Page last updated at 01:37 Asia/Manila, Wednesday, 16 March 2016 PH
The third sign of the times is the increased financialization of the economy. This term refers to the shift in the capitalist economy from production to finance. The revenue and profits of the financial sector have become an increasingly large proportion of the world-wide economy. Just witness how both large and small economies rise and fall with changes in the interest rate resulting from decisions of the U.S. Federal Reserve System. Here again, there are both good and bad effects. Financialization has given millions of people easier access to credit for consumption and production; sought to spread risk through derivative instruments prudently utilized; created ways to leverage capital to make it more productive; and more. The financial sector has also produced social or ethical funds allowing investors to apply their values in supporting or avoiding certain industries or certain companies. Social impact investment is becoming an increasing practice among those managing large pension funds and other accumulated savings that encourage investments in socially desirable sectors like renewable energy and other environment-friendly industries and eschew businesses that impact negatively on society such as cigarettes and casinos.
On the negative side, financialization has tended to completely commoditize businesses, reducing the meaning of this human enterprise to nothing but a price. More specifically, the financial sector has contributed to this commoditizing trend by equating the purpose of business to shareholder wealth maximization. At least up to very recently, the call to “maximize shareholder wealth” remains dominant and is the leading theory taught in many business schools (I can say that one exception is the IESE Business School in Barcelona, Spain where I was a Visiting Professor in 2007 to 2008). Along with this commoditization have come short-term mentalities under which leaders are tempted to become fixated on the upside potential for short-term success, and to downplay the consequences of excessive risk-taking and strategic failure. Especially for an emerging market like the Philippines where there is a great need for long-term investments in infrastructures and public utilities, short-termism can be a serious obstacle to the common good.
Finally, the fourth sign has to do with cultural changes which have led to increased individualism, more family breakdown and utilitarian preoccupations with self and “what is good for me.” This results in an abundance of private goods but a great scarcity of common goods like clean air and verdant forest. Business leaders increasingly focus on maximizing wealth; employees develop attitudes of entitlement; and consumers demand instant gratification at the lowest possible price. As values have become relative and rights more important than duties, the goal of serving the common good is often lost. This result of “ideological colonization” is especially destructive in many Asian societies, not only in the Philippines, where individuals are more family- and community-oriented. For example, in China where Confucian values have traditionally solidified family ties, there is an increasing trend towards narcissism and “what works for me”. This individualism has been further aggravated by the one child policy which nurtured the so-called Little Emperors, male children dotted upon by their parents and two sets of grandparents! “Rights become much more important than duties; sacrifice for a large good is no longer considered. These attitudes fuel the drive of top management to claim a disproportionate share of the wealth created, for employees to nurture an attitude of entitlement and for customers to expect instant gratification. A by-product is the cult of consumerism, the throw-away culture lamented by Pope Francis.
To counteract the negative aspects of these signs of the times, business leaders, using their good judgement, should resolve to do the following:
--Produce goods and services that meet genuine human needs and serve the common good, while taking responsibility for the social and environmental costs of production and the supply chain and distribution and watching for opportunities to serve the poor;
--Organize productive and meaningful work by recognizing the dignity of employees and their right and duty to flourish in their work (work is for the person rather than the other way around), and by structuring workplaces with subsidiarity that designs, equips and trusts employees to do their best work; and
--Use resources wisely in order to create both profit and well-being, to produce sustainable wealth and to distribute it justly (a just wage for employees, just prices for customers and suppliers, just taxes for the community, and just returns for owners).
Before seeing the mote in the eyes of politicians and public officials, people of business should first go through the process of examining their own consciences and arrive at certain action programs to avoid the evils of capitalism and truly promote the common good of society through their vocation as business leaders. “When they integrate the gifts of the spiritual life, the virtues and ethical social principles into their life and work, they may overcome the divided life and receive the grace to foster the integral development of all the stakeholders in their business organization.” For comments, my email address is email@example.com.