The Economic Crisis and Social Responsibility

There’s so much negative news about the economy these days, it can literally be depressing to visit news websites like MSNBC, CNBC, CNN and FOX News.  The list of major financial institutions on the brink of failure — Citigroup, AIG, Royal Bank of Scotland, etc., etc. — seems to go on and on with potentially dire consequences for the entire world.    

Perhaps of more immediate concern to most of us, the financial crisis has triggered a sharp rise in job losses.  Here in North Carolina the unemployment rate in December stood at 8.7%.  We still haven’t seen the January data (the statewide unemployment rate is due out on March 11th, and the county data will be released on March 19th), but we know it’s going to be bad.  In fact, it seems possible, if not likely, that North Carolina will see double-digit unemployment statewide — the worst since the early 1980s — within a few months.  You can follow the unemployment data at the Employment Security Commission of North Carolina website

Ours is one of those “Slump Belt” or old manufacturing states, that, while not suffering so much owing to the mortgage mess, has nonetheless seen its economic base erode over the years as industries like textiles and furniture have steadily declined and moved elsewhere.  It’s a familiar refrain to virtually all of us, but that doesn’t make it any less true.

As we look to recovery from what appears to be a deepening recession, the painful truth is that much of our economic growth during these years of manufacturing decline has been in the service industry (where pay tends to be low) and a financial sector now gone bust. 

We must therefore ask:  What will restart economic growth in North Carolina, as well as the country as a whole, and fill the void left by a decline in manufacturing exacerbated by financial crisis?  In truth, I do not think there is an easy answer.  But I do think that, regardless of one’s political persuasion, President Obama’s recent call for responsibility is the first step we must all take.   

For, very clearly, one of the things at the heart of the financial crisis is simply greed:  which I will define as the pursuit of personal gain with little or no regard for its social consequences.  I do not refer here so much to a Bernie Madoff or others like him — as egregious as their sins may be — but rather to the perfectly legal, yet selfish manipulations of the financial system which free market capitalism encourages and which sometimes lead to malevolent “bubbles” like that from which we now suffer.  Proponents of laissez faire economics assume the system will regulate itself, and perhaps most of the time it does — but, and alas, human nature gets in the way. 

We thus must begin by somehow revitalizing a sense of social responsibility, with a renewed understanding that our actions have consequences for institutions, businesses, colleagues, friends, neighbors, and even sometimes — if we are powerful enough — the society as a whole.  (To clarify, by social responsibility I do not mean our collective guilt for the financial crisis, but rather our responsibilities to others when we take actions.)   

Discussion of social responsibility and the economic consequences of the lack thereof brings to my mind the film, A Beautiful Mind (book here), in which Russell Crowe’s character, the true-to-life mathematical genius John Nash, develops his theory of “governing dynamics.”

The scene is this:  One night in a bar with some of his men pals from Princeton, a group of co-eds come in.  Nash and his pals fixate upon one of them:  a beautiful blonde.  Then, in a moment of inspiration, he realizes that if they all go for the blonde they’ll just get in each other’s way; they’ll block each other, and all of her friends will give them “the cold shoulder.”  However, if they work together, and no one goes for the blonde but instead each aims for one of her friends, they’ll each get a girl.  Taking this from concrete example to abstract theory, while Adam Smith said that in competitive behavior “individual ambition served the common good,” Nash observed that Smith “was in need of revision,” for the best result comes from everyone doing what’s best for themselves and the group.

A book the library has, Adam’s Mistake:  How a Moral Philosopher Invented Economics & Ended Morality by Kenneth Lux, seems particularly pertinent to the question of Adam Smith on social responsibility.  We also have a recent title on Smith which should provide a good overview of his ideas, James Buchan’s The Authentic Adam Smith:  His Life and Ideas, as well as Smith’s classic, An Inquiry into the Nature and Causes of the Wealth of Nations.  Adam Smith, of course, is generally regarded as the father of modern economics.     

Nash, on the other hand, is recognized as one of the great mathematicians of the twentieth century for his work on “game theory.”  In addition to his biography, we also have a compilation of his ideas, The Essential John Nash, edited by Harold W. Kuhn and Sylvia Nasar; and A Beautiful Math:  John Nash, Game Theory, and the Modern Quest for a Code of Nature by Tom Siegfried.  Some other works we have on game theory include:  Co-opetition by Adam M. Brandenburger and Barry J. Nalebuff; and Rock, Paper, Scissors:  Game Theory in Everyday Life by Len Fisher.

Books on business ethics and social responsibility also seem apropos to this subject.  Our holdings include:  Responsibility at Work:  How Leading Professionals Act (or Don’t Act) Responsibly, edited by  Howard Gardner; Profit with Honor:  The New Stage of Market Capitalism by Daniel Yankelovich; The Speed of Trust:  The One Thing That Changes Everything by Stephen M.R. Covey with Rebecca R. Merrill; Managing by Accountability:  What Every Leader Needs to Know About Responsibility, Integrity — and Results by M. David Dealy and Andrew R. Thomas; Winners Never Cheat:  Everyday Values That We Learned as Children (But May Have Forgotten) by Jon M. Huntsman; Saving the World at Work:  What Companies and Individuals Can Do to Go Beyond Making a Profit to Making a Difference by Tim Sanders; Field Guide to the Global Economy by Sarah Anderson and John Cavanagh with Thea Lee and the Institute for Policy Studies; Megatrends 2010:  The Rise of Conscious Capitalism by Patricia Aburdene; Shameless Exploitation in Pursuit of the Common Good by Paul Newman and A.E. Hotchner; Ben & Jerry’s Double-dip:  Lead with Your Values and Make Money, Too by Ben Cohen and Jerry Greenfield, with Meredith Maran; Aiming Higher:  25 Stories of How Companies Prosper by Combining Sound Management and Social Vision by David Bollier; and The Samurai Leader:  Winning Business Battles with the Wisdom, Honor, and Courage of the Samurai Code by Bill Diffenderffer. 

Finally, I will refer readers to my previous post on Keynesian economics.  Relevant to the above discussion are Keynes’ views that capitalism is not self-regulating and during crises sometimes warrants pro-active government intervention.

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