Many world politicians, business people, academics, students and the youth, activists, and civil society representatives, including many senior religious and spiritual leaders, have all called for a new kind of “ethical capitalism”, a moral, spiritual and virtuous economy. People everywhere are calling for an international framework of standards for an equitable and sustainable global economy to replace the current economic system of unbridled growth and increasing ecological degradation.
To address some of these concerns and issues, Prof. Mariana Mazzucato writing in an article in the Guardian notes that “Talk of a more moral capitalism is just hot air unless we rehabilitate and reward the idea of value creation”. This, I believe is very important. Thus, let us see what Prof. Mazzucato means by “value” and “value creation”.
“Value creation is about reinvesting profits into areas that create new goods and services, and allow existing goods to be produced with higher quality and lower cost. Investments in human capital, skills, infrastructure, and research and development create value. If we don't get this right, we will go from one bubble to the next, talking about "morality" and "responsibility" while challenging little that threatens value extraction and the inequality it generates.” This, I very much believe too. Let us continue:
“In order to boost share prices – and the stock-based pay of executives and other large shareholders – Fortune 500 companies have spent $3 trillion in the last decade on buying back their stock. Such value extraction has funnelled money away from areas that can increase long-term growth – for example research and staff development – to areas that only increase the inequality between the 1% (whose rewards are linked to stock price movements) and the 99% (whose rewards are linked to investments in the productive economy). Value extraction is rewarded over value creation.”
“What can politicians do about all this? There is today much talk about making capitalism more "moral", "fair" or "responsible". But restraining the power of value extraction requires a theory of value – an area once hotly discussed in economics, but no longer. This is because a century ago the notion that labour creates value (central to the work of "classical" economists like David Ricardo and Karl Marx, and measured by objective factors like productivity) was replaced by the "neoclassical", subjective notion that satisfaction and "preferences" create value. What is important here is not to defend any one theory, but to understand the implications of going from one that emphasises production (value creation) to one that emphasises consumption (value extraction).
The neoclassical theory has served ideological ends, more concerned with justifying capitalism than analysing it. It became mainstream with Paul Samuelson's famous Economics textbook in 1948, which portrays the supply of labour and wages as primarily dependent on companies maximising their profits, and workers their preference for working versus leisure, in free markets.”…
Read the whole article:
http://www.guardian.co.uk/commentisfree/2013/jan/15/fairer-capitalism-bubble-value-creation
N.B- Although I very much like the views expressed in this article, I also believe that the “values” discussed are mainly only “economic values”, if I am not mistaken.
However, although economic values are surely important, nonetheless, there are also non-economic values that must very seriously be considered, as without them, no economic value can truly be valuable!
This is why I also very strongly believe that the current global crisis- like the ones before it- is a crisis of values as much as economics, finance and management, something that not many economists have shown interest to cover. Let me to highlight a bit:
Overcoming Greed, Dishonesty and Delusion: Reclaiming the Moral and Spiritual Roots of Economics
…” To conclude my observation on this topic, we should note that, as it is been remarked before, this is precisely what the “crisis of capitalism” is all about. “It is nothing less than the crisis of humanism as a religion being played out in economic life. If freedom is made an absolute, as it is for example in the writings of Milton Friedman and Friedrich Hayek, such that it is impossible on intellectual grounds to place limits on the exercise of freedom, the result is an economic system shorn of justice … both the injustice and inhumanity of capitalist societies result inevitably from the failure to assert certain absolutes and so place proper limits on the use of freedom.”
In summary, although I defend certain positive benefits of a well controlled, regulated, accountable and transparent market economy, I also maintain that there can be no civilised marketplace if the economy and business are not value-led. I will also argue that the solution to the current socio-economic global crises is not technical. It needs to be looked at again in a fresh way that will embrace human values of wisdom, morality, ethics, justice, sympathy, empathy, accountability, responsibility, trust, integrity, cooperation and the common good…
All in all, the more I observe, the more it becomes clear to me that people everywhere, all over the world, young and old, are hoping for a value-led, people- nature- centred economics, business and way of life. They want, once again, to be able to trust. They want to see integrity and respect. They want to see accountability and transparency at all levels. They want to see more equality and justice. They want a fair playing field. They want to see people with high moral compass to lead politics, economics, business, finance, and media, amongst others. They want a value-led education and healthcare system. They want to be in a situation when they are in control of their lives, where they can plan and dream about a better future. They want to be free of the fear of getting old, sick, jobless and homeless. They want to be free of the pressures of modern life, consumerism, materialism, selfishness and more. They want to see stronger family values of love, sympathy, empathy, compassion, altruism, cooperation, giving and sharing. They want more respect for the mother earth, environment and nature. They want to see no more wars of "convenience", destruction for the sake of future lucrative reconstruction contracts! And they want to see more dialogue of civilisations, religions and cultures, and more consideration for the common good.
Since the collapse of the financial, banking and economic sectors, many articles, papers and books have already been written on why such scandals took place, on what went wrong. They all agree on the role of one vital element: dishonesty fuelled by greed. We forget at our own peril that honesty and greed are essentially spiritual and moral issues. They lie within the province of religious, philosophical and spiritual considerations, which seeks to apply transcendent wisdom to the formation of moral and spiritual values. Moreover, no part of human life can operate without these values, not least the sphere of business. Genuine faith, morality and spirituality far from being a private affair, relates to the whole of life, from the chief executive to the bottom line.”…
Read the whole article: