Tag Archives: Monetarism

The Business Roundtable, The Most Powerful CEOs and the Legacy of Milton Friedman

Six years ago I ruffled some feathers at a conference organized by the friends of Milton Freidman of the Chicago School of Economics. Friedman is the father of Monetarism, an economic ideology that has taken the world by storm. It has elevated neo-liberal economics and politics to the stratosphere and is now responsible for most of the instability that world economies are grappling with: Record government and private sector debt, bubble economies everywhere, and dangerously high balance sheets of the world’s top central banks. It delegitimized the very function of central banking and contributed to social instability and the greatest wealth gap in modern US history.

If you live in capitalist society, the best way to understand Friedman’s philosophy is by substituting the words “only money matters” for everything that ails you personally. If your wife leaves you, only money matters, you get a better-looking trophy wife right out of a catalog. If your dog dies, only money matters, you buy a more expensive dog. If government takes too much of your paycheck, only money matters, you kill government institutions, or you buy its politicians.  Focusing solely on the power of money and the overuse of monetary policy as prescribed by Freidman -as foolish as it seemed- became the dominant thinking in the world’s leading universities and at its most valued corporation.

The controversy at that conference started when I criticized Freidman for leading corporate America to believe that the sole purpose of a publically traded corporation is to serve the stockholder. Repeat after me, only money matters. Several people walked out of the room when I introduced the stakeholder model that’s at the heart of the MEMEnomics Corporate Sustainability Platform. You can call it Other Things Matter More. This is a model that serves the 5 P’s for Sustainability in the MEMEnomics-Spiral Dynamics framework: Purpose, Profit, People, Planet, and Process. A modified version of Don Beck’s original conception has been adopted by the Conscious Capitalism Movement, which continues to be informed by the Spiral Dynamics model till this day.

Friedman’s ideas represented a legitimate way for businesses to abandon all other virtues that fall under corporate social responsibility and pursue the sole goal of making money. So much so, that in 1978 the Business Roundtable which is made up of the most powerful CEOs on the planet, adopted Friedman’s guidelines as its end-all be-all source for corporate governance. So, why is this relevant today? In 40 plus years, the Business Roundtable has rarely deviated from supporting what they call shareholder primacy – until a few days ago.

On August 19, 2019 the Business Roundtable, in a major shift in focus announced that it’s moving away from the stockholder model and embracing a commitment to stakeholders such as employees and suppliers. The signatories to this statement are the who’s who of the most powerful corporations in the world, from Apple’s Tim Cook, to Amazon’s Jeff Bezos and heads of every Pharmaceutical and Oil Company on the planet and everything in between. (Click here to read the full statement and see the list of signatories)

Does this new statement of corporate purpose reverse the damage that monetarism has caused over the last 4 decades? Since 1978, nothing has been more important for the American corporation than preserving shareholder value. Capitalism became a simple mathematical equation. On one side was management hiding behind this fallacy of efficiency for the sake of the shareholder and on the other was the worker fighting the uphill battle to keep his job. The working class that built American cities and factories and those who supplied them became a variable in an equation that needed to be reduced to as close to zero as possible.

Fighting for the shareholder became a blood sport. This wasn’t a fiduciary responsibility like it’s supposed to be. To attract this rare industrial butcher talent, CEOs were offered a generous amount stock and their compensation was tied directly to the price of that stock. The brightest Friedman clones had taken over corporate America and its financial markets and they immediately went to work. They increased the price of the economic pie instead of creating a bigger pie because only money mattered. Jobs were outsourced, streamlined and offshored because only money mattered. Businesses, large and small were securitized, monetized, and downsized, because only money mattered. Jobs, unions and workers disappeared and you guessed it because only money mattered. Then as this whole house of cards was crashing down in 2008, instead of seeing the fallacy of an economy based on Monetarism our clueless politicians finished the job of debauching whatever value was left of our currency by making money available at 6 times the normal liquidity.

The Business Roundtable’s new declaration from a few days ago is like a statement made by a habitual criminal in court proclaiming innocence and vowing to change his ways. It reminds me of the movie series The Purge where, in a dystopian America, mayhem, anarchy, and murder are condoned for one night out of a year and where reality looks a lot different the morning after.  Well, corporate America has been purging its stakeholders for four decades in favor of those who became the 1%. They have systemically murdered any sense of loyalty they have for Main Street America. Now, They are realizing that the purging is reaching an ugly end and that a new and threatening dawn is on the horizon.

These powerful CEOs are looking to mitigate the damage caused by the rise of a new economic era that doesn’t fit their narrative for business as usual. It’s driven by those who haven’t drunk the shareholder Kool-Aid. They see the anger of the Millennials who witnessed their parents’ jobs being downsized then outsourced to places where slave labor increased shareholder value. They don’t understand why this new generation would rather “share” than “own.” They spend billions on consumer research but they won’t bother to look inward to examine their own conscious and sense of patriotic duty. What they do see is a new breed of politicians who are ready to put an end to the fallacy of an economy based entirely on money and stockholder value.

When only money matters, unending greed becomes the only virtue. When that virtue defines corporate values and culture for over four decades, the behavior becomes the norm. Jeff Bezos is a man who’s company put tens of thousands of stakeholder mom and pop shops out of business. When he says he supports the new stakeholder model, I have my doubt about corporate America being in touch with the stakeholder. If my work with evolutionary values over the last two decades tells me anything, it’s this: corporate America has become the habitual criminal in the court of public opinion, and with all it’s arrogance and desperation it’s asking us to believe that it’s ready to voluntarily go on the straight and narrow path. What it hasn’t noticed is that the judge and jury have changed. The pendulum is swinging the other way. It’s empowered by a culture with higher values and a new breed of politicians who see the deep damage that Milton Friedman has caused to the cultural fabric of America and the world.

 

 

 

 

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Spiral Dynamics and MEMEnomics in Collaboration to Design the Next Global Financial Architecture 

Dr. Don E. Beck and I will be keynote speakers at the 75th Anniversary of the Bretton Woods Financial Conference this July which is taking place at the same center that held the original conference that changed the world. This invitation came about as the organizers of the conference, under the leadership of the late Bernard Lietaer, the co-designer of the Euro, studied my book MEMEnomics. The group then decided to gain a deeper understanding of Spiral Dynamics by studying Dr. Beck’s original book on the theory.  I was fortunate enough to meet Bernard in Boulder, CO in the mid 2000’s when he attended an event led by Dr. Beck. Then as fate would have it, we met again in 2013 in New York as we shared the same media publicist that was promoting our respective books.

The theme of the upcoming conference is Economics at the intersection of Humanity, Technology, Ecology, Governance and Markets. Dr. Beck and I will be the opening speakers on the second full day of this In-conversation-with conference format. The organizers would like our opening (in their words) to be a showcase of Spiral Dynamic to prime participants to start thinking differently about economic systems.

There will be many prominent attendees and speakers  and many organizations represented that include: The IMF, New America, Poverty Action Lab, Council on Foreign Relations, The Buckminster Fuller Institute, National Geographic, CARE, The Nature Conservancy, MIT Innovation Lab, The Financial Times, The Schumacher Center, & The Institute for New Economic Thinking.

The Evolution of Bretton Woods

The original 1944 conference was organized by US President Franklin D. Roosevelt who invited delegates and heads of states from 44 different countries to create a post WWII economic and financial blueprint. John Maynard Keynes, the most prominent economists at the time was the master architect behind the conference that gave the world the current global financial and economic order. This was the event that gave birth to so many institutions born out of a new global paradigm on peaceful trade and development. It made the US the economic superpower it is today. It gave the world the International Monetary Fund and The World Bank, and made the US Dollar the de facto reserve currency for the world. It also gave us a preview of how a resilient Blue system (regulatory structure that understands economics) in government can direct economic policies and nudge a culture towards systemic prosperity by providing smart regulation that anticipates the Orange system’s (free market capitalism) every move and keeps its exploitation in check.

These values, which represent the Patriotic Prosperity Cycle in my book, were with us until the 1970’s when runaway inflation and  budget deficits made it impossible to keep the dollar pegged to the gold standard. That’s when President Nixon allowed the US currency to float and become a fiat currency backed only by the word of our government. The cycle entered the decline phase thereafter as Germany left the Bretton Woods Agreement, and the world was hit by the first Arab oil embargo. Its final entropy phase came during the Carter years when any and all measures of Keynesian economics failed to tame double-digit  inflation and runaway interest rates that were choking any meaningful economic growth.

As Keynesian economics waned in the US, it was replaced, with much fanfare by Monetarism, with Milton Friedman as its ideological father. This is the Orange economic phase I call the Only Money Matters Cycle in my work. Beginning with the Reagan presidency, the institutions created by Bretton Woods shifted from a trade, reconstruction, development and humanitarian mission, to mostly a banking function motivated by profit. Today these same institutions are the main reason why less developed countries remain in a perpetual downward spiral of debt that can never be repaid. (Click here to read my 2009 published piece  about the value systems structures that made this possible).

The push to develop the entire world into this peaceful commerce paradigm went into high gear under the Monetarist ideology and became instrumental in continuing the goal of ending wars against each other. But, as we came together to end wars through the virtues of free markets, and an insatiable appetite for consumption, we collectively and inadvertently waged a slow but deadly war against Mother Nature’s key ecosystems.

This will be the monumental challenge this conference needs to address. It seems that from the diverse list of attendees, speakers and the institutions  represented, this might just be the right place to start work on a new blueprint that reframes human activity as part of the planetary ecosystem. While the conference might not hold the same CAPI* the original conference did 75 years ago,  the hope is that it can inform leaders on the type of institutions we need to design to effectively address the existential threats we as a humanity have collectively created for ourselves and the planet.

Although the event itself is not open to the public, here’s the link to its website for more information. https://www.brettonwoods75.org/

*CAPI stands for Coalescence of Authority, Power and Influence. It’s is an advanced Spiral Dynamics concept adopted from the Adizes Institute. It’s presence as a representation of systemic stakeholders, is an essential ingredient in the design of Large-Scale transformational systems.  

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