According to Henry Ford, one of the twentieth century’s greatest entrepreneurs, capitalism cannot thrive and prosper without respecting ethics. For Mr. Ford, it was morally and ethically wrong that a chief executive be paid more than forty times the average wage of his employees (1). In other words, Henry Ford belonged to that breed of entrepreneurs (now, an endangered species) for whom capitalism is certainly the mode of social organization most successful and most respectful of everyone’s liberties, provided that those holding the reins of the economic power be capable of showing restraint and self-control.
Today, the proud vessel of capitalism has turned into a lawless pirate ship. In twenty years, the list of global companies prosecuted for corruption has grown steadily. Moreover, one of the biggest scandals of the early century is absolutely legal; I mean the compensation granted to this world’s top executives and big bosses (including salaries, stock options, golden parachutes and other benefits) has skyrocketed in a few decades, from Mr. Ford’s ethic ratio of forty to fifty times, to more than five hundred or a thousand times the employees’ average wage. "My job is worth that of a thousand people." Who can possibly claim this?
One might say anyway: after all what does it matter if the rich get richer, as long as we can continue to live decently from the fruits of our labor. Unfortunately, this explosion of the highest wages has be well compensated in some way. If they want to continue giving shareholders the top dividends they demand, companies have no choice but to dismiss, to relocate or to outsource tasks, while exploiting all those at the pyramid’s bottom.
The NGO Oxfam has recently estimated that the 67 world’s richest people have as much wealth as the poorest half of humanity, ie 3.5 billion people. In the United States only, the 1% richest have seen their incomes rise by 86% between 1993 and 2012, while the rest of the population’s increased by only 6%. This 1% has now a share of the national capital which is close to the levels observed under the Old Regime in Europe. The American Dream has become a nightmare, and there is a real threat that American democracy turn into an oligarchy.
Today we are witnessing a dramatic surge in global inequalities. Everywhere, the concepts of sharing or redistribution, seem to have become outdated ideas. One concept reigns supreme: greed. The consequences of this new world order, are the tens of millions of people affected by unemployment or poverty and hundreds of millions of others who are anxious for their near future, for fear of dismissal, relocation or outsourcing.
The societal balance, as we’ve known it for fifty years and more, is in danger. And the danger is even greater than politics appear to have no influence on this world order based on profit and greed. Worse, most politicians are supporting it, because as they profess: “It is globalization”, “The world is like that”, or even: “Rich people’s benefits help combat poverty”. This is untrue. The best way to fight poverty, the only remedy against inequalities is redistribution and sharing. And when top executives or big bosses do not exercise self-restraint or self-control, it’s time to make them do it, by introducing taxes that are up to these challenges.
As stressed by the economist Thomas Piketty, the tax rate on the richest in the United States has averaged 80% between the 30s and 80s, with peaks up to 90%! At that time, rising inequality had sparked a national debate which was concluded by a drastic policy proposal: taxing heavily wealthiest and the income from capital, while leaving innovative entrepreneurs and wealth creators prosper. Does this policy prevented America to prosper during the same period? No. America became stronger and richer. With annual growth rates of 4 to 5%.
Henry Ford belonged probably to a time when notions of ethics and public good still had some meaning. Today, the financial, economic and social crisis we emerge from with difficulty has at least taught us one thing or two: it is illusory to trust the markets alone, as it is unrealistic to ask most of the planet’s big bosses to worry about the public good, or to exercise self-control.
There is an urgent need to act to prevent this predatory capitalism to devour itself while putting democracy in danger. It is urgent to implement control, regulation and taxation mechanisms. There is also an urgent need to focus on the development of innovative economic alternatives, such as the third sector and social entrepreneurship. Both represent a growing force of inspiration to meet the challenges of today’s society while inventing growth models that are equitable and respectful of people.
Although still limited, the success of social entrepreneurship has shown that the enterprise can go much beyond a simple function of wealth creation to become a motor of change, an instrument for creating social ties and solidarity. It is only at this price that we could take up the greatest challenge of the century and fight poverty and inequalities effectively.
Montse Rafel, Director General
(1) Even when profit-oriented, third sector organizations remain within these "ethical" levels. At Dianova International for example, the highest salaries cannot exceed four times the lowest salary, by convention