Is it moral to attempt ‘fixing’ income inequality by ‘fixing’ human self-interest? — ESG Series : Part 1
The ‘S’ (Social) of ESG aims to fix problems such as ‘income inequality’ rising out of capitalism as we know today, and asks for social indicators to be built into companies’ balance sheets, thus delivering a higher ESG scorecard which would then bring institutional investments into their companies.
Over the last few days, i’ve been having conversations with an ESG Consultant. I attended a Masterclass on ESG that Vipul Arora and his guru, Dr. Stuart L. Hart conducted online.
The last 45 mins or so of the 2-day Masterclass on ESG was Vipul’s presentation. He called for ‘conscientiousness’ over compliance. He reminded his Indian audience of Indian / Sanatana Dharma (Hinduism) value systems — living in harmony with nature, welfare for all living beings, etc — and drew their association with ESG’s core principles.
Since attending this Masterclass, and then my conversations with Vipul, i’ve been delving more into ESG — whether ESG is going to help transform India and bring in the necessary capital for investments, or, is it yet another neocolonialist project in the garb of environmentalism and social equity.
He has his heart in the right place and his intentions pure. I had several conversations with him on these topics. The one big irritant for me personally in these conversations has been the constant emphasis on rising income disparity in India. Coincidentally, there is a recent article by ‘Inequality Labs’ on rising income inequality in a national newspaper (https://indianexpress.com/article/opinion/columns/the-devil-is-in-the-footnote-9235068/).
The argument is that, capitalism as taught around the world is based on ‘greed’, driven by delivering value to shareholders only, that unleashes all the bad things such as income inequality. And that lowering income inequality is a noble goal that all societies including developing economies like India must practice even while they’re on the journey to becoming developed nations.
This is what i want to speak about in this post.
Greed & Capitalism
The Masterclass had a reference to this book by Dr. Hart: “Beyond Shareholder Primacy: Remaking Capitalism for a Sustainable Future” (https://www.sup.org/books/title/?id=36118). I’ve not read the book but going by the title and the introduction — “Our current Milton Friedman–style “shareholder primacy capitalism,” as taught in business schools and embraced around the world, has become dangerous for society, the climate, and the planet” — clarifies the intent of the book to a large extent.
The argument is for a more conscious capitalism. The argument is for including the costs of environment into the Balance Sheet of the company.
I am all for it. It is a moral ask. It is a call to conscious living in harmony with nature. It is a call to build companies which distribute their wealth to other stakeholders, such as employees, other than shareholders only. It is a call to Gandhian values.
Use of force or coercive methods for compliance is not Capitalism
However, is it moral for any organisation such as the UN or any corporate body, such as BlackRock, or any government to ‘dictate’ what companies must do with their profits? Is it moral for governments to define the fair share of profits that employees must get?
If governments, or groups of companies driven by social activism (read ‘ESG norms’ driven by UN) came down to such diktats — this would amount to nothing but furthering Marxist ideology of the state taking control of the profits of the business and redistributing it to those with less. This would not be capitalism any longer. First, let us be honest about that. Let’s not give fancy names like ‘representative capitalism’ and ‘conscious capitalism’ to such forced or coercive economic models.
Fixing human beings to behave better
Progressive social activists across the world want to fix human beings to behave better for delivering the most optimal social and environmental outcomes.
They believe there are no inherent causes of social evils of society such as poverty, crime, wars, etc. and that it is bad design of institutions which drive human beings to doing bad things. And therefore when you fix institutions, all social problems of human-kind will vanish. Since institutions are driven by people, they design institutions to exert control on the individual to behave better.
Interestingly, Gandhi was of the same opinion. For instance, he wanted ‘Ahimsa’ or absolute ‘non-violence’, including surrendering to violence, as a tool to bring about transformation and lasting peace in the world.
Coercion
This is what is happening with ESG norms. ESG wishes to have corporations start taking into account environmental and social factors and bring these into their balance sheet alongside measuring ‘compliance’, so that financial institutions can invest in companies with all these good (ESG) indices ticked-off.
Ofcourse, if this landscape is allowed to percolate and grow, there will be inevitable coercion of financial institutions refusing to invest in companies which do not or are incapable of bearing the cost of complying with ESG.
With his repeated threats of fasting-unto-death, Gandhi, on multiple instances coerced Hindus into stopping retaliatory violence against Muslims in Moplah in Kerala in 1921, Direct Action Day in Calcutta in 1946 and the unforgivable massacre of Hindus moving in trains from Pakistan to India in 1947. He continued this well into 1948 until he was assassinated.
Even at the cost of digression, one could comfortably draw parallels between ESG activists and Gandhi. Thomas Sowell explains how:
Man by nature is both greedy and altruistic
The conservative worldview (for the lack of a better label), including the Indian/Hindu conservative worldview, is that man is capable of both greatness and the greatest immoral behaviours. This is the nature of man. This is reality.
And hence conservatives design systems & institutions for running human societies with this reality in mind.
Man’s greed is a given. Man’s acting in their own self-interest and that of their families is taken for granted.
So instead of asking men to not acting in greed, conservatives you design systems which allow men to pursue their self-interest. And do so with freedom!
Instead of trying to change man’s inherent nature, this view attempts to determine how the moral and social benefits desired could be produced within the constraint of the ‘essential nature of man’ ~ Conflict of Visions by Dr. Thomas Sowell
The only condition is that you bring no harm to the smooth functioning of society at large and do not harm others in your pursuits of wealth or power. This is where government & ‘rule of law’ comes in.
Any attempts to curb man’s innate nature of acting in self-interest for one self for pursuit of wealth, power (or other desires and objects of desire) is deeply immoral as it leads to curbing the self-actualisation of a man and therefore the self-growth of man in his current life. Dr. Milton Friedman explains this beautifully:
There is absolutely no alternative way, so far discovered, of improving the lot of the ordinary people, that can hold a candle to the productive activities that are unleashed by free enterprise ~ Milton Friedman
Related Posts:
- Hypocrisy of ‘Income Inequality’ & ‘Climate Change’ Activism — ESG Series : Part 2 (Coming Soon)
- ESG and the Road to Serfdom : https://www.linkedin.com/pulse/esg-road-serfdom-stuart-loren
