The Merits and Limitations of “Conscious Capitalism”

An intriguing conversational interview comes our way via the Cato Institute. Conducted on February 4, the subject of the interview is John Mackey, the libertarian business owner of the much celebrated Whole Foods Market grocery chain and the co-author of the recently published Conscious Capitalism: Liberating the Heroic Spirit of Business. The meat of the talk is about 30 minutes long, with the first half exploring Mackey’s broader ideas about economics and society and the latter part focusing on the specifics of his corporation and how he runs it. I’ll begin my analysis with the second half first.

“Conscious capitalism” is essentially what it sounds like: ethically-grounded free enterprise. To Mackey’s credit, he does far more than write about the subject; his company is an embodiment of conscious capitalism in action. Whole Foods Market, founded in 1980 in Austin, Texas and now consisting of 331 locations in America and the UK, has received numerous accolades in testament to this: it has been listed as one of Fortune magazine’s “100 Best Companies to Work For” since the list’s inception in 1998, most recently at #5 in the 2007 compilation; it was named the EPA’s Green Power Partner of the Year in 2006; and it received the highest marks in “social responsibility” in the 2006 Harris Interactive/The Wall Street Journal ranking of the world’s best and worst corporate reputations. All this while being the 55th largest retailer in America and employing over 33,000.

Obviously, Whole Foods Market is not the realization of pure and distilled distributist principles. Throughout its history, the corporation has aggressively acquired smaller and more localized competitors. And while some stores employ a “forager” to identify and purchase from local farms and producers, the majority of purchases are made with major national vendors and distributors in order to take advantage of volume discounts. Nonetheless, as far as multi-national corporations are concerned, Whole Foods Market is certainly one of the more locally integrated and responsive businesses out there.

Mackey’s concept of conscious capitalism is perhaps most powerfully conveyed through his in-house business philosophy. Echoing Aristotle’s approach to politics (as opposed to Machiavelli’s), Mackey believes that friendship, rather than fear, should be the basis of management. Additionally, his emphasis on self-management and self-policing within teams of employees (and this communitarian tie-in to employee advancement) is a concept very much inline with the Greek understanding of liberty as the “cultivated ability to engage in self-governance.”

Equally worthy is Whole Foods Market’s emphasis on “stakeholders,” as opposed to shareholders, a bottom-up approach that avoids dehumanizing employees and customers for the sake of increasing profit. According to Mackey, happy team members lead to happy customers, which in turn lead to happy investors. It’s an understanding of business that, in his words, leads to “win-win solutions instead of trade-offs.” Other commendable practices include transparency on pay and internal equity.

In my estimation, Mackey is to be genuinely congratulated  for his business practices. Listening to him speak, it’s easy to see that his regard for the welfare of both his employees and customers is born of deep convictions, and not mere market strategies. He has provided an exceptional example of how a businessman can be remarkably successfully while still adhering to high ethical standards.

However, what Mackey has definitively not provided is a comprehensive answer to the depraved state of capitalism in America today. To justify this indictment, I return to the first portion of his interview.

The framework for Mackey’s argument can be distilled into two premises: 1) capitalism is inherently good and is responsible for uplifting humanity and 2) capitalism has lost its ethical foundation and, in doing so, has ceded the moral high-ground.

It’s no surprise that Mackey puts forth the initial premise, given the authors he cites as influential. Friedman, Hayek, and Smith are all mentioned as important thinkers who were responsible for awakening him from an idealistic dream-state he fell into as a humanities student at the University of Texas during the 1970s. Mackey credits these men for allowing him to see “how the world really works” and empowering him to set on the path to prosperity a fledgling business that was already bleeding money. As further substantiation of his claim that free enterprise uplifts humanity, Mackey points to the mercuric rise of common “standard of life” metrics, such as literacy and life-span, since the development of free market economies.

Mackey’s next premise is that as the West has moved from a milieu defined by Judeo-Christian values to a society increasingly defined by secularism and the absence of morality and ethics from public life, the ethical foundation of capitalism has corroded. This Mackey, asserts, is a clear departure from how the father of the free-market, Adam Smith, envisioned things playing out:

Adam Smith’s book that he [thought was his] most important work is not the Wealth of Nations, but the Theory of Moral Sentiments where he put forth a view of human nature that’s not strictly self-interested, but cared about what other people thought. And unfortunately, we didn’t integrate those two philosophies together. We didn’t need to 200 years ago, because we had Judeo-Christian ethics that under-pinned the society. Now that we’ve begun to move away from that, capitalism needs to find a new ethical foundation, or it’s just going to be seen as a bunch of socio-paths running around trying to line their pockets.

Mackey recognizes about American capitalism what John Adams recognized about American government when he said that “our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other.” Mackey also acknowledges the need for religion and morality to moderate the destructive forces of what Adams called the unbridled human passions of “avarice, ambition, revenge and licentiousness.”

However, like Adams, Mackey clearly fails to recognize that the vitality of religion and morality will inevitably be undermined within the context of a liberal society. So long as liberalism provides the philosophical foundations for a society, the very social institutions that Mackey identifies as critical to preserving the integrity of capitalism will ultimately be eviscerated from the public sphere, pushed back into the corners of private life where their ability to moderate individuals’ behavior will exist only insofar as individuals voluntarily allow them to. “Find[ing] a new ethical foundation” for capitalism is not a solution; it’s a flimsy band-aid that will fall off. The reality is that Mackey does not have a workable conclusion to his argument.

Let us pause to consider what things would look like if Mackey’s prescription was followed, and a new ethical foundation on which capitalism could stand was erected. Imagine further that every American decided to, for the moment, adopt the tenets of said ethical system, which, among other things, promoted moderation and good-will towards others. How would the subsequent unfolding of events differ than they have over the past two centuries? Would it not be the case that individuals who chose to break from such a “repressive” institution would have this right protected by the government, as they have over the past two centuries? Would it not be the case that any business owner could will-fully decide to engage in self-interested, short-sighted practices that negatively affect the common good (so long as they don’t violate any regulations, which Mackey believes should be minimal anyway), as has been the case over the past two centuries?

Of course not. Things would unfold as they have, resulting in an economic order defined by people like Bernie Madoff and corporations like Enron and Goldman-Sachs. For so long as Lockesian ideas of individualism and liberty remain embedded in the ethos of American politics, traditional, non-government systems of authority, like organized religions, civic associations, and even something as abstract as “ethical foundations” can and will be escaped by individuals who seek to maximize their self-interest and pursue their own conception of happiness.

The fact that Mackey fails to recognize this is especially ironic given his staunch libertarinism. For indeed, libertarians are as vociferous of advocates for moral relativism and against “illegitimate” sources of authority as are any progressives. How he can rail against the illegitimacy of government regulations while expecting people to become docile to ethical norms and accept as legitimate the authority of associated institutions is irreconcilable with his statement that he “believe[s] in liberty and believe[s] in freedom.” The only way it is not is in some pie-in-the-sky scenario where every single individual chooses to consent and abide by the same set of ethics, a utopian impossibility in a pluralistic, liberal society.

Mackey has provided an example of how an individual can run a successful and ethical business in the modern era. If everyone were like him, then certainly the ethics of capitalism would be far more socially conscious. However, everyone is not like him. People are self-interested, self-serving, and often don’t give a damn about anyone besides themselves and their family. Short of increasingly invasive government regulations and compulsory adherence to an ethical system, they will remain that way so long as liberalism defines American political philosophy.

I will gladly shop at Mackey’s stores and support other committed conscious capitalists. But forgive me if I find his societal prescriptions short-sighted and doomed to fail, the temporary treatment of symptoms rather than the cure for what truly ails us.

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9 comments

  1. Will Hayman · · Reply

    The thing you’re missing in all of this is that Capitalism is not a moral system. It’s merely the attempt to get the most for the least. If I have time I’ll find it, but The Wealth Of Nations is merely a restatement of a book written by some Jesuits which was a restatement of an Islamic treatise on the subject.

    Also, I’m really not understanding your preference for local production of goods. Can you explain why this is preferred in your system? Read any mainstream economics textbook and look up Ricardo’s views on comparative advantage.

    1. I know capitalism isn’t a moral system, but it needs a good moral system to function ethically. My point is that philosophical liberalism will inevitably undermine said good moral system.

      I’m rather taken with the arguments of distributism, first espoused by Chesterton and Belloc in response to Pope Leo XII’s encyclical Rerum Novarum. In the end, the human goods produced in a distributist society outweigh any material advantage produced in a free market.

    2. “My point is that philosophical liberalism will inevitably undermine said good moral system.”

      Please read that First Things essay I sent you to understand why I think this is the case.

  2. Will Hayman · · Reply

    But this really distills my political philosophy in a nutshell. Explain to me what system you are proposing, and how it is to run on virtue.

    1. “The world runs on individuals pursuing their separate interests.” This isn’t fact. It’s a relatively novel way to organize a society. Has it led to leaps and bounds in terms of “standard of living?”Absolutely yes, if standard of living is simply a catchphrase for things like material wealth and lifespans (of course not bad in and of themselves, but not the primary goods of which I think a society should be organized around).

      As regards to what system I advocate, as I say, I’m still trying to work out the details. It’s a lot easier to identify flaws than offer a comprehensive, prescriptive vision, especially when such an approach probably couldn’t exist in a society characterized by liberalism and pluralism. I will say read After Virtue, and if you don’t have the time, go to the “Sites” tab and find MacIntyre’s political philosophy at the bottom. Apologies if you think that’s a cop out, but it’s a lot easier than me writing an essay.

  3. Given he is one of the most hostile union busters among American bosses, his stores are not a place I shop.

  4. Will Hayman · · Reply

    I think when you say self interest means pursuing material goods you assume people are materialists. I see my self interest as pursuing a career I always dreamed of pursuing, finding community, being a good son, brother, etc. Wealth is nice, but it isn’t in my interest to pursue it at any cost.

    1. I never said self-interest manifests itself in only material ways. I said most measurements of the alleged advancement of civilization in the past 300 years, such as “the standard of living,” rely on “value-neutral,” material metrics. From the wiki page for standard of living: “Standard of living refers to the level of wealth, comfort, material goods and necessities available to a certain socioeconomic class in a certain geographic area.”

      Of course self-interest isn’t only related to material possessions. Unbridled self-interest is responsible for things like divorce, casual sex, declining numbers of religious adherents, etc. So the same that can be said for the economic realm is bad for the social realm: unmoderated self-interest is bad for society.

  5. […] that Sullivan is limited by the same parameters that prevented John Mackey from realizing that “conscious capitalism” would not be enough. Mackey suggests that capitalism simply needs an ethical element to it; Sullivan seems to […]

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