Personal Social Responsibility (PSR)

The fundamental question of our time: Improved life for all or equal outcomes for all? Can we create ethical equity by tearing others down? can we re-distribute wealth without discouraging its production? Are some people just better at creating, managing and keeping wealth than are others? Must the choices we make have consequences, or must the government above us of our shortcomings and sins? At what point do we surrender personal social responsibility for collective social responsibility, that is, when everyone is responsible, then no one is responsible/

Percent of people in the world living above $1 a day, 2015. The wealth of the world is tangible and intangible. Tangible wealth consists of the natural and produced physical resources and, for the most part, their surrogate measures, i.e., money. Intangible wealth can be found primarily in the “rule of law” and education (or knowledge and skills). In the past two hundred years, GDP (a widely used surrogate measure of tangible wealth) has increased from about one trillion dollars to about seventy-five trillion dollars. People create wealth within a system. Within the past two hundred years, capitalism, free markets, and political freedom have provided the basis for the system driving this economic growth and enhancements in the quality of human life across the globe. Intangible wealth has also increased, probably at a faster rate than did tangible wealth. This seventy-five trillion dollar global free-market system works on an often unwritten code of conduct and culture that forms the social basis for the political and economic system of capitalism.

“There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”[1]

Liberty and freedom, rights and responsibilities
“Liberty is not the power of doing what we like, but the right of being able to do what we ought.”[2]

Wealth and justice
“The object of civil society is justice, not truth, virtue, wealth, knowledge, glory or power. Justice is followed by equality and liberty.”[3]

This free market system is based on values, and one unifying force in determining social behavior is an understanding of the interrelationship and the role of consequences, rights, and responsibilities. Consequences are the outcomes that follow naturally from prior actions. Rights are those things we claim owed to us, typically by government, society, or the world at large, e.g., “The world owes me a living” is a claim of a right by a person of the world at large. Responsibilities are those implicit and explicit obligations that we recognize and assume, primarily by learning an culture. For example, you are responsible for brushing your teeth. And, by the way, you will suffer the consequences of your poor dental health. And, no, you do not have an inherent right to dental services, and certainly not for free, although some may claim that universal healthcare creates a right to free or ‘affordable’ dental care.

This is a critical aspect of rights. Some are “unalienable,” like those articulated in the American Declaration of Independence. N.B. The U.S. Constitution is more concerned with laws, their creation, implementation and limits, although it does articulate some additional, constitutional rights, the Bill of Rights. What the Declaration says is as follows:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.

While popes, politicians, premieres, and presidents often suggest otherwise, there is no practical, natural right to housing, healthcare, employment or education. While these rights sound noble, fair and just, the assertion of these rights does not make them so, unless someone assumes or accepts responsibility for securing, maintaining and delivering each right. This leads us to responsibilities. In almost very case, the assertion of a right must be accompanied by the assignment of someone to be responsible for delivering that right. And some rights are harder to deliver than are other rights. More importantly, we need to understand the difference between positive and negative rights.

This cultural issue is complicated by a recent political shift in emphasis from negative rights (what the government can’t do to you) to one of positive rights (things the government must do for you, e.g., health care, education, pensions, cell phones, food stamps). Unfortunately, these positive rights claims can not all be fulfilled by the government because (1) governments lack the economic wealth needed to satisfy every positive rights claim; (2) the government can not extract sufficient resources from the productive economy without destroying incentives and damaging the economy, i.e., doing more bad than good; (3) governments have an weak-to-inconsistent record when it comes to delivering on these social promises; and (4) some would deny that these positive rights exist and, if they do, the government can not efficiently or effectively address them.

To some degree, this is a matter of “Walk the walk, don’t just talk the talk.” Politicians and other leaders can tell people that those people have rights, but unless the politicians accept and faithfully fulfill responsibility for delivering those rights, these are merely words, maybe ambitions. And presidents have, at times, ignored laws and rights.

Think for a moment as to what rights you believe you have. Start with negative rights, e.g., the right to own property, the right to own a gun, the right to practice your religion, the right to privacy. These are not tangible and they have no explicit cost to each person claiming or receiving these rights, other than the cost of lives expended to establish and to defend these rights.

Socialism and capitalism

Capitalism is the legal, moral, economic and cultural system of the creative combination of various forms of capital – human, social, natural, financial, intellectual, etc. – to create more capital. Human or social capital is an estimate of the value of human life. This is not placing a price on human life, rather it is attaching value to happiness, health, knowledge, and other intangible social constructs. Socialism is the legal, moral, economic and cultural system of distributing tangible capital equitably across all people. There are numerous practical differences between the two systems.

· Capitalism emphasizes creation and innovation; socialism emphasizes the ‘fairness’ of wealth distribution and centralized planning.

· Capitalism sees people as free individuals expressing their self-interest, while socialism emphasizes the role of government in creating and maintaining the collective good.

· Billions of customers drive capitalism; politicians and bureaucrats drive socialism.

· Capitalism follows the rule of law; socialism expresses the “will of the people.”

· Capitalism assumes each person knows what is best for his or her life; socialism assumes that the government knows best.

Unfair or inaccurate? As president, Barack Obama opined “Today,” he said, “women make up about half our workforce. But they still make 77 cents for every dollar a man earns. That is wrong, and in 2014, it’s an embarrassment.” The most embarrassing aspect of this claim is the resort to rhetoric without critical thinking. A cogent, less embarrassing analysis explains the gap: “The 23-cent gender pay gap is simply the difference between the average earnings of all men and women working full-time. It does not account for differences in occupations, positions, education, job tenure, or hours worked per week. When all these relevant factors are taken into consideration, the wage gap narrows to about five cents.” According to a Georgetown study, nine of the ten most remunerative college majors are overwhelmingly male; nine of the ten least paid college majors are dominated by women. The exceptions are “pharmaceutical sciences” (52% female) and theology/ministry (66% male).[4]

Do you have a right to have a ‘fair share’ of a state’s, country’s, or the world’s income or wealth? If yes, what type of distribution is fair? And who decides the ‘fair’ level? Is it more important that we eradicate absolute poverty or relative poverty? The World Bank asserts that consumption, not income or wealth is a better measure of poverty, and eradicating absolute poverty has a more powerful claim on morality than does eradicating relative poverty, if only because we can eradicate the former, but we do not have a method or metric for solving the latter. Simply re-distributing wealth or income on a massive, even confiscatory scale does not eliminate relative poverty, nor does it permanently ‘cure’ absolute poverty, nor is the confiscation required for some short-term salve of one’s conscious either sustainable or inherently just.

In 1980, the United Nations called for the reduction of absolute poverty as a primary goal for the world in the coming generation. With economic freedom and growth, the world met this goal, tripling incomes worldwide and reducing poverty rates by eighty percent. Now some social critics have changed the objectives and created a new objection, as we have moved from a universal concern and an effective strategy for reducing absolute poverty to an almost illogical concern with perceptions and claims of inequality or unfairness in incomes or wealth. The concerns are illogical in that one inherent aspect of the strong economic growth needed to eradicate poverty is a greater variance in incomes, i.e., incomes spread out as they all grow at similar, strong rates.

President Obama has characterized income inequality as “the defining challenge of our time.”

“Today, the gravest challenge and the most corrosive fault line in our society is the gross inequality of income and wealth in America.” (Hedrick Smith, Who Stole the American Dream? p. xiv)

How did income inequality come to be a greater concern than jobs, healthcare, or poverty? How did anyone ‘steal’ the ‘American dream’. The primary explanation seems to be in the astounding growth in wealth and incomes over the past thirty years, across all levels of incomes, all around the world. It is NOT true that “the rich are getting which and the poor are getting poorer,” partially because it is not a simplistic, zero-sum world of wealth implicit in statements such as these. While incomes have increased worldwide and tens of millions of people have risen from poverty to achieve a more meaningful life, but this has also meant that the absolute dollar gap has widened. As world health expert Hans Rosling[5] notes, increases in income should be measured logarithmically. This means that a ten percent increase in a daily income of ten dollars is as fair as a ten percent increase in a daily income of one hundred dollars. Percentage change, rather than absolute change, is a more meaningful measure of progress and fairness. And the percentage of the world’s people in poverty (to the left of the vertical dashed line) has declined dramatically in that period, from over forty percent of the world less than fifty years ago to less than 15% today.

Look back two hundred years, and we find a much ‘fairer’ or ‘equal’ world but only because of the one billion people, more than ninety percent lived in poverty. Global GDP was about one trillion dollars; today it is about $75 trillion. Today there are a comparable number of people in poverty in the world, but we have added six billion people who are not poor. Population increased by a factor of 7.5. GDP increased ten times faster than population growth. In the accompanying figure, the horizontal axis is a logarithmic scale of levels of income; the vertical axis is a ratio scale of population.

Consider the grossly misleading video on wealth inequality in the United States. Assuming the described distribution of wealth in America is accurate, ask these questions: Does the graph tell us anything about specific levels of consumption, the key measure, not “inequality”? Do the truly poor have greater concerns about their relative poverty or their absolute poverty? Do the poor have a moral claim on the wealth created by others? And do you really believe that income (the horizontal axis) and wealth (the vertical axis) are perfectly correlated? That is, do only those with high incomes have great wealth?

More important, is this an inequality or form of injustice? Why? Or is it envy? Per Thomas Aquinas, “Envy is sorrow or sadness over another's good, because that good is regarded as something withheld or taken away from the envious person's excellence or reputation.” Does one person having great wealth mean that others have less wealth? The entire basis for an argument as to a more fair distribution of wealth or income is based on the demonstrably false assumption that wealth or income are fixed, limited, and tangible. Does another person’s happiness reduce my own? If I own an automobile, is it unfair or unjust that another person owns ten? or fifty? Would the world be safer or more fair were we to destroy forty-nine of those cars, just to make things equal?

There was a time when Americans had the right to own another person, as property. This concept treated slaves as a form of capital, like land, tools, or homes. It was a legal right for own person to own another person. And this is not historically a racial matter, nor is it a right assigned to one race to own another race. Slavery crossed racial boundaries, and has never been limited to a single race. The related concept of “wage slavery” exists today. This does not mean that your employer owns you per se; it just means that the wages leave you with no residual income, profit or wealth. Everything you earn is immediately consumed just to live another day, and you are forced to return to work, unable to escape this vicious cycle. You may even be increasing your debt, further shackling you to your only source of income. It is not a legal form of slavery, but it has the same effect as the former ‘right’ to own a slave.

What brought six billion out of poverty? Contrary to some popular opinion, capitalism has been the solution, and not the problem. Winston Churchill said that democracy is the worst form of government, except for all the others that have been tried. In the past two hundred years, global per capita GDP has increased ten-fold, from $400 to $4,000 per person. While markets and customers can be abused and manipulated, the ‘invisible hand’ that results from economic freedom makes capitalism the most powerful, successful and sustainable basis for wealth creation in world history.

The primary features of global business today are billions of customers, free or open markets, capitalism and wealth creation. Capitalism involves the creative combination of various forms of capital (or wealth) to create wealth. Capitalism is based on the basic right of private property and the right to trade, with the government’s role to provide to defense, public safety, and ensuring contracts. Social entrepreneurs practice capitalism to create social capital. With the flattening of the competitive field under globalization and rapid economic developmentamong once-dormant economies, social entrepreneur-ship has become both an opportunity and a necessity, as traditional jobs disappear, new markets emerge, and the debt-ridden entitlement economy in the developed worldcrumbles. Social entrepreneurship is a matter of inspiration, compassion and, in some cases, desperation.

Political and economic freedoms are the foundations of capitalism and markets that drive wealth creation. Wealth is now created, rather than stolen or transferred. Wealth is not fixed. A World Bank analysis identified three forms of wealth – natural, produced and social. Natural wealth, a traditional measure, consists of natural resources, minerals, land and water. Produced wealth are those goods and services produced, sold, and consumed that determine Gross Domestic Product (GDP) and serve as the measure of wealth under global capitalism and free markets. Intangible wealth or social wealth (aka social capital) stems primarily from the rule of law and education. The rule of law is a form of social capital; the rule of law consists of the roles, norms and sanctions created by society to help it survive. Education refers to knowledge, cultural values, and skills that allow a society to thrive, to develop wealth, and to sustain competitiveness and the quality of life. Most important, wealth is not limited or fixed. Over time, people must create wealth (not just expropriate or transfer wealth) before distributing wealth, fairly or not. Social entrepreneurs create wealth to serve others, building the common good through individual empowerment, not through charity, altruism or wealth re-distribution.

The global expansion of negative rights, based on political and economic freedom, along with the rise of capitalism and the Industrial Revolution, greatly increased economic wealth. But the same phenomenal growth in wealth has increased the positive rights claims, for free education, health care, pensions, and other positive rights, that test the capacity of the public sector to deliver. And this returns us to the underlying dilemma: How do we find a sustainable balance between wealth creation and wealth distribution? There is a longstanding and natural relationship between social entrepreneurship and social justice. The conflict stems from a diffeence in attitudes: Is social entrepreneurship the means or the ends to achieving social justice? In this course, we will argue and assume that social entrepreneurship is primarily a means to achieving social justice. The readication of poverty requires action, after reflection.

[1] Milton Friedman. The social responsibility of business is to increase its profits. New York Times Magazine, September 13, 1970. [2] Gary Galles. Lord Acton on Liberty and Government. http://mises.org/daily/1086 [3] http://www.acton.org/research/lord-acton-quote-archive [4] Anthony P. Carnevale, Jeff Strohl and Michelle Melton. What’s it worth? The economic value of college majors. Georgetown University Center on Education and the Workforce. http://www.thedailybeast.com/articles/2014/02/01/no-women-don-t-make-less-money-than-men.html [5] http://new.ted.com/talks/hans_rosling_shows_the_best_stats_you_ve_ever_seen