addition, the lack of information made available
to the public by today’s large
capitalistic mega-corporations is also a significant issue that must be
addressed with immediate effect. The implementation of these measures today will
be the nascent steps towards assuring that American capitalism creates a decent
society for all of us in the era ahead.
Citations
& References
1.
‘Corporate Governance’ by Steger, Ulrich.,Amann and
Wolfgang (Digital Version) – ‘Beyond the Scandals and Buzzwords: Diffusion of
corporate governance regulation’ (Page 6-7)
2.
‘Why ethics and profits can and
must work together in business’
by Donald P. Robin (WISE Reading)
3.
‘Sustainable Value: How the
World’s Leading Companies Are Doing Well by Doing Good’ by Chris Laszlo – ‘The old
mind-set about stakeholder value versus the new mind-set about stakeholder
value’ (Page 132-133)
