Cooking the Books 2: Vice’s homage to virtue

At their annual “World Economic Forum” jamboree in the Swiss ski resort of Davos in the last week of January, the world’s political and business leaders vied with each other to strike an “ethical” pose. It was, commented one newspaper, a case of ethics with everything.

There is even a magazine called the Ethical Corporation. At the time of the Tsunami its Asia-Pacific editor, James Rose, was active in the Australian press. “Put profits aside in the rebuilding” read the headline of one of his articles, “Shareholders should let companies assist in the post-tsunami reconstruction” (Australian, 4 January). “Companies must look beyond the bottom line” read another, “Corporate leaders see only profits as important. They must change” (Melbourne Age, 7 January).

Shareholders in construction companies would be only too willing to let them assist in the rebuilding. In fact, shares in them went up in anticipation of juicy reconstruction contracts. But this was not what Rose had in mind. Supply lines for aid, he wrote, “could be usefully shortened if corporations went in and did more of the work themselves, gratis, under the direction of the charity groups on the ground”, and:

“What we need here is for corporations to throw off the cloak of self-interest. The best thing they could do is to approach the situation as it now stands as if it were a legitimate business opportunity, apart from one important factor: they will expect no financial or brand rewards”.

It’s a nice thought. The skills and the techniques are there, there are people in need, so why not bring the two together without any thought of profit? But it’s not going to happen, because that’s not the way capitalism works or could ever work.

Capitalism is a profit-making system and capitalist corporations have no choice but to put profits first. Not because the top executives are selfish or greedy or insensitive but because that’s the economic logic of the system. Corporate executives are merely what Marx once called “personifications of capital” and capitalism is an impersonal economic mechanism of the accumulation of capital out of profits which those in charge have to apply irrespective of their personal opinions or preferences.

Rose is aware of what he is up against as he wrote in the same issue of The Australian:

“What is a corporation? On one level, it’s a pure money-making machine. There is solid opinion to say that’s all it can be. Even if a corporation wants to be a paragon of the New Age, it is constrained by the fiduciary obligations to its shareholders. It is legally constructed to focus on its and its owners’ self-interest”.

That opinion is indeed solid, very solid. Corporations don’t seek to maximise profits just because this is laid down by the law, as Rose suggests. The law merely reflects the underlying reality of capitalism. It’s not the law that needs changing – it never will  be on this point – but the whole profit system that needs dumping.