Wednesday, April 01, 2009

Playing with compassionate capitalism



At least the U.S. economic recession appears to have done something good for consumers. Or not.

With auto sales plunging to their lowest levels in 27 years, Ford Motor Co. and General Motors are giving their car buyers payment protection plans if they lose their jobs or they are torn between buying a new car or keeping the old cranker.

Ford will cover payments up to $700 each month if consumers lose their jobs, while GM will pay $500 to customers who have lost their jobs through no fault of their own.

These generous offers from America’s top two automobile manufacturers followed President Barack Obama’s announcement that the U.S. government will back new-car warranties issued by GM and Chrysler, both companies seeking further federal assistance to bail them out of potential bankruptcy. Obama’s announcement is expected to boost consumer confidence about buying their vehicles.

Comedian Jay Leno, host of the “Tonight” show, will be performing for free at the Palace of Auburn Hills on April 7, 2009, in what could be a little comic relief for Michigan’s high unemployment. Michigan’s unemployment rate has been among the highest in the entire United States.

The free show is designed for “anybody out-of-work in Detroit,” said the comedian. The unemployed will get tickets to the event, plus free refreshments and parking.

To help avert a double-digit sales decline, Hyundai Motor Co. launched a program in January 2009 that allows buyers to return their vehicles within a year if they can’t make the payments due to job loss or disability. Ford is also offering zero-per cent financing on certain car models. The auto company likewise announced it would partner with its dealers in introducing a program to help local charities affected by the economic downturn.

Drugstore operator Walgreen is offering free-clinic visits to the unemployed and uninsured for the rest of 2009. The clinics would provide tests and routine treatment for minor ailments for free, but patients will still have to pay for their prescriptions. According to Walgreen, patients will get treatment at its in-store “Take Care” clinics for respiratory problems, allergies, infections and skin conditions that would typically cost $59 or more for patients with no health insurance.

There are more examples of companies reaching to the bottom of their hearts in these very tough economic times. Australia-based outfitter, Intrepid Travel, has offered those let go of their employment a 15% discount on more than 400 of its tour packages since September last year. Those downsized, but who optimistically called their layoffs as extra vacation time, would surely love their offer of “Laid Off Take Off” deal.

Compassionate capitalism, as it is more popularly called, is not new. The Bill & Melinda Gates Foundation, for instance, donated 48 million dollars in grants to public-private projects designed to boost incomes of poor small cocoa and cashew farmers in Africa, hoping the assistance would help farmers lift themselves out of poverty and reduce hunger. Similarly, the Rockefeller and Ford Foundations have been generous donors to worthwhile projects worldwide even before Bill Gates and his wife Melinda came to embrace philanthropy.

Not being cynical, but does compassionate capitalism really work? Or is it really capitalism with a heart?

According to Maimonides, a great Talmudic philosopher, “The highest form of charity is to prevent someone from having to take charity.” Advocates of microfinance or microcredit, for example, favour giving a small loan at fair market value to the poor and the jobless so they can start their own small business. Exactly what Nobel Peace Prize winner Muhammad Yunus of Grameen Bank has been providing in bringing livelihood opportunities to the doorsteps of millions of poor Bangladeshi women.

Indian entrepreneur Narayan Murthy, founder of the global software giant Infosys and one of the world’s most admired business leaders, has called on India to practise compassionate capitalism as the only solution to poverty in the country. Murthy said, “If India has to solve its problem of poverty, we have to embrace capitalism. As evangelists of capitalism, we must conduct ourselves in a manner that will appeal to the masses.”

But the payment protection plans of Ford and GM for their consumers can hardly be called compassionate at all. They are all designed to keep consumers buying; hence, at best, they are marketing strategies that would eventually translate into more sales and more money to companies. President Obama’s assurance about warranties is the same thing, a mere booster for consumer confidence that would keep people buying even when their pockets have already dried up because there are no more jobs to pay them wages.

Walgreen’s free patient care is likely to attract more and longer line-ups to their clinics. So far, about 30 per cent of its “Take Care” patients were new customers to Walgreen. But it is certainly not a better substitute for comprehensive health care reform. It is called taking advantage of opportunities in an economic recession.

Helping GM survive the recession is indeed compassionate capitalism, and there is no doubt about that. This reminds us of one of the most notorious statements of the twentieth century attributed to a former GM president and later Secretary of Defence in the Eisenhower administration, “What is good for the country is good for General Motors, what is good for General Motors is good for the country.” Perhaps, this is also the underlying reason why the Obama administration is rescuing GM.

Starbucks has also announced the impending closing of some of its retail outlets that have less than twenty per cent profit margin, calling them “underperforming.” But how many businesses in these recessionary times have a greater than twenty per cent margin? So thousands will lose their jobs because Starbucks isn’t making enough profit on these stores to satisfy their thirst for money. Wouldn’t it be amazing, in the name of compassionate capitalism, if Starbucks offered employees of those stores the chance to buy them as franchises and thus keep their jobs? Maybe Starbucks is just practising compassionate capitalism by allowing their competitors to survive.

How about a little dose of compassionate capitalism as the best way to thank your redundant employees? One U.S. manager felt pangs of guilt after firing some of his staff and the rush of depression carried on with his day at work. So he placed a “for hire” advertisement in Craigslist to help peddle his ex-developers’ skills after being forced to axe them. Is this type of compassion right?

Rich DeVos wrote in his book, From Compassionate Capitalism, “What we think about people matters a great deal. If we think of them as children of God, possessing a divine spark and having God-given worth, it follows that we ought to treat all people with respect and dignity. But if we think of people in a strictly material sense, devoid of any spirituality and gaining worth only through the state, then what happens? We need only to look at communist history to answer that question.”

DeVos is co-founder of Amway Corporation, an American company that has two million independent distributors in 70 countries around the world, including China. It has been investigated by the U.S. Federal Trade Commission for allegations that its companies are pyramid schemes or cults. In 1983, Amway pleaded guilty to criminal tax evasion and customs fraud in Canada, resulting in a fine of $25 million dollars, the largest fine imposed in Canada at the time. In 1989, Amway settled outstanding custom duties for $45 million. Amway has been involved in several other cases which they settled out-of-court.

Would anyone be persuaded by DeVos about compassionate capitalism when there’s so much doubt on how Amway profited from its multimarketing schemes? This is not someone like Bill Gates or Narayan Murthy.

Compassionate capitalism in America is nothing but the same compassionate conservatism that has been levelled against George W. Bush, a rubric that sounded like welfare state although what it wanted to conserve was really the capitalist system. Worried about being considered heartless, thus losing the presidential election, Bush and the Republican Party opted for compassionate conservatism, which is actually more of the same, less government for more market capitalism

When the U.S. Congress approved the billions of dollars to bail out Wall Street and financial institutions like AIG, Citibank, Bank of America, et al, nobody described it as compassionate capitalism. Maybe that’s right, because the bailout money was spent mostly for millions of dollars in bonuses for Wall Street top executives, hardly an act of compassion for the poor and the needy.

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