And What Of Capitalism?
Travelling to North Korea I was able to see one of the few countries set aside from the global market system. In part, this was artificial because of economic sanctions levelled at their ability to trade and seek investment. Importantly, it is a central pillar of their guiding ideology, that is of the ‘Juche idea’.
Juche might be described humanism on steroids, where man — forgive the non-PC definition for those who gag at this lack of gender etiquette— is at the centre of all of creation, whereby all creation depends on man’s activity.
The romantic idea of Juche essentially describes an mandate of self-reliance. It is interpreted by North Korea (through the guiding vision of their Eternal Leader) as being able to determine their future. They can stand alone.
What does this have to do with Jed Emerson’s recent book, The Purpose of Capital, if anything?
In my last entry, I wrote about how Jed had framed the book looking at a world that was by and large dominated by capitalism. North Korea appeared to be an outlier, even to China which while not a capitalist society had embraced market reforms that essentially removes ambiguity.
In the short time after I arrived in North Korea, my biggest awakening was how compatible the country was, or could be, with a world dominated by financial capitalism.
Here’s the rub: it doesn’t present a challenge to Jed’s book in any regard. If anything, it tests the central idea that Jed unpacks about Impact Investing across different forms of how systems are organised to create, value and exchange capital. The big takeaway, and the point of all of these posts, is to examine The Why behind how capital is defined, created, valued and exchanged.
The strength of Jed’s book is that it is not a ‘how to’ book full of simple definitions and formulas that someone could read to ‘hack’ Impact Investing. If anything, it is precisely the challenge to that sort of approach which has become the predeliction of would-be/wanna-be self-proclaimed social entrepreneurs and impact investors alike.
So this post is a necessary line in the sand to create some boundaries around this idea. And it is timely.
As I was reflecting on this, aware that I hadn’t posted when I had expected to, the daily broadsheet mainstream newspapers in Australia were busily writing articles about this global system dominated by financial capitalism which is a start point for Jed in his book about the purpose of capital.
Some of the headlines were as follows: (source: The Australian, 26 August 2019)
Trade war puts markets on edge
With capitalism under siege, where will it (the debate) end?
Investors nervous as trade war flares up again
Admittedly, the macroeconomic factors which are shaping the energing trade wars between US and China, and South Korea and Japan, among others including fallout from Brexit, paint a broader canvas that might fall under the domain of Impact Investing.
But does it really? How do these relate? And without being too abstract, these are the important considerations that must be challenged and wrestled with if any sense can be made of Jed’s book.
There is not a neat little perimeter of activity for all of those do-gooder impact investors to involvethemselves in which sits outside the Main Event which features the cut and thrust of capitalism.
Similarly, having now visited North Korea, despite the sanctions, and perhaps more so, considering the sanctions as a possible long-term defining feature of that economic environment, if the idea of Impact Investing is to have any real meaning in a world dominated by financial capitalism, then the same principles are almost truths that can be translated into any other system.
My mind turns to the very remote, micro villages peppered across coastlines and mountainous terrain of Papua New Guinea where I have spent time examining how to establish a working policy framework for ecotourism. Those villages mostly trade only through barter. They catch their own fish, their vegetables come from the gardens they tend too, and fruit and vegetables that grow wild in the jungle forests, their housing is built from bamboo won nearby cut using machette and assembled with considerable sweat equity. They have no roads, no electricity, no fresh drinking water other than the sky juice which falls from above. They have been on their land for hundreds, and maybe thousands of years.
They too are outside of this framework of financial capitalism. But it is the flow of capital, how it is defined, created and valued so that it can be exchanged fairly, which joins these three systems, and others, together: remote villages, Capitalism, and North Korea.
It might be fair to say that Corporate Social Responsibility has been caught short in its ability to tame or to strengthen capitalism in a way that would make it ‘sustainable’, however you might define that word.
And we come back to the same problem time and time again. BHP chief executive Andrew Mackenzie in this article found in The Australian is quoted saying “a sense of purpose enhances a company’s profitability”. He wasn’t speaking about Impact Investing, but it does come back to Jed’s treatise about the purpose of capital.
The article from Ticky Fullerton captures this is more detail:
“The proble for business, however, is that the finger of blame for all of this (instability) is pointed squarely in its direction. This surge in popularism breeds from anger over inequity, both real and perceived…. Big business is being forced to look itself in the mirror: fat cats, fat pigs, answering only to their one-eyed shareholders….
It is the investor that takes the risk, the investor that is the engine of corporate growth; ergo, the company must be responsible to shareholder first. But last week, big business in America announced it was throwing out Friedman and “shareholder first” and bringing in a more acceptable capitalism…. Their own more inclusive capitalism, particularly on diversity and carbon emissions.”
But it’s not as simple as stopping there at one paragraph to hold hands and sing kumbaya. It is complex. The article goes on to say that people from former US Treasury secretary Larry Summers, to Bernie Sanders and Elizabeth Warren point to the problems with reform in how emphasis is placed.
And that is why I found Jed Emerson’s book so refreshingly challenging to read. I had hoped to write a short review of a couple of pages, but it deserves more attention. Besides which, this idea demands more robust examination from all sides of politics and across a broad ideological spectrum.
Is capitalism broken? I don’t know if that is necessarily the right question. But Jed’s book can shed light on ways that our future could be brighter.
Its now a race against time, and this conversation is no longer a luxury for those who might want to indulge to make themselves feel self-satisfied for having doing good by doing well.
Join me for the next post as I examine the central question underpinning Jed’s book, and why this was so profound to read while I was in Pyongyang earlier this month.
You can download your own copy of Jed Emerson’s The Purpose of Capital for free here: https://www.purposeofcapital.org/the-purpose-of-capital
Feel free to read along and compare notes as I review the book through these pages. I’d be interested in your thoughts too. Welcome to the inaugural gathering of the Pyongyang Book Club!
