Monday, October 26, 2009

The New Co-op Capitalism

by Noreena Hertz

February 23, 2009 | 6:09am

The first full crisis of globalization means the start of a kinder, more selfless economic system.

There are some who say this current global financial recession, this recession/depression that is being felt in London and New York, in Shanghai and Sao Paolo, will not have an impact on the nature of capitalism. That five years from now, well, capitalism will basically look like it did six months ago.

I understand this caution about predicting anything new, a reluctance to call the past era one of capitalism’s demise. But I do not agree with it. I believe the conditions are in place for a markedly different economic model to emerge from the carnage this economic crisis has wrought.

Under Gucci Capitalism, mandating corporations to do things for a greater public good was rare. Under Co-op Capitalism, mandates rather than voluntary measures will increasingly be the norm.

For what we are seeing today is not just a variant of the Russian crisis, the dot-com crisis, the Japanese crisis. This first full crisis of globalization, this first collective lose-lose, this first blue- and white- and multicolor-collared recession is so profound, is going to negatively affect so many people all over the world, is so obviously a manifestation of what happens when private institutions are allowed to put their profits before all else, and is so obviously linked to the flawed doctrine of the past 30 years, that to navigate it successfully will, I believe, demand a different operating environment.

I have named the past era of capitalism, Gucci Capitalism. It was an ideology born in the mid-1980s—the love child of Ronald Reagan and Margaret Thatcher, with Milton Friedman its fairy godfather and Bernard Madoff its poster boy. An era whose fundamental assumptions were markets should be left to self-regulate, governments should be laissez-faire, and human beings are nothing more than rational utility maximizers. A time when a conspiracy of marketers, credit-card companies, banks, and advertisers fueled a particular narrative—that it was less shameful to be in debt than not to have the latest pair of Nike sneakers or Gucci handbag.

No wonder, with this its underlying ethos, regulators were too weak, bankers too powerful, checks and balances were not in place, whistleblowers ignored. No wonder, with this the driving force in society, it wasn’t a matter of if but when the whole pack of cards would come tumbling down. Gucci Capitalism was as lacking in real values as its name suggests. Unsurprisingly, it is now under attack from both left and right. Even one of its most prominent cheerleaders, Alan Greenspan, claims to have been blinded by its ideology. But attacks of self-awareness can be short-lived. Is there enough evidence to point to the emergence of a significantly different alternative economic model?

I believe there is, that the conditions are in place for a new form of capitalism to arise from the debris of the past: Co-op Capitalism, with values of cooperation, collaboration, and collective interest at its core.

There are five key reasons why I believe this is so.

First, the public is angry and the media is on its side. While initially this anger was directed at bankers, it will soon shift to big business more generally, at companies that pay their executives millions of dollars while laying off workers. At companies that are still recording significant profits and are unwilling to share any of that bounty with those of their customers who are finding life tough. At investors who take over companies with little of their own monies by pledging the companies’ own pension funds, and then walk away with impunity when the company files for Chapter 11. We are already seeing a rise in public protest in the form of demonstrations and web-based campaigns and boycotts. Anticipate more of this in the coming months unless political and business leaders make explicit that they are on the public’s side.

Second, there is now a mandate for government to intervene that simply was absent over the past three decades. In a recent survey conducted in the US, more than half of those polled now say the free market should not be allowed to function independently. This is a seismic shift. Again, it is banks that are the first to see the impact of this, with interventions ranging from nationalization to the capping of executive salaries. Although I don’t predict or condone such wholesale micromanagement by government of the private sector as a whole, any company that could be perceived to be acting against the public good now risks standing in the line of fire.

Obvious industries to be targeted first are the fast-food industry and Big Pharma. With health costs soaring, and governments needing to rein in expenditure, predict more pressure on fast-food companies to take responsibility for the obesity crisis and on pharmaceutical companies to deliver affordable medicines. Under Gucci Capitalism, mandating corporations to do things for a greater public good was rare. Under Co-op Capitalism, mandates rather than voluntary measures will increasingly be the norm. No wonder some of the smartest companies are pre-empting this and swiftly pledging to make necessary changes unbidden. Both PepsiCo and Mars, for example, are hurrying to shift their product mix toward healthier lines.

The third reason why the time is now ripe for a new form of capitalism is that the downside of globalization has finally been exposed. Just how quickly the financial crisis infected country after country—Taiwan is now expecting its GDP to fall 11 percent—shows us all too clearly how in an interconnected world we stand or fall together.

Under Gucci Capitalism, I felt it was always quite likely that the chances of collective fall were higher than collective ascent. That was because the only body truly protected in the international arena was business. Under the aegis of the World Trade Organization, companies could feel secure that they could sell their goods all over the globe.

While the rights of global business were well cared for under Gucci Capitalism, no comparable mechanisms were set up to address the global problems that businesses were culpable for: climate change, infringements of labor and human rights, or the negative consequences of relocating business in terms of job losses and ghost towns. Instead these were dealt with, if at all, by a patchwork of weak separate bills and bodies that lacked teeth, clout, and resources.

Discussions are already under way about the creation of a global financial-regulatory system. The financial crisis revealed the limitations of trying to regulate a global industry nationally. But this is just the beginning. If Co-op Capitalism is capitalism’s next incarnation, expect the establishment of new WTO-type global institutions or the integration of new toothsome global rules into existing bodies—this time with a mission to address the myriad problems that are generated by business and affect the general public both domestically and overseas.
Without minimizing the difficulties of bringing nations together, it is not unprecedented. It was the international cooperation fostered at Bretton Woods that stopped us from falling off a collective precipice 65 years back, while more recently the Montreal Protocol, an initiative initially resisted by the CFC industry but now ratified by 194 countries, succeeded in stopping the widening of the hole in the ozone layer.

The fourth reason why we are heading toward a new era of capitalism: A new configuration of geopolitical forces is emerging as a result of the rise of China, Brazil, and India and the emergence of the G20, a new credible, cohesive, and powerful body that demands to be heard, and has limited if any allegiance at all to Gucci Capitalism. I anticipate a period in which the intellectual and practical hegemony of Gucci Capitalism will be directly challenged. And in which voice will be horse-traded for cooperation, with limitations on CO2 emissions, for example, exchanged for greater power within such institutions as the World Bank and IMF.
Combine this with a new US administration that even before the crisis talked about spreading the wealth and is committed to a multilateral ideal, and a Continental Europe that, having been hit particularly hard by the global recession, has a strong incentive to distance itself from an ideology that it neither spawned nor ever sat that well with its inherent communitarian values, and we have all the ingredients in place for a significant ideological shift.

Fifth and finally, it is not just at an intergovernmental level that we see the signs of more cooperation. The assumption of Gucci Capitalism that we as individuals were selfish, super-individualistic beings who only cared about maximizing our wealth, salaries, and resources is proving to be more an expediency of mainstream economists than an accurate depiction of mankind.

While it is true that over the past few decades there has been a growing obsession with material worth, this may be more a case of nurture than nature. Anthropological studies show that societies that have less share more, while recent work in behavioral economics has confirmed that benevolence is not alien to human nature. So while under Gucci Capitalism there was a tendency to bowl alone, it might just not be the case that we are essentially individualistic.

More likely is that we are entering an age of pulling together, as was the case during the Great Depression and the Blitz, and that this will be one of this era’s key defining characteristics.

It’s early days to show mass manifestation of this, but there are a few things we can point to: the meteoric rise of the global “freecycle” movement, whose members give stuff away for free rather than sell their goods on eBay; or the rise in Japan of “job sharing,” where employees, rather than witnessing their colleagues’ sackings, are choosing to work fewer hours themselves to minimize the collective blow.

All are manifestations of the new Co-op Capitalism.

We are now at a most critical juncture, when leaders in business, in government, in society have a choice to make: to embrace the Co-op agenda, with its calls for multilateralism, and global institutions to protect our environment and our citizens. This agenda has a renewed idea of government as an institution whose primary allegiance is to humanity as a whole, however rich or able. And it has a renewed idea of business as a force for innovation and improving the state of the world, which needs reining in where the pursuit of profit conflicts with society’s interests, and helping out when the short-term finances for innovating for our future are not there.
Or instead we could choose a very different path: the path of naked self-interest, the path of dog-eat-dog, in which reward is decoupled from responsibility. Those leaders currently calling for economic protectionism should be clear about the consequences of such a path. If China sees its imports banned, it will be less likely to agree to concerted CO2 emissions reductions. If the UK attempts to give jobs only to British workers, its already hemorrhaging manufacturing base may find itself with nowhere to export. This is a path that treads a thin line, as history should remind us, between economic nationalism and xenophobia.

This is a critical juncture, a dangerous one even, because the stakes are so high and there’s everything to fight for.

My hope is that our leaders have sufficient vision, and we the public have sufficient ambition, to turn the wreckage before us into an opportunity to join forces to push for a more supervised, more equitable, economic system. One that tends to fair rules, social justice, and sustainability, and reconnects the economy with what is right and just. That we choose to pull together not apart to co-create a better future, and really mean it when we say yes “we” can, and put the emphasis on the “we” when that is what we say. That we choose the open-source version of capitalism, the multiplayer version in which one only wins when all parties work together in pursuit of a common good. That we choose to shop not at Gucci, but at the co-op.

Noreena Hertz is a fellow of the Judge Business School, University of Cambridge, UK, and visiting professor of globalization at Erasmus University, Netherlands. She is the author of the bestsellers The Silent Takeover and IOU: The Debt Threat.

Thursday, October 8, 2009

Restoration Harvest

OCTOBER 7, 2009, 9:30 PM

Timothy Egan, New York Times

YAKIMA, Wa. — The apples look like Christmas tree ornaments, wearing a blush of dew at first light. The grapes could have been painted on, those clusters of sweet calories in their best October color. And here and there is the smell of hops, newly freed from their climbing nets, headed for breweries bottling a taste of fall.

I drove into the Yakima Valley, an edible landscape fed by water from the ice-covered volcanoes, on a day when yet another story appeared about how our food can kill you.

The piece by Michael Moss in the Sunday New York Times told of Stephanie Smith, a 22-year-old dance instructor who is paralyzed from a food-borne illness caused by E. coli. Minnesota officials have traced her condition to a hamburger that her mother grilled for a Sunday dinner in the fall of 2007.

You look at Stephanie, and follow Moss’s trail of the burger from a splotch pattern of trimmings taken from slaughterhouses all over the hemisphere and then through the exit door of the food giant Cargill, and wonder how this diet of ours became so disconnected from simple sources.

Cargill has $116 billion in annual revenues. They deliver, in the case of frozen burgers, a product of nearly indecipherable components, from disparate origins, on a mass scale. They deliver it cheap.

A restorative of sorts is at hand this time of year. Barely 1 percent of all Americans work the land year-round as farmers, but still something in us needs a harvest. Every now and then, we have to see our food, if only to preserve the illusion that this good earth can keep us well.

The Yakima Valley is one of the nation’s most bountiful farm regions, producing cherries and peaches, apples and pears, plums and peppers, cider and good wine.

Red Delicious, which is to a fruit bowl what plastic surgery is to beauty, is still the most popular apple — a polished piece of fruit that can keep its buffed pose year-round in near-freezing warehouses, but is utterly tasteless.

Honeycrisp, which is sunshine in a marbled orb, and Gala and Fuji are all coming on, as are innumerable varieties that had nearly been lost in the joyless pursuit of the perfect apple.

In afternoon light, the vineyards are impressionistic. I tried little bunches of cabernet franc and some malbec, picked that morning, their sugars at their peak after a spell of warm days and cold nights. And the pears, just off the tree but soft enough to produce chin juice on first bite, are candy.

In the romance of an October day, all of it seems like Eden in an age of warehouse burger peril. All of it seems like it fits — sustainable and local, to use those drab words that people insist on attaching to good food from somebody you know.

But this image is somewhat illusory. The Yakima Valley is a miracle of manipulation. It would grow little but sage and scrub brush without its network of irrigation ditches and pipes, draining water off the Cascades.

And these fruit types: many of them were hatched in labs. In this valley, even a hobbyist can play Apple God with grafts of genetically superior species. That fresh-picked fruit may look as local as Mount Adams, but apples originated in Kazakhstan. The only one native to the United States is the crab apple.

Still, at harvest time, the roadsides of this valley are full of people trying to get closer to the consumer, with food that has a story behind it. Despite the travails of the Great Recession, organic fruit and vegetable sales were up 37 percent last year, showing the consumer has a similar desire to connect.

I’m not one who thinks that organic always means better. I wish the non-factory farm produce was cheaper. But as the Cargill E. coli episode proved once again, cheap food can come with a terrible price.

There are more than 70 million cases of food-borne illnesses a year in this country, resulting in 5,000 deaths. Leafy vegetables — that’s you, bundle of supermarket spinach, and you, pre-washed lettuce — are the leading culprits, outside of meats, according to a study released this week by the Center for Science in the Public Interest. Just a few years ago, bagged baby spinach was said to cause the death of three people, and severe illness in 200 others.

Fruit is less troublesome, because it hangs above soil that can contain pathogens.

How much of the danger from leafy vegetables can be blamed on the industrial model that produces cheap calories I don’t know. But as consumers follow Michael Pollan’s advice to get to know our food producers, we will learn to see the processed burger and the industrial vegetables for what they are — cheap global commodities that carry some risk.

The best antidote for such a thing is to see, touch and experience food as it comes off the fields. As imperfect as this harvest picture is, it satisfies a need that has never bred out of us as people.

Timothy Egan worked for 18 years as a writer for The New York Times, first as the Pacific Northwest correspondent, then as a national enterprise reporter. In 2006, Mr. Egan won the National Book Award for his history of people who lived through the Dust Bowl, The Worst Hard Time. In 2001, he won the Pulitzer Prize as part of a team of reporters who wrote the series How Race Is Lived in America. Mr. Egan is the author of five books, including "The Good Rain: Across Time and Terrain in the Pacific Northwest," and "Lasso the Wind, Away to the New West." He lives in Seattle.