Conscious Capitalism. John Mackey

increased to sixty-eight years, from its long historical average of thirty years or less.6

       In just the past forty years, the percentage of undernourished people in the world has dropped from 26 percent to 13 percent.7 If current trends continue, we should see hunger virtually eliminated in the twenty-first century.

       From a world of almost complete illiteracy, we have transformed, in only a couple of hundred years, into one in which 84 percent of adults can now read.8

       With the growth of economic freedom, 53 percent of people now live in countries with democratic governments elected by universal suffrage, compared with zero people just 120 years ago, as even democracies denied women or minorities, or both, the right to vote.9

       Contrary to popular belief, prosperous countries have a higher level of life satisfaction. The self-determination associated with free markets, along with greater prosperity, leads to greater happiness. The top quartile of economically free countries has a life satisfaction index of 7.5 out of 10, compared with 4.7 for the bottom quartile.10

      FIGURE 1-1

      World population and gross domestic product (GDP) per capita

      Source: Data from Angus Maddison, “Statistics on World Population, GDP and Per Capita GDP, 1–2008 AD,” Groningen Growth & Development Centre Web page, March 2010, www.ggdc.net/MADDISON/oriindex.htm.

      Entrepreneurs: The Heroes of Free-Enterprise Capitalism

      In her recent book Bourgeoisie Dignity, Deirdre McCloskey, an economist at the University of Illinois in Chicago, argues persuasively that the most important factors in free-enterprise capitalism’s success have been entrepreneurship and innovation, combined with freedom and dignity for businesspeople.¹¹ The inventions that have changed the world—automobiles, telephones, gasoline, the Internet, antibiotics, computers, airplanes—didn’t happen automatically or by government edict; they all required massive amounts of innovation. Human creativity, partly individual but mostly collaborative and cumulative, is at the root of all economic progress.

      Entrepreneurs are the true heroes in a free-enterprise economy, driving progress in business, society, and the world. They solve problems by creatively envisioning different ways the world could and should be. With their imagination, creativity, passion, and energy, they are the greatest creators of widespread change in the world. They are able to see new possibilities and enrich the lives of others by creating things that never existed before.

      Educator Candace Allen, wife of economics Nobel laureate Vernon Smith, writes movingly about the need for entrepreneurial heroes in society and the great impact they have on our lives: “Ultimately, the hero is the representative of the new—the founder of a new age, a new religion, a new city, the founder of a new way of life or a new way of protecting the village against harm; the founder of processes or products that make people in their communities and the world better off. What I will contend here is that in our modern world, the wealth creators—the entrepreneurs—actually travel the heroic path and are every bit as bold and daring as the heroes who fought dragons or overcame evil.”¹²

      Why Capitalism Is Under Attack

      Despite enabling widespread prosperity, free-enterprise capitalism has earned little respect from intellectuals and almost no affection from the masses. Why is it so disliked by so many people? Does it need to change? Do we need to think about it differently?

      Rather than being seen for what they really are—the heroes of the story—capitalism and business are all too frequently vilified as the bad guys and blamed for virtually everything our postmodern critics dislike about the world. Capitalism is portrayed as exploiting workers, cheating consumers, causing inequality by benefiting the rich but not the poor, homogenizing society, fragmenting communities, and destroying the environment. Entrepreneurs and other businesspeople are accused of being motivated primarily by selfishness and greed. Meanwhile, the defenders of capitalism frequently speak in a jargon that not only fails to inspire people, but often reinforces the ethical critique that capitalists only care about money and profits and that businesses can only redeem themselves through “good works.” This is a fundamentally misguided view.

      We believe that capitalism has long been under attack for several reasons:

      1 Businesspeople have allowed the ethical basis of free-enterprise capitalism to be hijacked intellectually by economists and critics who have foisted on it a narrow, self-serving, and inaccurate identity devoid of its inherent ethical justification. Capitalism needs both a new narrative and a new ethical foundation, one that accurately reflects its intrinsic goodness and virtue.

      2 Too many businesses have operated with a low level of consciousness about their true purpose and overall impact on the world. Their tendency to think in terms of trade-offs has led to many unintended, harmful consequences for people, society, and the planet, resulting in an understandable backlash.

      3 In recent years, the myth that business is and must be about maximization of profits has taken root in academia as well as among business leaders. This has robbed most businesses of the ability to engage and connect with people at their deepest levels.

      4 Regulations and the size and scope of government have greatly expanded, creating the conditions for the spread of crony capitalism, restricting competition in favor of politically well-connected businesses. Crony capitalism is not capitalism at all, but is seen as such by many because it involves businesspeople.

      These are significant challenges, but they must be overcome if we are to continue to spread freedom and bring dignity and the fruits of modernity to the billions on the planet who are still in dire need.

      The Intellectual Hijacking of Capitalism

      The early intellectual case for capitalism was built almost exclusively on the theory that people create businesses to pursue only their personal self-interest. Economists, social critics, and business leaders largely disregarded the second and often more powerful aspect of human nature: the desire and need to care for others and for ideals and causes that transcend one’s self-interest. The founding father of modern capitalism, Adam Smith, recognized both of these powerful human motivations. His book The Theory of Moral Sentiments preceded his far better-known book, The Wealth of Nations, by seventeen years. In the earlier book, he outlined an ethics based on our ability to empathize with others and to care about their opinions. Through our ability to empathize, we are able to understand how other people are feeling and imagine what it would be like to be in their shoes.

      Smith was far ahead of his time, both in his economic philosophy and in his ethical system. If the intellectuals of the nineteenth century had embraced and integrated his economic and ethical philosophies, we might have avoided the extraordinary strife and suffering that occurred in the nineteenth and twentieth centuries over competing political and economic ideologies.

      Unfortunately, that did not happen. Smith’s views on ethics were largely ignored, and capitalism developed in a stunted way, missing the more human half of its identity. This created fertile conditions for ethical challenges to capitalism, which were not long in coming. Karl Marx attacked capitalism as inherently exploitative of workers. Critics used the Darwinian idea of the survival of the fittest to describe markets as inherently ruthless and brutal. Just as nature was seen as “red in tooth and claw,” business was seen as harsh, dehumanized, and uncaring. These descriptions ignored the higher-level human aspirations and capabilities that free-enterprise capitalism potentially taps into so well.

      Another factor that fed distrust of capitalism was a failure to distinguish between the fixed-pie or zero-sum concept of mercantilism and the expanding-pie concept of free-enterprise capitalism. Much of today’s animosity toward capitalism stems from a misconception that we need to share all resources fairly and equitably. But the reality is that by artfully combining resources, labor, and innovation, wealth can be greatly expanded. The poor can become wealthier without requiring the well-off to become poorer. The pie grows, and there