Does stakeholder capitalism contribute to human flourishing?

 

Many people reading this are likely to view the use of stakeholder terminology by business leaders as little more than a public relations tool. That is certainly how I have viewed it in the past. If you are a business owner, or executive, who wants to encourage employees, suppliers, customers, and community members to feel loyalty to your business, it makes sense to acknowledge that they may also have a stake in seeing it prosper. And it does no harm to remind governments of their stake in the prosperity of your business via its contributions to tax revenue.

However, I have recently come to associate stakeholder terminology with stakeholder capitalism. That ideology has close links to the concept of corporate social responsibility (CSR) and the increased tendency of businesses to seek rewards from governments for pursuit of environmental and social goals (ESG). Reading about stakeholder capitalism has added to my previously expressed concerns that such interactions between business and governments are leading liberal democracies more deeply into a corporatist quagmire.

Stakeholder capitalism

Michael Rectenwald’s book, The Great Reset and the Struggle for Liberty, has persuaded me that in advocating stakeholder capitalism, Klaus Schwab, the founder of the World Economic Forum (WEF), has in mind a corpus of ideas and policies that are fundamentally opposed to free markets and classical liberalism. Moreover, the WEF may have sufficient influence among powerful elites to eliminate the already dwindling influence that classical liberalism has been having on public policy.

Rectenwald’s book was written in response to a book by Klaus Schwab and Thierry Malleret entitled Covid-19: The Great Reset, which was published in 2020. Rectenwald draws attention to the open espousal of policies opposed to free markets in that book. Schwab and Malleret welcomed the possibility that governments might take advantage of the pandemic “to permanently increase their role”, and eliminate classical liberalism, which they refer to as neoliberalism. They write:

“COVID-19 is likely to sound the death knell of neoliberalism, a corpus of ideas and policies that can loosely be defined as favouring competition over solidarity, creative destruction over government intervention and economic growth over social welfare. For a number of years, the neoliberal doctrine has been on the wane, with many commentators, business leaders and policy-makers increasingly denouncing its “market fetishism”, but COVID-19 brought the coup de grâce.”

They go on to predict:

“Shareholder value will become a secondary consideration, bringing to the fore the primacy of stakeholder capitalism.”

Klaus Schwab has been advocating stakeholder capitalism for over 50 years, and has been influential in having that concept endorsed at international meetings of powerful people from business and government. The first Davos Manifesto, signed in 1973 states:

“The purpose of professional management is to serve clients, shareholders, workers and employees, as well as societies, and to harmonize the different interests of the stakeholders.”

The 2020 Davos Manifesto is titled: “The Universal Purpose of a Company in the Fourth Industrial Revolution”. It includes similar sentiments to the 1973 Manifesto, but goes on to state, among other things:

“B. A company is more than an economic unit generating wealth. It fulfils human and societal objectives as part of the broader social system. Performance must be measured not only on the return to shareholders, but also on how it achieves its environmental, social and good governance objectives. Executive remuneration should reflect stakeholder responsibility.”

Some CEOs would welcome a long muddled list of performance objectives because it offers them the opportunity to “do their own thing” and provide ready-made excuses for poor performance. Others would prefer to see governments pursue social and environmental objectives by more efficient mechanisms, and to have their own performance judged according to more tangible benefits to shareholders. How does the WEF propose to encourage compliance with its Manifesto?

The WEF’s ESG Index

The WEF published a report in 2020 setting out metrics for measuring company performance with regard to ESG goals. The title of the report is  Measuring Stakeholder Capitalism: Towards Common Metrics and Consistent Reporting of Sustainable Value Creation.

A mechanism for grading companies in terms of their environmental, social, and governance practices and plans might be thought to offer useful information to investors and consumers who concerned about the environmental and social impacts of their decisions. However, Rectenwald points out that it also has potential implications for interactions between business and government:

“Woke planners wield the Environmental, Social, and Governance (ESG) Index to reward the in-group and to squeeze non-woke players out of business.”

Ideological reach

In a recent Newsweek article, Jon Schweppe asks, Why did corporations go ‘woke’? His response, in brief, is that “this is part ideology, part price of admittance to an elite club, and part protection racket – doing everything one can to avoid upsetting the mob”.

Rectenwald’s book suggests to me that the WEF should come to mind following any mention of “ideology” and “an elite club” in this context. The corporate partners of the WEF include over 1000 of the world's largest business organisations. The annual meeting of the WEF in Davos is an invitation-only event but is widely reported in the media. Many notable political leaders, journalists etc. have been members of the Forum of Young Global Leaders, which is reserved for people under 40 years of age who show promise of global leadership. In addition, the WEF’s Global Shapers movement, a training camp for young change-makers (under 30 years old) has over 10, 000 active members.

Implications

Rectenwald points out that because ESG is “an impressionistic, qualitative, metric” it exposes business leaders and companies to the whims of woke arbiters. He cites the recent experience of Elon Musk who has been unfairly besmirched because he may have benefited from an emerald mine owned by his father in South Africa during the apartheid era. He sums up:

“In today’s political economy, satisfying shareholders, employees, and customers to earn profits has become less important for corporations than ingratiating the woke cartel and the governments that support it.”

Rectenwald’s book goes on to discuss possible implications for individual liberty of potential innovations such as an individual carbon footprint tracker, but in this essay I want to stick with the implications of stakeholder capitalism.

The Hayek quote at the beginning of the essay suggests another important implication of stakeholder capitalism. The quoted passage is from Law, Legislation, and Liberty (v3, p 82). The context of the quote is a paragraph in which Hayek is responding to the idea that large corporations should be required to consider the public or social interest. He suggests that “as long as the large corporation has the one overriding duty of administering the resources under its control as trustee for its shareholders its hands are largely tied; and it will have no arbitrary power to benefit this or that particular interest”. The paragraph ends by suggesting that obliging large corporations to consider the public interest gives them uncontrollable power that “would inevitably be made the subject of increasing public control”.

There is also reason for concern that obliging corporate managers to adhere to ESG will make them less accountable for productivity performance of enterprises because it will be difficult for company boards to assess the veracity of claims that performance has been adversely affected by ESG. Wokeness can be expected to provide a cover for inefficiency.

I acknowledge that stakeholder capitalism may have some positive implications for human flourishing, that should be offset against the negative implications discussed above. For example, in my book Freedom, Progress, and HumanFlourishing, I note that the difficulty that governments have been experiencing in agreeing upon concerted international action to combat climate change was ameliorated by the actions of business organisations in planning for a carbon free future.

Nevertheless, as I also argue in that book, there is more reason to be concerned about the implications of declining productivity growth than about climate change. By further reducing productivity growth, stakeholder capitalism seems likely to cause a great deal of economic misery.

Unfortunately, major economic crises will probably need to be endured before political leaders inspired by classical liberalism emerge once again to implement the public policy reforms that are needed to restore free markets.

Do clinical delusions have anything in common with a mythology mindset?

 

In my discussion of Steven Pinker’s book, Rationality, I referred to his observation that people tend to have a reality mindset in the world of immediate experience and a mythology mindset when discussing issues in the public sphere. Although that is an accurate observation about a general tendency, delusions are also fairly common in the world of immediate experience.

The delusions that most of us experience are fairly harmless. For example, it may not do you much harm to believe that you are happier than average, even if you aren’t. That common delusion may help to explain why so many people walk around with smiles on their faces.

For some unfortunate people, however, the world of immediate experience includes delusional beliefs that are symptomatic of mental ill-health. These are referred to as clinical delusions.

The question I ask above has been prompted by my reading of Lisa Bortolotti’s recent book, Why Delusions Matter. Lisa Bortolotti is a philosopher who specializes in the philosophy of the cognitive sciences, including issues relating to mental illness. She observes that there is a strong overlap between clinical and non-clinical delusional beliefs. The non-clinical delusional beliefs that she discusses include beliefs that Pinker would associate with a mythology mindset.

A conversation context

Bortolotti notes that in any discussion between two people, you have a speaker and an interpreter swapping roles as the conversation proceeds. The speaker says something and the interpreter listens, making inferences about the speaker’s beliefs, desires, feelings, hopes and intentions on the basis of the speaker’s words, facial expression, tone of voice, previous behaviour and so on.

Interpretation becomes challenging when the interpreter suspects that the speaker may be delusional. The interpreter rarely has the information needed to assess that the speaker’s beliefs are false, so falsity cannot be a necessary condition for attribution of delusionality.

Three elements are often involved when the interpreter judges the speaker to be delusional:

• Implausibility: The interpreter finds the speaker’s beliefs to be implausible.
• Unshakeability: Speakers do not give up their beliefs in the face of counterarguments and counterevidence.
• Identity: The beliefs seem important to the image that speakers have of themselves.

Clinical delusions

Bortolotti offers what she describes as an “agency-in-context” model to explain clinical delusions. She explains:

“The adoption and maintenance of delusional beliefs are due to many factors combining aspects of who you are and what your story is (your genes, reasoning biases, personality, lack of scientific literacy, etc.) and aspects of how epistemic practices operate in the society where you live.”

The epistemic practices she refers to include what we learn at school about knowledge acquisition, and the stigma that makes it difficult for people with delusional beliefs to participate fully in public life.

There is no doubt that persecutory delusions are harmful to the speaker and others. They undermine the ability of speakers to respond appropriately to events, and often erode their relationships with others.

However, Lisa Bortolotti suggests that it is important for interpreters to understand that most delusions offer some benefits for speakers. Delusions “let speakers see the world as they want the world to be; make speakers feel important and interesting; or give meaning to speakers’ lives, configuring exciting missions for them to accomplish”.

Interpreters also need to understand that the underlying problems of speakers don’t disappear when they obtain insight about their delusions. They may become depressed when they approach reality without the filter of their delusional beliefs.

There is not much to be gained by attempting to reason with people whose beliefs are unshakeable. Bortolotti suggests that it is probably more productive for the interpreter and speaker to share stories rather than exchanging reasons for beliefs. Exchanging stories can show how delusional beliefs emerged as reactions to situations that were difficult to manage. While sharing stories, interpreters have opportunities “to practice curiosity and empathy in finding out more” about underlying problems.

Conspiracy delusions

From an interpreter’s viewpoint, a speaker’s beliefs about the existence of conspiracies often have similar characteristics to clinical delusions. They are implausible, unshakeable, and closely tied to the speaker’s self-image.

Bortolotti emphasizes that those who hold conspiracy delusions often claim to have special knowledge of events – they claim to be experts, or to know who the real experts are. Identifying as a member of a group is often also important. Non-members often refer to members of such groups in a derogatory way e.g. QAnon supporters and anti-vaxxers. However, people are often attracted to conspiracy delusions promoted by like-minded people whom they trust. The act of sharing a delusional story can be a signal of commitment to a particular group.

Comments

Lisa Bortolotti’s book has improved my understanding of delusions in a couple of different ways. First, it has given me a better appreciation that delusions offer some benefits to the people who hold them, and those benefits help to explain the unshakeability of delusional beliefs.

Second, viewing delusions within the context of a conversation between a speaker and an interpreter is helpful in drawing attention to the value judgements involved in assessing whether the speaker’s beliefs are delusional.

My main criticism of the book is that the author seems to me to be biased in favour of “the official version” of events, even though she acknowledges that contrary beliefs are sometimes vindicated. The most obvious example bias is her apparent reluctance to give credence to the possibility that Covid19 may have originated in a lab in Wuhan.

I am pleased that my reading of the book did not leave me with the impression that the author believes that it is delusional to have an unshakeable belief in the importance of the search for truth. In emphasizing that value judgements are involved in assessing whether beliefs are delusional, Lisa Bortolotti seems to me to be providing readers with a better understanding of the meaning attached to the concept of delusion in clinical and non-clinical settings, rather than casting doubt on the existence of reality.