Chapter Two: Sustainability

This chapter explores the definition, history and nature of sustainability. With human progress over the last two hundred years came justifiable concerns over the sustainability of progress and, especially, the sustainability of the natural environment, caused primarily by rapid population growth and increasing demands on non-renewable carbon-based energy sources. The concerns were based on a Malthusian argument that population growth-based human demands on the fixed natural resources would create a horrific zero-sum conflict for those rapidly declining resources, while short-term wealth and indifference to the long-term impact on the environment would pollute the planet into a dystopian nightmare.

Meanwhile, human ingenuity and technology, especially around medicine and food production, at least postponed somewhat the Malthusian scenario. Then, attention to these predicted crises and a longer-term outlook produced a wholly unexpected trend, per Matt Ridley, humans are the only species to become more prosperous as they become more populous. This evolutionary process of human progress led to attention to not only sustainability, but also to human development, in both social and economic terms. This begat the study and practice of sustainable development.

“People should have one meat-free day a week if they want to make a personal and effective sacrifice that would help tackle climate change, the world’s leading authority on global warming has told The Observer. Dr Rajendra Pachauri, chair of the United Nations Intergovernmental Panel on Climate Change, which last year earned a joint share of the Nobel Peace Prize, said that people should then go on to reduce their meat consumption even further.” (The Observer, September 7, 2008).

Sustainability

We focus first on sustainability. As a practical, popular concept, sustainability recognizes the intangible costs that often accompany tangible wealth creation, economic growth, and greed. Sustainability is a social, economic, and a prosocial leader’s goal and responsibility. Short-term economic success that destroys environmental resources and social capital cannot be justified – or sustained -- as a way of doing business. Nor can attention to shareholder wealth or to short-term profit maximization justify inattention to long-term sustainability. In fact, traditional measures of shareholder wealth cannot be maximized over the long term without sustainability.

This is the way we've been fishing the oceans over the last 50 years. World War II was a tremendous incentive to arm ourselves in a war against fish. All of the technology that we perfected during World War II -- sonar, lightweight polymers -- all these things were redirected towards fish. And so you see this tremendous buildup in fishing capacity, quadrupling in the course of time, from the end of World War II to the present time. And right now that means we're taking between 80 and 90 million metric tons out of the sea every year. That's the equivalent of the human weight of China taken out of the sea every year. And it's no coincidence that I use China as the example because China is now the largest fishing nation in the world.

Problem is we've also gone crazy with the amount of salmon that we're producing. Aquaculture is the fastest growing food system on the planet. It's growing at something like seven percent per year. And so even though we're doing less per fish to bring it to the market, we're still killing a lot of these little fish.

08:24And it's not just fish that we're feeding fish to, we're also feeding fish to chickens and pigs. So we've got chickens and they're eating fish, but weirdly, we also have fish that are eating chickens. Because the byproducts of chickens -- feathers, blood, bone -- get ground up and fed to fish. So I often wonder, is there a fish that ate a chicken that ate a fish? It's sort of a reworking of the chicken and egg thing.[1] 

We also introduce the role of prosocial leadership in promoting sustainability. A prosocial leadership approach can achieve sustainable success. While leadership is influence, management is stewardship of scarce resources. Managers are accountable for the resources under their command and control. For the prosocial leader, sustainability means the management of all types of resources, especially environmental resources.

Sustainability

            A global, free-market economy has generated unprecedented produced wealth, a world economy of more than $75 trillion dollars with a global population of 7.5 billion people. Global, free-market capitalism has contributed to phenomenal wealth creation, but is capitalism sustainable into the future? Or has it run its course? And, if capitalism is “dead”, what will replace it? There have long been critics of capitalism and skeptics, and significant doubts about financial capitalism[2] resurfaced during the recent global debt crisis.

In 1867, the father of communism, Karl Marx, made this prediction about the (un)sustainability of capitalism, and the inevitable emergence of communism.

"Owners of capital will stimulate the working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and the State will have to take the road which will eventually lead to communism."[3]

Marx believed that capitalism would collapse under the weight of its natural excesses, primarily greed and exploitative human interactions. Capitalism, he claimed, was not sustainable. One hundred forty years later, communism has nearly disappeared as a fundamental economic and political culture, and capitalism has become more pervasive. Marx appears to have been incorrect. Yet doubts about capitalism remain. Some argue that recent evidence would suggest that Marx’s prediction is about to come true, perhaps in a form of “world socialism”. And the run of success for capitalism may be about to end.

Even advocates of capitalism have been aware of problems with its excesses. A Scotsman, Adam Smith, the father of modern, free market capitalism, was cautious about misguided ‘capitalism,’ speculation, and threats to sustainability. Almost one hundred years before Marx, in 1772, Smith wrote:

“A dwelling-house, as such, contributes nothing to the revenue of its inhabitant,” Smith said in The Wealth of Nations. “If it is lett [sic] to a tenant for rent, as the house itself can produce nothing, the tenant must always pay the rent out of some other revenue.” Therefore Smith concluded that, although a house can make money for its owner if it is rented, “the revenue of the whole body of the people can never be in the smallest degree increased by it”.

“When the profits of trade happen to be greater than ordinary,” Smith said, “overtrading becomes a general error.” And rate of profit, Smith claimed, “is always highest in the countries that are going fastest to ruin.”[4]

In 1772, a bank run occurred in Scotland. Only three of Edinburgh’s 30 private banks survived. The reaction to the ensuing credit freeze from the Scottish ‘overtraders’ sounds familiar, “The banks, they seem to have thought,” Smith said, “were in honour bound to supply the deficiency, and to provide them with all the capital which they wanted to trade with.”

For a society, a system or an organization to endure, its philosophies (values) and practices (culture) need to be sustainable. To some, like Marx, the global economic and financial crisis of 2007-2009 was an evitable and desirable event, if only to curb some of the excesses of consumerism, consumption and waste that accompanied free markets, capitalism, global trade and cheap credit. Perhaps this crisis was a necessary correction, forcing people to adjust their expectations and to curb some excesses, actions they would not have made if left to their own choices. Whatever the political, historical, or economic view, the fundamental question remains: “Is a global market economy based on capitalism achievable and sustainable?”

Affluenza

Research[5] examined American consumers’ addiction to excessive consumption, an array of behaviors also known as affluenza. Using the personal lifestyle survey developed by de Graaf, Wann and Naylor (2005) to measure affluenza, contrary to the authors’ claims, an empirical test did not find wide-spread or high levels of affluenza. Building on the original affluenza instrument produced a modified, six-dimension, twenty-one item instrument to measure affluenza. Analysis using the revised instrument confirmed a low level of affluenza among the young adult participants in the surveyresearch.

A poll of nearly 2,000 Britons found that 70 per cent of respondents incorrectly said it was true that the US had done a worse job than the European Union in reducing carbon emissions since 2000. Tim Montgomerie said factual inaccuracies and mistaken assumptions have contributed to Britons and Europeans taking a hostile stance towards their most powerful ally, which often acted against national interests. “We wanted to find out how British people understood America and found that there was an unbalanced view. Maybe there are good reasons but if we cleared a lot of that factual ignorance we would have a better understanding of what America really is” (Telegraph, August 18, 2008).

There continues to be significant ambiguity concerning sustainability and efforts related to promoting a sustainability agenda. One of the commonly identified causes of poor sustainability practices is capitalism. Again, there are conflicting if not contradictory views on the nature of capitalism’s impact on environmental sustainability, as well as simplistic or disingenuous definitions and examples of capitalism. Some people equate capitalism with selfishness, greed, “affluenza” and indifference to the environment. Some claim that it is the excesses of capitalism, not capitalism itself, that create threats to the environment. Some credit capitalism for human progress, for increased life expectancy, for global prosperity, and even for reducing military conflict by replacing it with trade. Yet those who offer this praise often are quick to claim that capitalism needs to be replaced, or that a new form of capitalism is needed, or that Marx was correct and that capitalism would destroy itself. The next section will address some of these concerns about capitalism, trade, and free enterprise, and their possible deleterious effects on sustainability.

Winston Churchill offered these thoughts on the role and value of private enterprise and capitalism:

"Some see private enterprise as a predatory target to be shot, others as a cow to be milked, but few are those who see it as a sturdy horse pulling the wagon."

"The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries."

“Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy."

Critics of capitalism, free trade and globalization persist. Cultural differences, global politics, ethnic conflict, and terrorism demonstrate that the benefits of these wealth-creating processes are not always widely accepted, partially because many people still do not have the education or access to markets necessary. Some critics object to capitalism and its profits on moral grounds. Some people object strenuously to profits. Controversial academic Ward Churchill, describing what he called the “perfectly predictable” September 2001 terror attacks on the World Trade Center in New York and questioning the moral culpability of the people working there, wrote, “When you bring your skills to bear for profit, you are the moral equivalent of Adolph Eichmann.”[6]

So what are we to conclude about the long-term prospects for the system of capitalism and the produced, natural and intangible wealth it has produced (and destroyed)? First, viable alternatives to global capitalism are not apparent. Marx’s prediction about communism appears to have seriously underestimated the strength of capitalism and overestimated the strength of communism. Second, while global capitalism has, at times, destroyed natural wealth and social capital, the net result has been to an increase in not only produced wealth, it has increased social capital (primarily through economic freedom, education, and the rule of law), and developed a greater appreciation for the need to respect and sustain natural wealth. For instance, the consumption of non-renewable petroleum is deeply impacted by supply and demand, price changes, and the development of alternative energy sources, all the result of global, free-market capitalism. The resultant positive environmental effects of reduced petroleum use are the result of capitalism at work, not its failure. Third, economic and political freedoms appear to go hand in hand. Efforts to reduce economic choices, freedoms, and markets will likely reduce social capital. And, finally, while it has taken some time for the issue to emerge, the need for a sustainable natural environment has been recognized and may best be sustained through capitalism. Capitalism requires ownership; without a sense of ownership, we have the “tragedy of the commons” dilemma, where common, joint owners of a “public” asset cause people to abuse the common good.

Sustainability is an explicit part of the organizational need for a sustained comparative advantage. We need to next consider the various approaches to and the types of sustainability available as organizational strategies. We will see that are options are broader and more empowering than they are constraining or limited.

Types of sustainability

“Old thinking: Companies have long mistakenly thought that adopting environmentally friendly processes adds costs. New thinking: Green practices like recycling, reducing and reusing waste can cut costs because they make company more efficient.”[7]

Sustainability – long-term intangible wealth creation -- has three facets, economic, environmental and entrepreneurial. Economic sustainability requires efficiency in the use of resources, cost-benefit analysis, and private ownership of “common” resources. Environmental sustainability describes the process of protecting and preserving natural resources, with a focus on the economic and social costs of environmental degradation. Entrepreneurial sustainability describes the process of generating new revenues, developing new processes, and serving new customers. Entrepreneurial sustainability focuses primarily on benefits or revenues, while environmental sustainability focuses primarily on resources, inputs and costs.

The popular view of an environmental sustainability strategy has been characterized by the phrase, “Reduce, re-use, recycle.” This phrase describes the philosophy and the practice of conservation of scarce, non-renewable natural resources. [For a detailed example of social behaviors associated with this concept, see the Appendix.] But sustainability means more than reducing the input costs or the damage done to environmental resources. We need a strategy built on entrepreneurial sustainability. Another simple phrase, “Improve, innovate, inspire,” more broadly addresses environmental concerns. Improve means to matter better use of the resource. Innovate suggests we determine new, creative sources of and uses for environmental resources. Inspire relates to the idea that we need to influence others to show concern for the costs and potential benefits of careful environmental resource use. “Improve, innovate, inspire” describes the entrepreneurial sustainability process. For example, the development of alternative and renewable energy to replace our economic dependence on and the environmental damage from petroleum would be an entrepreneurial sustainability approach.

Prosocial leaders help to sustain the environment by applying entrepreneurial principles and practices to solving social problems. For example, domestic propagation of bamboo can increase the supply of a highly useful, renewable environmental resource, useful for building homes, floors and furniture, and producing 35% more oxygen than would equivalent amounts of traditional forests. The Wall Street Journal reported[8] that business firms once assumed improving quality would increase costs; firms were proven wrong then and firms often held the same erroneous assumption about “going green,” that doing so would increase costs. In fact, “going green” can create wealth by reducing costs and by creating a long-term competitive advantage for the firm.

All three types of sustainability would be positive goals that serve the common good, each requiring good management to produce results. In accounting terms,[9] the difference between revenues and costs is profit, or the process we have described as value creation or wealth creation. Prosocial sustainability entails long-term survival of the organization, achieved through wealth creation based on economic, environmental, and entrepreneurial sustainability efforts.

Basics of sustainability

            Product and process technological innovation. Better products, better solutions, more durable products, reduced energy consumption,

            Market competitveness. More responsive to consumer needs, not just wants. Educating a better-educated consumer about features and externatities of various products and processes/services.

            Economic profitability. Creating new, surplus wealth, for investment in new technology, for subsequent generations, for ‘rainy day’ scenario.

            Creative destruction. Note the irony of creativity destroying previous products and processes. The critical decisions involve destroying or setting aside less effective, less sustainable, less economically viable products and processes in favor of truly ‘new and improved’ alternatives. And one altenrative can be to simply discontinue rather than replace the process or product.

Prosocial leaders engage in sustainable strategies for the purpose of wealth creation, not solely out of environmental concerns; the problem is that traditional measures of wealth creation often ignore or fail to adequately capture the cost of environmental degradation, especially for non-renewable environmental resources. For example, corporations and countries plant trees to replace those cut for industry and construction; renewing forests is in the organization’s best economic interests and help to sustain long-term wealth creation. Petroleum, while new reserves have been found, is non-renewable; we cannot create more petroleum.

Case: Oil

            Oil, perhaps the critical natural resource behind the knowledge economy, provides an excellent illustration of the conflicts and tension in sustainability. First, oil is a non-renewable resource. Unlike trees or flowing water, once oil is consumed, it is gone. While new deposits of oil are found every year, oil remains a finite natural resource. The stewardship of oil highlights the “reduce, re-use, re-cycle” philosophy at work. Second, the consumption and use of oil produces by-products that pollute the environment and cause harm. Smog, carbon monoxide, auto accidents, collapsing roadwork are just a few of the negative effects that accompany the consumption of oil in a knowledge economy. These negative effects need to be reduced or eliminated for oil to be part of a sustainable long-term strategy for the world. Third, the control of oil presents a significant political and military problem, evidenced daily in the last one hundred years, as consumers of oil struggle to gain reliable, affordable access to oil and producers of oil struggle to protect their oil sources and revenue. Much of the military conflict of the twentieth and twenty-first century can be traced back to the desire to control oil. This conflict is, by nature, inconsistent with a strategy of sustainability.

Oil, 2016. In the preceding ten years, global oil prices fluctuated between $30 and $140 a barrel. By 2016, a gallon of gasoline could be purchased for about twelve minutes of minimum wage labor ($1.69 and $7.25, respectively), less than the minimum wage labor time needed to buy a gallon of gasoline in 1973 ($0.42 and $1.65, respectively), about fifteen minutes.

            A prosocial leader must consider sustainability, looking beyond short-term profits, the accumulation of natural wealth, and the desire to achieve control at the expense of others’ well-being. For oil, this means environmental and entrepreneurial strategies that respect social capital and that show good stewardship as managers of scarce natural resources that have a profound effect on lives in a knowledge economy. Wisely used, oil can help wealth creation. Ill-managed, oil presents an array of potential lethal scenarios for individuals, organizations, countries, and the world.

Evolution of a sustainable paradigm

Events of the twentieth century changed the basic paradigm of the global economy. Product- and manufacturing-based economies evolved to become more service- and knowledge-based. From a sustainability perspective, we need to decide if conditions improved. So first, what did happen in those years?

In 1900, after agriculture, the next largest American employment class was domestic servant. By the end of the twentieth century, a popular if misguided cliché of “service economy” meant flipping burgers, or people doing one another’s laundry. One hundred years ago, laundry was done by hand at home. Technology replaced people. We automated and outsourced home labor. Technology, later information technology, impacted the American home, with appliances, work-reducing machines, air conditioning, central heating, personal transportation.

American economic leadership around the globe peaked in 1945, but the advantage was not to be sustained. In the last half of the twentieth century, we noted that recovering economies challenged American post-war global economic supremacy. But, in that period, Americans learned to take global economic supremacy for granted. American management often adopted a short-term, smug philosophy: “Get the product out the door,” as global customer clamored for goods produced in the massive American manufacturing infrastructure that survived the second world war. When Americans thought of foreign competition, they read “Made in Japan” as “This is junk.” Epitomizing American manufacturing prowess, in 1956, eleven of eighteen best-paid executives in America were employed by Bethlehem Steel. But this success and advantage was not sustainable, not with this management strategy.

By 1981, post-war economies, especially in Western Europe and Japan had recovered and threatened American manufacturing and the implicit accompanying global economic domination Americans had grown to take for granted. In 1981, United States president made a statement about the new management-labor relationship when he fired  (illegally) striking air traffic controllers. That same year saw IBM introduce their MS-DOS personal computer, “new” Coke launched (and crashed), and MTV debuted. These events highlighted the shift from high-wage, domestic, unproductive labor to high value-added global competition among organizations and workers. There was an intensification of global production competition, especially Asia. After ignoring many aspects of customer service for years, there was a slow, painful, yet eventual turn of attention to customers and to product quality.

By 1995, manufacturing wages in America ($18 per hour), once the highest in the world, fell behind France ($20), Japan ($25), Belgium ($26) and Germany ($32). While difficult for middle-class, blue-collar incomes, it also made American workers more competitive and revealed the shift in employment from manufacturing to service and knowledge work. Health care and education replaced steel making and manufacturing as the economic engine that drove the late twentieth century economy.

These new ‘factories’ produced healthy and educated people, greatly improving social capital. While fewer people had manufacturing jobs, manufactured goods did not decline. Entrepreneurial sustainability strategies changed the way we worked and increased intangible wealth, paving the way for more tangible wealth creation and causing people to pay more attention to environmental sustainability strategies. Economic productivity improved social capital and allowed people to pay more attention to the environment.

Social, political issues for the twenty-first century

What role did traditional financial wealth play in this intergenerational process? Poverty, once the curse of the old, had become an issue of the young “working poor”. Tax revenues increased dramatically. For example, highly regressive social security taxes ballooned from a base of 1% to more than 15% of income below $100,000. And traditional families declined, as today fewer than 5% of American households have two parents, with one and only one working outside the home. Between 1974 and 1993, median income of all households increased only 0.2% yet 11% for married couple families, while incomes for single-parent households declined almost 4%.

The percentage of high school graduates moving on to college increased from 45% (1990) to 63% (2000) of a rapidly growing American population and the number of college professors doubled to more than one million. Education became a key driver for economic and social progress. While science and technology became more important to innovation and development, the aims and value of an education remained quite basic. Economically and politically free countries prospered, grew and improved. Tangible and intangible wealth increased in many “poor” and “rich” countries. While progress was uneven, those who failed to share in the new prosperity suffered from poor education and difficult home life, as both causes and effects of poverty.

America attained economic growth, power and competitiveness due to its ability to adapt, to embrace free trade and technology, to develop and maintain productive workers, and to accept the destruction of jobs as part of the process required for the creation of new jobs. America people operating as customers, consumers and -- in an impersonal sense -- a market, intuitively understand the role of markets. This understanding is neither deep nor philosophical. Rather, it is practical, daily, and nearly invisible to people living and working in an American economy approaching $18 trillion.

America is not alone in having experienced the recent and ongoing global transformation from an industrial and a services-driven society to one where information has become the key service. Service remains critical, only now technology, specifically information technology has replaced much of the human labor of the services economy. A customized web newspaper can be edited by each reader; a research project can be facilitated by a search engine rather than a librarian. The telephone and telecommunications are being supplanted by the Internet, e-mail, and electronic commerce as the critical network.

And the nature of work changed dramatically. American population, manufacturing and employment grew, even as the number of jobs making goods declined. The number of jobs where people engaged in managing and analyzing information – symbolic analysts -- grew rapidly. Farming, domestic service, and factory jobs declined, and jobs in health care, education, and financial services expanded dramatically. More goods and services came from fewer workers.

Economic realities have intervened. The widely predicted Asian twenty-first century has experienced start-up problems. A currency collapse centered in Thailand in 1998 soon spread throughout the region, stalling growth across Asia. Japan's economy contracted. China's boom slowed to a near halt.  Indonesia, Thailand, Korea, India and other Asian tigers saw their teeth grow dull and their appetites exceeding their ability to feed themselves, with real estate devaluation, political instability, generational divides, religious, cultural and language conflicts, economic sluggishness, and collapsed confidence. Predictions that Asian thrift, work values, religious tolerance, high levels of savings, and government efforts to pre-select and cultivate key industries -- these all appear to be much less powerful than once envisioned.

Sustainable management

Prosocial leadership is the antidote to lingering management problems and the result of this evolution of paradigms. Prosocial leadership behavior is a blend of the best of leadership (influence, the common good) and management (stewardship, wealth creation). Antisocial behavior and leadership are destructive, dysfunctional. Leadership, management and organizational behavior are all based on values. People and firms value wealth. We emphasize and value wealth creation, including the development of personal, social, and psychological capital.

Wealth creation and distribution

We focus on wealth creation but wealth distribution is important, both for moral and practical reasons. Shift from wealth as something to be seized, taken, found or discovered to something to be created. Unless and until you solve the wealth creation dilemma, arguments over distribution issues are pointless: You can’t distribute what you don’t have.

Wealth creation is not the same as wealth accumulation. Unless you address wealth distribution, wealth creation will be threatened, it will not be sustainable. People confuse earning a million dollars (income) with spending a million dollars (consumption or expense) and with having a million dollars (wealth).You must have wealth to be able to (re)distribute wealth. Making wealth distribution the first priority reduces wealth creation. There is tension among making, accumulating and distributing wealth. Wealth is not a zero-sum game; wealth can be created.

There are three distinctive emphases of American culture: First is the emphasis on the individual, on her rights and her self- interests. Second, we see an emphasis on freedom, both political and economic, to act. This freedom of choice begets competition. And third, there is an emphasis on wealth creation, not wealth taking.

Wealth, capitalism and globalization

Sustainability is a management responsibility. Sustainability is a social responsibility and a method for creating long-term wealth. We tend to equate wealth with financial capital. We need to recognize the different forms of wealth, including human, intellectual, natural (resources), and physical. Capitalism had more to do with the assembling of large amounts of various types of wealth (or capital) to create efficiencies in adding value. Historically, this approach ignored the costs of diminishing natural wealth as well as the adverse impact of many manufacturing processes on human or social capital. However, capitalism need not be inconsistent with sustainable strategies for people, natural wealth, and the environment. With a prosocial leadership approach, one that recognizes human, social, natural and other forms of intangible capital, capitalism can promote sustainability.

Sustainability requires us to, at times, forsake short-term gratification, greed, and environmental damage for the sake of an enduring strategy for success. In the next section and chapter we will shift our attention from the context of prosocial leadership to the actual behaviors and personal strategies that comprise prosocial leadership, starting with attention to and the articulation of clear vision and goals.

Coke Teams Up With Socially Focused Smoothie

Investment in Britain's Innocent, Known for Environmental and Charity Efforts, Marks New Expansion Approach         

Aaron O. Patrick and Valerie Bauerlein  

Wall Street Journal

April 8, 2009, B6

Coca-Cola's investment in British smoothie maker Innocent not only connects the beverage giant to a fast-growing product but also to a company known for good social and environmental behavior. Coke said this week it will take a minority stake in London-based Innocent, which has quickly become one of Britain's top brands by marketing its healthy ingredients and social commitment. By giving 10% of its profits to charity and using recycled bottles, Innocent was one of the first consumer brands launched in Britain to develop a big following through ethical marketing. Founded 10 years ago, it now has 82% of the U.K. smoothie market, according to a spokeswoman.

Innocent cuts a quirky public figure. Some of its trucks are covered in fake grass and daisies. Those trucks are mounted on hydraulics that make them appear to dance, with drop-down windows for giving away samples.Coca-Cola money will be used to expand Innocent's operations in Europe, where few supermarkets sell smoothies. While Innocent has run TV- and newspaper-ad campaigns, it has also specialized in less-traditional advertising. One of its ad agencies, Albion, created a board game for schools promoting the health benefits of fruit and vegetables. Some 200,000 people turned up to a Innocent musical concert in London named Fruitstock in 2006. In following years it replaced the event with smaller village fetes. Innocent reaches out to its consumers in surprisingly direct ways. Its Web site features a "Daily Thoughts" blog where employees not only post items about new products, but also offer random tips such as what to feed tadpoles. Next month, Innocent is inviting customers to come to an AGM (A Grown-up Meeting), to solicit feedback; the phrase is a play on the Annual General Meetings held by U.K. companies.

Entrepreneurial Culture

Edmund S. Phelps

Wall Street Journal

February 12, 2007; Page A15

The nations of Continental Western Europe, in the reforms they make to try to raise their economic performance, may prove to be a testing ground for the view that culture matters for a society's economic results. As is increasingly admitted, the economic performance in nearly every Continental country is generally poor compared to the U.S. and a few other countries that share the U.S.'s characteristics. Productivity in the Continental Big Three -- Germany, France and Italy -- stopped gaining ground on the U.S. in the early 1990s, then lost ground as a result of recent slowdowns and the U.S. speed-up. Unemployment rates are generally far higher than those in the U.S., U.K., Canada and Ireland. And labor force participation rates have been lower for decades. Relatedly, the employee engagement and job satisfaction reported in surveys are mostly lower, too. It is reasonable to infer that the economic systems on the Continent are not well structured for high performance. In my view, the Continental economies began to be underperformers in the interwar period, and have remained so -- with corrective steps here and further missteps there -- from the postwar decades onward. There was no sense of a structural deficiency during the "glorious years" from the mid-'50s through the '70s when the low-hanging fruit of unexploited technologies overseas and Europeans' drive to regain the wealth they had lost in the war powered rapid growth and high employment. Today, there is the sense that a problem exists.

Many economists attribute the Continent's higher unemployment and lower participation, if not also its lower productivity, to the Continent's social model -- in particular, the plethora of social insurance entitlements and the taxes to pay for them. The standard argument is fallacious, though. The consequent reduction of after-tax wage rates is unlikely to be an enduring disincentive to work, for reduced earnings will bring reduced saving; and once private wealth has fallen to its former ratio to after-tax wages, people will be as motivated to work as before. The values that might impact dynamism are of special interest here. Relatively few in the Big Three report that they want jobs offering opportunities for achievement (42% in France and 54% in Italy, versus an average of 73% in Canada and the U.S.); chances for initiative in the job (38% in France and 47% in Italy, as against an average of 53% in Canada and the U.S.), and even interesting work (59% in France and Italy, versus an average of 71.5% in Canada and the U.K). Relatively few are keen on taking responsibility, or freedom (57% in Germany and 58% in France as against 61% in the U.S. and 65% in Canada), and relatively few are happy about taking orders (Italy 1.03, of a possible 3.0, and Germany 1.13, as against 1.34 in Canada and 1.47 in the U.S.).

Appendix. De-Affluenza: Environmental Impact Behavior Scale (EIBS)

Using the scale (below), write a number in the right column for each statement. 1=never 2=rarely  3=sometimes  4=about half the time  5=often    6=almost always  7=always

1.     I set my air conditioning thermostat above 75 degrees in the summer.
2.     I re-cycle newspapers.
3.     The auto that I am in most often gets more than 25 miles per gallon in the city.
4.     I use re-usable bags for my grocery shopping.
5.     I re-cycle metal and plastic.
6.     I replace burnt out light bulbs with energy-saving light bulbs.
7.     I shut off my personal computer every night.
8.     I use public transportation to go to and return from my job.
9.     I plan errands to minimize mileage in my car.
10. I follow a low-cholesterol diet.
11. I carpool for my commute to and from work.
12. I bring my lunch to work rather than go out for lunch.
13. I wash my laundry with cold water.
14. I donate to charity usable household items.
15. I unplug charging devices when they are not in use.
16. I purchase energy star appliances.
17. I compost my organic household waste.
18. I don’t buy new items until they need to be replaced.
19. I keep my programmable thermostat below 68 in the winter months.
20. I grow vegetables.
21. I buy clothing made from organic fibers.
22. I use non-toxic household cleaners.
23. I jog at least two miles at least three times a week.
24. I generate energy at my residence with solar paneling.
25. I pay my bills online.
26. I purchase products made from re-cycled materials.
27. I use re-cyclable cups to drink water.
28. I fill a reusable water container for personal consumption.
29. I avoid drinking bottled water.
30. I use a ceiling fan to cool my residence in summer.
31. I use energy efficient appliances in my residence.
32. I water my lawn often in the summer.
33. My personal vehicle gets over thirty miles a gallon in the city.
34. I use low flow toilets and shower heads in my home.
35. I grow fruits and vegetables at my place of residence.
36. I buy organic foods.
37. I recycle aluminum cans and glass bottles.
38. I use a biodegradable lawn care service.
39. I take showers that last less than 10 minutes.
40. I use the blinds and curtains to keep the sun out and the room cooler.
41. I have a volunteer activity that I do at regular intervals.
42. I exercise at least three times a week for at least thirty minutes each time.
43. I read books from the library.
44. I use a programmable thermostat.
45. I donate money to charitable organizations.
46. I practice regular maintenance on my car.
47. I recycle my electronics at the appropriate facilities.
48. I use rechargeable batteries.
49. I use water saving devices on my sinks and showers.
50. I eat organic food that is produced locally.
51. I do not mow my lawn on poor ozone days.
52. I use environmentally friendly cleaning products.
53. I use solar power outdoor lights.
54. I alone generate only one bag of trash per week.
55. I recycle cardboard boxes.
56. I take showers that last less than 10 minutes.
57. I have a well insulated residence.
58. I have energy efficient windows and doors in my home.
59. I drive a hybrid vehicle.
60. I fix leaky faucets and toilets immediately
61. I buy organic food.
62. I walk when traveling short distances.
63. I research company practices of companies whose products I buy.
64. I research candidate’s social platforms in order to make an informed decision.
65. I run household appliances during off-peak hours to reduce electricity use.
66. I have bamboo flooring in my residence.
67. I have low-flush toilets in my residence.
68. I keep my showers under 5 minutes.
69. I have double-paned windows in my residence.
70. I print on both sides of a sheet of paper.

[1]  http://www.ted.com/talks/paul_greenberg_the_four_fish_we_re_overeating_and_what_to_eat_instead/

[2] For instance, see Jason Dean, James T. Areddy, and Sernea Ng. Chinese premier blames recession on U.S. actions. Wall Street Journal, January 29, 2009, p A1.

[3] Karl Marx. Das kapital. 1867. This is his theory of ‘surplus value’.

[4]  http://www.ft.com/cms/s/0/2802e3a8-f77c-11dd-81f7-000077b07658.html

[5] Lorenzi, Zhang and Friedman. Addicted to Consumption: An Empirical Investigation of American Consumers. JOBM. 20xx, xxx-yyy.

[6]  Eichmann was a German Nazi war criminal. Cited in Katherine Mangu-ward. A radical takes the stand. Wall Street Journal. March 27, 2009, W11.

[7]  Alan G. Robinson and Dean M. Schroeder. Greener and cheaper. Wall Street Journal, March 23, 2009, R4.

[8] Alan G. Robinson and Dean M. Schroeder. Greener and cheaper. Wall Street Journal, March 23, 2009, R4.

[9] In economic terms, we could use a cost-benefit analysis, where the benefit is equivalent to the accounting concept of revenue and a positive benefit-to-cost ratio would indicate that the process is efficient, profitable, or wealth creating.