“Supercapitalism” and Corporate Social Responsibility

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Robert Reich’s book Supercapitalism presents a cynical and inherently flawed understanding of the value of corporate social responsibility. His major argument discards corporate social responsibility as a marketing claptrap. Not only is this abject dismissal wrong-headed; it is potentially dangerous. Corporate social responsibility can be, and is, a perfectly viable engine for social change.

Public policy advisor Reich’s (cited in Binns, 2009) Supercapitalism uses a historic premise – “the not quite golden age” (p. 239) – to propose that the price of successful capitalism is democracy itself. This not quite golden age refers to the mid-20^th century following the Second World War, wherein mass production brought about a “comprehensive prosperity…[and] the stimulus for the success of corporations and associated suppliers and retailers” (p. 239). The average American citizen’s life was “stable and in comfortable equilibrium” (Judt, 2007: p. 1).

These halcyon days gave rise to a “degree of civility between business, employees, the community, and government,” eventually supplanted by “competition that modified the relationship between business and the society…as the marketplace became saturated with competing entities” (Binns, 2009: p. 239). These entities, according to Reich, have now “become so efficient at getting the goods and services people want and the returns on investment that investors want” (Binns, 2009: p. 239) that they have effectively stampeded the democratic process. Major corporations deploy legions of lobbyists in Washington to manipulate public policy in their favor, and in so doing, effectively squelch the average citizen’s voice. (Australian Broadcasting Corporation, 2008).

Interestingly, Reich offers no real solution to the problems that he raises in the book (Hagan, 2008). His only real suggestion involves the application of “controls on corporate lobbying efforts” (p. 92).

Similarly, Mackenzie (2008) easily refutes Reich’s view of capitalism itself as fundamentally erroneous:

“Reich wrongly sees capitalism as an individualistic institution. Trade based on division of labor is social. Reich fails to see that market prices are the product of a social process. It is especially important to remember that wage determination is a social process, whereby marginal productivity hinges upon the value that consumers attach to final products of labor. Once we see the role of markets in determining income, we must reject Reich’s claim that income determination is solely political” (p. 382).

Corporate social responsibility, Reich (cited in DiTraglia, 2010) argues, is an oxymoron, since “companies only act in a socially responsible fashion if doing so increases profits. Consumers care about social issues but are unwilling to pay a premium for social responsibility” (p. 5).

In discussing corporate social responsibility, Reich (2007), says:

“It is easy to understand why big business has embraced corporate social responsibility with such verve. It makes for good press and reassures the public. A declaration of corporate commitment to social virtue may also forestall government legislation or regulation in an area of public concern where one or more companies have behaved badly…The soothing promise of responsibility can deflect public attention from the need for stricter laws and regulations…Corporations that have signed codes of conduct promising good behavior appear to have taken important steps toward social responsibility, but the pressures operating on them to lure and keep consumers and investors haven’t eased on the bit. In supercapitalism, they cannot be socially responsible, at least not to any significant extent ”(p.170, emphasis in original).

This supposition – that consumers are only performing lip service to the idea of corporate social responsibility, and will not pay more for socially responsible products under any circumstances – is absolutely wrong. As DiTraglia (2010) aptly points out, “consumers pay a premium for social responsibility all the time: fair trade coffee, recycled copy paper, cruelty-free eggs. These products are on the shelves precisely because consumers want to buy them, and firms can make a profit selling them” (p. 5). Reich’s poo-poohing of this reality smacks of a strangely naïve and simplistic grasp of what motivates many consumers’ behaviors. It also marks the beginning of the reader’s suspicion that Reich may not be the most reliable guide for this topic.

The true value of corporate social responsibility escapes Reich, as Porter and Kramer (cited in Pava, 2008) elucidate: “The best-run businesses search actively and imaginatively to find and invent solutions that produce more products and better social outcomes simultaneously” (p. 808, emphasis in original). As Pava (2008) shrewdly notes, if companies were to follow the obsolete advice peddled by Reich, they would soon realize that even if they are disinterested in corporate social responsibility, their customers definitely hold it in very high esteem (p. 808). Consumers regularly make socially responsible decisions, from dolphin-friendly tuna to cosmetics that have not been tested on animals, and similar to the corporations that Reich decries, they vote with their money.

Reich’s condescending attitude towards consumers is not only irksome, but anecdotal at best, as Ramia (2009) ably demonstrates:

“The book makes some interesting observations about consumers, investors, and citizens; many of which resonate in common discussions in living rooms, bank queues, on the streets and in bars, cafes, lecture halls and classrooms but not often in the scholarly work of political economists” (p. 2).

Similarly, in a New York Times Op-Ed piece, Reich (2008) waxed about the financial woes of middle and lower-class Americans:

“The problem has been masked for years as middle and lower-income Americans found ways to live beyond their paychecks…The first way was to send more women into paid work. Most women streamed into the workforce in the 1970s less because new professional opportunities opened up to them than because they had to prop up family incomes. The percentage of American working mothers with school-age children has almost doubled since 1970 – to more than 70 percent. But there’s a limit to how many mothers can maintain paying jobs” (p. A25)

Why does this matter? Numerous disturbing assumptions pepper Reich’s work. In this example, the most glaring must be underlying sexism implicit in assuming that women were torn away from motherhood and farmed out like oxen, as opposed to choosing to be a working mother out of a desire for a career. Reich’s position then wholly dismisses and insults the efforts of working mothers everywhere. Similarly, in Supercapitalism, Reich’s assumptions about the sheep-like self-interest of consumers leave a bad taste in the reader’s mouth, and frankly make him less desirable, and certainly less trustworthy, as a public policy leader. Pava’s (2008) astute observation that Reich’s book, “if taken, can do much harm,” comes to mind (p. 811). In essence, if Reich persists in these antiquated attitudes and this uninformed and premature dismissal of corporate social responsibility, how competent is he to lead the charge into economic parity?

References

Binns, L.A. (2009). Supercapitalism. Social and Economic Studies, 58, 238-242.

DiTraglia, F. (2010) Supercapitalism: Francis DiTraglia Web Site. Web.

Hagan, J. (2008). Robert Reich, Supercapitalism. Illawarra Unity – Journal of the Illawarra Branch of the Australian Society for the Study of Labour History, 8 (1), 90-93.

Judt, T. (2007). The Wrecking Ball of Innovation. New York Review of Books, 2007, p. 1.

Mackenzie, D.W. (2008). Supercapitalism. American Journal of Economics and Sociology, 67 (2), 381-388.

Pava, M. L. (2008). Why Corporations Should Not Abandon Social Responsibility. Journal of Business Ethics, 83, 805-812.

Ramia, G. (2009) Supercapitalism: The Transformation of Business, Democracy, and Everyday Life. Labour and Industry, 20 (1), 107-1010.

Reich, R. (2008). Interview. In: Kerry O’Brien. TV. Australian Broadcasting Corporation. 2008.

Reich, R. (2007). Supercapitalism: The Transformation of Business, Democracy, and Everyday Life. New York: Knopf.

Reich, R. (2008). Totally Spent. New York Times. 2008, p. A25.

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