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We Need Your Support!

This post is a request for your help and support.

As I look around our world with its achievements in improving living standards but its growing inequalities, antagonisms and rising mistrust of elites and others, I am reminded of David Livingstone’s last words:

“ALL I CAN ADD IN MY SOLITUDE, IS, MAY HEAVEN’S RICH BLESSING COME DOWN ON EVERY ONE, AMERICAN, ENGLISH, OR TURK, WHO WILL HELP TO HEAL THIS OPEN SORE OF THE WORLD”

Each of us has opportunities daily to help in healing; each of us can lead; each of us can make a difference.

I am grateful to all in our Caux Round Table for Moral Capitalism network for their contributions and their leaderships. We strive to contribute to the cause of healing and improving with ideas and recommendations – big picture and small bore – to put in the public domain for all to take up, improve upon and use in their many vocations.

During 2019, we plan to:

  • Implement new certificate educational programs in moral capitalism.
  • Deepen our understanding of common core values among wisdom traditions to give moral capitalism a universal foundation in human aspirations for the good.
  • Convene an international dialogue in Zagreb, Croatia, in June.
  • Convene round tables and collaborate in conferences in Mexico and China.
  • Schedule round tables to consider modernization of the methodology used to value companies and securities in 6 major global centers of finance and public policy leadership.
  • Publish 12 issues of Pegasus.
  • Publish books relevant to the theory and practice of moral capitalism.
  • In Minnesota, convene monthly round tables on important aspects of moral capitalism and hold quarterly workshops on ethical government practices, recognizing that public office is a public trust.
  • Launch a new website.

Your donations to our travel and organizational expenses are needed. Small donations can be particularly helpful:

  • $60 donation pays for distribution of one issue of Pegasus.
  • $100 donation pays for the staff cost of preparing one issue of Pegasus.
  • $500 donation pays for putting 4 e-books on Amazon for global distribution.
  • $500 donation pays for converting one e-book to a print-on-demand paperback available on Amazon Books for global distribution.
  • $500 donation pays for one workshop on public trust in Minnesota.

You can donate here and a contribution form can be found here.

Anything you can give would be most appreciated.

John Bogle, Moral Capitalist: A Tribute

John Bogle passed away recently. He understood financial markets, as we do, that they have a stewardship responsibility inside capitalism to support real wealth creation which raises the living standards of all fairly.

He opened financial markets for ordinary people – the arms and legs of capitalism – by making no-frills, low cost index funds easily available. He started a company, Vanguard Group, in 1975.

Vanguard’s business model allowed investors to minimize their risks by investing in a diversified portfolio of company stocks and so avoid the fees charged by fund managers who bought and sold individual stocks for their clients but who most often failed to outperform the market.

Vanguard was set up as a non-profit with its mutual funds and fund shareholders as owners of the business. Profits were plowed back into the business to reduce fees charged to buyers of its funds. Vanguard now manages $5 trillion globally. Vanguard has an expense ratio substantially lower than any other fund complex in the world.

Then, in 1977, Vanguard marketed its funds directly to individual investors and did not require them to go through brokers, who took fees for their service.

Bogle’s investment philosophy was to mimic the market, not try to outsmart other investors in the short run. Rather, his approach was to grow the market over time – little by little, but steady, year after year. This minimized the risk of loss which kept many with small or no fortunes from putting their assets at hazard in equity markets. Investors could obtain a market rate of return at lower cost with index funds. Even today, almost half of all American households don’t invest for the future at all.

Taken altogether, many Americans are richer and the financial industry poorer thanks to John Bogle. Warren Buffet said that John “did more for American investors … than any individual I’ve known.”

Bogle understood that it was the financial service industry that chased risk in order to get higher returns – greed for money. He saw Wall Street as “Financialism,” not honest capitalism. Bogle argued that financial advisors had a duty to be good stewards of the best interests of their clients only.

Bogle’s strategy was encouraged by federal government tax policies in the authorization of IRAs (individual retirement accounts) and 401(k) savings plans. These two arrangements allowed investors to defer the payment of taxes on their earnings in such funds. Index funds are now just under 30% of the stock market.

He received me graciously in December 2012. He had liked what I had written in my book Moral Capitalism – ”Moral Responsibility is a form of stewardship, of agency, of fiduciary undertaking. … it is a vision of mutuality, of service, of both self and others.”

In giving me a copy of his book The Clash of Cultures, he signed it with this word of encouragement: “Press on – Regardless!”

John differentiated between investment and speculation. The first was good use of money and the second was just gambling to make a money play off the misjudgment of others about the odds of future contingencies happening or not. He understood that speculation did not necessarily create new wealth; it just moved money around from some to others, as happens in any poker game.

Bogle called his industry “The poster-boy for one of the most baneful chapters in the modern history of capitalism.”

Another one of his books, which I have, is just called Enough.

What Do You Believe Accounts for Wall Street’s Recent Volatility? Please Join Us on the 31st

What was Wall Street telling us in the closing months of 2018? How can we know? Should we care?

Who drives prices in financial markets anyway?

Financial markets happened just about from the birth of capitalism in Holland and England. The Tulip Mania, the South Sea Bubble and the Mississippi Company Bubble demonstrated early on in the evolution of capitalism the incentive power of finance and the frequent irrationality of its pricing.

As we move into more and more advanced post-industrial capitalism, it seems prudent to reflect on the role of financial markets with the borrowings which keep them robust.

As the 2020 campaign begins, the issues around Wall Street will take center stage for the next two years.

Please join us for a round table discussion about Wall Street at 9:00 am on Thursday, January 31st at the University Club of St. Paul.

Registration and a light breakfast will begin at 8:30 am and the event at 9:00 am.

Cost to attend is $15 for Business and Public Policy Round Table members and $35 for non-members. Payment will be accepted at the door.

Space is limited.

To register, please contact Jed at jed@cauxroundtable.net or (651) 223-2863 (email preferred).

The University Club is located at 420 Summit Ave in St. Paul.

Parking will be available along Summit Ave.

The event will conclude at 11:00 am.

A Garden Among the Flames

I received a Christmas card from one of our colleagues, a Christian who has a substantial business in the Middle East.

He chose for his message a poem by Ibn Al-Arabi who lived in Andalusia, Spain from 1165 to 1240 C.E. I had not known of his poetry before but found his sense of the spirit compelling for our times of distrust and hard-edged competition.

He wrote:

A Garden Among the Flames

My heart is capable of wearing all forms.
It is a pasture for gazelles and a monastery for monks,
A temple for idols and the Kaaba for the pilgrim.
It is the tablets of the Torah and it is the book of the Koran.
I profess the religion of love, wherever the destination of it caravan may be.
That is the belief, the faith I keep.

Happy New Year.

“Market Failure: What is Wall Street Telling Us?” Please Join Us on the 31st


What was Wall Street telling us in the closing months of 2018? How can we know? Should we care?

Who drives prices in financial markets anyway?

Financial markets happened just about from the birth of capitalism in Holland and England. The Tulip Mania, the South Sea Bubble and the Mississippi Company Bubble demonstrated early on in the evolution of capitalism the incentive power of finance and the frequent irrationality of its pricing.

As we move into more and more advanced post-industrial capitalism, it seems prudent to reflect on the role of financial markets with the borrowings which keep them robust.

As the 2020 campaign begins, the issues around Wall Street will take center stage for the next two years.

Please join us for a round table discussion about Wall Street at 9:00 am on Thursday, January 31st at the University Club of St. Paul.

Registration and a light breakfast will begin at 8:30 am and the event at 9:00 am.

Cost to attend is $15 for Business and Public Policy Round Table members and $35 for non-members. Payment will be accepted at the door.

Space is limited.

To register, please contact Jed at jed@cauxroundtable.net or (651) 223-2863 (email preferred).

The University Club is located at 420 Summit Ave in St. Paul.

Parking will be available along Summit Ave.

The event will conclude at 11:00 am.

The Next Capitalist Revolution

A while back, I ran across several academic papers pointing to a causal connection between increased concentration of market power and stagnation in wage gains. The correlation was that rents obtained through market power were disproportionally shared with managers and owners and not with employees.

I also ran across several charts showing increased concentration of market power in American business sectors. Here are a few:

The special report in the November 17th, 2018 issue of The Economist pointed to the need for de-concentration of market power as the next revolution in capitalism. Anti-trust limitations on company market power would, said the editors, reduce rent extraction (a technical term economists use to point out returns to market power and not quality of product or service or fair pricing in open markets).

Take Google, for example. It has bought up some 200 small companies – potential competitors.

Amazon has just bought a software firm which manipulates data on individual health conditions and a company which sells drugs over the internet. Put the two together and fund them with Amazon cash and you re-structure the health care market to Amazon’s advantage in giving its platform greater market share.

Rent extraction – the result of successful rent-seeking – is the antithesis of moral capitalism and even of Adam Smith’s invisible hand capitalism. Smith excoriated monopolies and mercantilism for the unfairness of its rent extraction propensities. Rent extraction is an economic system using political power of some kind to obtain cash income. It is the basis of aristocracies and landlord regimes, of warlord societies and political hegemony and most of the crony capitalism and self-serving autocracies in the world today.

If profits in America were at historically normal levels, says The Economist and private sector workers got the benefits, real wages would rise by 6%.

The Economist pointed out that in America, the free cash flow of companies is 76% above its 50 year average, while real incomes for workers and the middle class have been largely stagnant for several decades. Is it, therefore, any wonder that so many non-elite Americans voted for Donald Trump in 2016?

The Economist also calculated that the global pool of “excess” profits is $660 billion, of which more than two-thirds were extracted in America.

The Economist recommends: 1) let individual users of tech services take their information anywhere they want; 2) outlaw many barriers to entry such as non-compete clauses in employment contracts; and 3) modernize anti-trust jurisprudence to take into account more than short-term consumer benefits, including consideration of competitive health of markets and excessive returns on capital.

In several commentaries and articles last year, I suggested new examination of the big internet firms for buying excessive market power. It’s nice to have The Economist supporting our recommendation.

“Market Failure: What is Wall Street Telling Us?” Please Join Us on the 31st

What was Wall Street telling us in the closing months of 2018? How can we know? Should we care?

Who drives prices in financial markets anyway?

Financial markets happened just about from the birth of capitalism in Holland and England. The Tulip Mania, the South Sea Bubble and the Mississippi Company Bubble demonstrated early on in the evolution of capitalism the incentive power of finance and the frequent irrationality of its pricing.

As we move into more and more advanced post-industrial capitalism, it seems prudent to reflect on the role of financial markets with the borrowings which keep them robust.

As the 2020 campaign begins, the issues around Wall Street will take center stage for the next two years.

Please join us for a round table discussion about Wall Street at 9:00 am on Thursday, January 31st at the University Club of St. Paul.

Registration and a light breakfast will begin at 8:30 am and the event at 9:00 am.

Cost to attend is $15 for Business and Public Policy Round Table members and $35 for non-members. Payment will be accepted at the door.

Space is limited.

To register, please contact Jed at jed@cauxroundtable.net or (651) 223-2863 (email preferred).

The University Club is located at 420 Summit Ave in St. Paul.

Parking will be available along Summit Ave.

The event will conclude at 11:00 am.

What Are We Worth?

Recently, we have been wondering at the emphasis in capitalism placed on income earned rather than on asset value. Not marking the value of assets is particularly odd because it does not account for vital assets such as social or human capital, which contain moral qualities or for natural capital, which is subject to degradation.

I recently saw a story that in the U.S., a credit rating agency for individuals will add to its consideration of one’s “asset” potential to support a loan one’s habits of paying cellphone and utility bills. Timely payments indicate a person of more “worth” as a capitalist.

I am, thus, reminded that a person’s credit is a reflection of their asset value, not just their earning capacity. A good credit is a worthy asset. And one’s credit does not depend on one’s income but more on one’s character and good judgment.

A good credit rating is a capital account in some important way, standing us in good stead through the vicissitudes of material ups and downs.

The great Wall Street tycoon J.P. Morgan was once asked: “Is not commercial credit based primarily upon money or property?”

Morgan answered: “No, sir; the first thing is character.”

Untermeyer: “Before money or property?”

Morgan: “Before money or anything else. Money cannot buy it.”

This is from Morgan’s testimony before the U.S. House Committee on Banking and Currency in December, 1912.

As We Reflect

On this last day of 2018, I wonder as I do often during this time of year as to the meaning of these holidays. We are so parochial in so many ways – each confined within certain traditions and so most likely distant from others with their traditions who, in turn, may feel themselves to be distant from us.

Yet, I am reminded listening in our family’s rather ordinary Protestant tradition to English Christmas carols with very young grand-daughters sitting on the rug entertained by new toys of one part of the meaning of Christmas – which is the freedom and the burden of personal choice.

The story of Jesus as told in the New Testament and retold in the carols is that of a gift – a gift, if you will, of choice. We are not commanded to follow Jesus. He just appears and teaches. We can adopt his teachings or not. It’s up to us individually.

No ultimate power commands us. That is the reality of ethics and morally. It is up to us. How should we live? How should we treat others? How should we regulate ourselves?

As I wrote in my 2004 book Moral Capitalism, moral capitalism is not a power, not a self-actualizing system that runs on its own. It must be made to happen by our decisions, made one by one, person by person. A tall order, perhaps, but one that follows nature, just as streams must flow from high to low.

Thus, I felt affirmed by the following comment in an article on homelessness in the quite wealthy city of Seattle, Washington, here in the U.S.:

“Advocates point to Zillow and McKinsey studies that show a high correlation between rent hikes and homelessness in Seattle, for example. But correlation is not causation and the survey data paint a remarkably different picture. According to King County’s point-in-time study, only 6 percent of homeless people surveyed cited “could not afford rent increase” as the precipitating cause of their situation, pointing instead to a wide range of other problems—domestic violence, incarceration, mental illness, family conflict, medical conditions, breakups, eviction, addiction and job loss—as bigger factors.”

We live in systems and are subject to powers and principalities, in the words of the New Testament. They constrain our choices. We are raised to believe in this or that. Such beliefs constrain our choices. We are moved by emotions. Such emotions constrain our choices.

But what efforts should we make to make our choices truly our own and in our best interest and with regard for the common good?

We are significantly free and our freedom can be used for good or for ill. Let’s use it for good in the New Year.