Monday, January 18, 2010

The Communitarian Spirit - Bank Bonuses

Klaus Schwab, founder and executive chairman of the World Economic Forum, based in Geneva, Switzerland wrote a thoughtful piece about what is going not only in the banking business, but communities as a whole. Mr. Schwab says "The emphasis on profit to the exclusion of other values led to the current economic crisis, and may undermine social peace." He talks about the role companies (including banks) used to play in society and the role of the executives within these companies. He talks about the "stakeholder theory" he developed and presented to the World Economic Forum about 40 years ago, this theory considers any enterprise as a community with a number of stakeholders, or social groups that are directly or indirectly connected and are dependent on its success and prosperity. These stakeholders include employees, customers suppliers, the state and the local society.

To meet and discuss their mutual responsibilities and promote that each individual is embedded in the common good can only be promoted through the interaction of all participants. The erosion of this spirit is obvious, visible not only in business but also in politics, etc. The business enterprise has been transformed from a purposeful unit to a purely functional unit.

The purpose of an enterprise-to create goods and services for the economic good-has been replaced by a purely functional enterprise philosophy aimed at maximizing profits in the shortest time possible. The enterprise is no longer an organic community and the entrepreneurial system is being perverted. It becomes a "profit-generating machine" in which all parts that do not fulfil that purpose, including managers,employees, products, locations, etc., are replaceable. This development is particularly visible in the financial sector, where there is at best only an indirect connection with the original purpose of an enterprise, meaning the creation of substantive, real value.

The consequences that one cannot expect anything other than selfish thinking and action from an individual who knows that he or she is replaceable at any time. Instead of a community or world that is guided by a communitarian sense of duty vis-a-vis society, there is a rise in individualistic profit-seeking behavior in which society plays only a secondary role.

The current crisis should actually be a warning shot for us to fundamentally rethink the development of our morals, our ethical norms, and the regulatory mechanisms that underpin our economy, politics, and glob interconnectedness.

We are all hiding from the reality of rising unemployment that will remain with us for years to come; it will also put enormous pressure on public goods and services as governments are forced to pay off their ballooning debts. The billions needed will lead to higher taxes, reductions of social and public health systems as well as reduced investments in education and infrastructure. In the end it is the taxpayer, the average citizen, who has to shoulder the costs of the crisis by a reduction of his/her disposable income.

Thus a real danger that the financial and economic crisis will develop into a real social crisis. Difficult times lie ahead. If we want to keep society together, then a spirit of community and solidarity is more important now than ever before. We need to embrace the stakeholder principle , not within the narrow confines of companies, but at a national and global level as well.

From this context, the bonus discussion is just a symbol of a more fundamental question: whether we can adopt a more communitarian spirit or whether we will fall back (or already have, my words) into the old habits (or always had, my words) and excesses, thereby undermining social peace.

Mr. Klaus Schwab, truer words are hardly ever spoken in our "politically correct" society, our "must have it ALL now" outlook on life and our increasing lust for greed and "our keeping up with the Joneses". But presently, I'm not holding my breath waiting for "societies" to change much voluntarily. It takes 9/11's, Haiti, Katrina's, etc., for the world to assume a communitarian spirit, shortly thereafter forgotten by most except the ones most directly or most indirectly affected.

Plus the operating of the "good old boys and girls" club, members who all think alike and those who can be convinced to think and act like the GOBG club, but not actually accepted; with all then acting in a herd like manner . Anyone they consider as having an adverse opinion is banned from the herd. Even whistle-blowers are shunned by the elite and the lower culture parts of the black community and drug dealers have a violent way of dealing with "informers".

Social peace has already or always has, been undermined especially now in England, Germany, Belgium, Denmark, the Netherlands, large parts of Africa, the Middle East and rapidly deteriorating in this country.

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