Progressive Business

The following guest post, by Christian Olaf Christiansen, Associate Professor, University of Aarhus, Denmark is brief introduction to his new book, Progressive Business: An Intellectual History of the Role of Business in American Society. [i]

Toward a “gentler capitalism”?

Prior to the financial crisis of 2008, the view that capitalism could become more enlightened and more civilized had become widespread, at least among a group who saw themselves as business reformers: “We may just be at the beginning of an economic revolution, one that is happening quietly, gradually, and from the bottom up; one that is constantly gaining momentum, despite (or perhaps because of) its lack of revolutionary fanfare, making it more thoughtful and balanced, and thus more likely to succeed.” [ii] These were the editors’ final lines of Humanism in Business, an anthology concerned with how business can take an active role in a global context of poverty and sustainability problems. The authors ambiguously captured the theme of a “silent” revolution, a transformation of the economy already taking place, but combined with an invitation for the reader to join an evolving group of “humanists” that believe in the idea of a “life-serving economy” instead of a “profit-serving economy.”

But it is not only management and organization researchers who observed a radical transformation. Under the heading “A Gentler Capitalism,” David Callahan, a senior fellow at the left-leaning think tank Demos, wrote that the times are changing toward a gentler and more socially responsible capitalism. Referring to recent statements by America’s top business leaders, H. Lee Scott Jr., Chief Executive of Walmart, and Microsoft’s founder Bill Gates, Callahan implied that a sea change is under way, changing the role of business in society: “As more corporate leaders proclaim their commitment to social responsibility, and as politicians, unions and activists demand that they live up to this rhetoric, a new era of a gentler capitalism may truly begin”. [iii]

Statements such as these are likely to have perplexed social critics, politicians, as well as the public at large, leaving them with the impression of a radical change, not only of discourse, but of practice. The financial crisis of 2008 may have shattered the dreams and the visions of “a gentler capitalism,” but these ideas remain of great historical as well as contemporary interest. What neither of these pre-crisis observers reflected upon, however, was that these ideas of a self-reforming capitalism were reminiscent of a host of historical precedents, and that these have often been alternatives to political attempts to tame the beast of laissez-faire capitalism.

Neither state nor market: moral self-governance of business

My book Progressive Business: An Intellectual History of the Role of Business in American Society is a book about the history of ideas of moral self-governance of business. It is also a book about how these ideas have been critiqued. The “soft” rhetoric of a more socially responsible kind of capitalism is not new, and neither is it new that critics have tried to come to terms with it. Both the proponents of “capitalism with a human face” as we might call it today, as well as their critics, share something with previous generations, who were also divided between believers and skeptics of the ability of business to transform itself. At the same time, however, advocates as well as skeptics have changed their way of thinking, embedded as it is in historical context. I argue that revisiting the history of these ideas and their critics will offer historical self-understanding and help put the present in historical perspective. We may never get “behind” the soft rhetoric, but we can come to a better understanding of how it has been advocated and critiqued for the last approximately 150 years. In the book I thus set out to investigate the historical arguments for and against a set of beliefs that holds that our common problems can be solved through a gentler capitalism, that is, by invoking a new, social ethic in the minds and hearts of managers, capitalists, and entrepreneurs.

Historically, libertarians have sought to legitimize capitalism, lauding it for its ability to promote economic growth, social efficiency, and individual freedom. By contrast, radical and reformists leftists have critiqued capitalism and argued that it causes intolerable inequality, environmental destruction, and the degradation of work. Others, however, have sought to conquer a middle ground by showing that capitalism was already in a state of flux, transcending the harsh economic doctrines of narrow self-interest and of laissez-faire, and that it could become more gentle and civilized through moral self-governance of corporations and ethical business. Or in the words of historian of the institution of American business schools Rakesh Khurana: “to juxtapose hierarchy (in the form of law and regulation) and markets as the only two ways of ensuring that our capitalist system retains the confidence and trust necessary for its optimal functioning is to overlook a third possibility.” This third possibility Khurana then identified as “a broader American tradition of self-regulation in a social system that seeks to promote responsible action through a sense of shared purpose rather than through the atomized interactions of the marketplace or the centralized direction of the state,” whereafter Khurana ended his book on the moral decay of business schools since the 1980s turn to “the emerging logic of investor capitalism” calling for “a recovery of the higher aims,” that is, a rediscovery of the ultimate purpose and meaning of business so that it, again, would be capable of moral self-regulation as an alternative to the free market as well as to the hierarchical state. [iv]

An ideal-type analytical concept that captures this idea of moral self-regulation of corporations is “market reformism”. It stresses 1) internal—as opposed to external—reform; belief in private property and private control of companies, skepticism of labor unions and of the state; 2) ambivalence toward the profit motive and self-interest as superior moral principles for business/capitalism, also being critical of “economism”/free market economics; 3) capitalists/managers/corporations have a “direct” responsibility toward a variety of stakeholders in business. They also have a scope for moral agency (beyond compliance to “market laws”), and the position prefers voluntary responsibility instead of legal demands and regulations. 4) It believes in social harmony between classes (capitalists and workers), working together for common purposes. In brief, it is an ideology which believes in the self-reforming potentials of business/capitalism, fusing together economic concerns with a social ethic.

In Progressive Business I argue that “market reformism” was an important element in the historical discourse on capitalism in three, defining periods of time in US history: the late nineteenth century (c.1870–1900) which I refer to as the US’s First Great Transformation, the New Deal era (c.1935–70), and the most recent period of globalization and triumphant capitalism (c.1970–present day), which I refer to as the Second Great Transformation. In each of these periods, market reformism was offered as an alternative, third way of handling the manifold risks of industrial modernity (unemployment, sickness, degradation of work, environmental destruction). This third alternative was that businesses would morally self-regulate, and not leave the course of events to the random play of market forces, but, most certainly, neither to the strong hands of the state or labor unions.

Management discourse and the American ‘spirit of capitalism’

The book highlights figures that have received comparatively little attention in intellectual history so far, such as management writers, organizational theorists, and business ethicists. As Nils Gilman has argued, such writers have been far more influential than has hitherto been recognized. [v] In order to understand the constant renewal, survival, and manifold ideological justifications of capitalism, the intellectual histories of neoliberalism and of conservatism can be supplemented with an account of these ideas. As French sociologists Luc Boltanski and Éve Chiapello argued in their The New Spirit of Capitalism, justifications for capitalism go far beyond standard economic liberalist doctrine. According to Boltanski and Chiapello, the three central “supporting pillars” of capitalism during two centuries have been “material progress, effectiveness and efficiency in the satisfaction of needs, and a mode of social organization conducive to the exercise of economic freedom compatible with liberal political regimes.” The thing is, however, that “precisely by virtue of their very general and stable character over time, these reasons do not seem to us to be sufficient to engage ordinary people in the concrete circumstances of life, especially working life,” which is why Boltanski and Chiapello looked at management discourse. [vi] As they wrote, “management literature must […] demonstrate how the prescribed way of making profit might be desirable, interesting, exciting, innovative or commendable. It cannot stop at economic motive and incentives.” [vii] Or as Thomas Frank pointed out, management theory should not just be understood as technical advice, but as a genre which is often just as much about “a far more abstract goal: the political and social legitimacy of the corporation”. [viii] Similarly, my focal point is mostly broader appeals to the social legitimacy of capitalism and of corporations, such as when capitalism was increasingly described as being democratic, cool, revolutionary, and capable of moral self-governance in the 1990s. [ix]

Brief book overview  

Chapter 1 describes the development of market reformism and its criticisms in the context of the First Great Transformation (c.1870–1900), where the United States went through a profound transition toward capitalism, wage labor, the rise of big business, nationally integrated markets, etc. It was accompanied by various kinds of industrial unrest and uprising, the founding and institutionalization of labor unions, and the rise of the progressive movement and of the Christian Social Gospel. Several “countermovements” advocated new kinds of social protection against a pure market regime, be it in relation to workers’ salaries, the use of child labor, the length of the working day, or insurance against illness and death. At the same time, free market liberals vehemently supported free markets. Market reformism, then, offered its own kind of social protection, often revolving around individual capitalists and industrialists who should take on extra social and moral obligations for some of the risks of industrial capitalism, and who were often cast as “fathers” who watched over their enlarged “households.” In conclusion, I propose to conceptualize these ideas of business’ moral self-governance as paternalistic market reformism.

Chapter 2 shows how market reformism was reinvented in the New Deal era (c.1930–70). This period has been described elsewhere as a time of unprecedented and sustained growth, rising living standards, Keynesian economic policies, and declining levels of inequality. [x] It was a period of crisis for the ideas of laissez-faire and of free markets. [xi] Karl Polanyi, writing The Great Transformation in 1944, even thought that the time had come to an end for the utopian project of laissez-faire economics. In this sense, he turned out to be a poor prophet of history. The chapter sketches key trends of the first half of the twentieth century, which changed the context for market reformism profoundly. Most importantly, the world wars and the strengthening of political reformism in the wake of the Great Depression, along with theoretical developments within the fields of cultural anthropology and of socioeconomics, marked a new era in which free market liberalism was severely challenged. Influential proponents of the market reformism of the mid-twentieth century, such as Chester Barnard, Elton Mayo, and Peter Drucker, morally dissociated themselves from what they saw as the failed vision of nineteenth-century free market liberalism. Stressing cooperation, awareness of human relations in industry, ideas of industrial citizenship and of a new “soulful corporation,” they tried to show how market society could eliminate what had been its worst features, but could do so typically without “resorting” to the realm of politics. The idea was to civilize capitalism from within, through enlightened management. In conclusion, I have dubbed this era’s ideas of moral self-governance of corporations as managerial market reformism.

Chapter 3 shows how mid-century market reformist notions in the subsequent years were criticized from a host of different observers of widely different scientific and political orientations. Market reformist notions such as the idea of the “soulful corporation” and managers as statesmen acting in the public interest, were widely discussed issues in the struggles over American capitalism. Much was at stake for free market liberals, as well as for (among others) Marxists, in critiquing the idea. Furthermore, the chapter highlights John Kenneth Galbraith’s notion of “countervailing power,” which was to become a keynote in later critiques directed against market reformism, stressing the need for government, and for unions and other non-governmental organizations for restraining the market power of corporations.

Chapter 4 describes the new spirit of capitalism in the US in the most recent era of globalization, which I refer to as the Second Great Transformation (c.1990–2000s). It shows how capitalism and free markets were lauded in neoliberal terms for being necessary as well as supreme, creating wealth and new technologies in the most efficient manner. But besides these neoliberal arguments, there was also a discourse on capitalism which described it as being democratic, cool, revolutionary, and egalitarian. Not least, there was a new surge in the idea that capitalism was capable of moral self-governance. One result was a new thinking about markets and firms as key partners and drivers in new, creative ways of solving the world’s global problems. Many of these market reformist notions of the present, however—such as the idea of corporate social responsibility, or of creating an ethical awareness among managers—should be seen in prolongation of the continual history of struggles over the legitimacy of American capitalism. The chapter explains how this version of market reformism arose, which I propose to call entrepreneurial market reformism.

Chapter 5 describes how the triumphant, global capitalism was met by various kinds of criticisms, both from the left and from the right. There was a renewed insistence upon a social criticism of capitalism, highlighting increased economic inequality and inequality of life chances brought about during the emergence of triumphant capitalism. Furthermore, the chapter particularly highlights the critiques of the ideas of moral self-governance of corporations. Critics argue that the market reformism of today typically does not break with the fundamental principles of market self-regulation and voluntariness. Instead of offering an alternative to neoliberalism, the focus upon moral self-governance of business corporations actually supplements it. This does not necessarily mean that “in the final instance” all proponents of progressive business are just in it for the profits. But it does suggest that we need to be concerned about which institutions in society play what kind of roles and how a better society can be achieved, which again has to do with questions of democracy, representation, rights, redistribution, and much more.

In the Conclusion, I address three major issues: the Polanyian theme of social protection and the history of market reformism as a whole, the history of market reformism’s critics as a whole, and, finally, the wider analytical significance of the concept of market reformism, briefly touching upon the financial crisis as a case study.

Progressive Business tries to take a balanced account of these ideas, their history, and their critics. I argue that the ideas about ‘progressive business’ have helped legitimize business in times of crisis and critique for capitalism and for neoliberalism, and that they also – somewhat paradoxically – helped bring about the extreme uncompromising belief in free markets in the latest decades.

[i] This text is an abridged and edited version of the introduction to Progressive Business: An Intellectual History of the Role of Business in American Society.

[ii] Kimakowitz, Pirson, Amann & Khan (2009): ”Concluding observations”, in Humanism in Business, ed. Spitzeck, Pirson, Amann, Khan & Kimakowitz, Cambridge: Cambridge University Press, p. 437.

[iii] Callahan, David (2008): “A gentler Capitalism. A sea change may be afoot in how American business views its role in society”, LA times, January 31, 2008.

[iv] Khurana, Rakesh (2007): From Higher Aims to Hired Hands: The Social Transformation of American Business Schools and the Unfulfilled Promise of Management as a Profession, Princeton & Oxford: Princeton University Press.

[v] Gilman, Nils (2006): “The Prophet of Post-Fordism: Peter Drucker and the Legitimation of the Corporation”, in American Capitalism: social thought and political economy in the twentieth century, ed. Nelson Lichtenstein, Philadelphia, Pennsylvania: University of Pennsylvania Press.

[vi] Boltanski, Luc & Chiapello, Ève (2007): The New Spirit of Capitalism, London: Verso, p. 14.

[vii] Boltanski & Chiapello 2007: 58.

[viii] Frank, Thomas (2000): One Market Under God: extreme capitalism, market populism, and the end of economic democracy, New York: Random House, p. 178.

[ix] See also Frank 2000.

[x] Piketty, Thomas (2014): Capital in the Twenty-First Century, Cambridge, MA: The Belknap Press of Harvard University Press.

[xi] Judt, Tony (2010): Il Fares the Land: A Treatise on Our Present Discontents, London: Penguin Books.