The Academy of Management Conference in Disney World: ‘Magical Mystery Tour’ or ‘Back in the USSR’?

Walt Disney, Mickey Mouse and Cinderella Castle

Crane and Matten spent the last 5 days in Disney World Orlando. Which had nothing to do with recent fatherhood or anything like that. Who would have guessed: it was the venue of this year’s Academy of Management Annual Meeting – the biggest conference of management academics in the world, which takes place every August – in five of the Disney Hotels in Orlando.

As if this is not ironic enough, listen to the title of this year’s conference: ‘Capitalism in Question’! Whaow. Questioning capitalism in Disneyworld – for some a joke, for others hypocritical, for most of us simply absurd.

But wait a second. Once I arrived there, it took me only a few hours to think that Minnie & Mickey’s world is actually the best place to understand what is wrong with contemporary global capitalism. And, I love to add, nothing like what you would expect to be a capitalist experience; I rather had vivid deja-vu’s to my frequent visits to communist East Germany before the wall came down in 1989.

To begin with, the treatment Disney gives you as a consumer is rather dismal. I did not have a single meal where I did not had to join a long line. Even if you reserve a table, you are still kept waiting for a good half hour. Where i stayed (Coronado Springs) there was not much choice to begin with. Just one restaurant, and one snack bar. The latter had some 15 items on the food menu – but every lunch we could just chose between two types of pre-packed sandwiches. So, by and large, a pretty socialist experience. Bars closed at midnight sharp, and off it was to bed, just in the same way as you had to rush to checkpoints at midnight when visiting relatives in East Berlin back in the day.

The inefficiency was just hilarious. Even my welcome package arrived by UPS just in time on my return back to home…

The GDR claimed to be the worker’s paradise (‘Arbeiterparadies’), just about the same as Disneyland tells us everywhere that we are in the ‘Happiest Place on Earth’. Trained to be happy, wishing you a ‘magical day’ each and every second – the Disney ‘cast members’ (no workers here) have to push that message and play that role 24/7. Of course it’s mostly fake – and with dismal wages most of these actually rather nice people feel more like ‘mouse trapped’.

Slightly spooky is the extreme focus on security: tight controls and ID-ing at every (gated, of course) entrance. One colleague wanted to just walk between the different conference hotels; no such thing: all of them are heavily fenced in. He was warned that stepping off the main paths would immediately call security to the scene – so he joined the lines for the shuttle buses between hotels.

Now, I could rant on like that. The interesting question is what this all has to do with capitalism. It struck me, that at the end of the day, going to Disneyworld for five days of conferencing gives you a flavor of what it would look like if our life would be completely controlled by private corporations.

Its worth looking into the outline of the Conference to understand what we are talking about: Here is what it says:

“Three features differentiate capitalism from previous economic systems in history: (a) market competition among profit-driven firms, (b) wage employment within these firms, and (c) limited government over them.”

 If we look at (a), Disney shows what large corporations have always tried to do: Once you are lured into the resorts, life is controlled by one monopolistic corporation. That’s why ‘choice’, free competition or freedom of movement no longer exists once you are there. This experience meanwhile is rather ubiquitous, certainly in US style capitalism: fewer brands and chains control growing market shares and choice with regard to our IT software, our air travel or our means of commuting is often only symbolic. Yes, we can chose between different 30 different washing powders. But at the end of the day, it’s all the same thing.

The result is rather surprising: the actual ‘capitalist’ experience resembles life in ‘communist’ times. Of course I know that East Germany (or the Soviet block in the cold war) was more a state capitalist system, but still. Disney – once you are there – gave me snippets of a socialist experience.

Including the ‘regime critique’. How I enjoyed ranting about the place with my colleagues – in the flesh, on facebook or in other ways of making fun of the ‘jail’ in which we all felt trapped. Someone even wrote a little manifesto! Anonymously of course, Disney might share it with the NSA maybe?

It was great for the spirit. Back to the cold, free world out there, I kind of miss it already. Just in the same way ‘Ostalgie’ crept up to many of my fellow countrymen after the fall of the iron curtain…

DM

Photo by gwaar, reproduced under the Creative Commons License

The rise of Islamic politics – just another mode of global capitalism?

Ever since the Iranian revolution up until the aftermath of the Arab Spring most of us were made to believe that the advent of Islamic regimes is the ultimate rise of the common man and woman in societies previously repressed and exploited by ruthless dictators. Against entrenched élites of  crony regimes and their entourage, Islamic politics could be perceived as the overdue liberation of the impoverished masses from pseudo-nobility, military dictators or other élites, having had nothing other in mind than to line their pockets for decades and transfer their wealth to Swiss bank accounts.

It is about time to get rid of this stereotype.

Recent evidence comes from Iran, as it were the prototype of this type of regime change. Former president and revolution-veteran Ali Akbar Hashemi Rafsanjani in his attempt to re-enter political life now turns out to be a billionaire – as do many of his fellow ‘religious’ leaders. Now this may appear just a co-incidence of yet another political class not resisting the temptation once given free reign over the cookie jar.

But it is not just that: the main policies of his presidency (1989-2007) read like the script book of the Washington Consensus: liberalization of the economy, creating ‘free’ markets, privatization - Rafsanjani used the classic toolbox of what often is dubbed ‘neoliberal’ capitalism in the West. The result is rather similar, too. His policies created a new super rich upper class and made life rather tough for the vast majority of Iranians. I don’t know if there was an ‘Occupy Tehran’ camp – but the story of the 1% versus the 99% would certainly resonate there. And this after three decades of Islamic fundamentalist rule.

This in itself is surprising and widely overlooked in the Western media. The Iranian revolution, together with the more recent uprisings in the ‘Arab Spring’ of 2011, had this strong whiff of a grassroots movement, driven by the disenfranchised, poor, working class, common-man-on-the-street. Much of the rhetoric of Islamic fundamentalists – from Tehran in the 1980s to Cairo or Tunis in the 2010s – sounds like left wing, anti-establishment, people driven political movements with an eye of empowering the lower and middle classes in hitherto repressed dictatorships. In reality, nothing could be further from the truth.

The best example for understanding the way Islamic fundamentalism and a capitalist ideology can be the coziest of bedfellows comes from Turkey. Founded in 1923 on the remains of the Ottoman Empire Turkey is the oldest democracy in the Muslim world. For ten years now, the country has been ruled by Recep Tayyip Erdoğan and his Islamic Fundamentalist party AKP. The Islamic aspect – while blatantly obvious in local politics - only became more visible in Turkey’s recent conflicts with Israel in the context of support for the Palestinian state. For most of his tenure though, Erdoğan was praised in the west for his economic policies. He continued the economic policies of his predecessor Özal by reducing trade and FDI barriers, liberalizing the economy, privatizing many of the large assets of the Turkish state and creating a new class of Turkish entrepreneurs, the so-called ‘Anatolian Tiger’.

Erdoğan’s base (he won his third term by nearly 50% of the popular vote) is clearly in the poorer, underdeveloped and more backward parts of Central and Eastern Turkey and the poor, fast growing neighborhoods of Turkey’s big cities. Very much what on the surface looks like a working class movement. Conspicuously though, under Erdoğan we have also seen a systematic dismantling of worker’s rights and a trade union movement deeply rooted in the 90 year tradition of a social democratic state envisigaed by Modern Turkey’s founder Atatürk. 

While Erdoğan’s Islamic ‘projects’ – from a re-instatement of headscarves in public institutions to the recent gaffe about a ban of red lipsticks for stewardesses on Turkish Airlines – have slowly garnered some attention in the West, the anti-labor inclinations of his politics have largely been under the radar. After all, they did not differentiate him too much from most other Western capitalist economies recently. Suffice to add, that Erdoğan himself and his wider family is said to have amassed a fairytale fortune over the last decade which puts him just on par with the Ayatollahs next door.

On May 1^st (the European version of Labor Day) trade union rallies and demonstrations are common on in many larger European cities. This year though in Istanbul they were banned for the first time. The hard core of labor activists that still defied the ban and turned up on the city’s central Taksim Square were met by more than 4,000 police with water cannons, rubber bullets and oodles of tear gas, leaving many injured and hospitalized. Scenes, by the way, very much reminiscent of the way US authorities dealt with the Occupy protesters from New York to California.

But this is not just one isolated incident. In 2012, Turkish Airlines fired 300 employees who went on a strike opposing imminent legislation by the AKP targeted at further limiting rights to industrial action. In the built-up to a workout planned for May 15 this year one could read paternalistic messages from the company on large screens in every sales office of Turkish Airlines, encouraging workers to trust the company rather than the union. No wonder the strike went nowhere with the union complaining about intimidation and threats to workers.

There is a growing stream of work on this topic in the Academic world. Işık Özel , a professor at Sabancı University in Istanbul has done inspiring work on how contemporary political Islam is informed by pretty much the same mindset as modern capitalism. In one of her papers, she cites the mayor of Kayseri, one of the towns at the centre of the ‘Anatolian Tiger’: "To understand this town and its flourishing economy, one would have to read Max Weber!". In short, one can argue that much of what made Protestantism the ideological midwife of modern capitalism can now be applied to many contemporary streams of political Islam.

We lack the space here to explore this further. But one take-away is fairly obvious: political Islam and the rise of regimes predicated on its religious tenets is anything but an alternative path to oppose global capitalism. As much as the rhetoric seems to juxtapose this political movement against its arch-enemy, the United States as the ultimate capitalist system, the empirical proof on the ground points in a markedly opposite direction.

Islamic fundamentalism is not an alternative to global capitalism. It is exactly the same project, albeit under a different ideological cloak.

DM

(An edited version of this blog entry was published as an Op-Ed in The Globe and Mail on June 3, 2013)

Photo by MVI , reproduced under the Creative Commons License

Lunch at IKEA

Copyright Kai Hendry

Shopping on an empty stomach is not fun. Especially if its shopping for something a little more sophisticated, such as furniture. No wonder than IKEA, the Swedish budget furniture chain, runs restaurants in all its locations. I had a chance to check one out last Saturday. Well, that is, in the end I didn’t.

Copyright Kai Hendry

I have never eaten at IKEA but as my 11-month old baby daughter needed her food anyway, and we were just about to enter the store, we thought we might as well check it out. Nothing had prepared us though for what was going on there. There were two massive lines the size of a check in line for a intercontinental flight and I would estimate that there were at least 500 people in the restaurant. Families with kids, grandmother and dog were queuing up next to young couples or groups of teenagers, old single men as well as people in wheelchairs. It was an amazing mix.

Copyright rayb777

Given the size of the lines and the prospective waiting time we quickly folded the idea of lunch and just fed the baby with what we had with us. The IKEA lunch line though was an exciting spectacle to watch for a few minutes. The food looked actually quite good, though it was rather simple. Meat-and-two-veg seemed to be the general structure. And generous portions. It was cheap: none of the items is more than $7.99 with the legendary Meatball staple at $5.99. It also looked relatively healthy. Only two of the seven main dishes on offer contained fries or deep fried stuff; most had vegetables or salad as sides; and the pasta and crepes were even organic! No junk food this.

It is kind of funny when sitting in the restaurant of a multinational chain you suddenly get the feeling of being more in a public institution – the place looked like the hospital or school canteens of my youth or the university ‘mensa’ of my student days. The entire place had more something of an institutional air around it rather than a ‘restaurant’. Underlined by the demographics of the dining public this appeared more like a social institution than a privately run for-profit restaurant. It even reminded me a little bit of a public soup kitchen or red cross food outlets which I saw when visiting refugee camps in the aftermath of the Yugoslavian wars in the mid 1990s.

Now the peculiar thing here is that all this was not only provided by an otherwise known as a ruthless, efficient and profit driven multinational corporation. Even more, it was just because IKEA has this ultimate modern perfection of a Fordist business model with globally standardized sourcing, products, and processes that the company is able to offer this affordable food supply. I was reminded of investigations in the mid 2000s in Germany which found that IKEA had become the food supplier of choice for people on welfare and low incomes. At the time, the company already made 10% of its revenue in Germany just by food!

Matten jr. enjoyed herself at IKEA

It leaves one wondering about the status and nature of global capitalism. In some ways, IKEA represents this approach like few others. Some scholars have argued that IKEA though, shaped by the social-democratic climate of his home country Sweden represents a somewhat softer or human form of a global corporation. But just skimming the IKEA page on Wikipedia shows that the company is anything but a saint. I well remember that, when the wall came down in 1989 in Germany, some former dissidents had a funny déjà-vu when visiting their relatives in the West for the first time: they could recognize some of their friends’ IKEA furniture as items they had to assemble while being imprisoned by the regime in Eastern Germany which supplied IKEA with some of their phenomenally cheap products...

For me, the company just represents, first of all, the ascent and the degree to which private corporations shape the public and private sphere of ordinary people these days. After all, one out of ten Europeans these days is said to having been conceived in an IKEA bed. It also shows, secondly, that at least from a consumer perspective in the Global North a multinational such as IKEA contributes significantly to enhancing the standard of living and providing affordable access to basic necessities of life. But most of all, it raises some growing and unresolved questions about the status of the social sphere in a world where markets and capitalism seem to colonize every last corner of our lives. No student at my current university has access to cheap food at IKEA prices; and many of the ‘common’ folks I saw last Saturday at IKEA certainly know that taking the family out for a meal anywhere else would probably be beyond their budget. The last time I saw a meal service in a Toronto hospital it was just outright revolting junk served in a public institution. But why is it only a ruthless, self-interested multinational which provides a better alternative at that level today?

I have not doubts about the motivations of IKEA in running such a restaurant operation. I am just puzzled by the fact that the result resembles so much what traditionally looked like the public provision of these goods. This said, I am not even sure if I want to add: this should still be available for common folks, be it in schools, universities, hospitals or even worker’s canteens in companies. But I also know why IKEA can and these other players cannot provide this any more...

DM

Top three fotos reproduced under the Creative Commons License

Marx is back

Well, this headline only works if Marx was ever gone, if you know what I mean. But no, now he is literally back, and this in no less a becoming space than on the new edition of Mastercard issued by the German savings bank Sparkasse Chemnitz. And this by popular demand, no less. Customers in this East German city were asked to vote on what motive they would like to see on their credit cards – and Karl Marx won hands down!

Now, we have to be correct here. Technically, it is not Marx the philosopher who was voted in. The bank’s customer’s in Chemnitz (for 40 years under communist rule it was actually called ‘Karl-Marx-Stadt’) were given a choice of the city’s landmarks, and the humongous Karl Marx sculpture - that survived the zeal to eradicate the GDR legacy - won the competition. It is impressive; I had a chance to check it out last Christmas (see the picture below).

So here we are, Marx on a Mastercard. For many this is just hilarious, for some it’s a sad sign of how capitalism has now even commoditized and incorporated the very symbol of its critique. For me personally, Marx on a Mastercard is nothing short of a neat symbol that maybe Marx’s real contribution to the world gets slowly appreciated.

Apart from a few intellectuals who wear the brand of being a Marxist on their sleeves, after the fall of the iron curtain Marx was considered by most people as being disposed of to where he belongs: the scrap yard of history.

I am not a Marxist and my education did not give me a chance to study Marx in too much detail. The more though I become acquainted with his thinking I find that Marx today is more relevant and important than ever before. Francis Fukuyama (‘The end of history’) and all those other, mostly conservative, thinkers who gleefully touted the demise of Marx after the collapse of Communism in Eastern Europe in my view were seriously misguided. In fact I happen to believe that the true ‘Marxists’, the people who act like Marx predicted capitalism would make people to behave, are actually in the conservative end, or right wing, of the political spectrum.

An anecdote to this effect from the country of today’s Marx-tercard: in the run-up to Germany’s first election after the reunification in 1990 the opposition leader Oscar Lafontaine called the incumbent Chancellor Kohl ‘the last surviving Marxist’. Why? Kohl believed that the country could only be unified if it got a common currency immediately. Unifying a country for the political right in Germany at the time was all about creating common economic conditions. Exactly this is the core of Marx’ analysis: in a capitalist society the only dimension which governs all social relationships is the economic level. The Left at the time in Germany though saw very clearly what we know now: to unify a nation split apart for 40 years in very different circumstances a host of other policies would be more important than just the economic level.

Here is why I think the people who voted Karl Marx the Millennium’s ‘Greatest Thinker’ in a BBC poll a decade ago were bang on the money: Marx was one of – maybe even the first –political philosopher who understood that modern capitalism, if allowed to prosper and dominate, will render the economic relations between members of a society as the most important and ultimately the only bond that keeps a community together. What keeps a society together in his view are purely the economic ties between the individual actors. For us today that maybe sounds a bit trivial. But at the time of him writing this it was truly a revolutionary thesis – and the fact that we consider this to be so normal just goes to show how correct Marx’ analysis was.

Communism in some ways is a footnote to Marx’s work, I sometimes think. If ownership of the means of production (i.e. capital) is the main bond of a society, a fair society would be like one where this ownership is evenly distributed. Communism did not work because his analysis of human beings as purely economic actors of course is a bit limited. But he came to this conclusion by analyzing the then emergent system of capitalism – and in our current capitalist system we just see how right he was.

His main legacy then is still powerful and visible today though. If Marx were to rise from the dead today I would venture the guess that the places where he would find himself most well understood would be the modern business school. He would not necessarily like what he hears, but he would have no problem to get the language and rationale of the place. Just take the model of the firm as an example: business school orthodoxy still is that firms are purely economic actors and that the only way to explain and to run them is by focusing on economic relations. The core tenets of Agency Theory as the dominating theoretical framework in business schools conceptualize human beings just along these lines: little predators whose only interest in life is the maximization of their economic goals.

The fairly new areas of CSR/Business Ethics/Sustainability etc. have entered the business school agenda just because it has become so blatantly obvious that businesses have other impacts and goals – for better or for worse – than just those economic ones. But even if we look at the CSR literature – the vast majority of it is still focusing on the ‘business case’ for CSR; if you want to do a good job in an MBA class on CSR you have to sell it as a means to sell more stuff, or to reduce cost, or at least as a way to manage risks. In other words, the only ‘correct’ way to be socially responsible is when it actually makes economic sense.

So putting Marx on a Mastercard is actually not so bad a place. Ask an (illegal) immigrant in Europe or North America how important it is to have a credit card: it establishes an economic relation, for sure. But that relation is so important as it is a basis for all other aspects of being a membership in today’s society. A credit card – especially in the age of the internet – is one of the most vital links to membership in the wider community; an economic relationship which crucially shapes all the other social, political or otherwise defined relationships in society. So Karl Marx fiercely staring at us from the Mastercard of the Sparkasse Chemnitz maybe just wants to tell us: ‘I told you so!’

DM

Why Occupy Wall Street should occupy corporate leaders' minds

This weekend, the Occupy Wall Street protest will go global. Protests, marches and occupations are planned across the world, with almost a thousand events across every continent scheduled to go ahead on October 15th. Here in Toronto, the financial district around Bay Street is preparing for an occupation that has so far garnered more than 9000 followers on Facebook. In London, social media sites have registered more than 15000 followers for the planned occupation of the London Stock Exchange. Similar smaller scale events are in the offing from everywhere from Alaska to Auckland. Whatever the success of these protests, it is remarkable the speed at which a local event in New York which was hardly reported on two weeks ago, has now been turned into a global movement.

Although the range of issues and demands of the Occupy Wall Street campaign and its various international incarnations are many and diverse, they share a strong single point of focus. The financial sector is very much the villain here. This is in some contrast to the movement that the current events most parallel, the anti-globalization protests that took to the streets in late 1990s and early 2000s, exemplified best by the Battle in Seattle in 1999. At that time, although many of the issues were the same as those receiving attention now, the main point of focus was international finance and trade organizations such as the WTO and the IMF, and meetings of political leaders such as the G8 were major targets. Now, by occupying the financial centers of major cities, the focus is much tighter. The financial sector is public enemy no.1.

In many respects, this is not too surprising. Economies across much of the developed world have been in a constant state of crisis for the past three years. Austerity measures are biting hard. Unemployment is up. And a significant proportion of society feels excluded, exploited, and ready for an alternative. The financial sector is an obvious target because it is here that the systemic risks have been created, and it is here that so much of taxpayers money has ended up, shoring up institutions that are too big to fail. When these same organizations continue to post substantial profits, pay out huge bonuses and generally carry on as before, it is fairly predictable that they will become the focus of so much public ire.

Much of the initial response to Occupy Wall Street has been dismissive. The financial sector, which must be getting quite used to being the bad guy these days, has hardly raised a murmur in response. As of yet, we haven't seen a single press release on the events from major financial services organizations such as Bank of America, Barclays, Citigroup, Goldman Sachs, HSBC, or anyone else. Don't business leaders have anything to say about what's going on?  Don't they want to be part of the conversation? Or are they just so concerned that anything they say will just be ridiculed by the protesters, or simply set them up as even more of a fall guy, that they are fearful of trying to put their position across in public?

But big business, and big finance in particular, needs to take this seriously. Here's why.

First, because governments are looking to be responsive and populist, especially with elections around the corner in the US. That could mean tighter controls, less freedom and more regulation. As even Dominic Barton of McKinsey made clear in the Harvard Business Review earlier this year, "Business leaders face a choice: They can reform the system, or watch as the government exerts control ... there is growing concern that if the fundamental issues revealed in the crisis remain unaddressed and the system fails again, the social contract between the capitalist system and the citizenry may truly rupture, with unpredictable but severely damaging results." Better regulation might fix some of these problems, but knee-jerk regulation, borne of anti-corporate prejudice is not going to be the best fix for the capitalist system, and not necessarily the one that we need.

Second, because the protests create a great opportunity for collective action on the part of business. Problems of financial risk, executive pay and corporate lobbying aren't going to be fixed by individual company initiatives, or even by national government regulation. If one firm or one country reduces its attractiveness by, for example, controlling pay, then talent will likely migrate to more rewarding shores. If one company puts a limit on government influence, then the attention of policy makers will simply be taken up by its competitors. That's the savage logic of the global marketplace. The best recipe for meaningful change is collective action across an entire industry. Like a financial sector executive pay protocol. Or a banking industry code of practice on political influence. But to be effective these would need to include government and civil society participation and include effective monitoring and sanctions across borders. No one is pretending this wouldn't require a huge effort. But crises of trust, like the current protests, could be the context that is needed for collective action such as this to arise and prosper.

Third, because these protests clearly signal that for some proportion of the population, all the money, time and effort expended on CSR simply isn't working. And spending more isn't going to make a difference. These people are looking for a change in the system, in the rules that govern business and it's relationship with government.They're looking for more accountability, less political influence, and if their demands are for better corporate citizenship, they mean the kind of citizenship where you pay your fair share of taxes and don't just simply offshore when it suits you. This requires a very different approach to CSR than the one now predominant in the corporate sector. It means fixing attention on how to devise better rules, not how to behave better within the existing rules.

The challenge here, clearly, is a big one. Perhaps then it is no surprise that corporate leaders have been content so far to just cover their ears and hope it all blows over. But there are fundamental issues that need addressing at the heart of our model of global capitalism. Occupying Wall Street, Bay Street, or the City of London may not be any kind of solution, but that does not mean it should just be dismissed either. Business leaders would be foolish not to see this as an opportunity to create an improved system of capitalism that serves us all better.

Photo by david_shankbone. Reproduced under Creative Commons licence 

CSR – It is still Greek to European Banks!

Yesterday, Greek Prime Minister George Papandreou narrowly won the support of the Greek parliament for his ongoing efforts to steer the country away from bankruptcy. Whether this has given him a second political life though is an open question. Greece’s financial troubles are far from over.

As a member the EU and the Eurozone the survival of Greece within these European institutions seems still anything but certain. Last week, the debate among European heads of state and Finance Ministers on further support for Greece was tough and controversial. Finally an agreement of another multi billion Euro cash injection from mostly France and Germany paved the way for keeping Greece floating for another month or so.

A thorny nettle of disagreement between the countries was the question, in how far private sector banks should be part of the solution. Germany, whose banks exposure of some €20bn is much lower than France’s was insisting on more involvement, while France opposed this approach in fear of a downgrading of their private banks by rating agencies. The compromise turned out to appeal to banks to ‘voluntarily’ become involved – but precious little is found in the news about whether banks have actually taken up this ‘invitation’.

If we watch the footage of protests and civil unrest in Greece it is conceivable that further ‘austerity’ measures (i.e. cutting public services) – let alone an outright bankruptcy – of the Greek government will pose a serious threat to the country’s democratic institutions. Much (admittedly not all) of Greece’s current troubles are following the global financial crisis. Greece is perhaps the most visible example of what many citizens in North America and Europe think: that Governments pile up huge debts to fix the irresponsible behaviour of wealthy bankers and investors while asking the common taxpayer and middle/working class people to put up with reduced public services or – as for instance in the case of UK university students – higher prices for those services.

It reflects a recent debate in the CSR literature which was initiated by Colin Crouch, a prominent sociologist and, more recently, CSR expert at Warwick University. He argues that capitalism has been able to coexist with democracy in most Western countries only because there were mechanisms to deal with two problems inherent in capitalist market economies: first, the cyclical ups and downs of the economy, which exposes particularly middle and lower income groups to economic hardship. Second, the harmonious coexistence of both systems is only possible if the inherent inequality of income distribution in capitalist systems can be addressed in a way that some income at the top end is redistributed to those at the bottom.

For decades after World War II the mechanism to address this problem was referred to as Keynesianism. Government spending during recession as well as progressive taxation and a welfare state helped addressing these two problems. This system was somewhat obliterated in the 1980s with policies most visibly linked to Reagan and Thatcher, often referred to as ‘neo-liberalism’. Crouch though argues that those changes in fact created a policy regime of ‘privatized Keynesianism’. By encouraging and extending home ownership, pension plans based on investments in capital markets and other models of making the saving middle class to small scale investors, the two inherent contradictions between capitalism and democracy were basically to turn lower income citizens in ‘mini capitalists’.

With the so-called ‘financial crisis’ in the late 2000s though this system has proven to be no longer effective. Many lower and middle income citizens in Western countries have lost their homes and pensions – or at least have suffered a severe reduction of their value. Currently, he suggests, we see this mechanism of ‘privatized Keynesianism’ weakened, if not absent, with no real alternatives in sight.

In this situation we face two stark options. The first possibility is that similar to the 1920s and early 1930s, this absence of a mediating policy regime may give rise to political extremism, anti-democratic movements or outright the re-invigoration of fascism or left wing authoritarianism. In this light, the developments in Greece, but also the ongoing rise of the political extreme right in many European countries and the United States actually get quite a daunting character. We are not quite there yet, but the signs of far reaching unrest and despair about the effects of a global, largely unregulated capitalist system are clearly there and by all accounts, are likely to rise.

The other option though, in Crouch’s argument, is that one group among the winners of global capitalism and arguably the most powerful players step into the role of addressing the two inherent tensions between capitalism and democracy. This is exactly the point where corporate social responsibility would kick in. And in fact, as we have argued elsewhere, much of what companies are doing under the label of CSR is in fact very similar to classic welfare state activities. CSR in this perspective would see private corporations as pivotal actors in addressing those two inherent tensions between capitalism and democracy.

The reaction of European banks to support the effort of saving Greece from bankruptcy so far however shows little sign of awareness of this broader context for corporate responsibility. The Greek bailout situation is probably a blatant example of a country at the brink of severe political unrest where direct involvement of the private sector might indeed prevent a country sliding into anarchy or political extremism. So far though there are no signs that any of the European banks have seriously thought about their broader role in society. Maybe it is because the business case for this kind of CSR is so hard to make...

Picture by PIAZZA del POPOLO. Reproduced under Creative Commons Licence.