And the real winners are ...                      

 Interview with Fran Wood from The Star Ledger

Sunday, July 09, 2006

You might think the most appropriate people to be wearing that T-shirt proclaiming "The one who dies with the most toys wins" would be the wealthiest among us. But don't bother sending the shirt to the man Forbes magazine calls the richest man in America.

Or the second-richest.

The richest man -- Microsoft billionaire Bill Gates -- several years ago joined his wife to form the Bill and Melinda Gates Foundation, which has committed more than $30 billion to the dual goals of improving education and eradicating the world's worst contagious diseases.

Two weeks ago they got a partner. The country's second-richest man, Berkshire Hathaway CEO Warren Buffett, announced he is giving 80 percent of his $44 billion net worth to the Gates foundation.

Now neither of these guys will end his days living hand-to-mouth. But this joint project could well cost them the chance to die with the most toys.

Their consolation is that generations after they are gone, their largesse will still be improving life on Earth.

The Bill and Melinda Gates Foundation, the world's most heavily endowed private charitable foundation even before Buffett's announcement, already has chalked up impressive accomplishments in Africa, the continent with the most urgent health needs. In Botswana alone, the foundation's efforts, combined with those of the Merck Company Foundation, have helped meet the World Health Organization's goal of getting half the identified HIV/AIDS patients on anti-retroviral treatment -- an accomplishment deemed unachiev able just four years ago.

But the larger story here is that two men who accumulated unfathomable personal wealth have concluded that they should spend most of that wealth helping others.

Bruce Springsteen, on his latest CD, takes an old sea shanty and adds a playful new verse that goes, "I wish that I was Mr. Gates./ They'd haul my money in in crates." I suspect Bruce is not alone in this sentiment. In fact, I'll bet there isn't a person alive who doesn't occasionally muse how he or she would live with Gates' or Buffett's riches.

But I'd also guess our reveries of mansions, yachts, Porsches, exotic vacations, whatever, rarely include dramatically improving life for people in developing nations or inner-city schools. So it's nice to know that some people who actually have that money are thinking about these things.

"One of the preconditions of capitalism is the discipline and willingness to avoid consumption to reinvest surplus for long-term gain," says Ray Carey, former chairman and CEO of ADT Inc., and author of "Democratic Capitalism: The Way to a World of Peace and Plenty" (AuthorHouse Publishing). "Instead of putting their names on dozens of buildings, Buffett and Gates are putting their money on two areas that are in various levels of crisis around the world."

Speaking by phone from his summer home in Nantucket, the 78-year-old Locust resident says he thinks the frustrating ineffectiveness of so many education and health care efforts stems partly from not fully utilizing available technology.

 "Gates must know more than any one person about the application of Information Age technology," he says. "Buffett is famous for his long-term view of investing, an attitude crucial to success in their two selected areas. It is this combination of huge amounts of money plus huge amounts of competence that makes (their commitment) so exciting and likely to produce success."

If the Buffett-Gates enterprise is great news on its own, it has the potential to get even better if it spurs others with extreme wealth to rethink their own legacies.

Just days after the Gates-Buf fett press conference, action movie star Jackie Chan announced he is giving half his fortune to charity. Chan, already cited by Forbes as one of the world's 10 most generous celebrities, established a foundation in 1988 to benefit Hong Kong's needy children. But he said the Gates-Buffett announcement inspired him to step up even more.

One hopes others are listening -- movie stars, athletes, CEOs and other capitalist big dogs whose in comes routinely run into eight figures annually. Many are giving to charity already -- but many more could do so without visibly diminishing their lifestyles. Besides helping charities, says Carey, they'd be helping their country.

"Among other benefits, the (Gates-Buffett) program can help repair America's terrible image in the world," says Carey. "Our foreign aid is close to .1 percent of GDP, compared to the U.N. target of .7 percent."

Some people will always have bigger toys. That's how the world works. But long after the toys have rusted away, we will remember those who left the world better than they found it.

Fran Wood is a Star-Ledger columnist.

 Future Survey,  January 2006 

Democratic Capitalism: The Way to a World of Peace and Plenty.           

Ray Carey, Locust, NJ.  (Bloomington, IN: AuthorHouse).

          Former Chairman/CEO of ADT, Inc. argues that “the universal, timeless, human urge for freedom, peace, and plenty can be satisfied by a superior form of commerce, the synergistic coupling of democracy and capitalism.” Democracy as a social philosophy means equal rights, responsibilities, and privileges for all; capitalism means private ownership of production and distribution, motivated and disciplined by competition. “Democracy and capitalism become synergistic in democratic capitalism because they support and enhance each other. From democracy comes the involvement and participation of all; from capitalism comes the energy and resources to excel.” Capital and labor are not in conflict because the source of capital and the people doing the work are the same people. All become owners through pension and savings plans, and in more direct ways through employee stock option plans and profit-sharing. Democratic capitalism maximizes wealth because workers are motivated to produce and innovate in a trusting, cooperative environment in which they share in the surplus.

           At the beginning of 21C, “the worldwide economic system is functioning at only a fraction of its potential because of US-led ultra-capitalism, which combines mercantilism, that treats the worker as a cost commodity, and finance capitalism, that dominates the economy instead of supporting it” (Chapter 9 is devoted to Enron: Poster Boy for Ultra-Capitalism). America, the country with the greatest record of improving lives through economic freedom, is becoming known as “an economic imperialist with a cop-of-the-world attitude.” Under ultra-capitalism, concentrated wealth is escalating to new record levels. The US banking system has limited the capacity of economic freedom to spread wealth and improve lives. America is an intellectual and political gridlock, between supporters of ultra-capitalism and those trying to use government to redistribute wealth; this prevents badly needed monetary, fiscal, and regulatory reforms.

           The ideal of democratic capitalism has not been realized because of a failure in the truth-seeking process, manifested by “the usual errors of imperial-minded formalists applying old answers to old questions,” in a secretive and static process. Our leaders are not only failing to seize the opportunity to unite in economic common purpose, but are going backwards economically and in new forms of violence. “Global social progress has been retarded by persistent and egregious mistakes that should have been avoided by the correct truth-seeking process.” American culture led by universities must train leaders and educate citizens in an efficacious, multi-disciplinary truth-seeking process to harness knowledge for human betterment, through a determined effort at “Enlightenment II.” Institutional investors have the fiduciary responsibility and the democratic power to democratize capitalism by reforming company practices and government policies.

 [NOTE: Fresh, thoughtful, and remarkably well-read.]

Culture Watch                      

Books Democratic Capitalism is a fascinating, important, erudite book that leads the reader through the history and development of capitalism making a clear case for what needs to be done in the future.

Democratic Capitalism

The Way to a World of Peace and Plenty
by Ray Carey, © 2004
Published by Authorhouse
Paperback: 497 pp

           This fascinating, important, erudite book is not an easy, weekend read, nor a book you’d like to take on vacation for a beach read. It requires patience and hard thinking. Fortunately, it is written in a clear, accessible style that leads the reader, step by careful step, through the history and development of capitalism, and explains the current state of the world’s economics in terms even a layman can comprehend. It also makes a clear case for what needs to be done in the future.

          That’s a tall order for one book, but the author acquits himself handsomely. Carey served as CEO for ADT, Inc. for many years, and has, since his retirement, spent untold hours of thought and research before writing this book. It is a masterpiece of meticulous documentation (there is a 20-page bibliography) and explanation. The proposals set out in the final chapter are short, clear, and well-supported by the preceding evidence.

          Carey begins by reviewing the 19th century writings of John Stuart Mill and Karl Marx. Both men expounded new theories about the equitable distribution of wealth, Mill believing that a free market system could eliminate scarcity, and Marx maintaining that only a revolutionary approach could rebuild the world’s economic systems. Carey comes down squarely on Mill’s side, although he points out that toward the end of the 20th century, the United States has strayed widely from Mill’s principles, veering off into what Carey terms “Ultra Capitalism.” This he defines as “... short-term and greedy ... [a] record concentration of wealth that ... limited the spread of economic freedom and provoked global social tensions and violence.”

          This is a hard charge, but Mr. Carey makes a most convincing case for his theory. The next time you find yourself asking why so much of the world hates us, pick up this book. The answers it offers are painful to read, but pretty much incontestable.

          What, then, is democratic capitalism? It is a system that combines the best aspects of the political construct of democracy with the economic construct of capitalism. Carey’s premise is that in the past, we have gone about things in the wrong order, seeking to establish the political structures of nations first (as in post-Soviet Russia), and then to encourage their economic development. Done the other way around, i.e. seeing first to the economic stability, democracy is bound to follow. He believes that people everywhere long first for the basic material comforts (food, a place to live, a job). Once those things are achieved, they long also for freedom, as defined by democracy.

          Democratic capitalism’s “...common features include a fundamental morality broadly understood, customer loyalty, high levels of productivity, job security, meritocracy, minimum structure, action orientation, and a compensation system that is both fair and perceived to be fair.” Moreover, under democratic capitalism, workers will have minimal interference from management, and encouragement in their desire to be innovative. Democratic capitalism will also harness the power of worker involvement, sharing profits that will create worker/owners through plans like payroll-deduction stock purchase and 401K plans.

          In his explanation of how he himself came to be a passionate believer in democratic capitalism, Carey summarizes his own career, during which he learned effective methods of motivating the people who worked for and with him. As he moved up the career ladder, he began to formulate the principles that brought great success both personally and for the companies he ran.

          Carey cites thinkers all the way back to Aristotle. The list of his readings is astounding: Galileo, Descartes, Isaac Newton, Condorcet, Edmund Burke, Thomas Jefferson, James Madison, Robert Owen, Kant, Hegel, and so on and on. To say that he has been both catholic and meticulous in searching out his sources is an understatement.

          Democratic Capitalism is an important book. When you’ve read the book, you might want to consider sharing your copy with your Congressman or Senator, who would probably thank you for it.

— JS               www.seniorwomen.com/ca/cw/cult043005.html            May 2005

  
Review of Democratic Capitalism by Keith Wilde        

This review has been copyrighted by the Committee for Monetary and Economic Reform, but may be reproduced if accompanied by: "Copyright 2005 COMER Publications".  Keith Wilde Ph.D. has a background that includes think tanks, banking, and government.

In my opinion, Ray Carey has provided the most comprehensive and persuasive case yet for the idea of broad ownership and the best account of mechanisms for achieving it. The following is a digest, the full review can be read on the COMER website: http://comer.org.   Keith Wilde, Ottawa, Canada, August, 2005

Ray Carey, Democratic Capitalism, The Way to a World of Peace and Plenty, AuthorHouse, Bloomington, Indiana, 2004. xviii + 542 pp.; Bibliography; Index.

This is an unusual book, an unusually important and helpful book. It is remarkable not only for the theme, but also for the breadth of coverage and the authoritative grasp with which the topics are treated.

The essence of Democratic Capitalism is to turn on the productive capacities of people by giving them a sense of purpose and a confident stake in the collective enterprise. Ray Carey knows how to do it, and he has the track record to prove it. He believes it is a natural if not inevitable evolution of the social order, following on the 17th century recognition that technological progress can be deliberate, and the application of reason to the social sphere in the political revolutions of the Enlightenment era that ensued in the 18th. The template for governance of social progress became available through combining Adam Smith’s proposal of economic freedom through growing capitalism and Jefferson’s ideal of political freedom through growing democracy. The commercial application of this ideology, he says, "has resulted and continues to result in democratic capitalism." The adversary from its beginning has been the opportunistic aspirations of financiers, whose positions had already become entrenched through the practices and ideology of the mercantilist era.

 Carey reaffirms the position of many industrialists in the 1930s that banded together with many cooperative bankers in a campaign for "Stable Money". Money should be a neutral medium of exchange, a cooperative facilitator of industry rather than an instrument for exploiting its productive efforts parasitically. Carey cites Adam Smith on the point that money should be ample, low-cost, non-volatile and patient, and notes further that Smith warned against speculators who would deflect capital away from growth and make money volatile and impatient. The reforms that were imposed on the financial interest in the thirties are acknowledged as a critical element in the ongoing rivalry between democratic and plutocratic capitalism, and their dismantlement in the last quarter century is a main theme of the book.

Carey believes not only that Democratic Capitalism is superior, but also that there is a degree of economic determinism in it, that it is an inevitable evolutionary step. He finds this in the Information Age technology and in the kind of work environment that its successful development entails. Capitalism failed to reach its full potential in the Industrial Era, he says, because capitalists have invested mainly in physical assets and not in people. "In the Information Age, however, investment in people is no longer merely a choice but a necessity, for success is dependent on the release of cognitive power in motivated, involved, contributing and sharing associates." Information Age industries require that democracy and capitalism be synergistic. As Peter Drucker expressed it, "If the feudal knight was the clearest embodiment of society in the early Middle Ages, and the bourgeois under capitalism, the educated person will represent society in the post-capitalist society in which knowledge has become the central resource." "Competitive demands in the Information Age for involved, educated and contributing associates will finally result in their demanding full partnership and a full share."

This perspective reflects Carey’s experience of 18 years as successful CEO of ADT, Inc., the largest provider of central station alarm services, and before that a career spent entirely in companies specialized to leading edge technology. He knows that cooperative people power is what builds wealth, not only in high-tech but in every kind of enterprise, before as well as after the information revolution.  Carey’s analysis of human motivations and interactions seems well suited to quieting the reservations that are commonly expressed to proposals for income that is separate from payment for direct labor.

Carey provides a list of ways that wage earners can become worker-owners, some of which like the ESOP are programs specific to U.S. regulations. Among them, however, are some generic methods, including company pension plans, stock grants, stock options and stock purchase. The latter, when combined with a scheme for profit sharing based on company performance improvement, is Carey’s personal favorite and the one he implemented as a CEO. It is better than a simple company match of payroll deduction purchases because it is combined with a motivation to make the company more successful. The worst of the methods is stock options. The rationale is worth quoting in full: “Stock options are a counterproductive compensation device at all levels of corporations. Employees ought never to be financially destroyed by the downside of any corporation compensation plan [as many have been, in bear markets]. At the executive level, stock options became the coupling device with Wall Street that motivates executives to go for extremes for short-term earnings that rain money on all of the dealmakers but that leave the downsized parched and dry. Stock options helped create the environment in which executives faked profit improvement and disgraced the word capitalism.”

By contrast, when employees are motivated by opportunity to share in company profits, when their contributions of innovative effort are recognized and rewarded, and when they feel the effects in their pay envelopes, they develop the attitudes of ownership, responsibility and (consumer) sovereignty that are the elements of a true democracy. They learn about democracy in the microclimate of the enterprise, preparing them to demand and participate in political democracy at the state level. Carey cites Singapore as a primary example, where the burgeoning economy even under an authoritarian government has brought greater political freedom in its tail. (Similar stirrings seem to be afoot in China among the growing entrepreneurial class.)

That political democracy follows from economic democracy is a major theme in Democratic Capitalism. It is a lesson that is repeatedly discovered by successful industrialists, says Carey, and is a concept that should be recognized in business schools but so far has not been. Thus part of the blame for the hostile, adversarial relation of workers to owners (managers and capitalists) in the Industrial era belongs to ideologists who tried to put the cart before the horse by introducing political freedom and democratic control among peoples who didn’t have the adequate preparation that comes from cooperative effort in smaller scale undertakings. He credits Mortimer Adler, in his collaboration with Louis Kelso, (Capitalist Manifesto) for having "discovered what the intellectual community has been missing for too long... .The ‘thinkers,’ the intellectual community, have concentrated on changing the world through the political structure and the culture instead of discovering the superior economic system and helping align the political structure and culture in its support."

A long central chapter on "The Economic Logic..." focuses on the contributions of Adam Smith, J.S. Mill and Karl Marx as the trio of thinkers who laid out the key concepts of a democratic capitalism. Smith is credited, as noted already, for recognizing that a constraint on the financial interests was necessary to the flowering of his "invisible hand", and both Mill and Marx for recognizing that the failure of capitalism lay in insufficient purchasing power in the hands of worker/consumers. Mill’s evolutionary solution was job security, worker ownership and profit sharing, but Marx, in his belief that labor would continue to be displaced by the capitalists’ technology and its wage to be continually suppressed, opted for revolution. His followers "inherited the intellectual tradition of loving the state and distrusting commerce." "Adler apparently did not connect Kelso’s manifesto with Marx’s, so did not propose a more careful examination by the intellectual community of...Marx’s signature concept that social progress depends on movement to the superior economic system."

The adversary of this democratic vision of capitalism is a parasitical financial behemoth, which has been a threat to it since the dawn of industrial development in the 17th century and which vaulted into dominance as "ultra-capitalism" in the past three decades. Ultra-capitalism combines financial dominance with old-fashioned mercantilism that treats the wage earner as a disposable cost commodity. Business schools have failed to see this, and schools of economics have been its patsies. Almost half of the book is devoted to description and analysis of ultra-capitalism, its origins, tactics and consequences. A full chapter dramatizes its parasitical and often irresistible threat even to companies that have built success on the principles of democratic capitalism. Carey brings the campaign literature of money reform up to date with a carefully detailed exposition that explains how the financial interests fought back from the reforms of the 1930s to its current unregulated dominance over governments as well as business, linking it clearly to abuses such as outrageously excessive "compensation" of CEOs, fraudulent financial reporting, incompetent and venal auditors, spectacular corporate meltdowns of recent years, and suspension of disciplines that the free market depends upon.

So, although Carey makes a case in the first half of the book for democratic capitalism as an evolutionary social development due to the exigencies of exploiting technological progress, he comes back at the end to the vision after the financial adversary is defeated, and that will take an informed as well as an outraged (or more likely desperate) citizenry. Having by this time read a substantial amount of the money reform literature of the 1930s and ‘40s (see July ER), I can affirm that Carey’s treatment is comprehensive, advanced and novel. I recommend it highly to readers of ER as a handbook for elucidating and summarizing most of the principles that have been developed in these pages by Wm. Krehm and his colleagues. It is available in paperback as well as hard cover (Amazon), and may be had for free download at www.democratic-capitalism.com.

Keith Wilde,
Email: keithwilde@sympatico.ca