Abstract
Before discussing in the next Sect. 7.2 (amongst others, in light of the newly proposed NMWO that has been discussed in Chap. 6), possible alternative models of conducting an enterprise than those that prevail under capitalism, it is useful to first undertake a deeper analysis of the basic principles that govern capitalist business conduct.
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7.1 Further Analysis of the Capitalist Profit Motive and How It Is Achieved
7.1.1 Brief History of the Profit Motive
7.1.1.1 Emergence of the Capitalist Enterprise
Before discussing in the next Sect. 7.2 (amongst others, in light of the newly proposed NMWO that has been discussed in Chap. 6), possible alternative models of conducting an enterprise than those that prevail under capitalism, it is useful to first undertake a deeper analysis of the basic principles that govern capitalist business conduct.
Since only limited attention has been paid to this subject matter in the previous Chapters of this book—as, incidentally, also in our previous work, whose angle of approach has been mainly the one of monetary and financial lawFootnote 1–, this subject matter will, in this chapter, be dealt with in some more depth. In this process, certain of the themes of the previous chapters of this book will be restated from the perspective of what this implies for the conduct of an enterprise itself, as well as for the (capitalist) principles underlying such conduct of an enterprise.
In this context, it should be clear that, despite all the rhetoric to the contrary, within capitalist economies, there is only one essential expectation regarding enterprises, namely that they would make as much profit as possible.
This insight has already, in a slightly more distant past, been described as follows by none other than John Kenneth Galbraith:Footnote 2
The market has only one message for the business firm. That is the promise of more money. (…) It must try to make money and, as a practical matter, it must try to make as much as possible. Others do. To fail to conform is to invite loss, failure and extrusion. Certainly, a decision to subordinate interest in earnings to an interest in a more contented life for workers, cows or customers would, in the absence of exceptional supplementary income, mean financial disaster. Given this need to maximize revenue, the firm is thus fully subject to the authority of the market.
This is not a mere statement.
On the contrary, this short paragraph captures one of capitalism’s most essential characteristics.
It is this basic characteristic of capitalist economies that will be at the center of this chapter.
Before delving more deeply into the extent to which this basic principle has become the all-determining criterion for the operation of capitalist enterprises (including its legal methods of organization)—and, under the impetus of economic neoliberalism, even of global society–, let us first try to ascertain how this basic characteristic of capitalism has historically come about, and then to examine more closely the basic working methods for achieving that profit motive in the context of entrepreneurial activities.
7.1.1.2 Brief Historical Overview of Certain Religious and Philosophical Perceptions Regarding the Pursuit of Wealth
7.1.1.2.1 Emergence of Money (Use)
As already explained above (cf. Sect. 2.1), the importance that present-day societies put on the so-called unbridled pursuit of profit (to which virtually all other societal values have been sacrificed in the course of the past centuriesFootnote 3) has historically first begun to occur as a result of a number of evolutions in the modes of human coexistence, with important, early turning points being (1) the transition from nomadic to sedentary (especially agrarian) societies, and (2) the transition from direct exchange economies, to cash-based indirect exchange economies.
As already explained in Sect. 2.1, this transition from nomadic to sedentary/agricultural societies that began to occur roughly a dozen thousand years ago, was accompanied by an increasing degree of division of labor and labor specialization.
As long as the use of money was not yet in the picture, there is no doubt that various positive consequences were associated with this, with the question of when exactly the various, negative consequences of a sedentary way of life started to occur, including especially: the emergence of the notion of (private) property,Footnote 4 as well as a gradually established division of the people belonging to such fledgling, sedentary societies into separate castes, including the classes of rulers and religious leaders who became especially skilled in methods of appropriating the fruits of others’ efforts.Footnote 5
Indirect barter—and the accompanying emergence of money itself—would further accelerate these processes. As a result, labor specialization occurred to an even greater extent, and with it the increasing division of people into separate classes.
In addition, the use of money allowed societies to become increasingly large-scale, relying on such things as: (1) Intermediary tradeFootnote 6 (which itself accompanied the rise of the class of merchants), (2) Administration (both to keep track of commercial transactions, and to organize taxation, which are still two important pillars of the administrative process—cf., in current times, the importance of entrepreneurial accounting and the service sectors engaged in it, respectively, the organization of tax services as central components of public administrations), and (3) The formation of specialized, paid militia and guard services (in modern times: army and police).
Partly as a result of these evolutions, small-scale, (tribal) communities would gradually grow into true empires,Footnote 7 with one of the first great examples in the history of the West, the empire of Alexander The Great and, sometime later, the Roman empire (while in the Middle East and the far East, great empires had already emerged beforehand, such as the Chinese and Indian empiresFootnote 8).
This also set in motion an evolution in which the emphasis in economics shifted from satisfying everyone’s basic life needs to accumulating wealth, and in which class societies started to replace societies in which everyone’s (economic) needs had been addressed on a more or less equal footing.
7.1.1.2.2 Plato
Notwithstanding the fact that the breakthrough of money-based, sedentary societies may seem to have been inevitable, it has not come about without a struggle in the realm of ideas.
Already in our previous work,Footnote 9 we have pointed out that this historical evolution, by prominent philosophers and religious leaders, was initially viewed with alarm.
One of the most famous philosophers of Classical Antiquity was undoubtedly Plato.
In works currently known by titles such as ‘The Laws’ (‘Nomoi’) and ‘The Ideal State’ (‘Politeia’), Plato devoted attention to themes such as the ideal state and just legislation.
It is noteworthy how critical Plato was of the increasing importance attached in his time to the use of money, and especially to the striving of certain groups of people—especially the merchants—to earn ever more money (which in modern terminology may be referred to as profit-seeking).
Well known is the following passus from The Laws, which relates to the use of moneyFootnote 10:
But the intention of our laws was that the citizens should be as happy as may be, and as friendly as possible to one another. And men who are always at law with one another, and amongst whom there are many wrongs done, can never be friends to one another, but only those among whom crimes and lawsuits are few and slight. Therefore we say that gold and silver ought not to be allowed in the city, nor much of the vulgar sort of trade which is carried on by lending money, or rearing the meaner kinds of livestock; but only the produce of agriculture, and only so much of this as will not compel us in pursuing it to neglect that for the sake of which riches exist – I mean, soul and body, which without gymnastics, and without education, will never be worth anything; and therefore, as we have said not once but many times, the care of riches should have the last place in our thoughts. For there are in all three things about which every man has an interest; and the interest about money, when rightly regarded, is the third and lowest of them.
With this statement, Plato very aptly catches the ethical question regarding the organization of socioeconomic systems, although it seems that, since then, humanity has mostly chosen the exact opposite path than that advocated by Plato at the time.
Even it seems that, as a result, centuries after Plato’s writings, one of the doomsday images Plato had warned about, specifically a society characterized by extreme polarization between rich and other, has fully manifested itself.
Reference can in this regard be made to the warning formulated by Plato, in The Ideal StateFootnote 11:
The further they go in the process of accumulating wealth, the more they value it and the less they value goodness. For aren’t wealth and goodness related like two objects in a balance, so that when one rises the other must fall. (…) So the higher the prestige of wealth and the wealthy, the lower that of goodness and good men will be. (…) And so there is a transition from the ambitious, competitive type of man to the money-loving businessman, honor and admiration and office are reserved for the rich, and the poor are despised.
The latter statement by Plato demonstrates a great understanding of the power of money, particularly how the excessive reliance on money use (and on wealth accumulation to which money use lends itself), is of a nature to create a dichotomy within societies between the (extremely) wealthy and the rest of the population, with all the problems that entails.
A few millennia later, it seems that these warnings were largely ignored. As a result, greed for money, throughout the Western world, continued to increase, the consequences of which, in our present times, the entire world suffers.Footnote 12
7.1.1.2.3 Jesus Christ
Plato has not been the only prominent sage in history who has spoken out in such an explicit manner against societies in which both money use and the pursuit of ever more money, are proclaimed to be central values.
Given the way in which, in certain—supposedly—Christian countries, including the United States of America,Footnote 13 Christianity is currently being interpreted, it may come as a surprise that the Gospel of Jesus Christ, too, does not gratify the pursuit of money and, by extension, material wealth.
Indeed, when considering the ideas of especially American Republicans, for instance on themes of a socioeconomic nature, it is hard to believe that they claim to base their views on the doctrinal systems of Jesus Christ, as revealed in the New Testament, since, in proclaiming their hodgepodge of conservative and neoliberal doctrines, they usually take diametrically opposed positions.
Restricting ourselves to a few salient passages from the Gospels themselves that demonstrate the attitude of Jesus Christ against wealth accumulation, it concerns for example: (1) The Sermon on the Mount (cf. Mt. 5–7), with as central message that people are not supposed to pursue material wealth (articulated under the description “not to pursue treasures on earth”), but should aspire to spiritual wealth (Mt. 6: 19–21); (2) The answer to the rich young man’s question of what to do to earn the Kingdom of Heaven, specifically to sell his possessions and to distribute the proceeds to the poor, and then to follow Jesus (Mt. 19; 16–30); (3) The parable of Lazarus and the rich man, who, after their deaths, ended up in heaven and hell, respectively, where the rich man is told that, given his greedy and selfish behavior during his life time, there is nothing more to be done to remedy his fate (Lk. 16: 19–31); (4) Jesus’ statement about Himself, specifically that the Son of man possesses not even a stone to rest his head on (Mt. 8: 18–22); (5) The exhortation, when hosting a feast, not to invite one’s rich neighbors because they are able to do the same in return, but rather the poor, lame and blind (Lk. 14: 12–14); (6) The parable of the rich man who spends his life building ever larger barns in which to store his harvests, deluding himself that one day, the day will come when he will be able to enjoy his wealth, but then dies unexpectedly and must leave his wealth for others to enjoy (Lk. 12: 16–21), among many other similar text passages.
More in general, Jesus Christ preached a doctrine that put charity first in the relationship between people, and in which the pursuit of money may never be the highest goal of life.
According to Cuvelier, Christ’s teachings even bear witness of a completely anti-capitalist attitude to life, since every capitalist system inherently tends to enrich the rich and make the poor even poorer, which is, for example, pre-eminently the case for the interest mechanism. According to Cuvelier, Jesus Christ thus preached a complete equality between people that excludes any form of exploitation of one’s fellow man. This teaching of Jesus Christ is, by definition, incompatible with the (later in history developed) methods of capitalism itself, including the expectation of investment return characterizing both capitalist shareholders and lenders, to the extent that the latter want to see their investments yield an optimal return in order to get richer and richer themselves.Footnote 14
In the vision of Jesus Christ, money may at best be a means—cf. in the parable of the Good Samaritan, in which Jesus gave an example of what charity means, under reference to the fact that the Good Samaritan starring in this parable, with his own money, paid the bill for the care of a wounded man (without any expectation of ever being repaid, let alone repaid with profit)Footnote 15—and with the ultimate message that in his life man is constantly faced with the choice of serving God (i.e., Love) or the Mammon (i.e., the pursuit of money), without it being possible to serve both at the same time.Footnote 16
In a similar vein, this attitude to life also speaks from the book of Acts of the New Testament, which reports on the efforts of the disciples of Jesus Christ and their converts to organize fledgling Christian communities based on Christ’s message.
7.1.1.2.4 Influences of Christianity in the Middle Ages
In the further history of the West (and—to the extent that starting in the late Middle Ages, and certainly continuing in modern times, the Western world has asserted an unusually large impact on the rest of the world–, gradually also in the rest of the world), it is striking how much this ideal of Christianity has been wrestled with.
This probably finds its explanation in the profound influence that Christianity has exerted within Western societies, starting at the time when Christianity was declared the main religion of the Roman Empire. When (relatively) shortly thereafter, from the fifth century AD onward, the (Western) Roman Empire gradually began to disintegrate and the resulting void was filled in by Germanic empires, this ever-increasing role of Christianity, strangely enough, did not come to an end. On the contrary, Christianity succeeded in bringing ever larger parts of Europe under its influence, so that by the end of the Middle Ages, the entire European world could be called Christian.Footnote 17
However, the question arises as to whether what could be described as the quantitative success of Christianity has not come at the expense of the quality of observance of the message of Jesus Christ itself, especially in the context of the subject matter studied here, namely the organization of socioeconomic order.
It even seems that the dichotomy within the Western societies of the time between, on the one hand, the (selfish) striving (of some) for ever more wealth accumulation and, on the other hand, the structuring of society on the basis of what was initially called Love (for one’s neighbor)—with this striving itself being based on one of the most essential messages of Jesus Christ, as expressed for example in Mt. 22: 34–40–, but is currently rather described by terms such as Solidarity or Altruism, would increasingly come to define European societies.
Initially, it even seemed—at least in the realm of ideas—that the battle would be settled in favor of the concept of love for one’s neighbor.
Put in general terms, it was argued by the most authoritative church fathers of early Christianity (including Saints Ambrose and Augustine) that it was morally unacceptable (and unchristian) for the wealthy to enrich themselves on the hood of their needy fellow human beings. Other expressions of Christian charity manifested themselves through the establishment of all manner of charitable institutions, including monasteries and fledgling hospitals, institutions that had not previously existed in the history of the Western world.
As already outlined above (cf. Sect. 2.2.4), the Church’s attention in the realm of ideas, moreover, soon started to focus, among other things, on a doctrine that came to be known as the ecclesiastical prohibition of interest, which, on the authority of various sources (including the Old and New Testaments, but also, for example, the philosophy of Aristotle), started to take shape in the early Middle Ages, and which for about a millennium would constrain the pursuit of profit (especially in the context of credit).Footnote 18
However, notwithstanding the official Church teaching remained that the purpose of man’s life could not lie in the accumulation of wealth on earth, during the further Middle Ages, gradually, numerous reversals of this principle would begin to occur.
Imaginative were certain attitudes of duplicity that the Catholic Church itself began to display, in which certain church princes and other ecclesiastical officials themselves began to excel in treasure-gathering, without asking too many questions about the compatibility of such behavior with the teachings of Jesus Christ himself.Footnote 19
However, in the context of the subject matter addressed here—particularly the question of how the pursuit of money evolved into the central, societal value of the Western world–, it is of greater interest that, in practice, the demise of said Christian ideals got accompanied by an ever-increasing toleration of commercial practices that were no longer in accordance with Christian doctrine itself.
As a result, the revival of trade and industry in the second half of the Middle Ages was accompanied by all manner of mechanisms aimed at circumventing the ecclesiastical prohibition of interest (including loans based on collateral that had a greater value than the loan provided itself; the bill of exchange, in which discounting masked an economic interest charge; etc.).
Gradually, even such masking would be omitted, so that by the end of the Middle Ages, the forerunners of modern bankers overtly started to grant credit at interest.
7.1.1.2.5 Evolutions from the 16th and 17th Centuries Onward
From the sixteenth century on, various pre-capitalist evolutions within which the pursuit of money and wealth accumulation became increasingly central would be further facilitated by the schism between the Catholic Church and the Protestant churches, during which it became apparent that the latter got increasingly tolerant of worldly, wealth accumulation.Footnote 20
It is probably no coincidence that the rise of one of the great merchant and banking families of the time, in particular the House of Fugger, which operated out of Augsburg and managed to work its way up, during the fifteenth and sixteenth centuries, to become the largest European banking family of the time, even counting several of the Habsburg rulers among its clientele, went hand in hand with the breakthrough of Protestantism in the German territories of the time.
Over the course of the seventeenth century, the fences were completely put down, with various methods of organizing trade and credit—which to this day still determine the appearance of modern, capitalist economies–, starting to determine the appearance of the post-feudal, socioeconomic order.Footnote 21
Among the most important of these new breakthrough methods of organization of trade and credit were, without doubt: (1) The becoming socially acceptable of loans at interest; (2) The breakthrough of the company/corporate form, whose shareholders (and later directors) enjoyed the benefit of limited liability; and (3) Paper money creation by private bankers who began to emit paper money for larger amounts than their underlying cash reserves in coinage made out of precious metals (which itself had evolved into the only chartalist money form during the Middle Ages).
It may be added that, as feudalism continued to crumble, (4) Labor against remuneration (or, wages) also evolved into one of the central ingredients of the emerging, (pre-)capitalist order.Footnote 22
According to Duplessis, the latter turnaround in which the employment model of feudalism was gradually abandoned by systems of paid employment, had already begun to occur from the fifteenth century onwards, both in cities and rural areas, as part of the economic revival that occurred during that period.Footnote 23
A consequence of this was that, already in the late Middle Ages, (fledgling) European industries began to exhibit some of the characteristics of modern times, albeit still limited to a number of sectors (including, in main order, the textile sector, in addition to food production and construction).Footnote 24 More precisely, the bulk of production based on non-feudal models of employment in these sectors initially took place primarily in small, artisanal workshops, within which the role of raw materials and labor was much more significant than that of capital in the form of machinery and factories. Since there was hardly any technological progress, downward pressure on wages was the most common method of reducing production costs. At the same time, labor mobility was limited due to urban regulations and guild formation. In addition to these fledgling industries, the mining sector also became based on labor against payment, even to the extent that the establishment of mining sites was often conditional upon a sufficient presence of (cheap) labor.Footnote 25
In the course of the sixteenth century, the potential offered by this method of organizing the economy on the basis of labor for remuneration would be ever more exploited, leading to an ever-increasing generalization of (fledgling) capitalism,Footnote 26 albeit that classical, societal structures, at the same time, kept presenting obstacles to capital investment, mass consumption, labor mobility and, in general, entrepreneurial initiative.Footnote 27 In the seventeenth century, this breakthrough of capitalism would, furthermore, experience hindrance from various other factors, such as war, epidemics, changes in the legal organization of marriage, monetary turmoil, and climate change.Footnote 28 On a positive note, however, wages stabilized and even increased throughout the seventeenth century.Footnote 29
The consequence of this evolution has been that, during the sixteenth–seventeenth centuries, more and more labor was made free for extra-agrarian activities, ergo for trade and fledgling industry.Footnote 30 This was accompanied by the shaping of a society that increasingly relied on labor against wages, which thus evolved into one of the main pillars of capitalism itself (and no longer on the previously prevailing system of serfdom, in exchange for protection).
Given the importance of this turnaround, we shall return to it further in Sect. 7.1.3.
7.1.1.2.6 Validation of Early Capitalist Practices in Calvinism
All the previously mentioned (pre-capitalist) methods of organization of trade and credit had the common feature that they were, inherently, aimed at making (as much profit as possible) for the benefit of the class of (in modern terms) merchants and entrepreneurs. This in turn created a breeding ground for a socioeconomic model in which a fair and equal satisfaction of the basic of life needs of all people—for example, in terms of food supply and decent housing (cf., furthermore, in Chap. 5)—was no longer considered as a central objective of economics, but rather making (as much) profit as possible for the benefit of the entrepreneurial class.
With this, wealth accumulation gradually became the new societal goal, an approach that soon got validated in a newly emerging, ecclesiastical doctrinal system, namely Calvinism.
Calvinism took shape during the seventeenth century. In it, the pursuit of wealth was elevated to a Christian duty,Footnote 31 provided this wealth was spent sparingly and not used for deploying a decadent lifestyle.
Calvinism would also contribute to an increasing individualism, in which, especially the pursuit of wealth by the ruling classes of merchants and bankers was rationalized as extending to a greater glory of God. According to Kruithof, the Calvinist idea also contained the seeds of the competitive model that started dominating capitalism: in the socioeconomic model propagated by the Calvinist, (only) the strongest survive, and the Calvinist finds this equitable (with charity as a corrective mechanism).Footnote 32
In doing so, Calvinism placed a particular emphasis on a (for that time) new work ethic, insisting that man’s task is to use their (God-given) abilities and talents as diligently and productively as possible. According to McGrath, work was hereby regarded “as a deeply spiritual activity, a productive and socially blessed form of prayer,” which made this author assume that this new view on the provision of labor contributed to the increasing importance of emerging capitalism.Footnote 33 At the very least, Calvin removed the religious and societal stigma attached to wealth gathering before in history.Footnote 34
All this, in the words of Jaap Kruithof, makes the Calvinist a peculiar combination between a merchant and a pastor: as a merchant, the Calvinist thinks of nothing but profit and wealth gathering, serves his own self-interests fiercely, and does not take kindly to the rules of fair play. As a pastor, the Calvinist likes to moralize, to pretend that there is a higher ethical reality at play in what he does, and to give sentimental sermons about how good what he does is for society.Footnote 35
Kruithof has pointed out, in his book ‘Arbeid en lust’ (translated: ‘Labor and lust’), that Calvinism profoundly changed the way of thinking in the West. According to this author, the Calvinist system of thought soon took hold of the (Protestant) North of Europe and would, moreover, become increasingly decisive for the organization of the socioeconomic order in other European areas that had remained Catholic. According to the same author, this effect continues to play out in large parts of the world up to this very day (including North America, large parts of Europe and Australia, and New Zealand, i.e., the traditional western world).Footnote 36
Kruithof does not go as far as to postulate that (merchant) capitalism was the result of Calvinism, but he does maintain that Calvinism was able to translate the mentality that had been shaping (merchant) capitalism in practice, in particular the pursuit of ever-increasing personal wealth by means of the methods of organization of commerce, crafts and credit cited in the previous Sect. 7.1.1.2.5. In this, Calvinism may even be considered the precursor of economic liberalism, and later in history economic neoliberalism.Footnote 37
The industrial (r)evolutions of the seventeenth and eighteenth centuries, partly because of the above, would thus begin to take place against the background of pre-existing, societal structures, albeit some of these underwent qualitative and/or quantitative changes, to be then, increasingly, translated into new societal norms. The great progress that occurred during those centuries was, in other words, mainly the result of an ever more intensive exploitation of technological and organizational working methods that were already available beforehand, to become increasingly validated by newly emerging thoughts of school, first Calvinism and later to be followed by the emerging economic schools.Footnote 38
During all this time, the turnaround caused by Calvinist thought would continue to assert itself.
For example, over the course of the nineteenth and twentieth centuries, this Calvinist view of wealth accumulation and work ethic would result, in certain societies (including strongly in the United States of America), in a view of life that came to regard wealth (and success in accumulating material wealth) as a sign of divine election, whereby both personal and national wealth were perceived as a special divine favor. In modern times, the inescapable result of this view of life, referred to by McGrath as a “mutilated version of the Calvinist work ethic,” has evolved into the still-prevailing success theology (which then also exerted its validity on the neoliberal ideology taking shape in the second half of the twentieth century).Footnote 39
7.1.1.3 Breakthrough of the Company/Corporation Form
Two of the in the Middle Ages newly emerging methods of organization of commerce, crafts, and credit, within which money (gathering) stood central, namely interest levying on credit and new, private (paper) money creation, have already been discussed at some length elsewhere in this book. (Cf. Sect. 2.2.)
Let us now briefly look at the organization of trade and craft activities (in modern terminology: entrepreneurial activities) through the lens of the company/corporate model, considering that it has been the latter model that, from the seventeenth century onwards, increasingly became the legal mechanism for conducting an enterprise (and, hence, of the purpose of wealth accumulation central to it), and in this manner became crucial in determining the outlook of capitalism as well.
Partnerships already existed in Classical Antiquity. They were, for instance, already mentioned in Roman law (albeit with no reported use of the company/corporate figure that would have been comparable to the major role these legal figures play within contemporary, capitalist societies).
During the (early) Middle Ages itself, the company/corporate figure had been somewhat forgotten. Instead, other systems of socioeconomic order had prevailed, such as: (1) (first) feudalism—which was essentially a system of strict hierarchy, in which all individuals in society, through a business bond (generally: land), in exchange for protection, were engaged in a system of servitude to a feudal lord, and in which there were no horizontal forms of cooperation between people, other than marriage and kinship, in addition to monastic orders—and, (2) parallel to the breakthrough of commerce and crafts, the (later) guild system,Footnote 40 which also did not aim at sustainable forms of cooperation between individual merchants and craftsmen, but mainly constituted a mechanism of market demarcation and protection.Footnote 41
By the late Middle Ages, the company figure would, gradually, begin to break through in the search for more appropriate, legal (organizational) forms for modern enterprises, based, on the one hand, on the pursuit of profit and, on the other, on the accompanying exploitation of other people’s labor.
This happened, in part, in the context of an increasing internationalization of trade (at least considered from a European perspective).
From the seventeenth century onward, commercial, and industrial enterprises, moreover, became increasingly large-scale, and therefore more expensive (in terms of start-up costs) and risky, while at the same time generating ever-increasing profits. Also because of this increasing large scale, the need for new forms of organization arose, especially then the need for a legal figure to bring together potential investors and willing (merchant) adventurers in common trade and industry projects.
The Old Roman legal figure of the partnership appeared to meet this need, albeit that to fulfill this function, it had to be equipped with a new essential feature, namely the limitation of liability, initially intended as a guarantee that the financiers of a new commercial project subjected to the company form would never have to risk more than their (initial, financial) contribution.
Thus the forerunner of what would gradually come to be known as the (capital) company form saw the light of day, in which the limitation of liability—ergo the delimitation of business risks—was regulated at the legal level, first through contractual agreements and systems of royal authorization to make use of the legal figure, and later in history through appropriate legislation, out of which today’s company form has grown. Early examples of such companies were the East Indian Companies (whose dubious exploitation practices would give rise to a masterpiece of Dutch literature, notably Multatuli’s ‘Max Havelaar’), that took shape in various European countries/jurisdictions.Footnote 42
Gradually, the systems of recruiting prospective shareholders also became more sophisticated, with even the emergence of stock exchanges for the emission of newly issued shares (= the so-called primary market), as well as for trading existing shares (= the so-called secondary market), as a further result of which the intent of profit maximization for the benefit of shareholders became even more prominent.
Notestein has pointed that, in England, the customary forms of company that helped determine England’s breakthrough as a colonial superpower during the seventeenth century, date back to organizational forms for enterprises that had been developed in the bosom of medieval guilds, but that got gradually adapted to new needs, especially than meeting the needs of merchants active in overseas territories. From these precursors grew two types of companies, notably the regulated companies, and the joint stock companies.Footnote 43
The prototype of the (English) regulated companies was the so-called Merchant Adventurers, a form of company recognized by the government as early as 1407 and being granted a charter in 1564.Footnote 44 At the beginning of the seventeenth century, the Merchant Adventures had between 3000 and 4000 members, while exhibiting characteristics of both a guild structure and a modern corporation.Footnote 45
In the joint-stock companies, the characteristics of the guild system would be even further abandoned. Here shares ownership—and hence the intent of profit maximization for the benefit of the company’s shareholders—became even more central, making the joint-stock company the legal form used primarily for high-risk enterprises, with a need for special arrangements with distant countries. A first, fledgling example of such a joint-stock company was the so-called Muscovy Company, established for trade with the Russian Tsar in 1553, with a total capital of £6000 that was represented by shares, having a nominal value of £25.Footnote 46
Just like interest levying on credit and private money creation, the breakthrough of (these predecessors of) the modern capital company form would soon start to change the outlook of Western societies—and later in history, of global society—in a fundamental manner. In this, the new methods of conducting an enterprise in a company form helped to put an end to the earlier systems of socioeconomic organization, including (what remained of) feudalism and the guild system, even more quickly.
The basic idea of feudalism had been one of servitude in exchange for protection (albeit that this model had, in many cases, degenerated into appropriate forms of oppression, especially in the cases where the feudal lord who was supposed to protect his serfs turned out to be of ill will himself, which was all too often the case).
The basic idea of the guild system had been to establish professional associations of merchants and craftsmen, who worked for their common interests (including through obtaining privileges), without aiming at providing organized forms of cooperation between individual merchants and/or craftsmen. However, even this guild system would, over time, bring with it negative consequences, including the artificial shielding of professional sectors (and therefore the markets in which they operated) from new entrants.
Gradually, these traditional forms of organization of trade and crafts would give way to the new form of organization offered by the (capital) company form, the latter especially by allowing for the establishment of larger-scale business empires, within which the pursuit of profit (for the sake of shareholders) was elevated to be the central objective. With the later breakthrough of stock exchanges—in modern terms: financial markets–, this characteristic of profit maximization would become even more prominent, to the proportions it assumes in contemporary societies.
7.1.1.4 Crystallization of the Capitalist, Socioeconomic Order
It appears that in the eighteenth century, Europe had abandoned for good all attempts to establish an equitable socioeconomic system.
Instead, the breakthrough of capitalism had a fundamental downside (which still constitutes the main downside of the capitalist, socioeconomic model in modern-day societies as well), namely the fact that the increasingly large-scale commercial and artisanal, later industrial enterprises, all needed to rely on more and more (cheap) labor, as well as on more and more raw materials, to make their projects successful.
This implied that the new breed of merchants and artisans, later entrepreneurs, who increasingly organized themselves under the form of (capital) companies, had an ever-increasing need for personnel to (help) perform the actual, material work (as well as an ever-increasing need for raw materials to keep up with economic production; cf. already in Sect. 3.1).
As the feudal system itself began to wind down, in addressing the need for ever more work forces, it was possible to look to the great masses, where it soon became apparent that the modal man, who no longer found a place in society as a serf, did not seem predisposed to take on a role of entrepreneur himself, but rather looked for opportunities to rent out his labor to the newly emerging entrepreneurs (who, as mentioned above, increasingly organized themselves in the company/corporate form).
And it is here that the drama of capitalism started to unfold fully.
Let us first take a brief look at the outlines of the crystallizing socioeconomic picture of the time:
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At one end of the spectrum, we had a fledgling, emerging entrepreneurial class that managed to make use of the new mechanisms of organization of commerce, crafts/industry, and credit, that evaded traditional Christian and/or feudal logic, including (1) credit at interest, (2) private paper money creation, and (3) the (capital) company form. This class of merchants, artisans, and entrepreneurs, moreover, discovered, in ever-increasing numbers, ever more new prospects for making profits, a phenomenon that was intensified by the discovery and exploration of overseas territories.
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On the other side of the spectrum, there were the great masses, who themselves also increasingly experienced the demise of the model of feudalism and who—initially mainly in urban areas, but gradually also in rural areas—had to look for (new) methods of earning an income themselves.
It should come as no surprise that the system of socioeconomic organization thus newly formed provided the breeding ground for the already above, additional basic mechanism of capitalism, namely labor against (fixed) wages.
Conceptually, this called for people who themselves were not cut out for conducting an enterprises (in the broad sense of the word), to rent out their labor to those who were.
However, a fundamental caveat applied here, namely that the group of employers was at the same time increasingly inspired by one underlying societal goal, namely the pursuit of profit (rather than, for example, the goal of establishing just models of society—as, for example, based on traditional, Christian doctrine, which, in theory, still held).
This in turn implied that the wages entrepreneurs were willing to pay to those who rented out their labor, had to be kept as low as possible (at the risk of otherwise unduly eroding company/corporate profits).
Thus, a new basic principle of capitalism became exposed, which held that the wages of the labor-supplying classes should be kept as low as possible in order to maximize company/corporate profits. This basic principle of capitalism would later in history be referred to as the Iron Law of the Wages.Footnote 47
Soon, this principle would gradually be considered a premise for entrepreneurship itself.Footnote 48
And with this a new, essential characteristic of capitalist logic got gradually established: the intent of wealth-gathering that underlies the various mechanisms of socioeconomic order that broke through in the sixteenth–seventeenth centuries, essentially requires a willingness to exploit one’s fellow human beings, especially those do not themselves engage in the use of said capitalist mechanisms, but who nevertheless look for a method of survival, in particular by making their labor available in exchange for a fixed remuneration.
Since then, this characteristic of capitalism has evolved into one of the most essential peculiarities of the new, socioeconomic thinking that began to take shape during this period.
Even further away from the ideals of Jesus Christ Himself, from whose ideas the Western world was, in this manner, increasingly evading, were certain mechanisms of exploitation that started to take shape shortly thereafter, including the reintroduction into Western societies of slavery, and the maintenance of feudalism as a method of (forced) employment in some (Eastern) European territories, in addition to an industrial organization of these new methods of exploitation of other people’s labor, that would take shape during the nineteenth and twentieth centuries.Footnote 49
The logical outcome of this new method of organizing labor in the Western world itself, was the formation of a so-called ‘proletariat’, characterized by a large multitude of unskilled workers, who could be very cheaply enlisted in the economic production processes and who started to no longer being regarded as fully-fledged fellow human beings, but only as a cheap production factor.Footnote 50
7.1.2 Economic Rationalization and Its Translation to the Policy Level
7.1.2.1 Genesis of Economic Theorizing
7.1.2.1.1 General
As a result of the evolutions dealt with in Sect. 7.1.1, in the period from the sixteenth to the eighteenth century, the appearance of the Western world was changed very profoundly.
At the socioeconomic level, feudalism had gradually been supplanted by an amalgam of organizational methods that together provided the building blocks for (mercantile) capitalism.
In the world of ideas, as already mentioned, an initial, if non-uniform validation of the newly emerging trading and financial practices started to occur in the Protestant thought good in the broad sense of the word.
Especially Calvinism began to demonstrate a very open attitude to wealth accumulation as a life goal, provided that the accumulated wealth was not accompanied by a wanton spending pattern. In addition, Calvin preached a pervasive work ethic, that continues to this day to resonate with the (labor) ethic of economic neoliberalism itself.Footnote 51 (Cf. Sect. 7.1.1.2.6)
Shortly thereafter, certain American, Christian movements would even start to justify the practice of slavery.Footnote 52
Nevertheless, in the realm of ideas, the torch of defense of the new socioeconomic system, that gradually emerged based on the aforementioned practices, would soon be taken over by the secular mental movement of rationalism that, among other things, tried to recognize, by means of scientific methods, tendencies in human behavior, including at the level of the socioeconomic order.Footnote 53
One of the most famous, early examples of this approach is, without a doubt, the work of the Scottish moral philosopher Adam Smith, first through his book ‘The Theory of Moral Sentiments’ (1759), and later through his even more famous book ‘An Inquiry into the Nature and Causes of the Wealth of Nations’ (1776). With these works, Smith at the same time profiled himself as one of the frontrunners of economics as an independent, academic discipline.
In addition to the works of Smith himself, during the second half of the eighteenth century and into the nineteenth century, numerous other tracts devoted to the theme of the socioeconomic order would see the light of day, to grow together into the school of economic liberalism,Footnote 54 in which this qualification as an ‘economic school’ was made only afterwards.Footnote 55
Without wishing here to subject Adam Smith’s writings to a full dissection—this has obviously already been undertaken in very voluminous literature–, the main point made here is that, in Smithian thought, wealth accumulation in general, and the conducting of an enterprise in particular, got strongly praised as building blocks of prosperous societies.
This even happened to the extent that one can speak of a true reversal of the value scale in relation to Christianity which, at least in the realm of ideas, had managed to dominate the subject matter for a millennium and a half before.Footnote 56
7.1.2.1.2 Roots of Two Basic Tenets of Economics: Trickle-Down Economics, and the Iron Law of the Wages
Let us illustrate the foregoing by reference to two of the most central ideals of the ideas of economic liberalism (which, incidentally, have, to a large extent, been resurrected in contemporary economic neoliberalism), notably the doctrine of trickle-down economics, in addition to the Iron Law of the Wages, where the emphasis will lie on how these doctrinal systems have been able to rationalize the pursuit of wealth, ergo the pursuit of profit (of the ruling classes within societies), into the most noble method of soci(et)al organization (to the proportions that it has assumed to this day, with this approach becoming the Leitmotif of business).
The works of economic-liberal authors generally show great sympathy for entrepreneurs, with Smith even calling their individual pursuit of wealth one of the most important forces for social progress. In particular, it is because someone who undertakes something wants to do better (ergo: richer) for himself that that person will do his utmost best to market quality products or services.Footnote 57
Although Smith did not himself promulgate the doctrine of trickle-down economics in such detail, his approach already included the idea, prevalent within contemporary global societies, that wealth accumulation by doing business is synonymous with socially valuable action.
A step further in this line of reasoning, it came to be said that society—ultimately through its systems of public organization—has every interest in facilitating and encouraging entrepreneurship as much as possible, which in present-day neoliberal societies has become the Leitmotif of practically all governmental action.
Soon the idea even started to take hold that (just about) all societal progress is due to the class of entrepreneurs, which justifies that these entrepreneurs should be bearing the fruit of their entrepreneurial projects the most, and that only a small part thereof may go to the rest of society.
The step in reasoning to arrive at the latter approach was provided through the rationalization of employing other people in enterprise projects (about which we have learned, in the previous sections, that from the fifteenth–sixteenth century onward, these had become an increasingly important method of employment; cf. Sect. 7.1.1.2.5).
It is hereby argued that, through entrepreneurial projects, numerous other people find employment in exchange for appropriate remuneration. It was soon also considered entirely normal that the bulk of the profits generated by such entrepreneurial projects accrue to the entrepreneurial classes themselves (in various legal capacities, ranging from capital providers/shareholders to those of directors and managers), while those who are ‘merely’ employed in such enterprises should be content with a—low—fixed remuneration.
Incidentally, it is to this logic that the trickle-down economics theory owes its name, implying that the bulk of the entrepreneurial profits should accrue to the entrepreneurs themselves, while a small fraction of the added value thus generated, in the form of wages, trickle down to the class of employed people and, through mechanisms of taxation and the levying of social security contributions, to the rest of society as well.
However, the tragedy of this doctrinal system lies primarily in the far-reaching degree of rationalization of the entrepreneurs’ pursuit of profit in accordance with this theorization, as a result of which, in order to keep their profits as high as possible, it was considered normal—not to say: elevated to an appropriate, basic economic principle—that the wages paid to those employed were to be kept as low as possible.
Here, the ethical views from earlier, historical periods, in the context of which models of justice (cf. with Aristotle), living together in friendship (cf. with Plato), or love for one’s neighbor (cf. in Christianity) had been advocated, were resolutely abandoned in favor of a (supposedly) more rational approach that began to look at establishing the socio-economic order purely on the basis of numbers and figures.
In this, it was quickly assumed that, in order to be sufficiently profitable and competitive, enterprises had to be purely concerned with their numbers and profit margins, averse to any consideration of justice or equity.Footnote 58 For this reason, it can rightly be said that the ideology of economic liberalism resulted into a sacrifice of all other (societal) values to the principle of the pursuit of profit (of the entrepreneurial class),Footnote 59 which thus gained the status of the most central value of capitalist economies that, in this manner, gradually took shape, partly on the basis of this type of ideology.
It is hardly possible to overestimate the importance of these learning systems. Indeed, in the centuries that followed, their idea would become pre-eminent in the organization of the socioeconomic order, first in several Western countries, but gradually throughout the world, leading to an economic system that came to be known as capitalism (even though contemporary adherents of it rather speak of the free market economy).
Thus, increasingly, an economic policy of allowing and facilitating entrepreneurs anything came into effect, an approach that under economic neoliberal policies from the 1980s onward, if possible, got even more accentuated.
7.1.2.2 Political Conversion
In the wake of the emergence of schools of economics, both in practice and in the realm of ideas, a political conversion of their ideas also started occurring.
Until deep into the second half of the eighteenth century, the design of government operations had still largely remained immune from the impact of ongoing socioeconomic developments.
The prevailing political system of that period was also known as the ‘Ancien Régime’, referring to a model of arrangement of state organization that had historical roots in medieval feudalism, but to which a number of contemporary shades had been conferred, including the increasing importance of central state authority and of the role of heads of state (who, in many European countries, had evolved into absolute monarchs who, at best, had internalized ideas of the Enlightenment that allowed their despotism to proceed somewhat within certain reasonable limits).
These absolute rulers were until deep in the eighteenth century supported in their position by two other leading classes, namely the nobility and the clergy, whereby the so-called third class—i.e., the class of merchants and artisans—did not (yet) saw fit to translate its increasing importance within the socioeconomic order, into a proportionate, political control.Footnote 60
It is precisely the discontent of this emerging third class with its minor role on the political stage that would degenerate, at the end of the eighteenth century into—in some cases, bloody—revolutions that started to occur throughout Europe, the first and most famous of these having been the French Revolution of 1789.
Not coincidentally, the new regimes that came to power in the wake of these revolutions would themselves install political models of organizing society in which the interests of the third class (= those of merchants, bankers, and entrepreneurs) took center stage, because of which, in the course of the nineteenth century, throughout Europe, so-called bourgeois-liberal states took shape.
As a further result, within the legal domain, various forms of new legislation that mainly benefited the interests of this third class of merchants and entrepreneurs (including bankers) were issued.
The latter can be aptly illustrated by the example of France, where soon after the initial revolution of 1789, work was made on the creation of new legislation that jettisoned virtually all traces of the feudal society model in favor of supposedly liberal codifications of legislation, including the famous Code civil of 1804 and the lesser-known Code commercial of 1807.
Limiting ourselves here to a few illustrations (on the ethics of socioeconomic order), it is, for example, very striking what significant importance the Code civil of 1804 attached to the so-called freedom of contract, that thus acquired the status of new, central societal ordering system. This, moreover, came to replace the—in principle lifelong—feudal bond that existed between a feudal lord and his feudal men).
Indeed, the system of feudalism had been based on an enduring (in principle, even lifelong) bond between a feudal lord and his feudal men. This feudal bond had involved, in a comprehensive manner, all socioeconomic relations and, in its original form, underpinned a model of highly localized and largely self-sustaining communities.
The model of society of the new times, on the other hand, came, to an ever-increasing extent, to rely on contracting which, by definition, was temporary in nature and included only well-defined aspects of societal life (such as renting a home, being employed, buying food…).Footnote 61 This in addition implied that, other than serfs, free men had to organize their societal functioning largely themselves, in stead of relying on an enduring, overall bond that linked them to another person, i.e., a feudal lord (and his descendants).
As a further result, living together (in feudal communities) was, increasingly, replaced by a societal model based on individualism, in which, through contracting, each person has to fend for themselves, while at the same time being supposed to act in competition with everyone else.Footnote 62
Less well known is that the commercial law counterpart of the Code civil, specifically the Code commercial, also contained numerous rules that have been as decisive for the organization of civil society in general, and for the representation of the interests of the class of merchants (later: entrepreneurs) in particular. For instance, this Code commercial contained a first beginning of company law legislation of a strongly facilitative nature (e.g., leaving aside earlier obstacles to the smooth use of the company/corporate form, such as, for example, the requirement of prior, royal authorization).Footnote 63
Thus, after the way for the emergence of capitalism had first been paved in practice (as early as the fifteenth century), and then in the realm of ideas (with especially the emergence of the school of economic liberalism in the second half of the eighteenth century), at the dawn of the nineteenth century, in terms of the political organization of societies (including their legal system), a deliberate and even more resolute choice was made for the organization of capitalist societies and economies, a choice that to this very day determines the outlook of the socioeconomic order (and, by extension, the outlook of the world itself).
7.1.3 Implications on How Capitalist Enterprises Are Conducted
7.1.3.1 General
Already in our earlier workFootnote 64 we have noted that, in the real world, the rise and breakthrough of capitalism has been anything but the story of roses that the adherents of certain ideologies (including, currently, especially economic neoliberalism) would have us believe.
Focusing on the theme of this chapter, specifically the way in which enterprises are conducted, we shall attempt to show how the hell of capitalism makes itself felt for the working classes (cf. Sect. 7.1.3.2), but by extension also for the entrepreneurial class itself (cf. Sect. 7.1.3.3), and even for the entire economic system (cf. Sect. 7.1.3.4).Footnote 65
7.1.3.2 Capitalist Hell for the Working Man
7.1.3.2.1 The Doom of Forced Employment for the Majority of Humanity
7.1.3.2.1.1 The Choice Between Exploiting, or Being Exploited
In what precedes, it has already been pointed out that capitalism relies essentially on what might be described as exploitation.Footnote 66 (Cf. especially in Sect. 3.1.2.)
This fact derives from the basic characteristics of the capitalist model itself, whereby the average person who wants to earn a living, generally, has no choice but either to become an entrepreneur himself, or to be employed by an enterprise (or, alternatively, by a government, most of which themselves still exist primarily to enhance capitalism—or in modern terms: the free-market economy—in all its excesses).
The step into entrepreneurship is, obviously, not an obvious one.
Under capitalism, taking such a step requires above all a certain state of mind—in particular, of being sufficiently driven by the pursuit of ever-increasing wealth, in addition to a willingness to sacrifice all other values to it, including a sufficient willingness to exploit one’s fellow human beings and, in many cases, to cause harm to the planet. It has even been argued that the main trait that distinguishes a successful entrepreneur from the rest of the population is psychopathy, rather than possessing unique skills or demonstrating excessive intelligence.Footnote 67
As a result, one could argue that the choice of whether to start and conduct an enterprise comes down to the choice between wanting to exploit or resigning oneself to being exploited.
7.1.3.2.1.2 The Myth of Meritocracy Debunked
7.1.3.2.1.2.1 Nepotism as a Means of Providing Unequal Access to Career Paths and Life Opportunities
Before outlining what is fundamentally wrong with the capitalist methods of organizing an enterprise, we shall first take a closer look at a central tenet of the economic schools that justify these methods. It concerns the myth of meritocracy, within the framework of which it is reserved that successful enterpreneurship, and thereby becoming rich, is mainly the result of personal merit and therefore equally available to all.
For the adherents of the ideologies and related political doctrines that adhere to capitalism, (successful) entrepreneurship is primarily the result of personal merit (and poverty the result of laziness and inertia)—in which it is, in most cases, conveniently overlooked that most of the accumulation of wealth on Earth is acquired through inheritance (with the underlying question of what is then the essential difference between contemporary capitalism and medieval feudalism).
Indeed, the already before mentioned merger of certain elements of Calvinist ideas with the tenets of economic liberalism, has in the context of contemporary, economic neoliberalism culminated in the myth of meritocracy, through which supporters of capitalism seek to offer an alternative explanation for the fact that fortune acquisition is primarily the result of being born into a wealthy family, and of the concomitant (greater) life chances.Footnote 68
Meritocratic doctrine, in contrast, holds that since the bourgeois-liberal societies that have taken shape since the early nineteenth century are based on freedom and equality, everyone within such societies enjoys equal opportunities for development, which implies that whether or not soci(et)al success—often perceived as synonymous with the accumulation of wealth—is achieved, is purely because of one’s own merit. The argument sounds that those who work hard will be successful in life, and thus also earn a lot of money.Footnote 69
Among certain figureheads of economic-neoliberal thinking, the view even prevails that poverty is the result of laziness, ignorance or even a state of character disorder.Footnote 70
This approach finds a far-reaching application in, for example, the Western model of education and helps explain the extreme degree of competition on which this education is based. It also explains why everyone, from childhood, is encouraged to study hard to ‘achieve something’ later in life.Footnote 71
In a more general sense, the myth of meritocracy explains why those who prove unsuccessful (which often translates into poverty) are looked down upon, the explanation being that it must be due to incompetence, laziness, and passivity. Ayn Rand’s publications, in addition to the high degree of acclaim they continue to enjoy in various parts of we world—including not least the United States of America—speak volumes in that regard.Footnote 72
Nevertheless, this manner of thinking is, increasingly, contested, with various research showing that hard studying or working hardly determines societal success, the latter to a much greater extent being determined by one’s origins (within a rich or poor family), ergo by the social class into which one is born, without personal efforts being able to do much to change this.Footnote 73
Focused on entrepreneurship, it turns out that, although the (medieval) guild system has been formally abolished, capitalist societies do not excel in vertical, social mobility, implying that it is much more obvious to start a business for those who already belong to the entrepreneurial class, or another upper class, than for those who belong to a lower social class (as the latter would have to start a new business from scratch).
Specific handicaps experienced by members of the lower, social classes (with regard to starting a business) include, among others: not having sufficient start-up capital of their ownFootnote 74; an insufficient access to appropriate (pre)education (e.g., expensive MBA studies); not having a sufficient social networkFootnote 75; not being able to rely on role models within one’s family or circle of friends; inequality of opportunities from early childhood, that prevents access to certain methods of self-development,Footnote 76 …, all factors that cause members of the lower social classes, even after obtaining a university or other higher degree, to hit a glass ceiling very quickly in comparison to members of higher social classes.
The meritocratic view of life, as adopted mainly by members of the established upper classes, has itself already been refuted in our books ‘De onvrije markt’ and ‘The Unfree Market and the Law’, to which we therefore refer further.Footnote 77
For those who prefer this truth from another source, reference can be made to the work ‘De Onmisbaren’ (to be translated as ‘The Indispensables’) by Ron Meyer, who has written about it as follows:Footnote 78
‘Das war einmal,’ many of my academic friends think. That was in the past, they say. They believe passionately in the fable of meritocracy: everyone has equal opportunities and those who work hard enough can climb up the so-called social ladder. Morking is a choice, so is touching the clouds. From my 8th grade class, only one person went to VWO. In wealthy neighborhoods, for some schools, that was true for a third to sometimes almost half the class. Not because children in more expensive neighborhoods are born with more intelligence, no, because where you grow up is still decisive for the future you face. (…) Opportunities in life are much less a matter of merit, of individual achievement, than of economic, social, and societal conditions. Of your parents. And of political choices. Worsening social security, raising rents, abolishing school swimming, or introducing a deductible comes – indirectly – on the plate of the children growing up in the poorest neighborhoods. In dozens of neighborhoods, children are disadvantaged even before they are born. (…) Education alone is not enough. Every time the studied class says that education is the solution to everything, it is also saying that current problems are entirely and solely your own fault. Inequality is not a systemic failure, but a consequence of your failure. And so, you don’t deserve better.
That’s what meritocracy does: it gives people a moral justification for not having to look at the causes of inequality.—(Own free translation.)
In the same regard, reference can also be made, for example, to an opinion piece by political scientist (and senior advisor to the Netherlands Council for Public Health and Society) Tim ’S Jongers, with as title ‘Wie hard werkt komt er niet’.Footnote 79 In it, ’S Jongers articulates the issue, aptly, as follows:
The reason I have so much trouble with the metaphor of the social ladder – the climb to the sky, to pick the stars of success – is my own starting position. Because if the ground on which that social ladder stands is quicksand, you can climb it as hard as you want, you don’t rise.
Poverty, a broken family situation, an inadequate network, no fair chance at a healthy life, and I could go on and on. My life began with a 10-0 disadvantage. You then have to deal with a complex inequality from which there is no easy escape.
And those who like it more literary can turn, for example, to French author Édouard Louis (whose name used to be Eddy Bellegueule), who has explored this theme, in an autobiographical manner, throughout his oeuvre, or, closer to home, to Flemish author Dimitri Verhulst.
7.1.3.2.1.2.2 Nepo Babies as a Modern-Day Illustration
While since our own book of 2015, until recently, little debate on (also) this characteristic of neoliberal societies seemed possible, this seems to have changed in very recent times. In particular, at the end of 2022, the dishonesty of nepotism occurring especially in the professional context of global societies began to dominate more and more the social media, leading to a certain interest from the specialized press in December 2022 under the form of pertinent opinion pieces.
The attention on social media focused on the children of celebrities, so-called ‘nepo babies’, who because of their descent are given far more life opportunities than children belonging to families of the low classes. This exposed the deeper, underlying problem of nepotism.
After various expressions of dissatisfaction with the phenomenon on social media, the debate was then broached via a contribution that appeared in the online magazine ‘Vulture’, under the telling title: ‘How a Nepo Baby Is Born. Hollywood has always loved the children of famous people. In 2022, the internet reduced them to two little words.’Footnote 80
This contribution in Vulture started with the following introductionFootnote 81:
Hollywood was run on an invisible network of family ties — and everybody was in on it! Everyone is someone’s kid, but it was as if everybody were somebody’s kid. (…) Aghast, content creators got to work. An unwieldy phrase — “the child of a celebrity” — was reduced to a catchy buzzword: nepo baby. TikTokers produced multipart series about nepo babies who resembled their famous parents, exposés on people you didn’t know were nepo babies (everyone knew), and PSAs urging celebrity parents to roast their nepo babies “to keep them humble.”
The contribution then turns to numerous examples that clearly demonstrate that nepotism has traditionally been rife in the entertainment industry, with numerous examples of film and TV stars, photographic models, among many others, who all owe(d) their successful careers primarily to the network or professional activities within the industry of their parents or other family members, and this since generations already.Footnote 82
By way of response to this contribution, the topic subsequently enjoyed considerable interest in the press, including from writers of opinion pieces.
One such opinion was expressed by Scottie Andrew of CNN who, in an opinion piece of the same date (namely December 22, 2022), defined the problem as follows: “One of the surest roads to success in showbiz is to be the child of an already famous and successful person.” Andrew thereby gave the following definition of the term ‘nepo baby’:
“Nepo baby” refers to the kid of successful adults who’s benefited from nepotism in industries like entertainment or adjacent fields (fashion and media are two of the other big ones). Unlike bootstrappers and naturally talented “nobodies,” nepo babies start off with an advantage – their parents’ connections – although many of them later claim their parentage is a burden when it comes to carving out their own names.Footnote 83
Citing a quote from Nate Jones, Andrew then aptly summed up the issue of nepo babies as follows: “A nepo baby is physical proof that meritocracy is a lie.”Footnote 84
In an opinion piece of December 22, 2022, Australian writer Rebecca Shaw tried to broaden the debate by referring to the results of more scientific research on the matter. Shaw pointed out that from such research regarding the United Kingdom, the results of which were made public in the second half of December 2022, it had appeared that there had been a huge decline in the number of artists (i.e., actors, musicians and writers) who stem from a working-class background. According to Shaw, still about 16% of arts workers who were born in the 1950s had a working-class background (which already implied a low figure), but this percentage had fallen to a mere 7.9% in December 2022. In contrast, it also appeared from this research that people who grew up in professional families had been four times more likely to end up doing such creative work.Footnote 85
Among the most striking forms of modern-day nepotism, Shaw mentions that the children from richer families enjoy much more life opportunities, have access to more connections, and have and more doors opened when pursuing a career. For Shaw, these elements are however not restricted to the very rich or famous but apply to all levels of societies where parents—or other relatives—have a good job in a specialized sector and are as a result able to provide their children better access to such a professional sector than people belonging to the lower classes.Footnote 86 For Shaw, the resulting huge differences in access to professional career paths and life opportunities for those belonging to the lower classes goes far too unacknowledged, the result being that there are too many talented people, “with wonderful creative brains and ideas”, that are never heard of because they are simply too busy surviving in neoliberal societies that deprive them from life chances. The conclusion for Shaw is clear (and similar to the one we had already reached in our book ‘De onvrije markt’ of 2015): “Obsessing over nepo babies while not addressing the structural and generational inequalities that produce poverty and privilege is just a good-looking (and fun!) distraction from the real problem”: having access to more and more professional sectors in which nepotism thrives “is becoming less and less viable for a large proportion of society”.Footnote 87
By way of rebuttal, some of the privileged descendants of previous generations of celebrities responded that the criticism was unjustified and that they owe their success solely or mainly to their own hard work, amounting to a variant of the meritocracy attitude.Footnote 88
However, it is clear that the phenomenon is far too widespread to be the result of mere coincidence, making it clear that nepotism, therefore birth in a wealthy or successful family, is the main condition for professional success within the industry, and that things like talent and hard work are mainly side issues: this implies that the latter elements, while they should be present to some degree, are by no means decisive for a successful career. As a result, those who exhibit these characteristics without descending from such a wealthy or successful family have far fewer chances for a glittering career than the nepo babies themselves, even in cases where the latter appear to be less talented or industrious.
And unfortunately, as we ourselves already wrote in 2015, the issue is by no means limited to the entertainment sector, but is present in almost all sectors of soci(et)al life, a phenomenon that we ourselves, since the beginning of our careers, have experienced almost daily within the Belgian legal and academic professional sectors as well.Footnote 89
7.1.3.2.1.3 The Maintenance of a Class Society
The aforementioned characteristics of capitalism—in theory, on the basis of a theoretical equality of opportunity; in practice, on the basis of a model of class inequality and nepotism—force people to choose between doing business themselves, or being employed by someone else’s enterprise, implying that for the bulk of the population of capitalist countries or societies, there are few alternatives, socioeconomically speaking, other than the so-called renting out of their labor for a fixed fee.
As explained earlier, this peculiarity of capitalism determines the fundamental dichotomy that characterizes capitalist societies. (Cf. Sect. 2.3.1)
In systems of unbridled capitalism,Footnote 90—particularly, (1) the capitalist system that prevailed in the Western world until the end of World War II, (2) the capitalist system that, since then, has remained in place in large parts of the rest of the world, especially in developing countries, and (3) the capitalist system that in parts of the Western world is restored because of the implementation of economic neoliberalism, often referred to as the free market economy–, this dichotomy occurred most sharply.Footnote 91
The response from the political (neo)liberal establishment that even people who hire out their labor to enterprises remain in control of their own destiny through the voluntary association model, has moreover proven to be a bolt from the blue, especially because of the unequal contracting position between the enterprises that employ people, and people looking for suitable employment.
Accordingly, the model of welfare states established in various Western countries after World War II (cf. Sect. 1.3) attempted to remedy this in other ways, for example, through labor protection legislation, in addition to replacement income systems.
Although such measures brought great comfort by ensuring that, throughout the Western world, a large part of the population was brought to a level of prosperity that at least helped ensure a dignified existence—abstracting from the fact that this has required the working classes to be meekly enlisted in the capitalist exploitation model itself, as well as the fact that the relative prosperity enjoyed by a large part of the population of the Western world has come at the expense of blatant exploitation of the developing worldFootnote 92–, from the 1980s onwards, the welfare state model became strongly contested by the adherents of economic neoliberalism, often under a double argument, notably that the established social security protection systems and public services are too costly (read: that they constitute too heavy a burden on corporate profits), and that such systems reward laziness and punish industriousness.Footnote 93
This helps explain why neoliberal governments, beginning in the 1980s, worldwide, started to push for the dismantling of several of the systems that made welfare states possible (cf. already in Sect. 1.5), an evolution that is most advanced in countries such as the United States of America and the United Kingdom, as a result of which, in those countries, social safety nets have already to a large extent been removed and, consequently, capitalist employment mechanisms themselves, have once again become dominant in shaping the socioeconomic order (with as measurable effects: an ever-increasing polarization between rich and poor, accompanied by a disappearance of the middle classes).
7.1.3.2.1.4 Conclusions
It is clear from the foregoing that the capitalist principles and working methods, create a fundamental dichotomy between rich and poor and that this dichotomy, largely, overlaps with the class division between entrepreneurs and the working layers of the population.
Although the welfare state model has (temporarily) remedied this in the Western world, it appears that, as economic neoliberalism succeeds in its aim to dismantle welfare states, the aforementioned dichotomies within capitalist societies are again rising increasingly to the fore.
In today’s neoliberal societies, only the wealthy to very wealthy classes still escape the acrimonious realities of capitalism, on the understanding that the doctrines of economic neoliberalism have simultaneously—and paradoxicallyFootnote 94—succeeded in convincing much of the rest of the population that the perpetual maintenance of such a (neo)liberal socioeconomic system is a necessary condition for maintaining free and democratic societies.
Furthermore, it is even so that the average Western man, at least under validation of capitalism itself, can still count himself among the more fortunate on Earth, to the extent that in numerous other parts of the world, a large part of humanity leads a life of (extreme) poverty and often, for a pittance, has to work much harder than the average man in the West, in order for the rich and extremely rich of the planet to become ever richer.Footnote 95
In summary, for the labor-supplying man, capitalism implies a condemnation to lifelong labor, not to become happier himself, nor even to contribute to a better society, but mainly to help ensure that the wealth of the ruling classes of entrepreneurs and bankers continues to grow.
In all this, under the continuing impetus of economic neoliberalism, capitalism becomes more and more unbridled, because of which the present living world has become one in which Plato’s previously quoted prediction that only people with money are still valued, admired and included in government, and that those who are not rich no longer count (cf. Sect. 7.1.1.2.2), has become abundantly true.
7.1.3.2.2 Affirmation in the Works of Fromm, Marcuse, and Kruithof
7.1.3.2.2.1 General
During the twentieth century, a multitude of authors have aptly identified the problems of the capitalist employment model (and the dichotomy within capitalist society into a class of entrepreneurs—including bankers—and the class of employed that has been created by this employment model, in addition to various other working methods of capitalism).
We shall situate three of these, notably: (1) Erich Fromm; (2) Herbert Marcuse, and, closer to home, (3) Jaap Kruithof.Footnote 96
7.1.3.2.2.2 Erich Fromm
One of Erich Fromm’s central themes is that, in general terms, exposure to capitalism has led to an increasing degree of dehumanization of the labor-supplying strata of the population of capitalist countries.
Fromm has situated his approach against the backdrop of the caesura that resulted from the new scale of values that became widespread in the Western world from the eighteenth century (= the period of rise of industrial capitalism). According to Fromm, in the medieval world of ideas, wealth was not perceived as an end, but only as a means. The end was life itself, or, as the Catholic Church of the time maintained, the salvation of man’s soul. Economic activity, while necessary, was perceived as part of external life activities—opposed to the inner search for God—that only had meaning and value insofar as they promoted life and its goals (especially human salvation).Footnote 97 The great revolution brought about by the thinking of philosophers such as Adam Smith was that the pursuit and achievement of economic success, especially in the form of profit and material wealth, became objectives in themselves, and even more so, became the main objectives within the (capitalist) societies that got shaped based on these ideas. With the rise of capitalism, the new life objective became the pursuit of material wealth, rather than the pursuit for salvation of one’s soul.
According to Fromm, within capital societies, (modal) man was also given a totally new task, namely, only to contribute to the growth of the economic system. Man was no longer supposed to strive for his own salvation or happiness, but to put his life at the service of the economic system. Hence, man was reduced to a cog in the service of the capitalist machinery.Footnote 98
The (at the time new) hierarchy brought along by capitalist societies was one in which capital (and its objectives) was placed above labor (i.e., human beings)—hence the name ‘capitalism’–, a hierarchy scale which has since then, worldwide, come to define interpersonal relations between people, and in which two scales of values constantly clash, particularly that of the world of fortune versus that of life (and its intrinsic value) itself. As a further principle of capitalism, all unpleasant work is thereby imposed on the lower classes of society, whose ranks have to be replenished again and again (if necessary, by importing cheap labor from poorer countries, or by shifting production to such poorer countries).Footnote 99
While acknowledging that capitalism has contributed to a certain degree of material progress for a part of humanity (but not for all people in the world), Fromm holds that this has come at the cost of a fundamental dehumanization of the (working) human being who, reduced to being a slave to the self-conceived capitalist machinery, lives only for impersonal and extra-personal purposes and, in the process, has become filled with feelings of nullity and meaninglessness. The term labor market alone, according to Fromm, reflects the entire tragedy of the fate that has befallen humanity since capitalism started to break through: just as an enterprise buys raw materials, it buys other people’s labor power in order to employ it in its economic production processes (= labor as commodity). This is expressed in economic science itself through the designation of labor, ergo of most of humanity, as a so-called factor of production.Footnote 100
The capitalist ideologies—including, initially, economic liberalism and, currently, economic neoliberalism—have, moreover, succeeded in convincing almost every human being who participates in these processes—i.e., as good as anyone—that this is only normal and that the (average) human being exists only to provide labor, which has been accompanied by a secularization (deliberately orchestrated by liberals,Footnote 101 and later by communists and socialists) of capitalist societies. Virtually all interaction between people has hereby been reduced—not to say degraded—to purely mechanically taking place economic relations (in exchange for money), the result of which can only be a large degree of alienation, in a society where everything can be bought and sold, including other people’s, respectively one’s own labor. The result of this dehumanization has been that man is reduced to a hunted and bewildered being.Footnote 102
Meanwhile, contemporary Western societies are increasingly confronted with various negative consequences of modern-day capitalism, as evidenced by the growing number of depressions, burn-outs, and similar illnesses. This helps explain why, according to recent research the results of which were published in 2022, the use of antidepressants and similar drugs in Belgium has risen by a quarter over the past decade, with the growing numbers of young users resorting to such medication being of particular concern.Footnote 103 Moreover, in terms of antidepressant use, Belgium has long ranked among the top European countries. According to this same study, in 2020, there were no less than 1.22 million people taking antidepressants in Belgium, an increase of 7% compared to 10 years before. The same decade also saw an increase in use per individual user, with the number of daily doses increasing by a quarter over this period.Footnote 104
More generally, mental disorders are among the major public health challenges in the World Health Organization’s (WHO) European region and, measured over the course of a lifetime, affect about 25% of the population. In this regard, some studies have noted an upward trend in the use of antidepressants, with such antidepressant use found to be particularly alarming among women and the elderly.Footnote 105
7.1.3.2.2.3 Herbert Marcuse
Next to Erich Fromm, a similar line of thought can be discerned in the works of Herbert Marcuse, who vaunts the real negation of life brought along by capitalism, in which the extreme risk of starvation on the part of the dispossessed has become the main driver of their socioeconomic actions.Footnote 106
Herbert Marcuse has, furthermore, pointed to the faxt that, under validation of capitalism, the average human being in the Western world has gradually evolved into a one-dimensionalFootnote 107 being who exists only in the socioeconomic dimension, and in which everything else that makes life interesting and pleasant has been systematically pushed into oblivion.
Building on this line of thought, we ourselves have pointed out in our earlier work that, after four to five decades of neoliberal policies, such a ‘one-dimensional human being’ still performs only the following soci(et)al functions:Footnote 108
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The function of working from morning to night, without having much time to do anything other than work, and doing so until (spurred on by neoliberal pension reforms) as late as possible in a person’s life.Footnote 109
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The function of working for one central external purpose, particularly for making the shareholders of the company/corporation for which one works as rich as possible (and, in the case of people in public service, for making the entrepreneurial sector in general as rich as possible).
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The function of consuming as much as possible, whereby the average person’s income, increasingly, should be spent as exclusively as possible to pay for the goods and services produced by the capitalist economic model of production for production’s sake (and consumption for consumption’s sake), despite the fact that many of these goods and services are intrinsically useless and, in many cases, harmful to humans and the environment.
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The function of borrower (or, credit taker), which helps bring about: (1) that people consume more than their income allows; (2) that the imprisonment of one’s duty to labor is further reinforced (since people are required to spend a portion of their income on repaying loans, plus interest, which makes them even more dependent on having a job), and (3) that one’s income is certainly not spent on anything other than expenditures that make the rich of the planet ever richer (to the detriment of the poor).Footnote 110
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The function of perpetual taxpayer, to the extent that states obtain their income primarily by taxing labor-producing people.
7.1.3.2.2.4 Jaap Kruithof
Domestically, the moral philosopher Jaap Kruithof, including in his well-known work ‘Arbeid en lust’ (in English, ‘Labor and lust’) devoted a similar, historical analysis to labor and labor relations.
The development of Jaap Kruithof’s own vision on this subject must be situated in the period when the welfare states in the Western world were still playing a prominent role. Although Kruithof himself was already warning of the disastrous consequences that the implementation of economic neoliberalism would bring about, in the 1980s, the deterioration of the welfare state model, especially then in Europe, was still only in preparation. This helps explaining why Kruithof focused his attention primarily on the class conflicts that characterized the North-South relationship during that period.
According to Jacques de Visscher who has devoted a remarkable study to the ideological and moral agitation of Jaap Kruithof, Kruithof mainly denounced the fact that, in the period when economic neoliberalism began its advance, Western labor movements and left-wing political parties, that had traditionally mainly been concerned with the demands and rights of the proletariat, had sharply narrowed their politics. Instead of ‘communists’ or ‘socialists’, they became ‘social democrats’, pursuing class reconciliation rather than class struggle.Footnote 111 Added to this was the fact that the Western working class owed their increased standard of living and prosperity, made possible by the welfare state model, mainly to a relentless economic expansion that took place at the expense of the Third World. Thus, in the West, the welfare state model relied on a calculated solidarity between the bourgeoisie and the working class, which was however extremely detrimental for the interests of the developing countries. For Kruithof, this was completely at odds with the ethical compassion of socialism and, above all, represented a caesura with the international solidarity that had previously characterized socialism (and communism). In this way, an alliance was established between the Western bourgeoisie and the Western working class (who together built the model of the welfare state), on the one hand, and the feudal, bourgeois forces of the South, on the other, against the great masses of poor and oppressed of the Third World (i.e., approximately 85% of the global population).Footnote 112
To this must be added that this relative participation in the growth of economic welfare by the low classes in the West has since, under the impetus of neoliberal economics, increasingly, come to an end from the 1980s onwards, while the misery in which many developing countries find themselves remained largely the same. In this process, starting in the 1980s, the social democratic parties of European countries themselves collaborated heavily in the implementation of the E.U.’s neoliberal agenda, often directly against the interests of their electoral constituencies.
All this shows that, as capitalism is being made ‘unbridled’ again under the impetus of economic neoliberalism,Footnote 113 its basic characteristic of being a system of exploitation of the working classes is reasserting itself more and more sharply.
7.1.3.2.3 Empirical Data
7.1.3.2.3.1 Gallup
All the foregoing is, unfortunately, more than mere theory (from the mouths of—largely ignored—humane scientists) but finds poignant confirmation in the results of surveys systematically conducted since the beginning of the millennium by, amongst others, the American, professional survey company Gallup.
Indeed, since 2000, Gallup has systematically surveyed millions of workers from nearly 200 countries around the world about their level of satisfaction with their jobs.Footnote 114
In 2013, Forbes magazine reported on these polls as follows: “Work is more often a source of frustration than satisfaction for nearly 90 percent of the world’s workers.”Footnote 115
In 2017, worldwide, the number of workers described by Gallup as “emotionally disconnected from their workplace” was 85%, slightly better than 4 years prior when the number was 87%. This percentage was also slightly better in some countries during that period—such as the United States of America, where ‘only’ 70% of people had stated they dislike their jobs—and worse in others.Footnote 116
However, with respect to 2017, a whopping 94% of workers in China and Japan were uncommitted. The highest percentages of respondents indicating hatred for their jobs were in the Middle East and North Africa.Footnote 117
Gallup moreover found that, in 2017, globally, only 15% of workers felt engaged in their jobs. According to a further explanation given by Forbes, engaged means having a sense of passion for and “deep connection” to one’s work, in other words spending one’s working days through driving innovation and advancing the employing companies/corporations (and therefore, at least if we were to believe neoliberal rhetoric, society as a whole). Forbes’ analyses described 62% of employees as “not engaged,” meaning that they are unhappy, but not necessarily drastically so. These are workers who are more likely to sleepwalk through their days and want to put little energy into their work. And 23% were what Gallup calls “actively uninvolved,” meaning that the employees involved really hate their jobs. Such workers behave aloofly and may even undermine their colleagues.Footnote 118
7.1.3.2.3.2 The (Radical) Vision of Tessa Schlesinger
Tessa Schlesinger has commented on the aforementioned figures by arguing that, since the numbers of people who, worldwide, are dissatisfied with their jobs are so high, it is no longer valid to pretend that this results from a problem of attitude, laziness, stupidity, or a lack of appropriate skills on the part of the workers (which is one of the starting premises on which economic-neoliberal policies rest).Footnote 119
This implies that the problem is more likely to be on the side of the class of business owners, and more precisely stems from such things as: (1) their attitude; (2) their lack of ethics; (3) their harassment of their employees; (4) underpayment; (5) a lack of fairness in granting rest (including sick leave, vacation leave, emergency leave), and (6) their basic inhumanity to their employees.Footnote 120
In support of her (far-reaching) views, Schlesinger cites research showing that skills and intelligence are rarely the decisive criteria for successful entrepreneurship, since these traits are also present among members of the working classes, but that the one trait that is dominant among business owners (CEOs), and not dominant among the working class, is psychopathy. According to Schlesinger, as many as 20% of business owners and CEOs are psychopaths and, although not measured, much of the rest among them are close to psychopathy.Footnote 121
This implies, still according to Schlesinger, that CEOs and business owners are not more intelligent than others, but that, in their personal pursuit of success and wealth, they are more ruthless, they are willing to bend the rules exclusively in their favor, and that these are the main reasons why they make a lot of money.Footnote 122 And that, according to Schlesinger, is why 75% to 95% of working people hate their jobs, and, by extension, what is wrong with capitalism itself.Footnote 123
Schlesinger continues her argument by explaining the ins and outs of the typical, American company,Footnote 124 in which an executive sales manager himself wants to take home USD 250,000 a year. To achieve that goal, such a manager provides his staff with a minimum wage plus commission (related to realized sales). In the process, the manager will systematically increase the targets of his staff so that only he and his company benefit from the increased sales, while the rest of the sales staff responsible for these increased sales will be treated “like shit” (and will, as a general rule, be deprived of a rightful share in the increased margins).Footnote 125
The typical office politics prevalent in such companies, according to the same author, is a further part of the capitalist nightmare. According to Schlesinger, the latter is moreover determined, in large measure, by women who proclaim scandal and gossip about others, in doing so often undermine those they consider competitors, and generally do as they did back in high school.Footnote 126
Another aspect that characterizes this model of conducting an enterprise relies on what this author labels “theft of work.” Indeed, it is common within (capitalist) enterprises that, pursuant to clauses in employment contracts and/or personnel regulations, creative personnel must hand over the results of their work to the enterprise. (Cf. already in Sect. 2.6.) As a result, such creative employees rarely, if ever, receive the financial fruits of the product they have designed or invented. On the contrary, these accrue to the employing firm, based on an underlying rationale that the innovator receives a fixed wage for his skills, and that this justifies that everything they produce belongs to the firm. According to Schlesinger, the major problem with this is that the innovator, often a member of a lower, social class, usually does not have the resources of their own to invest in their ideas, forcing them to work for someone else. According to the author, a fair solution could be to apply distribution systems in equal halves (specifically, each 50% of the financial fruits). However, within the capitalist economy, it is the enterprises (and entrepreneurs) that hold all the power and are not interested in fair arrangements, but merely in being as profitable (for the benefit of the shareholders) as possible.Footnote 127
7.1.3.2.3.3 Contemporary Expressions of Discontent
The foregoing may help explain why in the span of the COVID-19 pandemic, numerous people in the United States of America resigned from their jobs. According to Time, as many as 3.9 million Americans resigned in June 2021. In July 2021, there were another 3.9 million, and in August 2021, another 4.3 million. The numbers were even more remarkable for young workers: in September 2021, nearly a quarter of people aged 20 to 34 were not considered part of the U.S. labor force, i.e., some 14 million Americans who, in other words, were neither working nor looking for work.Footnote 128
A similar example, with an even more extreme character, concerns the phenomenon presumed to have started in Japan—and, afterwards having spread to various other countries as well—known as ‘hikikomori’, in the context of which (mostly) young people who have completely had it with the ruthless exploitation that characterizes the post-World War II Japanese capitalist machinery simply refuse to leave their rooms, in order to completely withdraw from heartless society.Footnote 129
Other illustrations of the fact that the younger generations of certain Western countries in particular are increasingly disliking the exploitative model of capitalism concern practices such as “quiet quitting” (i.e., the practice whereby a worker does the minimum of what is expected of them, anticipating leaving the employing enterprise without having suffered as little damage as possible as a result of capitalist exploitative practices in the meantime)Footnote 130; the pursuit of getting rich as quickly as possible through (risky) investments, in order to retire as early in life as possible, etc.
On September 6, 2022, Gallup announced the results of a prior survey of the American population on this issue. According to the results of this survey, quiet quitters constituted at least 50% of the U.S. workforce—and probably even more. Gallup noted a decline in engagement and employer satisfaction among Gen Z and younger millennials—ergo the population group under the age of 35. According to Gallup, this implied a significant change from the years before the COVID-19 pandemic. Since the pandemic, younger workers have felt much less engaged and perceived to be taking fewer opportunities for advancement, especially from their manager.Footnote 131
According to GallupFootnote 132:
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The percentage of engaged workers under the age of 35 decreased by six percentage points between 2019 and 2022. During the same period, the percentage of actively unengaged workers increased by six points.
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Younger employees were down 10 or more points in the percentage who strongly agree that someone cares about them, someone encourages their development, and they have opportunities to learn and grow.
Empirical research additionally shows that these negative effects of capitalist employment policies, increasingly, radiate on children. For example, from the already mentioned UNICEF report dated May 23, 2022, and titled ‘Innocenti Report Card 16. Worlds of Influence. Understanding What Shapes Child Well-being in Rich Countries’,Footnote 133 it appears that capitalist employment policies directly impact child well-being in the (41 rich OECD and EU) countries examined in that report.Footnote 134 Overall, the report shows that many of the richest countries are failing to align their socioeconomic conditions with consistently high child well-being outcomes. There even appear to be disturbing signs of decline in aspects such as immunization, learning and mental health.Footnote 135
7.1.3.3 Capitalist Hell for the Entrepreneur and Banker
7.1.3.3.1 General
Although, as aforementioned in the previous Sect. 7.1.3.2, various literature has pointed out the high degree of dehumanization to which capitalism has doomed members of the working classes, the high degree of dehumanization to which members of the entrepreneurial and banking classes themselves have also been doomed generally remains underexposed.
Capitalist entrepreneurs should more precisely be prepared to adopt all capitalist working methods as much as possible, even more so than their average fellow human beings, to the extent that the success as an entrepreneur is dependent on a sufficiently high degree of willingness to do so.
This implies that entrepreneurs should be willing to demonstrate a far-reaching degree of inhumanity, both to the Earth, and to their (exploited) fellow human beings.
In addition, entrepreneurs should be willing to demonstrate, at any cost, the most intense competitive behavior possible.
Both aspects of how capitalism requires members of the entrepreneurial classes to, in a proverbial sense, sell their souls to the devil, will be addressed in the Sects. 7.1.3.3.2 and 7.1.3.3.3 below.
7.1.3.3.2 Willingness to Exploit
As already mentioned before, participating in capitalism requires the members of the ruling, socioeconomic classes, first of all, to harden themselves into beings acting as selfishly and greedily as possible, who must unambiguously devote themselves to one objective, namely, to generate as much profit as possible, as a rule at the sacrifice of all other values that can give meaning to a human life.
This requires from the members of the entrepreneurial classes a far-reaching willingness to sacrifice the following: (1) the financial, health and mental interests of their employed fellow human beings, as well as (2) the interests of the Earth (with the observation that the bulk of the environmental problems facing the Earth have been caused by (large) enterprises).
With this, within capitalist societies, the relationship between people has become utterly utilitarian, making capitalist society the furthest thing imaginable from the society models envisioned, for example, by Plato (based on mutual friendship), or by Jesus Christ (based on love for one’s neighbor).
7.1.3.3.3 Willingness to Compete
7.1.3.3.3.1 General
Second, within capitalist societies, members of the ruling classes should be prepared to demonstrate extremely competitive behavior, both within the enterprises they conduct (cf. Sect. 7.1.3.3.3.2), and in relation to another’s enterprise(s) (cf. Sect. 7.1.3.3.3.3).
7.1.3.3.3.2 Within Enterprises
Within a given enterprise, the competitive struggle assumed by capitalism manifests itself in several ways.
For example, when we consider family enterprises, it is striking how numerous wealthy entrepreneurial families are plagued by all manner of family squabbles and feuds, many of which are aimed at gaining as much power and control as possible within their enterprise (and, through this, at monopolizing the wealth accumulation that the enterprise makes possible for themselves).
This appears to be even more prevalent as generations of family members succeed one another in such family enterprises.
Indeed, where in some such family businesses there has historically been a founding father—sometimes even a pair of such founding fathers, for example two siblings working together—it is a fact that, in many cases, difficulties begin to emerge strongly as a result of situations of succession,Footnote 136 for example when a second or subsequent generation of descendants of the founding father(s), take over the torch of the business. In some cases, such family disputes assume such extreme proportions that no solution can be found other than to remove several family members from the enterprise (for example, by inducing—or even legally obliging—them to transfer their shareholdings).
However, even in enterprises where (at the level of shareholdership and/or top management), family ties do not (or no longer) play such a central role, climbing to the highest ranks of management and/or shareholdership is often not a bed of roses either. For example, in cases where such a non-family enterprise has a tradition, or the possibility, of filling the highest management positions through a system of internal promotions, the road to the top often passes over corpses (at least in the metaphorical, if not literal, sense of the term).
It is telling in this regard that the legal systems of several capitalist countries have even elaborated appropriate, legal procedures of battle delivery on the control of companies/corporations (such as, e.g., proxy fights and tender offersFootnote 137), in addition to, for small and medium-sized companies, so-called litigation arrangements.
7.1.3.3.3.3 Between Enterprises
Obviously, running a capitalist enterprise requires not only a willingness to be extremely competitive in the bosom of enterprises themselves, but also in the relationship with other enterprises.
Within the (neo)liberal free-market model, there is even an expectation that enterprises engage in fierce competition among themselves, with the goal of maximizing their own market share and, hence, profits.
In many cases, even the survival of enterprises may depend on this, because enterprises that do not behave aggressively enough risk being squeezed out of the market by a market player that is willing to go to extremes in its own unbridled pursuit of profit.
One of the capitalist methods of maximizing profits consists in acquiring the largest possible market share. This method often prevails in case of the production of goods or services that are easily reproducible and/or that can count on a large (potential) buyer audience (with IT as a typical example). It is therefore no coincidence that the players in such markets established the largest enterprises in the world and that competition in these sectors is extremely fierce.
But also the many (seemingly harmless in themselves, or even entertaining to the general public) quarrels between pop stars and royalty, to give just any example, express in their own way the same capitalist principle of eliminating, or otherwise tormenting one’s competition as much as possible in order to maximize one’s own profits.
In this constant struggle between enterprises—which, in the real world, amounts to a struggle between the people who are the stakeholders of these enterprises—to get the largest possible piece of the economic cake, it hardly comes down to improving the well-being of others, for instance by (at least) providing quality goods or services;Footnote 138 on the contrary, the only goal is the pursuit of one’s own profit, which is nevertheless, under the doctrines of economic liberalism and neoliberalism, referred to as the main mechanism that brings soci(et)al welfare and lifts humanity to a higher level of civilization.
In recent times, even people who had opted in the past to develop socioeconomic activities in what used to be considered soft sectors, such as the health care and education sectors, no longer escape the extreme competitive behavior that participation in capitalism requires. One of the main reasons for this is that, under the impetus of economic neoliberalism, these formerly soft sectors have also, increasingly, been subjected to the free market logic, for example through privatization or marketization operations.Footnote 139 As a result, the enterprises (and other entities) operating in such softer sectors of economic life have also themselves become subject to ever more forms of competition.Footnote 140
In the meantime, even public services and/or wholly publicly funded service providers, such as (certain) educational institutions, no longer escape this dance. In the EU, for example, the famous Bologna Declaration on higher and university education, has forced European universities and colleges, increasingly, into a model of mutual competition, with as main purpose to establish the distribution of the operating funds that governments make available to this sector.
7.1.3.4 Conclusion: A Hellish Economic System
Especially for those who by their nature do not want to behave selfishly and greedily, participation in capitalism is not an obvious choice (and this even more so as economic neoliberalism rages on).
Indeed, it should be clear from the foregoing that participating in capitalism requires several traits that are difficult to reconcile with an altruistic disposition, the most prominent being:
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A willingness to subordinate all possible other values to the profit motive of corporate life (in the broad sense of the word), including concern for the Earth itself, with all life forms it harbors, amongst which even other human beings.
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Often, a willingness to knowingly peddle products or services that are intrinsically useless and, potentially, even harmful to one’s fellow human beings and/or the environment.
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A willingness to permanently participate in an economic system characterized by production for the sake of production and consumption for the sake of consumption, again with all the pernicious consequences for the well-being of the Earth and one’s fellow man.
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…
It is probably no coincidence that the question of conscience involved in the willingness to participate in such an economic system has already been exposed in the distant past by prominent (and already cited earlier in this book) philosophers and religious leaders.
Among the many examples, we limit ourselves below to citing how Jesus Christ aptly articulated this issue of conscience in His famous Sermon on the Mount:Footnote 141
No man can serve two masters: for either he will hate the one, and love the other; or else he will hold to the one, and despise the other. Ye cannot serve God and mammon.—(Mt. 6: 24 – KJV)
This then raises the question of how long humanity wishes to cling to this capitalist model of society in which all values must perpetually give way to the short-term monetary interests of a few, while all other societal values are constantly at risk.
As has already been raised in our previous work, the ensuing policy question then becomes what still to do about this, with two main approaches open: (1) Either to do as economic neoliberalism teaches, namely to simply make all of this worse and worse for the sake of the economic processes themselves (an attitude echoed in the well-known saying, “It’s the economy, stupid!”), (2) Or to look for alternatives for the models imposed by capitalism.
It is based on this second approach that a(n) (feeble) attempt was made in the period 1945–1975 to build the model of the welfare state, which is, under the impetus of economic neoliberalism itself, back in decline. (Cf. already the overview in Sect. 1.5.) The extreme consequences of the latter thinking—up to and including the severe crises of recent years, including climate change—have been a major inspiration for our own work since 2014.
Section 7.1.4 below will first briefly recall how past attempts have been made to remedy certain negative outgrowths of capitalism, followed by Sect. 7.1.5 which will indicate how economic neoliberalism has responded to these. Following that, Sect. 7.2 will then elaborate on possible alternatives to the capitalist models for conducting an enterprise.
7.1.4 Limited Scope of Twentieth Century Correction Methods
It has already been explained a couple of times above: The realization that unbridled capitalism has degenerated into a system that is pernicious for (1) both humanity, (2) and the well-being of the Earth itself, has been strongly demonstrated earlier in history.
Awareness of the pernicious impact of capitalism on especially the working classes was evident in the post-World War II period, with the result that, as already explained in Chap. 1, at least in the West, work was undertaken in that period to implement methods of correction to unbridled capitalism that together provided the ingredients for the welfare state model.
It is very striking that said methods of correction have focused primarily on one of the two, most negative aspects of capitalism, specifically on correcting the far-reaching exploitation of the working classes that results from the mechanisms of capitalism, at least in the West. Attention to the environment—or, put another way, to the damage that capitalism, on an ongoing basis, inflicts on the Earth and on other living beings—has taken much longer, essentially until the 1970s (albeit before that, there have been those who have warned of the highly polluting effects of the capitalist, economic growth model). In addition, the corrective model of the welfare state was limited to the Western world, with the relative prosperity achieved there for a large part of the population being accomplished at the expense of the Southern half of the planet (particularly the so-called developing countries).
As already described above (cf. Sect. 1.3), the welfare state model rests on two main pillars that help to counteract, at least to some extent, the exploitation of the working classes by the class of entrepreneurs and bankers, namely: (1) the establishment of public services, and (2) the establishment of a social security system.
Public service refers to certain services furnished by the government, based on its own financial resources (generally extracted from the systems of general taxation), which are made free—or at a symbolic fee that does not cover the actual cost of furnishing them—and which are equally accessible to all members of the population.
The philosophy behind this is that the services in question are considered so essential that their organization cannot be left to the (free) market, since in such a case, due to the inherent dichotomy between rich and poor that capitalism creates within societies, too large a part of the population would be denied access to these services. Instead, public services are set up, or at least funded, by the government so that universal access to the services in question can be guaranteed. Typical examples of such public services are, as mentioned earlier, education, (health) care, and public transportation.
Social security systems—generally through the creation of replacement income systems–, aim to provide a safety net for those who are temporarily or permanently unable to earn their own income from labor, generally because of an unfortunate life circumstance, such as, for example, illness, disability, unemployment, or old age. The financing of this is generally borne by the government, either from generic taxation or through special levy systems affecting groups of the population (e.g., categories such as employers, employees, and professional self-employed persons). (Cf. already in Sect. 1.3.)
The underlying philosophy is one of solidarity (enforced through state authority) among the members of a population, so that those who, affected by an unfortunate life circumstance, are no longer able to gain an income from their labor on their own, still come to have the financial means to support themselves—and their families.
In the period after World War II until the 1970s, such systems of public service and social security were established throughout the Western world, because of which the model of the (Western) welfare state took shape. It was said that, as a result, capitalism took on a more humane face because these systems ensured a slightly better distribution of wealth than that which results from the operation of the mechanisms of capitalism—or, in modern-day terms: from free market mechanisms—themselves, and even more so for the lower classes of the population.
Thanks to this welfare state model, the exploitation model of capitalism itself was somewhat contained, at least in the West (but not in the bulk of developing countries).Footnote 142
However, labor against (a fixed) remuneration remained central even within that welfare state model. This implies that even within the welfare state model, the exploitative nature of the working population has remained an essential feature of the socioeconomic order.
Moreover, the interests of the environment received much less attention during this same period—resulting in fewer corrections to capitalism in pursuit of these interests–, partly as a result of which capitalism was able to assert its devastating impact on the Earth (including other life forms) for a long time, virtually uncorrected.
With this, capitalism has essentially always been a socioeconomic model in which the wealthy classes of entrepreneurs have been able to do as they please, regardless of whatever consequences their behaviors had on the environment (be it deforestation, excavation of ores, pollution of rivers, oceans, or soil, dumping of waste products, to even nuclear waste, or killing the climate, …).Footnote 143
A possible further explanation for this is that, since the Earth and other living things cannot themselves stand up for their rights, their interests have been rather marginally defended all along, albeit that a few international NGOs have emerged over the years that worked hard to advocate environmental protection, including organizations such as Greenpeace and the W.W.F. (or, in full, the World Wide Fund for Nature). Nevertheless, it has taken the well-being of the human species itself to be threatened before the issue, especially than in the last decade, started to be taken somewhat seriously and certain governments, including, for example, the EU, were finally found willing to take action, with the open question, however, of whether these efforts will achieve much until there is a global plan of action in which all the countries of the world, if not at least the most polluting ones, will be sufficiently willing to participate.
7.1.5 Assessment in View of the Goals of Economic Neoliberalism
Unfortunately for humanity and the Earth (with all that that implies), four to five additional decades since the 1970s—i.e., the period in history during which pleas for more equitable socioeconomic systems and for better systems of environmental protection strongly emerged among the broader population—have been lost to work for a more equitable socioeconomic for all people and for the creation of an economic system that does pay adequate attention to the livability of the Earth.
These lost four decades obviously correspond to the past—and, unfortunately, still ongoing—era of implementation of the ideology of economic neoliberalism that itself prioritizes opposing goals than the creation of a just living world and the survival of the Earth.Footnote 144
The crucial role of the doctrine of economic neoliberalism in the restoration of pur sang capitalism (which itself, spurred by this doctrine, is usually referred to in contemporary terms as the free market economy) has already been pointed out a few times above.
It should, moreover, come as no surprise that as free market forces go extended under the banner of economic neoliberalism, the profit-seeking of the entrepreneurial sector (and the wealthy classes behind it) itself also returned to the fore as the one leading societal principle neoliberalized economies.
Perhaps even worse, the profit motive is no longer limited to be the leading behavioral guideline for capitalist enterprises themselves but has increasingly asserted its impact in many other spheres of soci(et)al life. For example, in the context of public services and non-profit sectors, the profit motive translates mainly into far-driven rules and regulations of cost control, where we have already pointed out in one of our previous books, ‘Covid-19 and capitalism’, the pernicious impact this has asserted in the sector of hospitals and nursing homes.Footnote 145
With this, humanity has ended up in a society in which although everything can be bought for money, nothing can still be obtained without the payment of such a sufficient sum of money.
It is obvious that this reinforces the dichotomy within societies between rich and poor caused by the forces of capitalism, whereby an increasing number of services (and products) can only be acquired by those who are rich enough to pay the price for them, while the poor(er) are increasingly left out in the cold. To the extent that this principle begins to apply to vital services and goods, such as medical care, energy and, in recent years, even food and water (cf. already in Sect. 3.3), the situation becomes more and more catastrophic, in this manner increasing the urge to start seriously considering alternatives for (the working methods of) capitalism (which we ourselves, in our own work of the past decade, are trying to do to the fullest).
7.1.6 Conclusions
7.1.6.1 Problematic Nature of the Capitalist Model of Conducting an Enterprise in General
From the foregoing, it is clear that the way in which the profit-seeking of the entrepreneurial system determines capitalism, particularly with regard to the capitalist model of employment within enterprises, has, from time immemorial, been beset by two very fundamental problems, namely: (1) It concerns a wholly unjust model, and (2) It concerns a model with which the majority of humanity is unhappy.
It can in addition be added to this that (3) the model is no longer attuned to the needs of contemporary societies, evidenced by the great dissatisfaction it generates on the part of the younger generations.
7.1.6.2 Injustice of the Capitalist Model of Conducting an Enterprise in Particular
In what precedes, it has been made equally clear that the capitalist pursuit of profit that drives the entrepreneurial sector—and its glorification by neoliberal government teams around the world—is among the many reasons why the capitalist economy can be referred to as an economy of the top 1% (or, at best, of the top 10 or 15%), by which is meant an economic system that benefits only the interests of the richest 1% of humanity, or—somewhat more optimistically estimated—of the richest top 10% or top 15% of humanity.
Capitalism is, hence, intrinsically unjust, to the extent that its mechanisms and methods of operation determine that the bulk of the economic prosperity resulting from the collective efforts of man and nature accrues to a small group of few only, rather than being equitably and justly distributed to all mankind.Footnote 146
This intrinsic injustice is evident both at the micro level of individual (capitalist) enterprises, and at the macro level of entire popular households.
In the context of individual enterprises, the capitalist business model, in its various facets, is designed to employ personnel as cheaply as possible. In doing so, the personnel employed by such an enterprise obtains the lowest possible fixed remuneration, at best with a bonus on top to compensate for exceptional performance.Footnote 147
Related to this is the observation that the legal systems of most capitalist countries have been designed to make this capitalist business model function as adequately as possible (with as important legal building blocks: commercial/enterprise law, company/corporate law, labor (contract) law, and generic contract law).
Also on a macro scale, the mechanisms of capitalism contribute to this intrinsic injustice of the capitalist system.
As already explained above, a classic justification for this model is the well-known trickle-down economics doctrine (cf. Sect. 3.2.1.1) which, for several centuries now, continues to provide the theoretical justification for a policy of political economy that does everything in its power to please the class of entrepreneurs and their enterprises, which manifests itself, among other things, in the form of a fiscal policy that is as business-friendly as possible.
The same applies to the policy that aims to make the organization of the labor market ever more flexible in the interests of enterprises (which is tantamount to systematically dismantling previously created labor protective mechanisms).
In the area of influencing public opinion, the impact of neoliberal ideas and policies is also extraordinarily strong, for example through an approach that may be described as ‘meritocratic’ and that maintains that successful entrepreneurship is purely the result of the individual merits of entrepreneurs. This helps explain why neoliberal governments do not want to put anything in the way of the entrepreneurial class, under the guise that entrepreneurs are the only ones who make societies prosper, while everyone else is free to become successful entrepreneurs themselves.Footnote 148
However, this mindset is averse to any realism about the conditions necessary to become a successful entrepreneur (which amount to a combination of a sufficiently selfish personality and the right pedigree), and incidentally constitutes one of the reasons why Stiglitz once wrote about economic neoliberalism that it relies on a mythical worldview.
All this explains why the small class of entrepreneurs continues to succeed, globally, in taking the largest share of the economic pie, but also why the collective efforts of all those who do not belong to the class of entrepreneurs (including bankers) are incorrectly remunerated, both at the micro and macro level:
-
(1)
On a micro scale, as mentioned above, this is because the employees of a capitalist enterprise receive only a fixed wage (as low as possible)—at best supplemented by a bonus allowance made contingent on special efforts.
-
(2)
On a macro scale, the consequence of capitalism is, among other things, that the undertaxed business class contributes too little, relatively speaking, to the costs of organizing society (including such things as education and infrastructure), even though it is the class that proportionally benefits the most from these collective facilities. Furthermore, the class of rich entrepreneurs has seen in the thus-problematic nature of public finances an opportunity to enrich itself even more at the expense of society, through systems of credit to states and other public authorities that have become an appropriate, additional earnings model for the rich classes. In addition, the entrepreneurial class also does not—or barely—bear the costs of their damaging behavior (which, among other things, include environmental pollution and the large expenditures needed to combat it, most of which are passed on to the rest of society).
These characteristics of capitalist enterprise make it valid to qualify it as a model of privatization of benefits/profits and socialization of costs/losses.
All this explains why the model is utterly unjust, even in the classical Aristotelian sense of the word, since the capitalist business model implies that what good results from it falls disproportionately on the shoulders of one (small) group of people, especially the class of entrepreneurs, while its ill effects, also disproportionately large, rest on the shoulders of another (larger) group of people.
All this implies that for over four centuries now, humanity has stuck to a totally unjust system of socioeconomic organization that, for most of humanity, does not even contribute to what is the ultimate goal of human beings, namely being happy.
Given this observation, the question arises as to how it can be at all rational, as the supporters of economic neoliberalism like to suggest, to stick to such a model, other than to not want to touch the interests of the ruling, wealthy classes.
It could even be argued that the continued unwillingness to change this testifies to the failure of democracy unless a sufficient political will would still be mobilized in the near future to make fundamental changes to this system.
In the Sect. 7.2, we ourselves shall elaborate on what such alternative business models might look like.
7.2 Exploration of Some Conceivable Alternatives to the Capitalist Methods and Models of Conducting an Enterprise
7.2.1 On Whether Alternatives to the Capitalist Methods of Conducting an Enterprise Are Still Conceivable, and How These Are Addressed in the Public Debate
It is generally noted by the defenders of capitalism, including in the recent period mainly the adherents of the ideology of economic neoliberalism itself, that there are no alternatives to capitalism in general and to the capitalist model of conducting and legally organizing an enterprise more specifically.
To further support this viewpoint, reference is often made here to the failure of the attempts by the former Soviet Union and its vassal states to stage a so-called communist system (based on the ideas of, among others, Karl Marx, and Vladimir Lenin).Footnote 149
The latter attitude itself assumes, in a very simplistic way, the view that only two economic systems are conceivable, specifically, capitalism (or the free market system) on the one hand and communism on the other (whatever the latter means, to the extent that the experiments of the Soviet Union and its vassal states had little to do with the implementation of Karl Marx’s own ideas).
In more general terms, this argument boils down to a so-called ‘There is no alternative’ (abbreviated, TINA) argument.
Throughout this TINA argument echoes the distant origins of the emergence of the ideas of the predecessor of economic neoliberalism, specifically economic liberalism, as it began to take shape from the second half of the eighteenth century in the context of rationalism, which, as aforementioned, counts as a movement in philosophy which attempted to recognize natural laws in human behavior (including socioeconomic behavior), but which in reality sought to provide a rationalization for the scale of values on which the behavior of the bourgeois classes, from the fifteenth–sixteenth centuries on, increasingly, was supported.
However, we have already pointed out above (cf. Sect. 3.2.1.2) that, during the same period of rise of the school of economic liberalism, there was a similar, second school on the rise which, also based on rationalist methodology, studied socioeconomic processes, namely the (French) social school. In doing so, the latter social school arrived at completely opposite insights and views to those of economic liberalism itself. In the approach of this social school, it was assumed that society is best served by relying on systems of far-reaching solidarity, which should, as far as possible, counteract inequalities that may result from economic processes (such as trade and industry).
This fact alone shows that the mind-sets of liberal and neoliberal thought do not express economic laws so much as value choices, so that alternatives to the ideas of economic liberalism and neoliberalism are indeed conceivable.
Furthermore, before the rise of capitalism, humanity managed to function for thousands of years based on appropriate socioeconomic systems that did not, in such an extreme way as economic liberalism and neoliberalism themselves, glorified selfishness and greed in general, and the selfish behaviors of the class of entrepreneurs (including bankers) in particular.
It even seems that, as history progressed, wealth accumulation and the associated polarization between rich and poor within societies continued to occur in ever-increasing proportions, especially as capitalism began to take hold from the sixteenth century onward.
Finally, in a more distant past, numerous economists, and policy makers, have looked for alternatives to, at least corrections to, capitalism.
One of the main reasons why such alternatives still barely resonate in modern times is presumably the extreme degree of brainwashing to which the advocates of capitalism—with in recent times, especially the adherents of economic neoliberalism—have resorted, and in which, in a very systematic way, those still expressing dissenting methods, through all sorts of methods, were pushed into the corner.Footnote 150
On a global scale, the latter even took the form of veritable boycotts by capitalist countries, in addition to (neoliberal-driven) international trade and financial institutions, of countries trying alternative methods. In a more distant past, such treatment fell to the Soviet Union and its vassal states, and in the current context to countries such as Cuba and Venezuela.
In the 1950s, this approach even led to an unprecedented demonization of communist and socialist thought in, among others, the United States of America, in which the working methods of the adherents of capitalist thought (including then U.S. Republican Senator Joseph Raymond McCarthy) barely differed from the methods applied earlier in history by the Catholic Inquisition. Incidentally, this so-called McCarthyism, within American society, left great traces to this day. Reference can, for instance, be made to the fact that all forms of alternative thinking in the socioeconomic sphere are still very quickly labeled ‘socialist’ or ‘communist’, so that, as a rule, no attention should be paid to them (certainly not by American politicians who do not want to burn themselves to be labeled socialist or communist).Footnote 151
Up to this very day, it remains striking how much the adherents of economic neoliberalism continue to silence any criticism of their ideology, be it in the academic or political-policy context.
As for the academic context, this can be aptly illustrated with reference to the works of Paul Krugman (Nobel laureate in economics in 2008). For example, Paul Krugman’s quantitative analyses have long shown that economic, neoliberal policies from the 1980s onwards have not worked for anyone except the super-rich. In doing so, Krugman himself provided an answer to why right-wing policy ideas, such as low taxes for the rich or the ever-increasing marketing and privatization of health care in the broad sense of the word, continue to find such a following and application. Krugman has addressed this question in his book ‘Arguing with Zombies: Economics, Politics, and the Fight for a Better America’, which contains more than 400 pages of essays in which Krugman subverts right-wing and neoliberal economic talk—which he refers to as ‘zombie ideas’.Footnote 152
Closer to home, in the Belgian, political context, there are also numerous figures who very strongly adhere to (and implement) economic-neoliberal ideology, to fulminate every time a dissenting voice rears its head, where it is then called that it should be avoided to sink into (other) ideological debate, which in reality indicates that only one ideological frame of mind is allowed to dominate the public debate, namely that of economic neoliberalism itself.
Another reason why alternative approaches to capitalism have hardly been addressed stems from the extent to which the economically leading classes firmly hold (political) power within capitalist societies, as a further result of which alternative approaches to the economy can hardly, if at all, be advocated. This implies that if policy bodies—for example, national governments, as well as international organizations—remain inspired by economic neoliberalism, alternative approaches will continue to be largely ignored.Footnote 153
7.2.2 Concrete Ideas on How to Bring the Organization Models for Conducting an Enterprise to Higher Ethical Principles
7.2.2.1 General Purpose of Looking for Alternative Models of Conducting an Enterprise
After these (lengthy) introductory Sects. 7.1 and 7.2.1 which are nevertheless important for a thorough understanding of the main theme of this chapter, in this Sect. 7.2.2 we are going to try to find out whether, after (more than) four centuries of capitalism, alternative approaches to the capitalist model of conducting an enterprise are indeed still conceivable.
In an interview, Krugman expressed the view that there are probably few alternatives to a system of conducting an enterprise by means of profit-seeking companies/corporations, at least that no sufficient alternatives have yet been found that work (sufficiently). But this also does not mean, according to Krugman, that no change at all would be possible.Footnote 154
Keeping this in mind, let us assume that even in an alternative approach to entrepreneurialism, the basic premise remains that people will have to be left free to conduct enterprises to produce and market goods and services, but that government will take corrective action to combat the negative outgrowths of pure capitalist entrepreneurialism described above in Sect. 7.1.
A further (optimistic) premise is that the forces of democracy, ultimately, could be able to prevail and succeed in bringing to power political parties that will prioritize an alternative approach to socioeconomic ordering in general, and of corrections to the capitalist models of conducting an enterprise in particular.Footnote 155
Mindful of the findings to which the previous Sect. 7.1 led, such corrective action on the model of organizing enterprises should take place at least at three levels, specifically:
-
1.
On the moderation of the profit principle.
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2.
In terms of arousing sufficient attention to other values—such as a fair treatment of staff and a respect for the Earth.
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3.
In terms of achieving a more equitable distribution of the capital gains generated from conducting an enterprise.
It is obvious here that these objectives are strongly interrelated, in which, for example, the intent mentioned in point (3) will, of course, be part of the intent of fair treatment of the personnel referred to in point (2) and often will have to be accompanied by a moderation of the profit-seeking of the rich referred to in point (1).
This implies that the main purpose of the classification referred to above, is to be able to represent our ideas hereafter in a sufficiently systematized manner (in which a reiteration of idea lines cannot entirely be excluded).
7.2.2.2 Basic Principles of New Models for Conducting an Enterprise
7.2.2.2.1 Mitigation of the Profit Principle
7.2.2.2.1.1 General
To the extent that the wealthy on Earth—except for a few notable exceptions, such as e.g., MacKenzie ScottFootnote 156—may never voluntarily change their legal methods for conducting enterprises (and the profits these generate for themselves), the moderation of the profit principle will have to be based primarily on government regulation, preferably on a globally harmonized approach.
7.2.2.2.1.2 Fiscal
The New International Monetary Order (or, ‘NMWO’) that we have proposed in our earlier work, would be based on an entirely new tax logic, to the extent that taxation would not so much be intended to provide states with their financial means—as the allocations discussed in Chap. 4 would, under functioning of the NMWO, be intended for this purpose–, but rather to limit the accumulation of wealth and to combat unequal distribution of wealth within societies.Footnote 157
The underlying intent of this approach would be to create a global society where not selfishness and greed would reign supreme, but rather mutual solidarity and altruism.
Applied in the context of (re)organizing enterprises, this would imply that corporate profits themselves, through such a new NMWO taxation model, would be capped, simply by taxing them away from a certain level.
An additional advantage of this approach would be that enterprises would become incentivized to make expenditures that contribute to a more proper use of company/corporate profits, including fair compensation for the workforce, as well as investments that contribute to repairing the damage done to the Earth under four centuries of capitalism and, by extension, 10 to 12 thousand years of sedentary models of society.
Otherwise put, under such alternative economic (including monetary and fiscal) policies, the entrepreneurial sector could be massively induced to adopt a pattern of behavior that would be beneficial, rather than harmful, to the Earth (and all life inhabiting it).
In doing so, economic policy need not a priori oppose large scale, in other words, the reinvestment of the profits made by enterprises to finance their growth, provided that this growth contributes to the to-be-established, underlying objectives of the NMWO itself.
By way of example, one could, for instance, think of large-scale energy producers that do no longer rely on fossil fuel (or nuclear) production, but are fully committed to sustainable, green energy, or enterprises that produce food based on sustainable agricultural products (replacing, for example, artificial, industrial forms food, including food based on artificial sugars or based on industrial meat processing).
Of course, further examples are legion, since essentially every segment of economic life lends itself to such a change to more environmentally sustainable alternatives.
7.2.2.2.1.3 Restriction of Methods that Unilaterally Allocate Company/Corporate Profits to Capital Providers and CEOs
The limitation on wealth accumulation (which could easily be accomplished under our newly proposed NMWO; cf. Chaps. 4–6) could focus on the curtailment of dividend payments, alongside other (mostly corporate) processes that maximize the flow of company/corporate profits to shareholders. In this, partly to keep encouraging entrepreneurial sustainability itself, a certain level of wealth accumulation could remain acceptable, albeit within reasonable limits.Footnote 158
A first approach in that regard could be to simple tax away parts of the dividend income an individual still could receive (e.g., under the targets of the NMWO).
A second approach could be to encourage the entrepreneurial class to participate, for example through techniques of certification of shares, in the establishment of trusts or (private) foundations whose purpose will be to work for equitable models of society, in addition to environmental remediation.
The latter approach could at the same time amount to using the managerial talents of the wealthy entrepreneurial classes in a more positive sense than the mere pursuit of their own personal wealth (mostly to spend it on pointless luxuries), by inducing them to participate in projects of soci(et)al participation and, to this end, channeling a portion of potential profit distributions, that would otherwise be taxed away, into trusts or (private) foundations that ideally would function under the joint management of the entrepreneurs in question and other representatives of society.
The question even arises whether the wealthy entrepreneurial classes themselves—or at least part of them—would be as displeased with such an alternative approach to the senseless accumulation of wealth to which capitalism incites them as might at first glance be feared.
One may in this regard think of the private foundations or trusts that various very wealthy entrepreneurs have already set up today to make parts of their fortunes pay off for the benefit of global societies.Footnote 159
The latter can be illustrated by referring to a recent initiative of businessman Yvon Chouinard, (former) owner of Patagonia,Footnote 160 who announced in a letter dated September 14, 2022—which has been published on Patagonia’s website—that he would transfer his stock portfolio to a trust, so that its future dividends will accrue to noble causes.
In said letter, Chouinard more precisely announced that he would transfer 100% of his voting shares to the Patagonia Purpose Trust, which was created to uphold the values of Patagonia long known for its environmental activism. Chouinard in addition announced to transfer his non-voting shares of Patagonia to Holdfast Collective, a nonprofit organization dedicated to fighting the environmental crisis and defending nature.Footnote 161
In the letter of September 14, 2022—which bears a rare testimony of a successful businessman who, gotten averse to the principles of capitalism, seems to put his conscience first –, Chouinard articulated his intention as followsFootnote 162:
While we’re doing our best to address the environmental crisis, it’s not enough. We needed to find a way to put more money into fighting the crisis while keeping the company’s values intact.
One option was to sell Patagonia and donate all the money. But we couldn’t be sure a new owner would maintain our values or keep our team of people around the world employed.
Another path was to take the company public. What a disaster that would have been. Even public companies with good intentions are under too much pressure to create short-term gain at the expense of long-term vitality and responsibility.
Truth be told, there were no good options available. So, we created our own.
Instead of “going public,” you could say we’re “going purpose.” Instead of extracting value from nature and transforming it into wealth for investors, we’ll use the wealth Patagonia creates to protect the source of all wealth.
Here’s how it works: 100% of the company’s voting stock transfers to the Patagonia Purpose Trust, created to protect the company’s values; and 100% of the nonvoting stock had been given to the Holdfast Collective, a nonprofit dedicated to fighting the environmental crisis and defending nature. The funding will come from Patagonia: Each year, the money we make after reinvesting in the business will be distributed as a dividend to help fight the crisis.
(…)
Despite its immensity, the Earth’s resources are not infinite, and it’s clear we’ve exceeded its limits. But it’s also resilient. We can save our planet if we commit to it.
Notable in all of this is Chouinard’s (justified) assessment of the workings of the stock market, about which he noted that once a company has gone public,Footnote 163 only the objective of profit maximization for the benefit of shareholders can still come into play, so that there can no longer be any room for responsible entrepreneurship.Footnote 164
In accordance with this announcement, Yvon Chouinard, his wife, and his two adult children, transferred the ownership of Patagonia—valued at that time at approximately USD 3 billion–, to the mentioned, specially designed trust and non-profit organization.Footnote 165
Both these entities were, moreover, created to preserve the Patagonia’s independence and to ensure that all profits—approximately USD 100 million per year—will, henceforth, be used to fight climate change and protect developing countries around the world.Footnote 166
It was, furthermore, announced that Patagonia itself would continue to operate as a private for-profit company based in Ventura, California and selling more than USD 1 billion worth of jackets, hats, and ski pants annually. However, because of this move by Chouinard, the Chouinards themselves will no longer be the (private) owner(s) of the company.Footnote 167
Matt Levine (of Bloomberg) has pointed to the fact that the Chouinard family will still more or less retain control of the company. Previously, as early as August 2022, the family had to that end irrevocably transferred all the company’s voting shares, accounting for 2% of all shares, to the newly created Patagonia Purpose Trust. This trust, which will be overseen by members of the family and their closest advisors, is to ensure that Patagonia will fulfill its commitment to conduct business in a socially responsible manner and to channel its profits to its stated, noble objectives (rather than to its former, family shareholders). The Chouinards then donated the remaining 98% of Patagonia’s common, non-voting shares to a newly formed nonprofit entity called Holdfast Collective, which will thereby receive virtually all the company’s profits and use the funds to fight climate change.Footnote 168
In the short term, the operation was expected to make slight difference to the running of Patagonia itself. Indeed, through Patagonia Purpose Trust, Chouinard will continue to control Patagonia, albeit that the operation will make the allocation of profits completely different.Footnote 169
As laudable as the example of Chouinard is, however, in our opinion, it is not to be expected that the entrepreneurial sector will want to implement such far stretching reforms on a voluntary basis, on a sufficiently massive scale.Footnote 170
On the contrary, implementing such changes on a sufficiently large scale to counter capitalism will necessitate fundamental adjustments to the regulatory framework, both in the tax area, but also, for example, in the private law area (e.g., company law, in addition to contract law, including labor contract law).Footnote 171
As suggested in our earlier work, the approach in this regard will need to be both sufficiently holistic, and universal, taking the opportunity of creating a new, international monetary order (Cf. Chaps. 4 and 6) to also work on a new legal and fiscal framework for the conduct of business, including the organization of regulatory-imposed systems of alternative profit allocation.
7.2.2.2.2 Attention to Other Values
What precedes has shown that, under the rule of capitalism, enterprises are directed too much in terms of one central objective, namely making as much profit as possible for the benefit of the capital providers (or shareholders) of capitalist enterprises (in addition to those of their executives, especially CEOs) and that all other values, including the interests of humanity and the care of the Earth itself, have been systematically sacrificed to this central purpose.
Although there is a growing awareness that this needs to be changed, it still remains to be seen whether initiatives will make this change happen in a sufficient manner.
For the time being, looking for alternative still relies heavily on self-adjustment from the part of the entrepreneurial sector itself, because of which change does not proceed in a rapid manner, if at all.Footnote 172
Still, there are some countries that started to issue measures to address the severe environmental challenges that have beset capitalism over the past few centuries, with the European Union appearing to lead the way. For instance, the European Green Deal aspires to provide a roadmap to make the EU economy sustainable by turning climate and environmental challenges into opportunities in all policy areas and making the transition equitable and inclusive for all. This European Green Deal covers measures in various sectors of the economy, notably transport, energy, agriculture, infrastructure, and industries such as steel, cement, ICT, textiles, and chemicals.Footnote 173 Along similar lines, there is an increasing EU focus on sustainability in the financial sector.Footnote 174
These measures are, of course, still at too early a stage to already subject them to a thorough evaluation. However, there is a growing fear that action is still insufficiently far-reaching and rapid. Moreover, it is also becoming increasingly clear that a national or regional approach makes little sense, and that only a global impact can make sense.Footnote 175 Regarding the latter, it can be further pointed out that one of the main reasons for the failure of the recent climate conference Cop27 lies in the unwillingness of the participating countries, including in main order the most polluting economic superpowers, to decide among themselves what approach is appropriate. (Cf., in more detail, Sect. 3.1.4.2.10.)
7.2.2.3 Potential Impact of the Proposed NMWO
7.2.2.3.1 Measures Conceivable Under the NMWO in Terms of Profit Limitation
Under the NMWO that we proposed earlier (cf. the summary of our proposals in Chaps. 4–6), a holistic reorientation of socioeconomic organization in general, and of the legal methods for conducting an enterprise and profit allocation, could become a lot more conceivable.
Chapters 4 and 6 have already made it clear that the (capitalist) pursuit of profit should no longer remain the central (societal) value of the economic system to be established under the proposed NMWO. On the contrary, a fundamental reorientation of the (global) business world will be required, in such a way that other values (such as: care for the environment; respect for the Earth and its resources; humane treatment of employees; etc.) will be given at least equal consideration.
A new legal framework, both at the level of the NMWO and its participating member states, could establish a solid legal basis for such a new business ethic.
Within the new economy(ies) that will emerge on the basis of this NMWO, it should, in the first instance, no longer be the intention that the entire legal organization of society would remain aimed at the profit maximization of the class of entrepreneurs, or put differently, at the representation of the interests of capital.
On the contrary, the NMWO should create, by means of regulatory guidelines, an environment where efforts from work are mostly valorized, in such a way that everyone, thanks to their work, will be able to build a decent life for theirselves (and their family).
This will involve gradually abandoning the idea that conducting an enterprise (and the capital investments associated with it) should primarily, and at any cost, result in gigantic (company/corporate) profits that, through the operation of company/corporate law mechanisms, serve primarily to enrich shareholders.
For example, an underlying idea of this new business ethic might be that incumbent enterprises should, much more strongly than under the prevailing capitalist logic, be encouraged to reinvest their profits (rather than systematically distributing them to capital providers).
In a similar vein, an encouraging policy of certification of equity portfolios into private foundations or trusts could be worked out, so that profits made by enterprises no longer would serve exclusively to enrich the (super)rich but could be smoothly reinvested in global society. (Cf. already in Sect. 7.2.2.2.1.3.)
At the level of the enterprises themselves, in order to realize the underlying policy objectives of the NMWO and the resulting new economy, a tax skimming policy could come into play (cf. already in Sect. 7.2.2.2.1.2), whereby the profit level of an individual enterprise would be kept within reasonable limits through taxation. Besides avoiding extreme wealth gathering, such an approach could moreover be aimed at various other policy objectives, e.g., for reasons of competition—including avoiding that a market player would become much too strong–; for encouraging reasonable pricing in offered products and services (since a surplus profit would be taxed away anyway); for encouraging fair compensation of staff and (smaller) suppliers, …
As mentioned before, one could at the same time consider tax measures aimed at avoiding too high dividend distribution or similar techniques for distributing company profits to shareholders or similar stakeholders (e.g., in case their personal income and/or wealth would exceed certain scales as a result), in order to curb unbridled wealth accumulation on the part of individuals.Footnote 176
A side effect of such measures could be that, to the extent that the legal system would provide less room for channeling the bulk of company profits to capital providers/shareholders and/or CEOs, the need for continuous credit for the benefit of the entrepreneurial world will also diminish, since a moderation of profit distribution policies would, over time, make the entrepreneurial world much more self-sufficient at the level of financing their activities. Such an approach would, at the same time, also better protect creditors’ interests (since companies’ equity buffers will suffer less from too generous (profit) distribution policies).
Nevertheless, the NMWO will also need to pay attention to appropriate systems of lending to the corporate sector, a question that will be the subject of the Sect. 7.2.2.3.2 below.
7.2.2.3.2 Measures Conceivable Under the NMWO in the Area of Monetary Lending to the Entrepreneurial Sector
To the extent that within the operation of the economic system relying on the NMWO, there would still be a need for credit, a further approach could be to refer the incumbent enterprise sector to the private markets in the main order for the purpose of absorbing such credit.
Enterprises with surplus profits (for which, for whatever reasons, it would not make sense to reinvest in their own growth), could use these to grant credit to other enterprises in need of credit, possibly through the intermediary role of the private banking system (also to be reoriented under the scope of the NMWO).
Nevertheless, even within such a newly reshaped private credit market, it may occur that the funds available on it, at any given time, would not be sufficient to meet the credit needs of the established business sector.
For such cases, the NMWO could proceed to set up a model of money creation/credit for the benefit of the established business community.
As already mentioned in Chap. 6, one of the principles of the (monetary) credit policy for the entrepreneurial sector could hereby consist of a differentiated treatment of, on the one hand, individuals starting from scratch and seeking access to a professional activity (including those wishing to start a new enterprise) and, on the other hand, enterprises that have already successfully entered a phase of growth.Footnote 177
In this, the private banks themselves would henceforth become a mere part of the (private) sector of established enterprises, so that, for their credit needs, they will not enjoy (preferential) treatment compared to the rest of the sector of established (private) enterprises (and, for example, will no longer have privileged access to mechanisms of ex post financing by the NMSCB to cover (self-created, temporary) deficits).
Such lending, by the national, central banks to the established entrepreneurial world could, moreover, be on a fee basis. The new monetary authorities could even pursue a policy of differentiation defined in (sufficiently concrete) NMSCB guidelines and regulations, based on factors such as:
-
The size of the applicant enterprise (in terms of turnover, staff numbers, etc.).
-
Its profitability.
-
The extent to which the enterprise adopts—or does not adopt—certain ethical codes of conduct (in particular, aimed at properly dealing with the values other than money pursuit of CEOs and capital providers).
-
The way the enterprise actually behaves in practice.
-
The effects of business operations on the environment.
-
The way the enterprise treats its staff.
-
…
For those for whom these ideas—as already contained in our previous books ‘Nu het gouden kalf verdronken is’ (2015) and ‘Towards a New International Monetary Order’ (2017)Footnote 178—would sound too utopian, it may be pointed out that they are, gradually, beginning to resonate within ECB policy.
In particular, the ECG announced in July 2022 that it was planning to gradually change the content of the 344 billion euros of corporate bonds on its balance sheet. Specifically, this would imply that in the coming years, the ECB would reinvest the approximately 30 billion euros released each year (due to maturity of existing debt instruments held by the ECB in its portfolio),Footnote 179 in bonds issued by sustainable enterprises. The ECB also announced that, in doing so, it will limit the share of non-financial corporate bonds with a high carbon footprint that it accepts as collateral from individual counterparties, prioritizing that climate risk information must reach certain levels before an asset or loan will still be accepted as collateral. This reorientation of the ECB’s investment portfolio was intended to begin in October 2022, prioritizing enterprises with lower greenhouse gas emissions, carbon reduction policies and greater transparency about their climate goals.Footnote 180
This policy intent was reiterated and further elaborated on September 19, 2022, through a statement by the ECB that it will give enterprises a climate scoreFootnote 181 before buying their bonds, prioritizing enterprises that make greater efforts to disclose and reduce greenhouse gas emissions.Footnote 182 The ECB also announced that the Eurosystem will take these climate scores into account in all corporate bond purchases—either under the (regular) Corporate Bond Purchase Program (CSPP), or under the Pandemic Emergency Bond Purchase Program (PEPP)Footnote 183—to be settled as of October 1, 2022. The ECB, furthermore, announced that from the first quarter of 2023, it will start publishing climate-related information on its holdings of corporate bonds and report regularly on the progress of aligning its purchasing policies with the goals of the Paris Climate Agreement.Footnote 184
In a similar vein, a tentative alignment is even being sought at a fiscal level with an idea also floated in our aforementioned book ‘Nu het gouden kalf verdronken is’ that excess profits made by enterprises should, quite simply, be taxed away.Footnote 185 In particular, in the context of the energy crisis of 2022, the idea has begun to gain ground that enterprises (especially energy producers) can and do make ‘excess profits’Footnote 186 and that these should be taxed extra.Footnote 187
Obviously, in the new proposed NMWO, such a policy of taxing excess profits could be further extrapolated and aligned with the systems of direct lending to the entrepreneurial sector included therein.
To regulate all these ideas properly, the sufficiently detailed regulatory framework (based on general framework directives issued by the NGSCB and made more concrete by national implementation directives issued by the national central banks of the participating countries) could be developed, defining the conditions that any enterprise must meet to be eligible for credit from the national central banking system. These conditions should, of course, be grafted onto the underlying objectives of the NMWO itself, thus also reorienting the entrepreneurial world, increasingly, toward a model that would be primarily at the service of the common good of mankind (and the planet), rather than merely serving the unbridled pursuit of money by their underlying capital providers. Such guidelines could even include a reward system, whereby enterprises that participate to a greater extent in the goals of the NMWO would have access to cheaper credit, than those that score worse in that regard.
Furthermore, based on various, objective parameters, a system of measurement could be worked out based on which it could be determined which enterprises, from an altruistic point of view, score better and which score less. When setting such parameters, it will, of course, be a matter of finding the right balance between the altruistic concerns of such a valorization policy and a sufficient viability (and profitability) of the borrowing enterprises in question, so that the parameters will always be set sufficiently realistically (with the underlying aim of gradually building a better world for everyone).Footnote 188
Such an approach would also imply sanctioning (via either more expensive monetary credit, or even denying access to such monetary credit) enterprises that degrade other values (such as the environment, the interests of the workforce, the interests of the broader society, etc.), and rewarding those that benefit these other values.
Of course, all the foregoing requires an open debate, in the context of which all proposals of alternative approaches, other than those we ourselves have proposed in both our earlier work and throughout the present book, are welcome, provided that they are of such a nature that they could help bring about the return of a humane system of conducting enterprises.
7.2.2.4 Concrete Models of More Equitable Staff Remuneration
7.2.2.4.1 Towards New Systems of Remuneration
As one of the components in the search for more ethical entrepreneurship models, it will also be necessary to consider systems of more equitable distribution of company/corporate profits (or, in a classic metaphor, of the economic cake or pie baked by a given enterprise) among the other stakeholders of individual enterprises themselves (i.e., those other than shareholders and CEO’s).
As explained, under the prevailing, capitalist models of organizing enterprises, the profits created by capitalist enterprises are allocated to a single purpose, i.e., their distribution (through various company/corporate law techniques) to shareholders. This is also one of the main reasons why the remuneration of the personnel—as part of the costs incurred by a given enterprise—should be kept as low as possible. (Cf. the already mentioned Iron Law of the Wages.)
However, even under the logic of capitalist employment policy itself, there exist some forms of correction to this approach in terms of the remuneration of more specialized forms of labor. Essentially, this results from the application of the law of supply and demand, with the provider in this approach being the lessor of their labor and the demander being the employing enterprise. Here the observation applies that the more specialized a particular job is, the scarcer the supply and/or the higher the demand will be, which is then reflected in a higher price for such more specialized, hired labor.
Such a higher degree of specialization may be evident (especially for entry-level workers) from prior education and previous professional experience. This explains why certain higher degrees give access to forms of employment associated with higher compensation/wages (and, more generally, better working conditions). Classic examples are engineering and MBA degrees. Incidentally, universities offering such higher forms of training are aware of this reality, which in several countries is reflected in higher enrollment fees for students wishing to pursue such programs (which is clearly the case for MBA programs, for example).
Keeping in mind capitalist employment logic, the attractiveness of higher degrees will suffer from an increasing supply in the employment market (at least assuming a stable or decreasing demand for workers with such degrees), in other words when the number of graduates with a certain type of higher degree becomes (much) higher than the number of available employment positions.
This, moreover, explains why numerous higher degrees have long ceased to guarantee jobs that pay well or very well. This immediately places major question marks on the design of the policy of many western countries of recent years whereby young people are encouraged as much as possible to pursue higher education, resulting in an increasing influx of highly qualified people into the labor market, which in turn assures the business world itself of an ever cheaper supply of labor. In the Western world, this is a fate that increasingly affects the younger generations.
For highly specialized occupations, previous professional experience can also be a key factor, which helps explain the large rise in the neoliberal era of headhunting firms that actively seek highly specialized workers on behalf of entrepreneurial clients. In numerous cases, this translates, in turn, into even higher fees offered to convince a staff member of one enterprise to make the move to another (sometimes even competing) enterprise.
One of the (supposedly) specialized jobs that can boast the highest compensation is that of executive manager over a company/corporation, commonly referred to by the designation Chief Executive Officer (or CEO, for short).Footnote 189 Already in the past, the question has been raised in literature whether such CEOs are, as economic-neoliberal theorizing suggests—in what has been labeled by Galbraith as a form of blind adoration in the ability of entrepreneurs and businessmen from the part of the rest of society (also referred to as the so-called genius principle)–, indeed distinguish themselves mainly by intrinsic qualities (such as there are greater working power, greater intelligence, greater managerial ability), from other people, including in particular those they employ.Footnote 190 Or is it, as others have suggested, rather a lack of scruples displayed by CEOs (and the capital providers behind the enterprises they run) in putting other people to work for compensation that is significantly less than the compensation they pay to themselves (either as management and/or director’s fees, or as distribution rights in (surplus) profits) that produces the characteristic difference? In other words, the (presumably rhetorical) question arises as to whether the kind of people who end up in CEO positions, in the absence of conscientious or other altruistic tendencies, feel especially uninhibitedFootnote 191 from paying themselves, much more generously, fees than the fees they are willing to pay to others (including others who often must work much harder than these CEOs themselves).Footnote 192
One method already thought of in the past to address the issue of the compensation gap between lower and higher workers (with the CEO himself at the top) is the idea of capping compensation (for managerial positions within companies/corporations). A corresponding approach is to provide a high degree of transparency, a method that has even resonated with some regulation for listed companies and financial institutions.Footnote 193
Another approach that has been advocated in the near past constitutes the idea of issuing a regulation that would provide that the compensation for the highest position within a given enterprise, should only include a certain maximum multiple of the compensation for the lowest position within the same enterprise. Such an approach would amount to allowing the CEO to earn only a certain multiple (e.g., double, triple, or any other ratio) than what the lowest-paid job within the enterprise merits as compensation.Footnote 194
Although such—and similar proposals—have strongly dominated academic debate on this issue in a somewhat more distant past, in practice they have had limited impact. Moreover, the preoccupation of such measures has mostly been the protection of shareholder interests, in other words, the intent to avoid excessive amounts of money going into compensation to managers (or others) (and thus too much pressure on corporate profits intended for shareholders).
Any re-engagement with these methods of profit-sharing with staff will, of course, must take due account of the underlying objective of wealth limitation (on the part of shareholders and CEOs).
7.2.2.4.2 Towards New Systems of Profit Participation
Over time, alternative systems of employment other than the labor contract model (or for certain types of employed, self-employment agreements) have also been considered. We shall limit ourselves below to the alternatives devised in the capitalist world itself (not considering the approaches devised in, for instance, communist countries).
In a somewhat more distant past, in several Western countries, the cooperative company formula offered such an alternative. When this company form is used properly, everyone who contributes to the enterprise conducted by such a cooperative company becomes a cooperative partner. The consequence of this is that, in its purest form, all these ‘collaborators’ are not remunerated through a system of fixed remunerations agreed upon between the collaborator and the company itself, but that they become, (as much as possible) equally entitled to share in the profits made by the cooperative company. In other words, the legal form of such a cooperative company provides a formula for making everyone who participates in a business project equally entitled to share in the profits realized by the company.Footnote 195
In another use of the cooperative company form, profit distribution can be made based on their transactions with the cooperative (which can also translate into price discounts). In a more distant past, such cooperatives were also known as ‘consumption cooperatives’.Footnote 196
Another approach that has previously found application in the context of more traditional (capital) companies/corporations involves formulas by which the company’s staff itself is made (limited) entitled to share in the company profits. This can take the form of shareholdings,Footnote 197 or (purchase) options on shares (with the assumption in the latter case that the options will gradually increase in value, so that the staff member receives additional compensation by either exercising the option—and then becoming a shareholder in the company—or transferring the option to someone else).
Although past literature has strongly advocated the use of such formulas, the observation is that they have not taken off on a large scale. One possible explanation for this is that in numerous companies/corporations, the controlling and/or otherwise leading stakeholders (particularly the shareholders, directors and CEO) are generally not willing to share company/corporate profits with the members of their staff (let alone that they would show interest in legal figures that would aim to achieve that effect).
From the corner of neoliberal authors themselves, it has even been suggested that investing in the regulated stock markets makes it possible for anyone—including the staff of a given company/corporation—to become a shareholder, and thus share in the profits of companies whose shares are listed and/or traded on such regulated markets.
The latter approach relies on the premises on which capitalism (and, by extension, the bourgeois-liberal models of society that legally shape it) itself rests, namely that everyone participates freely and equally in the game of contracting (including investing in a regulated market). However, this approach takes no—or hardly any—account of the fact that it is usually not that obvious for members of the lower classes of the population to play investor on stock (or other) exchanges. The latter may be because members of the lower population classes often do not have sufficient savings, or sufficient knowledge regarding the operation of the stock markets, to successfully build up additional income from investments (in stocks).
7.2.2.4.3 Need for Further Regulation
Although some of the alternative compensation mechanisms discussed in the previous sections certainly remain conceptually useful, it is presumably illusory to assume that they will ever be applied, to a sufficient degree, through voluntary contracting, to bring about a real turnaround in the organization of capitalist employment policies—including the issue of workers’ compensation.
This implies that, to the extent that, based on the neoliberal prescription of voluntary contracting, this problem will not (and cannot be) remedied, there will rather be a need for legislative intervention to implement such systems of profit sharing, among other forms of better compensation models, in a sufficiently general way.
For example, one approach could be to issue mandatory rules that limit compensation and profit distributions.
As part of the treaty that would shape the NMWO referred to above, participating member states could, moreover, commit to concrete approaches in that regard under treaty law.
In particular, the countries participating in the NMWO could commit in these treaties to the conception of a legal framework that strikes a better balance between employee compensation and shareholder, director, and CEO compensation.
In addition to imposing certain of the aforementioned profit-sharing systems, this could also involve work on an alternative approach to remunerating collaboration on inventions (which lend themselves to the establishment of intellectual rights), so that the benefits of these do not unilaterally accrue to the employing enterprises (and their controlling/managerial stakeholders), but additionally fairly to the employed personnel (who are, as a rule, the actual inventors/innovators).
7.3 Conclusions
7.3.1 Summary of Principles Governing Capitalist Entrepreneurship and Employment
All of the foregoing will, of course, not be obvious.
A real reversal of capitalist policies on enterprise governance in general, and employment and compensation of personnel more specifically, will in the first instance require greater awareness among the general population.
It is in this regard almost unbelievable how much the forces of capitalism (with, during the past four decades, especially the role of neoliberal ideology) have managed to brainwash humanity that the current course of events would be the only conceivable one fit to shape socioeconomic relations.
As already explained in Sect. 7.1.1.2.5, it is furthermore striking that the socioeconomic changes which, from the sixteenth century onwards, started to reshape European societies—amongst others, characterized by a gradual crumbling of feudalism into models of society characterized by employment for low, fixed remuneration—have in the beginning period not been based upon much reflection (philosophical or otherwise), let alone on any significant political debate. This observation, incidentally, not only applies to the model of employment against (fixed) wages, but to most other, capitalist methods of organization of the socioeconomic order, including the private money creation system by private bankers, as well.
As a result, as early as the sixteenth century, fundamental reforms of European societies took place, which would gradually create a fundamental dichotomy within the capitalist societies thus taking shape, between, on the one hand, what we call in contemporary terminology ‘entrepreneurs’ and, on the other hand, those who did not start a business themselves but (out of necessity) had to opt for employment by the former, entrepreneurial class.
One of the main characteristics of this dichotomy was that the first, small group of entrepreneurs in most cases made large profits, while the second, large group of other people, in exchange for the labor they provided, could only boast of a fixed fee that was kept as low as possible.
Although there has obviously occurred a further tinkering with this system over the centuries that followed (e.g., at least in the West, an evolution from mainly daily or seasonal work, to permanent employment; the emergence of certain labor protection legislation in the twentieth century; establishing better levels of education of the population; …) and theories to rationalize this system were gradually devised (e.g., initially, the work ethic of CalvinismFootnote 198; later, the liberal, economic theories; and, today, economic neoliberalism), it has been basically this model of employment, in force since the sixteenth century, that increasingly started to shape the new, (pre-)capitalist societies throughout Europe (and later, the rest of the world).
Perhaps the biggest lie that has been put up from that period is the rationalization given to this soci(et)al model, as if such a system were based on a model of free contracting, in which all people can participate on an equal basis. The untruthfulness of this way of rationalizing the capitalist working methods, however, does not prevent that precisely this lie continues to define neoliberal thinking on the issue of employment to this very day (cf. especially the so-called voluntary association doctrine),Footnote 199 while, in reality, this model basically but amounts to a model of exploitation.
This model of exploitation of the great masses by the entrepreneurial class reached its zenith in the Europe of the nineteenth century, not coincidentally against the background of bourgeois liberalism. The latter led to the formation of bourgeois-liberal states based on very entrepreneurial-friendly legislation, which provided the entrepreneurial classes with a free pass to organize this system of exploitation in a legally conclusive manner (including through the civil law model of free contracting).
It was not until a century later that the resistance of the great masses would begin to provide some solace, in part under the impetus of new economic theories (e.g., Karl Marx). Around that time, the realization also began to grow that the capitalist system of exploitation did not necessarily constitute a natural law, but that alternatives, at least correctives were indeed conceivable.
This growing awareness was in turn accompanied by a call for democratization of the bourgeois-liberal states, with the working classes uniting in trade unions and appropriate political parties, created with the aim of giving shape to the rising demands for fairer models of employment. These efforts would bear fruit in Europe mainly in the period after World War II, in Western Europe in the form of labor-protective legislation that—together with systems of social security and public services—began to shape the welfare state model, and in Eastern Europe in the form of the (ultimately unsuccessful) experiment to create communist societies.
For large parts of the rest of the world, these efforts would have little impact, on the understanding that in some developing (and/or newly rising) countries, communism was somehow maintained (albeit in most cases marked by appropriate disadvantages).
As explained earlier, shortly thereafter, economic neoliberalism itself would begin to push for the dismantling of this model of the welfare state, which also exposed the systems of labor protection and trade unions, in ever-increasing numbers, to great pressure.Footnote 200
One of the new fables of economic neoliberalism that has been maintained ever since is the one of ‘meritocracy’, which in essence proposes that by studying hard first and working even harder later in life, everyone will elevate themselves to ever higher levels of prosperity (and that the mechanisms of the welfare state, including systems of labor protection and unionization, are but an obstacle to this).
As a result, efforts were made in numerous Western countries to do away with labor unions, at least to minimize their impact, while parallel efforts were made to organize labor as flexible as possible. This implied at the same time that it became easier and easier for the entrepreneurial classes to employ people, with capitalism itself in this manner regaining an increasingly unbridled character.Footnote 201
In all this, it should be clear that the voluntary association model of employment so lauded by economic neoliberalism has never succeeded—and most likely will never succeed—in creating just societies, rather the opposite.
7.3.2 Call for Further Awareness
Especially on the part of the younger generations, there is a growing awareness that things cannot go on like this, as evidenced by the very negative results of surveys on job (dis)satisfaction, in addition to occasional protest demonstrations against some of capitalism’s most severe excesses. However, these forms of expression of discontent are still mainly directed at the most negative outgrowths of capitalism only, including climate change, but still too little against the capitalist system itself, let alone that full-fledged alternative solutions are already being put forward.Footnote 202
What is needed is a growing awareness about the causes of the many problems into which capitalism has plunged the world into.
Once a sufficient awareness of the essential characteristics of capitalism and how these inherently cause the many severe problems facing humanity today will have grown, it will then become a matter of mobilizing the forces of democracy to translate this into an appropriate political agenda, which should be characterized by a sufficient willingness for far-reaching socioeconomic and societal change.Footnote 203
Such a new socioeconomic order could take the form of the model we proposed in our earlier work and on which this book itself builds further.
The question becomes whether this will ever be possible, or whether, crisis after crisis, the forces of capitalism will remain sufficiently resilient to continue their devastating impact on Earth and its humanity, in a largely undisturbed manner.
Notes
- 1.
- 2.
Cf. Galbraith (1967), p. 109.
- 3.
Cf. also Byttebier (2015a), pp. 163–175.
- 4.
On this subject, cf. the insights of Rousseau, in his work ‘Discours sur l’origine et les fondements de l’inégalité parmie les hommes’ (1754), in which Rousseau stated the following:
The true founder of bourgeois society: that was the one who was the first to fence a piece of land and dared to say ‘This is mine,” and struck gullible people who believed him. How many crimes, wars, massacres, misery and horrors would have been spared the human race, if someone had torn out the stakes or closed the ditch at that time and shouted to his fellow men “Don’t listen to this impostor, you are lost if you forget that the fruits of the earth belong to everyone and the earth belongs to no one!” But apparently, by then, societal development had reached a point where things could no longer remain as they were. (Cf. Beaud (1994), pp. 72–73, for a Dutch version of this quote.)
In French, this passus reads as follows:
Le premier qui, ayant enclos un terrain, s’avisa de dire: « Ceci est à moi », et trouva des gens assez simples pour le croire, fut le vrai fondateur de la société civile. Que de crimes, de guerres, de meurtres, que de misères et d’horreurs n’eût point épargnés au genre humain celui qui, arrachant les pieux ou comblant le fossé, eût crié à ses semblables: « Gardez-vous d’écouter cet imposteur; vous êtes perdus, si vous oubliez que les fruits sont à tous, et que la terre n’est à personne. » Mais il y a grande apparence, qu’alors les choses en étaient déjà venues au point de ne pouvoir plus durer comme elles étaient. (Cf. Rousseau (1971), p. 205. Cf. also Rousseau (2012).)
- 5.
These would later in the history of the West become the ruling classes of nobility and clergy, until, especially then in the nineteenth century, they themselves would be replaced by a new ruling class, namely the one of entrepreneurs and bankers.
- 6.
What is meant is trade in which it is not a producer who sells his goods to a user, but where such sale is accomplished by intermediaries who are not themselves the producers or consumers of the products traded. It is with the breakthrough of this type of trade that the pursuit of profit started to become a central, societal value. As a result, the merchant sector was also among the first, parasitic groups within societies, whose importance has since then steadily increased.
- 7.
Cf., for example, the Biblical story of Abraham (Gen. 12–25), the (mythical) progenitor of the nation of Israel. This story offers an illustration – historically accurate or not – of how an entire nation grew out of one family/tribe.
- 8.
One of the classic masterpieces of global, religious literature, the Mahabaratha, recalls in its appellation the great past of India. Translated, the word means something along the lines of ‘the great, Indian Empire’.
- 9.
- 10.
Plato (2000).
- 11.
Plato (1987), p. 306.
- 12.
It should also surprise no one that fervent supporters of neoliberal thought, for example authors such as Yaron Brook and Don Watkins—who, in a study devoted to Ayn Rand’s thought good, testify to the extreme degree of moral decay to which economic neoliberalism bears witness—have not shied away from completely reversing the scale of values on which Plato’s aforementioned statement is based, where, in a completely opposite sense, they have stated:
In Plato’s Republic, Socrates declares “the more men value moneymaking, the less they value virtue.” Rand’s view is exactly the opposite. The value of virtues is its role in promoting your own welfare - including your economic welfare. The more men value money making, the more they value virtue. (Cf. Brook and Watkins (2012), p. 77.)
This at the same time echoes the message of Calvinism. (Cf. below, Sect. 7.1.1.2.6.)
- 13.
It is mainly right-wing America that likes to label the United States of America as a Christian country, even though right-wing thinking there is virtually completely opposite to the scale of values proclaimed in the Gospel of Jesus Christ.
- 14.
Cuvelier (1990), pp. 129–130.
- 15.
Lk., 10: 25–37.
- 16.
Mt., 6: 24; Lk., 16:13.
- 17.
This evolution is depicted in a very illustrative way (by means of a great multitude of detailed maps) in Freitag (1960).
Regarding the spread of Christianity from the middle of the third century, cf. also Fox (1988), pp. 267–335. Besides in Europe, Christianity in its early days would spread to other parts of the world as well, such as parts of Africa, the Middle East and Asia.
- 18.
Cf. Byttebier (2015a), pp. 115–136, and Byttebier (2017), pp. 115–145.
Support for the interest prohibition could be found in certain text parts of the New Testament itself. (Cf. Cuvelier (1990), p. 129. Compare Mt. 5: 42; Lk. 6: 30–34.) Not only did Jesus Christ side against interest levying, but even against credit as such. Jesus Christ thereby expressed the expectation that whoever is rich would give away their money selflessly to the needy, without any expectation of repayment, or any other form of reciprocity, whatsoever.
It should also be borne in mind that this prohibition of interest was not promulgated by a central authority in the modern sense of the word. Rather, the ecclesiastical prohibition of interest took shape in lectures and writings of church fathers, in decisions of councils and, later in history, in edicts of worldly rulers, all of which in their own way were considered authoritative with respect to Christian believers. (Cf., for further details, Byttebier (2015a), pp. 115–136 and Byttebier (2017), pp. 115–145.)
- 19.
Indeed, anyone who has ever walked into the Vatican—alongside numerous cathedrals, churches and other impressive, ecclesiastical buildings–, and seen the immeasurable wealth of treasures on display there, can but wonder how this relates to Jesus Christ’s words from the Sermon on the Mount, namely, not to amass treasures on earth, whereby one can moreover only guess at the undoubtedly gigantic extent of the other forms of wealth and property (e.g., large land holdings all over the world), which the Catholic Church (among other Christian churches) has appropriated over the centuries. To this it may be added, for the sake of completeness, that, notwithstanding the success of the Catholic Church, thus considered, seems to have gone hand in hand with a loss of the most essential ideals of Jesus Christ Himself, nevertheless, within this Church, communities have emerged in which attempts have been made to give a more correct interpretation to the evangelical ideal of poverty, an aspiration that has very much characterized, for example, the attitude to life of St. Francis of Assisi and his followers, the Franciscan monks—and shortly thereafter, the Clares Sisters.
- 20.
The importance of this is impossible to underestimate, even raising as a question whether capitalism does not owe its breakthrough much more to this ever-increasing tolerance of wealth accumulation in the realm of ideas—first in Protestantism, and later in rationalism—than to the advance of new technologies that have the industrial upheaval of the nineteenth century to their credit.
- 21.
Even within traditional, feudal societies, there had been artisans who provided certain forms of specialized production that could not be left to the average serfs (who were essentially peasants). It concerned professional artisans who focused on the manufacture of well-defined products (as opposed to the average serfs, who generally were peasants who also practiced certain forms of cottage industry). The former, professional artisans were generally dependent on the king, the church, or other large landowners. They usually also were employed on a domain, in a place that belonged to the feudal lord. Thus, an important feudal lord could employ various, specialized artisans, such as leather workers and gunsmiths, but also netmakers, wagon builders, shield makers, fishermen, beekeepers, soap sifters, horse breeders, brewers, and millers. (Cf. van der Tuuk (2021), p. 26.) Certain abbeys themselves even grew into true centers of industry, where the craftsmen were employed in a central building, allowing great control over their work. (Cf. van der Tuuk (2021), p. 27.) Here the comparison with (later) capitalist factories was not far off.
- 22.
This implied, in other words, the breakthrough of another peculiarity of capitalism, namely that capitalism relies on a model of employment of large sections of the population by a small group of (what we can describe in modern terms as) entrepreneurs. Since Marx and Engels, it has been argued that this model of employment amounts to a model of exploitation (cf. Marx and Engels (2021), p. 33).
- 23.
- 24.
Duplessis (1997), p. 28.
- 25.
- 26.
Duplessis (1997), p. 138.
- 27.
Duplessis (1997), p. 141.
- 28.
Duplessis (1997), p. 141.
- 29.
Duplessis (1997), p. 143.
- 30.
Kruithof (1986), pp. 35–36.
- 31.
How subtle Calvin’s mode of reasoning has been, can be nicely illustrated by the following passus:
Nevertheless: (material) goods are desirable. By doing good works, they are obtained. No doubt this thought inflames the zeal to do good works. It is right, then, that Scripture holds out to us these earthly goods, and piously encourages us to acquire them. It is only for the children of God to be allowed to receive these good gifts from the good God and Father, in the way the Scriptures promise. There is in these promises, moreover, the promise of eternal life, which is destined for the children of God. For them, these temporal benefits are also a proof that God has called them to eternal goods. How could the Father, who in His paternal lordship so generously makes these perishable goods available, (…) if not to bestow upon His children as their own, the eternal goods.
(Own free translation of a text attributed to Calvin, as quoted by de Kroon (1991), p. 71.)
Or, put another way, in Calvinism, wealth acquisition started to be considered in the favor of God. (Cf. Sect. 7.1.1.2.3.)
What cannot be read in the passus, however, is how this relates to the gospel texts that exhort just the opposite behavior. (Cf. in Sect. 7.1.1.2.3.)
In any case, the unusually sharp contrast between this Calvinist approach and, for example, Franciscan thought, is striking. Indeed, in the order rules of the Franciscan monks, for example, one can read that
those brothers to whom the Lord has given the grace to labor, (...) must labor faithfully and devotedly for God, and in such a way that they exclude idleness, the enemy of the soul (...). As labor they may take for themselves, and their brethren, what is necessary for the body, except coins and money. (2 RegMB 5.)
And further,
The brethren may not appropriate anything, neither house nor abode, nor anything else. And as ‘pilgrims and strangers’ (1 Pet 2, 11) in this world, as people serving the Lord in poverty and humility, they may well go and ask for alms. They should not be ashamed, for the Lord has made Himself poor for us in this world. Therein precisely lies the loftiness of the supreme poverty. (2 RegMB 6). (Cf. these order rules, as quoted in Dutch by Blijlevens (2018), pp. 86–87, which we have here freely translated ourselves.)
- 32.
Kruithof (1986), p. 48.
- 33.
McGrath (1994), pp. 291–292.
- 34.
McGrath (1994), p. 300.
- 35.
Kruithof (1986), p. 71. This same discord can be found among many an entrepreneur working in today’s neoliberal economies.
- 36.
Kruithof (1986), p. 33.
- 37.
Kruithof (1986), p. 34.
- 38.
- 39.
McGrath (1994), pp. 299–300.
A variant of this approach constitutes the late Margaret Thatcher’s statement in which she labeled poverty as the result of a personality disorder. Specifically, in an interview with the Catholic Herald in December 1978, Margaret Thatcher stated
(…) there may be poverty because people don’t know how to budget, don’t know how to spend their earnings, but now you are left with the really hard fundamental character – personality defect.) (Cf. Hightower (2017).)
- 40.
Regarding the rise of the guild system from the tenth century onward, cf. Nicholas (1997), pp. 129–140.
- 41.
Kruithof (1986), p. 12.
- 42.
Compare also Utsa Patnaik’s observations regarding the practices of the English East Indian Company in colonial India (Cf. Section 3.1.2.1.2.).
- 43.
Notestein (1954), p. 250.
- 44.
Notestein (1954), p. 250.
- 45.
Notestein (1954), p. 251.
- 46.
Notestein (1954), pp. 251–252.
- 47.
Cf. Ricardo’s Iron Law of the Wages. (On this, cf. Galbraith (1987), p. 84.)
- 48.
For the sake of completeness, it may be added that, where in modern times this capitalist principle still prevails, it has been moderated somewhat by the realization that (at least in the Western world) the laboring classes must be left with a sufficient wage for the purchase of the products produced by the capitalist machinery—with the proviso, however, that these wages must not enable the laboring classes to engage in wealth accumulation of their own, as this would allow them to evade enlistment (as workers) in the capitalist machinery itself. In contrast, in developing countries, the Iron Law of the Wages, regretfully, still applies to its fullest extent. (Cf., already, the figures quoted in Sect. 3.3.)
- 49.
Kruithof (1986), p. 36.
- 50.
Kruithof (1986), pp. 36–37.
- 51.
Cf., for example, Brook and Watkins (2012), p. 77.
- 52.
Cf., for example, Noel Ray’s research (Cf. Ray (2018).)
- 53.
Cf. Byttebier (2015a), p. 137.
- 54.
- 55.
This school of economic liberalism differs from the later school of economic neoliberalism, which itself, from its inception, relied much more on collaborations between economists.
- 56.
Cf. Fromm (1952), p. 83.
- 57.
Cf. in Book I, Chapter II, Paragraph 2 of Adam Smith’s most famous work, The Wealth of Nations:
It is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. Nobody but a beggar chooses to depend chiefly upon the benevolence of his fellow-citizens. Even a beggar does not depend on it entirely. The charity of well- disposed people, indeed, supplies him with all the necessaries of life which he has occasion for, it neither does nor can provide him with them as he has occasion for them. The greater part of his occasional wants are supplied in the same manner as those of other people, by treaty, by barter, and by purchase. With the money which one man gives him he purchases food. The old cloaths which another bestows upon him he exchanges for other old cloaths which suit him better, or for lodging, or for food, or for money, with which he can buy either food, cloaths, or lodging, as he has occasion. (Cf. Smith (1979), pp. 26–27.)
- 58.
In Charles Dickens’ A Christmas Carol, we find this vision of life reflected in the character of Ebenezer Scrooge. In just about everything Scrooge proclaims and does in the first pages of this book, we find a reflection of the selfish thinking on which the economic-liberal thinking of the time came to rely.
- 59.
- 60.
Presumably, this translation of the socioeconomic power of the so-called third class to the political level had already succeeded best in England, where a model of parliamentary monarchy had already been established.
- 61.
In several agricultural areas throughout Europe, including Flanders, traces of the feudal system would continue to reverberate well into the twentieth century. One example concerns the tenure system, under which a lord of a manor leased several farmsteads (and accompanying land) to farmer-tenants, with these leases being renewed from father to son. Like a feudal serf, such a farmer-tenant exploited the farm and land, however not based on giving up part of his harvest, but by paying an agreed upon rent, which immediately illustrates that also in this relationship the payment of a sum of money started to replace the earlier, feudal obligations to hand over part of a harvest in kind. To this phenomenon, by the way, we owe several masterpieces of Flemish literature, including the novel ‘Boerenpsalm’ by Felix Timmermans, in addition to several works by Ernest Claes. Boerenpsalm recounts the revenge of farmer Wortel who leases his farm from a local castle lady. In the character of farmer Coene, created by Ernest Claes, we even experience a reversal of relations, in which, through hard work, farmer Coene succeeds in buying his farm with surrounding land from the impoverished lord of the castle, soon to even become his moneylender (with all the tensions this causes).
- 62.
Already in our earlier work, we have explained how the mechanism of free contracting has, however, failed to conceive truly just societies, in part because the mechanism of free contracting does not consider prevailing real inequalities (caused by various societal factors), to which the bourgeois-liberal state model of the nineteenth century itself did not want to remedy (rather the contrary). (Cf. Byttebier (2015b), pp. 49–55, and Byttebier (2018a), pp. 49–56.)
- 63.
Byttebier (1993), p. 813.
- 64.
- 65.
Cf. the July 10, 1985, lecture by Indian philosopher and mystic Jiddu Krishnamurti, quoted earlier, which focuses on this theme. (Cf. Krishnamurti (1986), pp. 43–59.) In it, Krishnamurti focuses on the question of moral responsibility for the prevailing type of society:
Can we now, each one of us, realizing our responsibility for having brought into being this society in which we live, this monstrous, unimaginably immoral society – can each one of us live in this world, in this society, and be utterly free of disorder? (Cf. Krishnamurti (1986), p. 50.)
In his July 14, 1985, lecture (cf. Krishnamurti (1986), pp. 61–77), Krishnamurti expanded on this, pointing out that “(...) we have built this society, this monstrous, evil, immoral world (...) in which we live.” (Cf. Krishnamurti (1986), p. 66.)
- 66.
Cf. already Marx and Engels (2021), p. 33: “But whatever form it has taken, the exploitation of one part of society by another has been a component of it in all past centuries.”
- 67.
- 68.
Even luck is said provide a much more important factor for success as an entrepreneur than intelligence or hard work, a proposition that has even been demonstrated mathematically. (Cf. Solman (2018), with further references.)
- 69.
Thus, contemporary, capitalist societies perfectly reflect Plato’s doom picture outlined in Sect. 7.1.1.2.2.
- 70.
Cf. Hightower (2017).
- 71.
Moreover, it is telling that the country that has one of the best education systems—if not the best—in the world, namely Finland, has itself resolutely abandoned this model of competition, and that in countries where this competition is most central, the education sector is facing numerous fundamental problems.
- 72.
Concerning the Calvinist origins of this frame of thought, cf. Kruithof (1986), p. 49.
- 73.
After this book went to press, an interesting academic study regarding Sweden was published showing that while cognitive ability is strongly linked to higher earnings, this is only the case until the very top of the income ladder. According to this research, intelligence among the top 5% of earners within society plateaus, and even decreases slightly. These findings confirm that, regarding the top 5%, other factors than intelligence (and hence personal merit) drive extreme success, including luck, family resources (such as being born in a wealthy family and/or relying on a huge family network), personal ambition, and emotional intelligence. This also implies that the highest earners in society are by no means more intelligent, or deserving, than others. (Cf. Keuschnigg et al. (2023); Pomeroy (2023).)
As the authors of the study put it:
The empirical results lend support to our argument that cognitive ability plateaus at high levels of occupational success. Precisely in the part of the wage distribution where cognitive ability can make the biggest difference, its right tail, cognitive ability ceases to play any role. Cognitive ability plateaus around €60,000 at under a standard deviation above the mean.
And furthermore:
Recent years have seen much academic and public discussion of rising inequality (…). In debates about interventions against large wage discrepancies, a common defence of top earners is the superior merit inferred from their job-market success using human capital arguments (…). However, along an important dimension of merit—cognitive ability—we find no evidence that those with top jobs that pay extraordinary wages are more deserving than those who earn only half those wages. The main takeaway of our analysis is thus the identification, both theoretically and empirically, of two regimes of stratification in the labour market. The bulk of citizens earn normal salaries that are clearly responsive to individual cognitive capabilities. Above a threshold level of wage, cognitive-ability levels are above average but play no role in differentiating wages. (Cf. Keuschnigg et al. (2023).)
- 74.
Cf. the well-known example of Amazon. A 1997 SEC filing shows that Jackie and Mike Bezos, the parents of Jeff Bezos, invested USD 245,573 in Amazon in 1995. (Cf. Meija (2018)). For a family belonging to the lower class, such an investment would have been virtually impossible.
- 75.
According to Bill Gates himself, his success is due in large part to his parents’ network. His late mother, Mary Gates, is said to have played a crucial role in the deal that secured Microsoft’s rise to the top. Mary Gates herself was, at the time, a respected businesswoman, with many connections, including her membership on the board of the nonprofit organization ‘United Way of King County’. It was there that she met the late John Opel, then chairman of IBM, and himself also a member of the United Way board. In 1980, Microsoft itself was a small, five-year-old company, with no significant success whatsoever, but Mary Gates saw an opportunity to help her son’s fledgling company by agreeing a major deal with John Opel. Specifically, IBM wanted to hire an outside software maker to develop an operating system for its personal computer(s). Although Microsoft had already expressed interest in the project, IBM was considering many other software companies as well, including, for example, ‘Digital Research’, one of Microsoft’s main competitors. Thanks to the connection of Bill Gates’ mother, Mary Gates, IBM hired Microsoft for the job. When Microsoft got the job, it however had no operating system of its own. So, in 1981, Microsoft had to buy QDOS, an operating system developed by hardware company Seattle Computer Products, and with it developed MS-DOS, the Microsoft Disk Operating System. Microsoft licensed its MS-DOS to IBM to use as the operating system for its personal computer(s). Because the MS-DOS system was not reserved exclusively for IBM, it became one of Microsoft’s most profitable products ever. The operating system was not only used in all IBM computers of the time, but soon after became the go-to operating system for almost every personal computer on the market. (Cf. Locke (2020).) And the rest is history…
- 76.
Errol Musk, Elon Musk’s father, became the owner of a half-share in a Zambian emerald mine in the 1980s, which he used to finance a lavish lifestyle for his family of yachts, ski vacations and expensive computers. (Cf. de Wet (2018).)
- 77.
- 78.
Meyer (2021), pp. 53–55.
- 79.
’S Jongers (2022).
This author adds,
When one denies that one’s starting position partly determines one’s own success, one’s understanding of another’s starting position will diminish. Whether one then starts life with or without disadvantage no longer matters. Whereas disadvantage determines how hard you have to work to be “successful”. The danger then is that collective efforts for equal starting positions crumble. Everything then becomes personal responsibility and ‘you just have to work a little harder. Poverty then quickly becomes a consequence of own choices, not being able to handle money, or not being able to work hard. As a tunnelcrawler, you are just a bit more modest about it. Because you know what it is to start life at a great disadvantage. Just as you know that much of what you can do is not based on your own choices. The ability to work hard, the IQ you possess, the fact that you have two feet and hands and good health are not choices. But they do determine how far you can get in life. (’S Jongers (2022).) (Own free translation.)
- 80.
Jones (2022).
- 81.
Jones (2022).
- 82.
Jones (2022).
- 83.
Andrew (2022).
- 84.
Andrew (2022).
- 85.
Shaw (2022).
- 86.
Shaw gives the following example:
To become a successful professional musician or artist or writer or actor you have to have time to spend making your art and hustling to make industry connections. This is extremely difficult if you don’t come from a stable background. I can only imagine that the process of discovering your creativity, of deciding to follow your dreams and talent, of knowing it’s even a possibility, is made much easier if you have the awareness, even unconsciously, that you will ultimately be OK if it doesn’t work out. That sort of freedom allows you to try things, to take big swings and to have extra brain space and time dedicated to getting good at the thing you love. (Shaw (2022).)
- 87.
Shaw (2022).
- 88.
Cf. the overview provided by Jones (2022).
- 89.
Cf. also the research of Clauset, Arbesman and Larremore, finding “that faculty hiring follows a common and steeply hierarchical structure that reflects profound social inequality.” (Cf. Clauset et al. (2015).)
- 90.
Cf. Byttebier (2018b).
- 91.
It has appeared that in countries that have continued to practice uncorrected capitalism (and/or that have fallen back on it, to a great extent, under the impetus of economic neoliberalism), the Iron Law of the Wages keeps resorting its full effect, as a result of which employing enterprises keep striving for the lowest possible wages and the persons to be employed generally do not have much choice but to agree to this. Again, this observation affects members of the lower classes of the population to a greater extent than members of the middle or upper classes. (For an extreme illustration regarding a Belgo-Irish airline that has been often in the news in this regard, cf. Ooghe (2022). For a comparable, recent illustration regarding the United States of America, cf. Sanaito (2022).)
- 92.
This insight is strongly present in the works of Jaap Kruithof.
- 93.
This is one of the main themes in the works of Ayn Rand.
- 94.
Cf., furthermore, in Byttebier (2018a).
- 95.
In this approach—and this even amounts to a form of rebuttal that often echoes from the mouths of neoliberals when confronted with the devastating soci(et)al impact of implementing their doctrine–, even the poor in the Western world are expected to consider themselves fortunate, to the extent that poverty in various other regions of the world often implies even greater misery.
- 96.
- 97.
Erich Fromm has even observed that perceiving economic activity and profit as goals in themselves would have been as incongruous for the medieval thinker as the lack of such perception is for the contemporary (neo)liberal thinker.
- 98.
Erich Fromm has, furthermore, rightly argued that the subordination (one could safely say degradation) of (personal) life as a means to economic ends touches the foundations of capitalist production, in which the accumulation of capital has become the main, not to say only, task and goal of economic activity. In this approach, the laboring man enlisted in the capitalist production processes works for the sake of (other people’s) profit, but also, for profit that is not intended to be spent, but to be useful as new capital investment. Within classical capitalism, increased capital should in turn, still through the employment of other people’s labor, generate new profits, which in turn must be reinvested, and this circular progression should continue indefinitely (given the underlying aspiration that the economy itself should continually grow). (Cf. Fromm (1952), p. 87.)
In recent times there has been a certain reversal in this, to the extent that the current (super)rich of the planet, increasingly, spend the profits from their enterprises, on the one hand, on all kinds of luxury expenses and, on the other, park them in tax havens (instead of reinvesting them in new enterprises). (On this so-called plutonomy, cf. Sect. 3.3.2.4.)
- 99.
Domestically, this can be well observed in road work, where it is notable that it relies heavily on men of immigrant background. With that, Galbraith’s observation remains valid how much reliance is placed on certain population groups for this kind of hard and unpleasant work. Equally striking—and all feminism notwithstanding—is the absence of women in this kind of hard and unpleasant work, which may help to put feminism’s complaint about the poor treatment of women into perspective. Of course, the latter does not exclude the fact that women belonging to the low, social classes are also employed in various forms of hard and unpleasant work (for example, in the textile sector, in cleaning companies, in the care sectors…).
- 100.
For a contemporary rebuttal of this traditional approach, cf. Reich (2022).
- 101.
The term is used here in its historical meaning of adherents of the tenets of political and economic liberalism, and not in the (rather pejorative) meaning given to it in American society, where the term is used to denote adherents of more progressive ideas than those of mainstream conservative or neoliberal thought.
- 102.
Cf. already the discussion in Byttebier (2015a), pp. 165–166, with further references to Fromm’s works.
- 103.
Martin and Van Garderen (2021).
- 104.
Martin and Van Garderen (2021).
- 105.
Cf. Chen et al. (2022).
- 106.
Marcuse (1968), p. 105.
- 107.
The phrase was introduced by Herbert Marcuse. (Cf. Marcuse (1974).)
- 108.
- 109.
For a poignant illustration of this, cf. the passus above regarding parental leave (or its virtual absence in numerous countries). (Cf. Sect. 5.2.4.3.)
- 110.
The waves of inflation that, due to rising prices in food and energy, started to occur throughout the Western world as of 2021, is a clear illustration of this insight.
- 111.
Because of this, in most Western countries, neoliberal rhetoric has managed to convince large parts of the population that there is no such things as a division in classes, but that within Western democracies, everyone equally enjoys the fruits of economic prosperity.
- 112.
Cf. de Visscher (1990).
- 113.
Cf. Byttebier (2018b).
- 114.
Burrows (2017).
- 115.
Burrows (2017).
- 116.
Burrows (2017).
- 117.
Burrows (2017).
- 118.
Burrows (2017).
- 119.
Schlesinger (2021).
- 120.
Schlesinger (2021).
- 121.
Schlesinger (2021).
- 122.
- 123.
Schlesinger (2021).
- 124.
By extension, this description also applies to the average, European company, in addition to those of many other countries of the world in which the Western model of business management has been copied.
- 125.
Schlesinger (2021).
- 126.
Schlesinger (2021). As the author, herself a woman, has put it,
Office politics is another nightmare. This happens particularly between women. They will scandal and gossip about others, often undermining those whom they consider competition - generally acting as if it’s high school all over again. Who isn’t familiar with the office gossip? And I’m being kind. (Cf. Schlesinger (2021).)
Schlesinger, however, is not the only one who has pointed out the problematic nature of workplace gossip culture. Even the Forbes website warns against it:
People love gossip. Fire and Fury, of course, is celebrity gossip (a big industry), but just as in the West Wing, gossip in your own organization - in which we share damaging information about the people we work with on the down low - is incredibly divisive and damaging. We all know it’s bad but - tell the truth - we’ve all done it. Sometimes, we do it to be funny or shocking. Sometimes, we want to seem in the know. Sometimes, we’re just being mean. This is the definition of gossip (in case you’ve never looked it up): “Casual or unconstrained conversation or reports about other people, typically involving details that are not confirmed as being true.” In other words, it’s a kissing cousin to lying. (Cf. Henley (2018).)
For an academic analysis of the phenomenon of gossip, cf. Avci (2021). One of the few retrievable academic contributions in which Schlesinger’s (bold) statement finds a certain confirmation is by Laura Crothers, John Lipinski and M. Minutolo, psychologists affiliated with Duquesne University (= Crothers) and Robert Morris University (= Lipinski and Minutolo), respectively, who in their article have treated “workplace bullying” in general and, what they describe as “a specific type of bullying primarily used by women, relational aggression” in particular, in more detail. (Cf. Crothers et al. (2009).) These authors have pointed out that research over the last decade has indeed shown that women often do not openly aggress against co-workers but use their social intelligence to manipulate relationships or damage the reputation of others. Relational aggression can include behaviors that occur in female power struggles and involve a range of emotionally abusive behaviors. This includes socially aggressive behaviors such as gossiping, social exclusion, social isolation, social alienation, talking (in negative terms) about someone, and stealing from friends or romantic partners. Direct relational aggressive behavior also falls under the construct of relational aggression and is defined as using confrontational strategies to cause interpersonal harm, including not talking to or interacting with someone, deliberately ignoring someone, threatening to withdraw emotional support or friendship, and excluding someone from a group by telling them they are not welcome. (Cf. Crothers et al. (2009), p. 102.) Furthermore, the authors pointed out that although bullying appears to occur equally among men and women, women appear to use relational aggression more often as their weapon of choice to bully others. Although, according to the authors of the study, there are likely several reasons to explain women’s use of relational aggression, one plausible explanation is that such a form of aggression is not considered inconsistent with a female gender role. (Cf. Crothers et al. (2009), p. 103.)
- 127.
Schlesinger (2021).
- 128.
Bruner (2021).
- 129.
According to Rooksby, MacLeod, and Furuhashi,
the term hikikomori (derived from the verb hiki “to withdraw” and komori “to be inside”) was coined in 1998 by Japanese psychiatrist Professor Tamaki Saito. Saito chose the term to describe the many young people he saw who didn’t fit criteria for mental health diagnosis, but were nonetheless in a state of extreme, distressing withdrawal.
Rooksby, MacLeod, and Furuhashi pointed out that “hikikomori is currently viewed as a sociocultural mental health phenomenon, rather than a distinct mental illness”. According to these researchers, by October 2022, at least 1.2% of the population (around a million people) were affected, making hikikomori a significant social and health problem. As these researchers, furthermore, pointed out:
There are several core features of hikikomori. This includes the affected person being physically isolated in their home for at least six months, cut off from meaningful social relationships, with significant distress and functional impairment – such as avoiding tasks where they might have to interact with someone, or deal with basic self-care needs. Alongside physical isolation, hikikomori people show an extreme psychological detachment from the social world. Places where active social interaction is expected – such as a school or work – becomes impossible for the person. They remain socially disconnected from those around them whether they are outside their house or not. While some hikikomori people, called soto-komori, can manage some activities outside, they will rarely interact with people. Some may use the internet as a window on the world, but they often won’t interact with others. (Rooksby et al. (2022).)
- 130.
Cf. an opinion piece published in the Financial Times on September 13, 2022: “According to Gallup, about half of Americans are “quiet quitters,” which it defines as people who are “not going above and beyond at work and just meeting their job description. “(Cf. O’Connor (2022).)
In another representation of this reality, it is called that today’s younger generations (rightly) place more importance on a better work-life balance than the generations of their predecessors.
- 131.
Harter (2022).
- 132.
Harter (2022).
- 133.
UNICEF (2022).
- 134.
UNICEF (2022), p. 4.
In five rich countries, parental leave amounted to less than 10 weeks (measured in full equivalent). Leave for fathers constituted, on average, only a tenth of all parental leave. Across the group of rich countries, expectations to prioritize work led to long working hours and stress, reducing the time and energy parents can devote to their children. On average, two out of five workers in Europe found it difficult to take up their family/parental responsibilities at least several times a month. (Cf. UNICEF (2022), p. 4.)
- 135.
UNICEF (2022), p. 5.
- 136.
As mentioned, inheritance law constitutes one of the most central methods of wealth accumulation. (Cf. Sect. 2.7.)
- 137.
On this, cf. Byttebier (1993).
- 138.
Indeed, according to Adam Smith, leaving the organization of the economy, in an unregulated manner, to free initiative would automatically result in the best possible provision of services and production of goods, to the benefit of society as a whole. (Cf. footnote 11 of Chap. 1.) Anno 2022, one can only question this optimistic premise, which has since nevertheless become one of the central tenets of (neo)liberal economic thought.
- 139.
For further siting, cf. already above, Sect. 3.2.3.4.3.
- 140.
On this underlying design of the Bologna Declaration, cf. Bieber (2011).
- 141.
- 142.
To some extent, one could even conceive of the model of the modern welfare state as a (moderate) attempt to reconcile the capitalist economic system with the idea of an ideal society that seeks to enable everyone, not just the rich, to lead a dignified existence. The establishment of the model of the modern welfare state (in the period 1950 to say 1975; cf. Kruithof (1986), p. 171) could even be considered, from a historical perspective, as one of the first attempts in the (known) history of mankind to introduce a socioeconomic order in which at least part of the wealth generated by the economic system is redistributed among the broad population in a fairer way than happens under the operation of a system in which everything is left to free market forces themselves.
- 143.
In current times, even space (around Earth) has not escaped the polluting effect of capitalist economies. Indeed, according to reports by NASA from 2021, more than 27,000 debris in space, were tracked by the sensors of the U.S. Department of Defense’s global Space Surveillance Network (SSN). In fact, there is much more space debris in near-Earth space, though too small to detect, but large enough to pose a threat to manned space flights and robotic missions. Furthermore, NASA’s website mentions that the increasing amount of space debris poses a risk to spaceflight itself. (Cf. NASA (2021).)
Another recent illustration offers a recent observation that there is virtually no unpolluted rain anywhere on Earth. (Cf. Frost (2022).)
- 144.
Cf. Monbiot (2022).
- 145.
- 146.
As already mentioned above (cf. Sect. 1.2.3), the Aristotelian concept of justice is central to this estimation.
- 147.
Such bonuses are common when a company/corporation wants to encourage certain categories of staff to perform above average—for example, with a view to bringing in new customers—but, as a rule, represent only a pittance of the corporate profits realized through the efforts of the individual receiving the bonus. In contrast, the bulk of the profits realized by a company/corporation go to a few individuals only (generally the CEO and shareholders).
- 148.
The extent to which this thinking was leading in the UK government formed by Liz Truss in September 2022 speaks volumes in that regard. (Cf. Sect. 1.6.2.)
- 149.
Among others, jointly in the famous Communist Manifesto. (Cf. Marx and Engels (2021).)
- 150.
Cf. already Marcuse (1974), pp. 25–26.
- 151.
From the second half of the nineteenth century, the Catholic Church itself has also not been indulgent in demonizing the ideas of socialism and communism. This is all the more surprising to the extent that the pleas of Karl Marx and Vladimir Lenin, for instance, for more just socio-economic models of organization of society, are not so different from the Catholic Church’s own call for greater solidarity and justice in the socio-economic sphere. Presumably, the Catholic Church’s aversion to communism and socialism goes back to the extent to which the latter idea itself contributed to the laicization of Western society. The result, however, has been that the Catholic Church itself has long undermined the zeal for greater solidarity within society and helped pave the way for the extreme domination of neoliberal economic doctrines, with all its disastrous consequences.
- 152.
Cf. Spencer (2020).
In Krugman’s own words, the impact of the lobby groups of the extremely rich is itself of fundamental importance here in “propping up zombie ideas – ideas that should have been killed by contrary evidence, but instead keep shambling along, eating people’s brains.” (Cf. Krugman (2020), p. 8.)
- 153.
In so doing, the upheaval of societies set in motion at the end of the eighteenth century even responds perfectly to Orwell’s satire Animal Farm, which recounts how, after a successful revolution, a farmer who exploits the animals on his farm is expelled, albeit that soon a new class of exploiters (especially the pigs) takes power, leaving the rest of the animals in equally bad—or even worse—shape.
- 154.
Cf. Spencer (2020).
- 155.
This is not to suggest that there is any great chance that this ever will happen. On the contrary, governments in Western democracies seem to be becoming increasingly right-wing, perhaps even indicating the imminent collapse of the current model of civilization that Gaya Herrington has talked about in her previously cited work. (Cf. Herrington (2020).) On the other hand, it does not make much sense to think about alternatives than from a certain hope that they might one day pass (however vain such a hope might be).
- 156.
- 157.
- 158.
These principles should also apply to CEO and director salaries.
- 159.
Cf. Thijskens (2022).
- 160.
Patagonia (at the time) produces (produced) outdoor clothing, equipment, and accessories for all types of adventure pursuits, ranging from skiing to climbing and camping. (Cf. Ott and Gamboa (2022).)
- 161.
Ott and Gamboa (2022).
Commenting on this move, Grace Chiang Nicolette, vice president of programming and external relations at the Center for Effective Philanthropy, shared that this unusual move by the Chouinard family may provide a blueprint for business owners who want to donate their businesses to causes that are important to them. (Cf. Ott and Gamboa (2022).)
- 162.
Chouinard (2022).
- 163.
This description implies that the shares of such a company are subject to listing/trading on an (official/regulated) financial market.
- 164.
Levine (2022).
- 165.
Levine (2022).
- 166.
Levine (2022).
- 167.
Levine (2022).
- 168.
Levine (2022).
- 169.
Levine (2022).
- 170.
Such formulas of self-regulation have at the time, how could it be otherwise, been strongly advocated in neoliberal thinking as an alternative to true government regulation. In the past, however, the formula of self-regulation has proven to be of little use, for which reference can be made, by way of illustration, to the corporate governance movement, which, although it has led to interesting, academic debate, has not produced any significant force for societal change.
- 171.
Cf., in similar vein, Rhodes (2022), who has commented on this,
We live in an era in which business owners are taking over as society’s moral arbiters, using their wealth to address what they see as society’s greatest problems. Meanwhile, the wealth and number of the world’s billionaires grows, and inequality stretches society to breaking point. It is great that Chouinard is putting his company to work for the future of the planet. What is not great is how our lives and our futures are increasingly dependent on the power and generosity of the rich elite, rather than ruled by the common will of the people. As a global society, we can’t stand back and hope that future billionaires decide to give away their wealth in the service of the planet - there is far too little time left for far-fetched luxuries like that.
- 172.
As previous experience with, among other things, the corporate governance debate has demonstrated, the idea that enterprises will self-correct and come to a sufficient degree of awareness on their own accord that, for the sake of the planet and its people, doing business differently is mandated, is perhaps too illusory. Moreover, the idea that enterprises should be left on their own to accomplish the necessary changes on their own accord, constitutes an attitude that was already proclaimed by sections of big business half a century ago, notably in response to the work of the Club of Rome (including the 1972 ‘Limits to Growth’ report), but of which, half a century later, it can safely be held that this approach has had little or no effect, rather on the contrary.
- 173.
- 174.
According to the EU website, “sustainable finance” must play a key role in achieving the policy objectives under the European Green Deal and the EU’s international commitments to climate and sustainability goals. To this end, the EU has, among other things, set itself the goal of channeling private investment in the transition to a climate-neutral, climate-resilient, resource-efficient, and honorable economy, as a complement to government efforts. (Cf., for further information, https://finance.ec.europa.eu/sustainable-finance/overview-sustainable-finance_en)
- 175.
It can also already be noted that this approach focuses primarily on one of the negative consequences of capitalism, specifically environmental issues, without already advocating, for example, similar work to bring about greater socioeconomic justice.
- 176.
Cf., similarly, Monbiot (2021) who has made the following observation in this regard:
But wealth taxes strike at the heart of the issue. They should be high enough to break the spiral of accumulation and redistribute the riches accumulated by a few. They could be used to put us on an entirely different track, one that I call “private sufficiency, public luxury.” While there is not enough ecological or even physical space on Earth for everyone to enjoy private luxury, there is enough to provide everyone with public luxury: magnificent parks, hospitals, swimming pools, art galleries, tennis courts and transport systems, playgrounds and community centers. We should each have our own small domains - private sufficiency - but when we want to spread our wings, we could do so without seizing resources from other people.
In consenting to the continued destruction of our life-support systems, we accommodate the desires of the ultra-rich and the powerful corporations they control. By remaining trapped in the surface film, absorbed in frivolity and MCB, we grant them a social license to operate.—(Monbiot (2021).)
Cf. previously, in similar vein, Byttebier (2015a), pp. 291–292, and Byttebier (2017), pp. 402–409.
- 177.
An established enterprise that has gone through its growing pains is an economic agent of a different order than an individual who wishes to build a professional activity from scratch. For example, such an established enterprise will not only already have a certain market share, but will also already boast, among other things:
-
A legally elaborated structure (for example, a company/corporate form granting access to the various benefits offered by this legal form – depending on the law to which the company/corporation is subject).
-
Personnel (under contract).
-
A more or less established customer and supplier base.
-
A large degree of knowledge and professionalization.
-
…
Moreover, as an established enterprise becomes more successful, it will also increasingly become a market player that will be guided by the capitalist pursuit of profit in its main order. Needless to say, then, that money creation for the benefit of such already established enterprises, too, will (may) be different from money creation for the benefit of individuals seeking access to a professional life for the first time (to meet their basic living needs).
-
- 178.
- 179.
At that time, corporate bonds accounted for less than 8% of the total 4.95 billion euros of assets bought by the ECB under its policy of quantitative easing, most of which had been government bonds (Cf. Arnold (2022).)
- 180.
Cf. Arnold (2022). Cf. also Ballegeer (2022).
Broadly speaking, the system will proceed as follows. The basic objective is to gradually ‘decarbonize’ the corporate bond holdings held by the ECB in a manner consistent with the goals of the Paris Climate Agreement. To this end, the Eurosystem will focus its purchases on issuers with better climate performance when reinvesting the proceeds of large redemptions expected in the coming years. In doing so, the overall size of corporate bond purchases will however continue to be determined solely by monetary policy considerations and the role these purchases play in achieving the ECB’s inflation target. To operationalize this shift of corporate bond purchases to enterprises with better climate performance, a specific climate score will be calculated for each individual issuer. Actual purchases will be focused on bonds of issuers with a higher (i.e., better) climate score. The tilt of purchases is intended to improve the weighted average climate score of the holdings over time. In doing so, the improvement in the portfolio’s weighted average score will be determined as a function of a decarbonization path for corporate bond holdings consistent with the goals of the Paris Climate Agreement. The methodology of the climate score will be reviewed no later than 1 year after its entry into force and will be subject to change if warranted. In addition, the Eurosystem will use differentiated bidding in the primary market that favors issuers with a higher climate score. It will also give specific treatment to green bonds, whereby such bonds that meet a stringent identification process by the Eurosystem may also receive favorable treatment in the bidding process in the primary market. Finally, the Eurosystem will apply other differentiated measures, such as maturity limits for lower-rated issuers, to further mitigate its climate-related financial risk. (Cf. European Central Bank (2022a).)
- 181.
The backward-looking emissions sub-score is based on issuers’ past emissions. It looks at how enterprises perform compared to their peers in a specific sector and compared to all eligible bond issuers. Those that perform better get a better score. The forward-looking target sub-score is based on the targets set by issuers to reduce their greenhouse gas emissions in the future. Enterprises with more ambitious targets for reducing carbon emissions receive a better score. This encourages them to reduce their emissions. The climate disclosure sub-score is based on the assessment of issuers’ reporting of greenhouse gas emissions. Issuing institutions with high-quality information receive a better score. This is intended to encourage bond issuers to improve their climate-related disclosures. (Cf. European Central Bank (2022b).) The climate scores of issuers will affect their relative weight in the benchmark for the Eurosystem’s ongoing reinvestment purchases of corporate bonds. This will result in the purchase of more bonds from enterprises with good climate performance and fewer bonds from enterprises with poor climate performance. In addition, the Eurosystem will use the climate score to adjust its bids in the primary market in favor of issuers with better climate performance and to impose maturity restrictions on bonds of lower-rated issuers. (Cf. European Central Bank (2022b).)
- 182.
The Associated Press (2022).
Note in this regard that the ECB emphasized that its primary mandate is not environmental, but to control inflation in the euro area, a task it tries to fulfill through its interest rate policy, among other things. However, it was pointed out that in doing so, the ECB may as well pursue other goals – such as supporting the EU’s general economic policy, which includes combating climate change – provided it does not get in the way of controlling inflation. In that regard, the ECB said it would apply climate criteria only to the share of bonds in its portfolio, not to the volume of its purchases, which would continue to be determined solely by monetary policy considerations. (Cf. The Associated Press (2022).)
- 183.
- 184.
European Central Bank (2022b).
- 185.
Cf. Byttebier (2015a), pp. 292–295.
- 186.
In the classical capitalist approach (and in this of economic neoliberal thinking), there can be no question at all of making excess profits. The sole raison d’être of the capitalist enterprise is to make profits, preferably as much as possible, whereby there can be no question of acting against enterprises that would make ‘too much’ profit—a notion that used to be unthinkable in classical economic thinking.
- 187.
Cf., for example, the interview with Paul D’Hoore, in NDBG (2022). In it, Paul D’Hoore provided the following explanation:
If you want to know what the concept of excess profit means, you have to ask those who use the word: politicians. But for now, I haven’t heard anyone say specifically what it means. It is not an economic or legal concept, but it is a linguistic invention. It is also open to interpretation, because when is profit too much? This is very sensitive among the population. If everyone has to pay much more for energy, you see with members’ eyes that there are companies that make a profit from selling this product now. (Cf. NDBG (2022) – own free translation.)
- 188.
In fact, the ECB scoring system already tends in this direction.
- 189.
In the Belgian legal system, the employment of such a CEO usually takes the form of an appointment as a daily director of the company conducting the business. This daily directorship position may be held under an employment contract or under an independent service agreement. (Cf. Byttebier and Wera (2022).) Bearing in mind the principles of capitalism, even such a CEO will have to negotiate their compensation with the company/corporation that employs them, while it appears that in numerous cases companies/corporations are willing to pay such a CEO very high salaries.
- 190.
- 191.
A recent illustration forms the bonus policy within the German company Lufthansia, which made headlines in December 2022. Indeed, on December 20, 2022, it was announced that executive board members of the German airline Lufthansa would be granted several million euros in bonuses for 2021 and 2022, notwithstanding the fact that the company had only managed to survive because of pandemic-related state aid payments during these years. It was, moreover, announced that Lufthansa’s supervisory board already had approved the payments during a meeting in early December 2022. This led to criticism in the German press, where it was pointed out that the German government’s economic stabilization fund had managed to save Lufthansa from bankruptcy during the COVID-19 pandemic through a bailout package of in total 9 billion euros (USD 9.53 billion). (Cf. Reuters (2022a).) In response, the German government responded on December 21, 2022 by stating that it considered these plans of Lufthansa to pay its executive board members such huge bonuses for 2021 and 2022, despite the fact that the German airline had received state aid at the time, as in breach of their bailout agreement. (Cf. Reuters (2022b).)
- 192.
Research by American Economic Policy Institute dating to 2017 probed trends in CEO compensation using two measures of compensation. The first measure included stock options (in addition to salary, bonuses, restricted stock awards, and long-term incentive awards). According to this measure, CEOs in America’s largest companies earned an average of USD 15.6 million in compensation in 2016, or 271 times the average annual salary of the average employee. Although the CEO-to-employee pay ratio of 271 to 1 in 2016 was lower than 299 to 1 in 2014, and 286 to 1 in 2015, it was still light years beyond the 20 to 1 ratio in 1965, and the 59 to 1 ratio in 1989. As a further result, the average CEO in a large company earned on average 5.33 times the annual income of the average very highly paid employee (i.e., the employee in the top 0.1 percent). Because the decision to cash in stock options tends to fluctuate with current and potential stock market trends (since people tend to cash in their stock options when it is most advantageous to them), the study also looked at another measure of CEO compensation to get a fuller picture of trends in CEO compensation. This measure tracked the value of stock options granted and reflected the value of the options at the time they are granted. By this measure, CEO compensation increased to USD 13.0 million in 2016, from USD 12.5 million in 2015. According to both measures, CEO compensation was extremely high relative to the compensation of an average employee or even that of an employee in the top 0.1 percent, and in addition grew much faster than stock prices or corporate profits. (Cf. Mishel and Schieder (2017).)
- 193.
As regards listed companies, for example, in the EU, the Commission Recommendation of 14 December 2004 fostering an appropriate regime for the remuneration of directors of listed companies, Text with EEA relevance (2004/913/EC), OJ L 385/55 was promulgated. One of the main principles of this Recommendation is that each listed company would disclose, in a so-called remuneration statement, its remuneration policy. Such a statement should be part of a separate remuneration report and/or included in the company’s financial statements and annual report or in the notes to the financial statements. The remuneration statement should also be posted on the company’s website. (Cf. Article 3.1 Recommendation 2004/913.)
- 194.
While such a rule would certainly have its merits, it would nevertheless only make sense if the rule also covered forms of benefits other than employee compensation, whereby the rule would have to be that no one could extract from the operation of the company/corporation—for any reason whatsoever, ranging from compensation for duties as CEO, to dividends or other forms of distribution of profits—an amount greater than a certain multiple of the lowest-paid staff member (expressed in FTEs, if applicable). Such a regulation should, of course, anticipate the many circumvention techniques that this type of measure (unpopular with big business) usually encounters, such as the compartmentalization of the business organization through several companies/corporations, including foreign ones; circumvention methods through the use of foundations or trusts, and so on.
- 195.
The problem in using this formula (in the Belgian legal order) has often been that this led to systems of compartmentalization of corporate capital. As a result, the bulk of corporate profits continued to accrue to the holders of shares representing the fixed capital of such a cooperate company (CVBA), while only a trifle of the profits made accrued to the holders of shares representing the variable capital. Consequently, such use of the CV(BA) form often provided, in practice, hardly any difference than that of the ordinary capital company forms.
- 196.
In the past, the cooperative company form could boast a relative success, with even savings banks making use of this formula (which in the Belgian context even produced an appropriate, financial scandal, notably the Arcopar scandal). Today, the legal form has less success, except for example in the liberal professions sector where it provides rather an instrument of cost sharing.
- 197.
In the context of Belgian company law, a new type of securities was even invented for this purpose in the past, namely ‘profit certificates’ that a company could issue without a capital contribution.
- 198.
For further details, cf. Kruithof (1986), p. 70.
According to Kruithof, Calvinist ideology evolved over the course of the 17th and 18th centuries, eventually culminating in the period of Enlightenment. In the eighteenth century, the thinkers of rationalism supplemented, expanded, and partly changed the Calvinist view on man and the world—especially through an extensive secularization of said Calvinist ideas—without, however, affecting its basic visions. In this approach, it has even been held that Enlightenment constitutes Calvinism, worked out to its last consequences. (Cf. Kruithof (1986), p. 71.)
- 199.
This can be illustrated historically with reference to the methods of employment that began to pass through from the sixteenth century onward. For instance, it appeared that in many cases employment by the new entrepreneurial class involved forms of forced employment, to which in many cases (local) governments cooperated. In cases where no actual physical coercion was used, there was usually economic coercion, since, due to the crumbling of feudalism and increasing urbanization, for large parts of the population, there was often no other alternative to provide for their livelihood (and that of their families), than to agree to such forms of employment, usually at extremely low remunerations. The downward pressure on the compensation of such wage laborers also resulted from the ever-growing numbers of people who became dependent on such labor, combined with the absence of any form of regulation, which at the same time implied that the labor was often very temporary (e.g., daily and seasonal labor). Soon the system would become more and more organized, with the enterprises that relied on such labor themselves becoming increasingly large-scale and industrialized. This led to the creation of ghettos of workers in various parts of Europe, in which living and working conditions were often even more miserable than under the system of feudalism itself.
At an international level, the emergence of this fledgling capitalist system would be accompanied by even worse forms of exploitation, particularly through colonialism and the reintroduction of slavery from the seventeenth–eighteenth centuries. (Cf. already in Chap. 3.)
- 200.
Within this framework, for example, there was a push for the dismantling of the role of trade unions, which partly found its rationalization in the view that, in modern societies, class thinking was over (or at least should be): instead, the neoliberal credo went that modern societies rely on equity of opportunity and on great opportunities for vertical, social mobility, in other words, on the idea that within neoliberal societies, the principle of meritocracy plays.
- 201.
On this, cf. Byttebier (2018a).
- 202.
This presumably finds its origin in part in the attacks launched in the more distant past against communism, and in recent times in the similar criticisms to which socialism (in addition to similar ideologies) has been exposed from the angle of economic neoliberalism and conservative political tendencies.
- 203.
We leave open the question of whether expectations about this can be sufficiently hopeful.
When we bear in mind, for example, the way in which, in September 2022, Liz Truss’s British government was formed from the womb of lobby groups that continue to espouse economic-neoliberal ideas in the most extreme ways, there is presumably little hope for optimism. (Cf. Sect. 1.6.)
Equally disheartening is a newspaper report, dated September 23, 2022, which shows that at that time several climate activists in the United Kingdom had been on remand for months awaiting the start of their trial… (Cf. Macalister (2022).) One of them was a certain Josh Smith, a 29-year-old stonemason from Manchester, who had been on remand in HMP Peterborough for more than 2 months by the mentioned date. The date when he will appear before a court was set for February 1, 2023, meaning that at that time he will have been detained for 6 months before a court will consider his case. (Cf. Macalister (2022).)
- 204.
All links to the cited websites were operational as of December 24, 2022.
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Byttebier, K. (2024). Conceptualization and Sense of Reality of Some New, Legal Models for Conducting an Enterprise. In: Ethics of Socioeconomics. Economic and Financial Law & Policy – Shifting Insights & Values, vol 8. Springer, Cham. https://doi.org/10.1007/978-3-031-38837-8_7
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