Article 5, Responsibility, Leadership, and the Social Contract

Responsibility
Accountability
Leadership
Social Contract
Challenges for capitalism

Responsibility

Capitalism encourages an economic game of searching for strategies to capture the market, and the stakes are business survival. These games are often characterized as a "jungle" or a sports game. The idea of being responsible often means simply paying lip-service to existing law.

There seems to be two prevailing views in the US regarding responsibility. One has to do with the "welfare state" mentality that "someone else" is responsible for everyone's welfare, and that if they cause you problems, you simply sue them. The other view is that no one is responsible for anything.

Let's look at that. If there is something laying in the aisle of a grocery store, and you see it, what do you do? 1) Pick it up so that no one falls and hurts themselves. 2) Call store personnel to pick it up. 3) Ignore it - if someone falls, he can sue the store.

My guess is, most people will pick 3. Both 1 and 2 mean accepting some level of responsibility for hazards that you become aware of. Interestingly, people can live with someone else getting hurt, more easily than they can live with accepting responsibility. Or, possibly, some have the idea of suing so ingrained in their thinking that it overshadows all other considerations. Or possibly some have the idea ingrained in them that it is some other person's responsibility (job) to pick things up.

Experiments in psychology indicate that when someone isn't specifically requested to help, commonly no one in a crowd will step forward and take responsibility. Yet a few will. For example, break down on a highway, and someone is likely to stop to help... especially if you are a pretty woman. If you are a man, you may have to wait for the police or a "hero" vehicle.

We live in a culture that denies responsibility. The buck doesn't stop on our desks.

On one hand, it really irritates me when someone sues a fast food restaurant because the coffee is hot. It seems to me that such people don't have the basic competence to live in the modern world, and they should wear a red flag on their head to alert the rest of us that we must be very cautious around them.

On the other hand, people, especially kids, shouldn't be learning about hot things by getting scalded, like I did. I was running my paper route one cold day, stopped in a restaurant and ordered a cup of hot chocolate and a piece of pie. The hot chocolate was made with boiling water, and the first sip left the roof of my mouth painfully raw for days afterward. The waitress apparently didn't think about expectations of drinkable temperatures. Should I have sued that little mom and pop restaurant for punitive damages... and put them out of business?

Responsibility can be a two-way street of acceptance, and a two-way street of denial. Businesses, and the people who work in them, often don't want to assume any responsibility unless they get forced to do so by the law. People don't want to assume any responsibility for their own welfare unless forced to do so. It's just easier to make someone else responsible than to always be on guard for hot coffee in cups not marked "hot."

Early in my various careers, I worked in two industries in which safety was paramount. In one, the electrical power industry, if you slipped up you could get cut in half by steam, fall hundreds of feet, kill yourself or someone else with 600 to 750,000 volts of electricity, damage millions of dollars in equipment, cut off electricity to millions of people, or cost millions of dollars in system electrical flow into your system. We had excellent safety procedures and training.

Working in the electrical power industry, it quickly became very obvious to me that you could hold management responsible, and have all kinds of safety meetings and training, but in the end only you could ensure your own safety. You can't make people safe - only they can do that by accepting responsibility for their own safety.

In another industry, in medical research and diagnostics, I worked with the possibility of radioactive and disease contamination, and with driving safety. Again in that industry, you could teach people all of the correct procedures for doing things safely. Often they simply wouldn't follow inconvenient procedures, and took unnecessary risks. You can give people the best there is, but only they can keep themselves safe.

What I learned from working with safety (as part of these jobs), is that responsibility is a two-way street. The individual doesn't know all of the things that can go wrong and hurt them. I watched one muscular man walk up to a radio transmitter, put his hand under a drawer to pull it out, and brush his hand across 240VAC, 3phase. Someone had left the cover off. He lay on the floor recovering for half an hour. Another man did the same on another day, putting his fingers firmly across 240VAC, 3phase, and spent months in a hospital, lost partial use of his fingers, and never worked with electricity again.

Someone in a responsible position has to take the responsibility for ensuring that people know what can happen, and help them understand how to watch out for themselves. But you can't monitor people 100% of the time. People have to take responsibility for their own welfare. So fast food restaurants have to make sure their hazards are labeled. People have to be wary of missing covers and other dangers.

It is being in high risk situations that make you acutely aware of exacly who is responsible for safety. A similar arena in which we are all aware of danger, is driving. High exposure (high annual driving miles) makes you aware of what the accident situations are, and how to prepare others for them through hundreds of hours of training.

A particular type of accident situation may only occur once in a lifetime of driving for those whose exposure (mileage) is limited. If the person isn't prepared, he may be killed. Yet most of us get lulled into a passive, relaxed attitude behind the wheel. Only the person behind the wheel can save his life through staying alert, and if possible, practicing how to react. Responsibility is a two-way street.

Lawyers that won against "big tobacco," are now trying to sue fast food restaurants over fattening food that is helping make the US an obese nation. Should the food industry be liable for weight control? After all, if they don't serve food that tastes good and is economical, they may lose business. Can't people monitor what they eat? Fast food is notoriously high in calories - doesn't everyone know that? Aren't people responsible for anything?

Kraft foods, one of the largest food manufacturers and distributors in the US, has entered a new era. They are working with dieticians to reduce the calories in food, stopping distribution to schools, and the Phillip Morris division is pointing out that cigarettes are harmful.*¹ Of course the more cynical among us don't believe that Kraft has suddenly gotten religion, but is doing this to avoid future legal troubles, having learned from tobacco. Perhaps heightened awareness of the obesity problem is prompting change.

Accountability

The idea of responsibility does not come easily to government. Accountability is even farther off. Government has a long tradition of broken promises, and for doing things for its own convenience, and there are no formal consequences for its actions. People in government are protected from lawsuits, except in criminal matters. One example is the damage that the police do when pursuing a probable criminal. The government doesn't have to pay for any damages they do to other's property.

Another example, I know of a person in Atlanta whose car was struck by a city worker driving a city car. The police determined that the city driver was clearly at fault. Did the city accept responsibility? It was weeks to months before the city would accept responsibility and pay damages, leaving the person struggling for transportation, which often was an expensive taxi. The city then refused to pay for any transportation costs during the intervening period. It was as if to say, "We're the city, and we don't have to accept any responsibility for our actions."

While I have relied on many in government who did act responsibly, government is unfortunately a lair for those who don't care, and act irresponsibly. They rest on the notion of no accountability that is the foundation that uncaring and bungling bureaucracies are built on. The entire idea of being endowed with the public trust, yet not being accountable, to me is not just a total contradiction, it is an obscene travesty.

Those who hold the public trust should be more accountable, not less. I think establishing responsibility without accountability is building on quicksand. This policy enables government employees to lie, mistreat others, and hide from responsibility, with impunity. Responsibility without accountability doesn't work. I strongly believe this should come to an end in government, as it is in business, and requiring accountability of those endowed with the public trust should be the goal of the next amendment to the US Constitution... if course it would have to be approved by politicians - fat chance.

For years, business hid its employees behind the corporate veil, so that people within business could do things with impunity. Business would cover the damages. If nothing else, employees would hide behind the veil of "policy," which is like saying "the computer did it." Computer decisions, and policies, are programmed by people - people did it. There is no such thing as people who don't have responsibility for their decisions and actions. Even during a war, the individual soldier is responsible for his decisions and actions, even if those contradict a direct order.

The trend over several decades now has been to permit legal suits against individuals within corporations. Corporations in and of themselves have few mechanisms for being responsible. Corporations are made up wholly of people, and people make the decisions. Individuals within corporations are responsible and accountable for the decisions that they make.

Corporate influence peddling and outright theft. Companies have not yet bought into the idea of being responsible and accountable. Misuse of employee pension funds are an example of what companies will do, if permitted. Companies have long manipulated their employee pension plans to gain competitive advantage. They reduce their direct operating costs by placing people on early retirement, making them a liability to the pension plan instead of to the company. Never mind that this practice takes contributors and turns them into siphons of other's funds.

Another thing that companies do to rob pension plans is to under-fund them by under-reporting their income forecasts for the coming year. The government actually permits them to do this. So then, when income exceeds "expectations," the company appears more profitable than it really is, simply because it didn't pay the full amount into the pension fund. Stockholders and corporate officers benefit while employees get screwed.

We are currently seeing a rash of corporate pension plan failures. Many corporations can't be trusted with employee benefits - the plans simply become pawns in their money games. Pension fund scandals are "expected" to be as big as the pension fund misuse of unions in the 1970s, and the Savings and Loan scandals of the 1980s. Newsflash: they are already larger than those scandals, but companies are much more clever in being unaccountable for their actions.

The betrayal of trust doesn't stop at corporations. Even stock funds are manipulated by industry. As this article explains: The Nation news magazine, The Soul of Capitalism. Those in power often vote against the interests of their own fund investors, including unions, and instead vote to support industry governing boards.

Corporate malfeasance has long been responsible for damage to the environment. Oil drilling companies come to elaborate agreements to limit environmental impact, and then their crews tear up the land that they pump on - and there is little to no enforcement or accountability. Other companies dump hazardous chemicals into rivers and streams, or into landfills, the ocean, or other countries. Unfortunately only the power of punitive lawsuits and criminal legal action make some of them stop.

In previous articles in this series, many irresponsible things have been mentioned that the business world does. As I have said before, my goal isn't to disparage business, which we all depend on for our economic well-being, but to indicate where the challenges are.

Investor pressure

The idea of investing in a company because you think it is going to do well in the long term and pay consistently good dividends, has morphed for many investors into the idea of gaining control of the company through the corporate officers to pressure it into high performance in quarter after quarter after quarter to reap a huge stock sale from the increase in stock value.

Investors want high profit machines that can crank out higher profits every year. They force companies to sell off bylines so the business is very tightly focused, they pressure employees to focus on short term gain at the expense of long term product growth, they force consolidation of divisions to eliminate cost centers, and they talk over every business decision with the board and CEO to make sure that profit is immediately increased.

Many investors look for companies in which to acquire 51% interest, so they can control them entirely. When the investor believes that he has maximized his return on investment, he simply sells out. Future investors who don't do "due diligence" get stuck with an empty mine.

The result of all of this pressure is that people lose their jobs, the company loses experienced talent through firing and people leaving over dissatisfaction, and long term goals and profits are lost. Many companies have caved in to investor pressure, stating in their mission statement that their only purpose is simply to make money for investors.

The idea of investors being responsible for the consequences of what a company does is unheard of. Investors can drive a company to do harmful, unethical, and even illegal acts, but the investor is completely isolated from responsibility. The extreme pressure of investors adds to the overlooking of responsibility toward employees, the environment, and the law. It is unethical for investors to be in this position - it is a conflict of interest.

One of the challenges for capitalism, for this and other reasons, is to put a cushion between investors and companies. Companies exist for many reasons, which are largely consumer and employee oriented, not just investor profit.

Leadership

What does it mean to be a leader? The ongoing hearings on 9-11 clearly indicate what leadership is not. Despite all of the partisan desire for finger pointing, and the public's and government's search for answers, the simple fact is, the changes necessary to prevent a 9-11 type of attack would not have possible prior to the 9-11 attack.

It would have been political suicide for anyone to suggest intrusive safeguards in air travel; or make the gigantic commitment of funds necessary to spot and stop terrorists before they can commit crimes; or to suggest intrusive monitoring of people; or to get law enforcement agencies in the US and other countries to cooperate in the timely sharing of information.

Civil rights groups would have mounted massive opposition to any such plans. The public would have ridiculed these actions and said that the political right was becoming increasingly dominated by hawks and extremists. Intelligence agencies would have continued protecting their assets and boundaries instead of sharing information.

From the terrorist's perspective, after the US strategic failure in Viet Nam, Carter's failed military attempt to rescue US hostages in Iran, the failure of US troops to establish order in Mogadishu under UN mandate, terrorist success against the USS Cole, and after escaping Clinton's rain of cruise missiles aimed at terrorist bases in Afghanistan, it was highly questionable if the US could react effectively against terrorism. Unfortunately, it takes an event like 9-11 to galvanize support and drive a sea change in policy.

We now know from previous attempts to destroy the World Trade Center (by those in Iraq), and from more recent intelligence on Al Quaida, that the problems were known. Even so, the politicians could not have made the case to the people and agencies.

I have a saying that, "life goes on." What I mean by that is that no matter what is going on, no matter how big it is, life is still dominated by and filled with the mundane. We have to eat and sleep. Someone has to mop the floor. The children have to be tended to. The point is, the mundane is always necessary, and therefore higher priorities are diminished by maintaining what is. Most of our energy goes into maintaining what is, and addressing the daily problems that arise. Very little time is left for the myriad of other things that deserve to take priority.

The biggest problem that capitalism faces, is that terrorist groups, and radical fundamentalism, which typically turns violent to achieve its priorities, feeds on disenfranchised people, that is, feeds on the poor and oppressed. These people have neither means nor answers, but capitalistic prosperity is continuously rubbed in their faces. Groups will continue arising in new forms and fomenting trouble, as they have done through history, as long as the disparity between haves and have-nots remains. (Similarly, people's historical identity is very important to them, and when it is displaced these people seek to get it back, even by violence.)

Businesses tend to see developing countries as wide open, lucrative markets. But businesses are not charities. Businesses don't see the disparities that they create between haves and have-nots. The challenge for leadership is to effectively address the disparity between the haves and have-nots created by capitalism.

Leadership tends to address what is politically expedient. Focus groups are a very worthwhile method of determining what are the concerns of the people, and thereby learning what is politically expedient to have as a priority. Focus groups don't necessarily reveal the needs of the disenfranchised. The disenfranchised are typically hidden from view, or overlooked. They don't have a platform for their voice to be heard. They suffer silently until there is a leader for them to rally around, and coalesce into a militant movement.

Similarly in business, as discussed later in this article, leadership always has priorities, and priorities typically mean excluding some things, even if only temporarily, to provide resources to focus on others. The leader without priorities is so preoccupied with the mundane that he gets nothing done at all. Leadership requires the vision to know not just what is a popular direction, but what is a necessary direction, and then having the ability to articulate this effectively to rally support, and then effectively implement it and sustain it. Few leaders have all of these abilities, if they even have any of them.

The pressures on leaders are enormous. It is very difficult to assess present needs, and even harder to assess future needs. Those in the organization with other agendas oppose anything that diverts attention and resources from their agendas. When opinions differ by 50:50 or 33:33:33, it is very difficult to get everyone's allegiance to one direction. Public dissent is typically unrelenting, and of course dissent is news, whether newsworthy or not. Unfortunately dissenters represent conflict, and thus have a better avenue of access to the news media than do leaders. A leader who does manage to get support for a cause is soon worn down by mundane needs, by people continuously voicing their differing agendas, and by unrelenting public dissent.

For example, Bush has united the "War on Terrorism" with eliminating Iraq's ability to harm us or its neighbors, through weapons of mass destruction or terrorism, and create a democracy in that part of the world, and these are defining priorities of the Bush Presidency. The weak economy, specifically represented by jobs, is a continuing problem. Kerry has focused on jobs as a campaign issue, and has become the dissenting voice against the "War on Terrorism" and Iraq priorities. Of course, these are legitimate issues, even though Presidents have limited power in affecting the economy, and Kerry supported military action in Iraq.

How should Kerry handle debating these issues? The effect of Kerry's dissent may be to cause doubts in the US that undermine support for fighting terrorism both here and abroad. Terrorists are already viewing what they interpret as weakened resolve in Spain, and are trying to drive wedges into the coalition that is trying to "pacify" Iraq. Kerry's dissent may possibly weaken the US position by focusing on weak resolve in the US for continuing to free Iraq, which may in turn attract and embolden terrorist efforts in Iraq, focus the Iraq people on as yet unresolved security and economic problems in Iraq, fomenting insurmountable resistance in Iraq. The result may be more conflict, more deaths of US and coalition soldiers and civilians, and ending in something short of a democratic Iraq that is able to handle the conflict within its borders.

Economically, the effect of Kerry's focus on jobs may be to cause jittery businesses not to hire, and a hype motivated stock market to remain bearish. A bad economy favors Kerry. Jobs and Iraq policy are legitimate issues, but it will be interesting to see what kind of leader Kerry will demonstrating himself to be through all of the high profile rhetoric on these issues - either a real leader, or just another rabble-rouser. People without the strength of purpose to win, create dissent. They do negative campaigns. It is a popular formula for grabbing office. True leaders rally people with their constructive ideas.

There are various techniques for accomplishing leadership, which I won't enumerate at length here, but a couple are getting others involved in the solution rather than allowing them to sit by and criticize. A second is simply the ability to work with people, rather than trying things like manipulation and force, which often backfire. The leader who thinks that he can get things completed by charisma and force is very deluded. A third is the power of vision. The past is educational, but it leads nowhere but backwards. Vision looks forward to what can be.

Leadership Challenges

In the capitalist system, people's future is tied to the success of businesses, which is affected by a myriad of factors, such as the economy, shifting jobs to less expensive labor, and competition. The challenge for capitalism is to find ways to make large numbers of people's futures secure. The challenges for leadership are myriad.

Rich VS Poor. In 2003 within the US there are still people living at or below poverty level; unemployment is very high among inner-city minorities; people over 40 lose their good paying jobs and when they get off unemployment they go to work for minimum wage, destroying their future and their children's future; there is a continuously growing divide between the haves and have-nots; retirees can't afford to stay alive; single moms work two jobs while raising their children on shoe-string budgets; and corporate CEOs earn millions of dollars even when their corporations perform dismally, while the lowest paid workers can't afford much of anything even when they do their jobs well and the corporation prospers.

Neither the US democratic system nor capitalism create a level playing field. The challenge to capitalism is to stop saying that these problems are other's responsibility - we are all responsible for finding solutions.

The US and world leadership. The US is a proud nation. We love to call ourselves the wealthiest nation in the world, the world leader, and the only remaining superpower. Yet like a boxer with the title belt, we are often reluctant to re-enter the ring and defend the title. Disparage the title, and we get very angry. Ask us to prove it again, and we say, "Why bother?"

The specter of Viet Nam haunted our image of leadership for several decades. But the AIDS crisis in Africa, terrorist havens in Afghanistan, and threats from Iraq have dragged us back into the world arena. Ignoring issues in these countries only allows them to fester and surface in our own back yard. But are we prepared for this role?

Bill Moyers and two British historian guests, on the Friday, July 18, 2003 airing of "NOW," raised an interesting issue about the US role in world leadership. Even for the wealthiest nation on earth, it costs a whole lot of money to rebuild Iraq, to lift it out of problem festering economic and political disease and into a healthy economy. It is enough to bankrupt us. With a struggling economy at home, can we do it?

As Moyer asked, will we hollow out the US economy to create a good economy in Iraq? Yet we have done it before with the Marshall Plan for Germany, and in rebuilding the Japanese economy. The program seemed to ask, "By turning our backs to our leadership role, while being dragged into these situations under protest, will we be drained of our good economy?" Will our lack of foresight and preparedness make us vulnerable to being dragged under, even though we can successfully carry out such plans as the Marshall Plan if we set our minds to it? Or to put it in a more poignant way, "Will we play while Rome burns?"

Life has taught me two opposing lessons (neither of which am I ever very good at practicing), and helped me gain some perspective on these. It is often the less financially able who are benevolent, especially during difficult times. Helping others flows from a good heart not absorbed in selfish interests. But trying to accomplish very much from a position of weakness typically drags you down. You can drag yourself into poverty and ineffectiveness by straining to help the many already in poverty. But the opposite is tricky. You can make people self-absorbed simply by making them financially sufficient. But people can also accomplish much from a position of strength. Make yourself strong first, and then help the many. In either situation, helping others flows from a good heart not absorbed by selfish interests.

I had reserved the following thoughts for the series on the challenges to democracy, but it fits snugly with the subject of leadership and capitalism. Capitalism, democracy, and terrorism are inextricably intertwined. Capitalism doesn't directly cause terrorism, but disparity between haves and have-nots is one distinct condition in which terrorists thrive. The role of leadership is critical.

The US position in the world is unique. Few, if any, countries are able to exercise leadership in the way that the US can. Europe is very reserved in foreign affairs. Much of Europe, with the notable exceptions of the UK and perhaps the Netherlands, remains in traumatic stress from past political ideological battles, which fractured its identity; and from two millennium of fractional battles over geography, politics, culture, and religion; and from two highly destructive world wars that dragged Europe through unspeakable horrors for much of thirty years and left the people, land, and economy in tatters.

These endless battles took an excruciating toll psychologically. (During this period, European philosophers reflected the sentiment of the miserably suffering public, that life had little to no meaning, and promoted Existentialism, and even Hedonism. Where was God in all of this suffering? Viktor Frankl was a notable exception.) Much of Western Europe (the Balkans) remains in tension as a result of this history of conflict.

France is the epitome of this condition. France seems driven to find peaceful solutions, and can hardly utter the word, "military action." France now seems to be searching desperately to regain its identity. France rebels against the influence of the US in its culture and foreign policy, and against US domination of any kind in any shared arena. Perhaps a much stronger France will emerge, accentuating the unique qualities of French attitudes, and bring with it alternative paths to peace that work through France's efforts.

Similarly, both Germany and Japan are struggling to know their place in world leadership, and they are finding their place. Additionally, most nations have a policy of not interfering in the affairs of other nations, so long as they are not threatened. The point is, none of the world's nations currently have the domestic support for a national role of addressing conflict in the rest of the world.

The US, on the other hand, believes itself to be a moral leader regarding civil rights and democracy, and, having wrestled with past failures, has less restraint against intervening directly in conflicts. There are three troubling aspects of this position that create domestic dissent. 1) The US doesn't have the resources to be the world's police force, and it isn't a desirable role anyway. 2) Other nations often disagree with the course the US selects (think of the French and Russian positions), and the US finds it nearly impossible to get the necessary unanimous support of the UN Security Council for military action. 3) Other nations resent US dominance, and get into power struggles with the US because of this (Kissinger* ²). 4) The high profile of the US invites others to use the US as a target (strawman) for their own purposes, as I have mentioned before.

A strawman is a target fabricated by false claims against it, erected as a diversion. Strawman examples: Iran called the US Satan to rally national support for its causes - but the real goal was return to fundamentalist positions. Usama bin Laden called the US Satanic and oppressive, to organize terrorists, and to show his power by striking the US - his real goal was the overthrow of Saudi Arabia and then to foment revolt in all Islamic countries to create an empire, which he was unable to carry out since he misjudged US reaction.

Similarly, Saddam Hussein used the same tactics to retain control in Iraq - hate the Satanic US oppressor who had no place on Iraqi soil, and make boisterous threats against the US that he couldn't possibly carry out. Saddam's lies and aggressive actions against the world demanded intervention. These people knew that it was easy to demonize the US in the perception of those you wanted to rally, especially the poor, the oppressed, and those needing a cause, and you could demonstrate your awesome power by striking the giant US, which typically acted with restraint to avoid international conflicts, and thereby propel yourself into power. It was a formula for success. But Saddam's recklessness in Kuwait demanded a response, and bin Laden's recklessness ended the formula with 9-11.

The US is vilified in the world as the cause of every bad thing, and glorified as the savior everyone wants to intervene when bad things happen. It is the paradoxical stigma afforded leadership and power. But the US can't be everything that others want it to be. An old maxim about leadership is very appropriate here. "Leaders don't do things, they get others to do things."

The US will completely exhaust itself if it tries to intervene in every world situation, and tries to bolster every lagging third world economy. Yet the US, and the world, can't just turn a blind eye to world problems - the world is too small, and with attitudes toward the US being what they are, the problems quickly invade us through our open doors. Responsibility denied regarding outsiders is simply an invitation to enormous problems within, later.

What I believe that the US leadership must do is set the example, and then help organize others into economic and military blocks with the strength to solve problems within their member nations. NATO, an example of a successful military block, will soon not need the US. The European Union, an example of a successful economic block, hasn't need the US economically at all, except for foreign trade. The Muslim oriented nations, including the Arab, and Persian nations, don't even want the US on their soil - at some point they have to get strong enough and organized enough to ensure the equitable distribution of prosperity and ensure political stability.

This reasoning stands as well for Asia, Southeast Asia, Africa, Indonesia, South America - all of these regions have problems that can suck the US into prolonged economic and military quagmires that can bleed the US dry. This is the fear that every US politician and US citizen has, and it is a paralyzing fear that drains support for applying military or economic measures outside of US borders - the "isolationist" attitude.

For a time (many years to decades), direct intervention may be necessary, but US foreign policy should target assisting regions with their handling of member nation problems, and diminish direct confrontation that draws the intense criticism and militant reactions of people within those nations. US direct intervention, as demonstrated twice in Iraq, is fraught with inherent problems both within the country and globally. The UN should remain the sounding board for world problems, and should lead in recommending intervention when regions are unable to handle their own problems. For this, the UN may need to change its charter so that the Security Council can act effectively. Diplomacy between countries who are friends at high levels, and dependent on each other economically, is likely to be the key influence in creating stable and peaceful regions.

Setting examples, organizing, and assisting, are leadership roles. So is effective listening - other countries also have proficiencies in maintaining peace. Doing every job yourself is not leadership.

Social Contract

We are missing a social contract that identifies responsibility and holds people accountable. The Captains of Industry, the CEOs and board members who should be leaders and the most accountable, instead are wealthy individuals who make tens to hundreds of millions each year whether the company does well or fails, and then move on to another ship, leaving all responsibility and accountability behind. The challenge to capitalism is to make business and its leaders aware of the social contract.

Sometimes I mention "social contract," without elaborating. What do I mean by a social contract? Without codifying it, I mean an informal agreement that binds people together in a common purpose.

I don't mean a covenant, in which "if this, then that." It is not a do this for me and I will do this for you arrangement. Nor do I mean something like subdivision covenant agreements. It is not a legal contract, although people might be sued for "breach of promise," as have those who entered into and then broke marital engagements.

It is based on the uniting of the ideas that a person is only as good as their word, and their word is their bond; plus the idea of responsibility, plus the idea of an agreement.

Many people today, especially in the business world, don't take their word seriously. Dealing honestly with people is not part of their business vocabulary. They create a product, and then refuse to support it. They advertise functions that the product won't do. They hint at a price for the product, and then find various ways to jack up the price. Examples, selling unneeded options, various fees, and you may have a warranty, but without a service agreement you won't get necessary service for the product. Consumers play the same games: they take things from stores, use them, and then bring them back; they agree to purchase something, and then refuse to pay for it when they find a better price elsewhere.

Dealing honestly with people means full disclosure. You will deliver what you promise, and won't back out of the deal.

It is wonderful today to find people who are responsible. Too many don't have the word "responsibility" in their vocabulary. Consequences of their actions are irrelevant as long as they accomplish their objectives without consequences to themselves. If they have your money, then whatever happens is not their concern. If the product fails, "buy another one." If the environment is damaged, "It isn't their fault." Responsibility means that you acknowledge that long term and short term there are consequences if you act or don't act, and you are the person or company that is held accountable for your actions or inaction.

When you find people who won't acknowledge a social contract, or fail to fulfill the agreement, you cease doing business with them. They don't have your best interests at heart, so buyer beware.

Examples of social contracts:

1. Marriage and family. Marriage automatically invokes serious long term commitments for most people. Families, including children, need emotional and financial support. Children need nurture and in general "to be raised." By default, children are also responsible to the agreement, and the state has to respect the authority of the family. You typically shouldn't marry a person who won't agree to a commitment to these responsibilities. Things often go wrong. One partner or a child gets a serious disease or has a serious debilitating accident. The other partner has to carry a greater load because of it. People can't just walk away because the going gets tough, or because their parents don't have enough money or follow certain practices.

The "starter marriages" of today indicate that we have a serious problem with the social contract. We also need fail-safes in society for when either the marriage partners, parents, or children can't or don't take the social contract seriously. Abuse, substance abuse, infidelity, and unreliability, may be reasons for intervention to either reestablish the contract or invalidate the marriage agreement.

Interestingly today, in the face of gay unions or marriage, people are clamoring to define marriage, keeping in mind that it is a basic part of civilization. I can't help but wonder what impact this will have on those for whom marriage is not a serious institution, but a convenience for a few years until someone else comes along - the starter marriages, and the very common "Hollywood" and "playboy" marriages. Perhaps we need a category called "temporary unions."

2. Companies and communities. Companies employ people in communities to make products that they can sell for "business interests." By coming into a community, they often become major employers, and can affect the environment. If they pay substandard wages, work their people to death, leave the community, or harm the environment, they can leave a trail of destruction in their wake. Too often, companies feel no responsibility for these things. Everything is a resource for their taking, and they can do anything that they can get away with. I believe that companies do have a long term responsibility to the people, families, communities, and environment that they impact, as well as to customers and investors, and when they refuse to agree to these responsibilities, then they are undesirable.

Businesses use social contracts between each other and individuals. Those companies and individuals who have proved reliable and useful are the first to get new contracts or purchases. Vertical channels develop into tight circles of providers who know the products and market well. Those who are unproven have more difficulty getting in to these circles, or getting established. Businesses won't rely on unreliable businesses who misrepresent their products and who won't support them. The same should be expected of them.

3. As a society, we rely on social contracts. We expect reliability. Social contracts change over time as expectations change, so they aren't things that should be immortalized by law. For example, things like beating children are no longer accepted or tolerated; and with the advent of easy divorce, such things as "breach of promise," are rarely cited. But social contracts should be recognized and enforced, and used to screen out undesirable parties.

4. Morphs. Social contracts morph into different forms as society and business change. For example, on eBay ® and other Internet auction sites, both buyer and seller provide feedback on each other's performance, that is available to the public. There is no law enforcing this. Buyers and sellers who get a significant number of bad feedbacks, are less likely to get business. Similarly there are Internet sites that permit feedback for public viewing on university professors and on businesses. Those who get a significant number of complaints become undesirable.

Other forms of social contracts are the Best Practice forums of trade organizations and ISO standards that provide agreements on high standards. This is accomplished by bringing together input from manufacturers, businesses, the public, and other vested interest parties.

We need more social contracts, and more venues (like more international Web sites for specialized targets) for providing notice to the public on the accepted standards, the ability of parties to enter an agreement and assume the responsibilities expected.

Social contracts and the law

Social contracts are likely to be more effective than laws in getting compliance. Laws are slow to respond, become endlessly complex, and become outdated. Enforcement is difficult because of the burden of proof required, the lack of monitoring and enforcement capacity, the propensity for getting around the law, and the ability of big money to bulldoze through the courts. Social contracts may eventually apply even to government. The effectiveness of social contracts is their affinity for the spirit of the agreement, the immediate feedback available, and the immediate and direct impact on the business (or individual or community) to engage profitably in business.

Social contracts, by depending on standards setting bodies and review boards, would be likely to reduce the need for rapidly proliferating civil litigation.

On the other hand, even if social contracts would become phenomenally successful, there will remain a need for civil law, monitoring, and enforcement. You always have to have safeguards. For example, there are always those who simply rename their business to shake off bad publicity. There is always collusion, and always the power struggle involved when a dependent organization is unwilling to go against interests that are mutually beneficial.

Is a social contract legally valid? When companies endorse the Best Practices of their trade organization, or people enter into marriage vows, they create an agreement with expectations that must be lived up to. Breach of marriage vows is typically taken to civil court and used as a basis for legal consequences. This is a last resort. Lawyers and courts are the final authorities on legality.

Challenges for capitalism

Capitalism can't afford to ignore its impact on the world. On one hand, the impact is very beneficial. On the other hand, there are destructive consequences in that jobs, ways of life, and other businesses are displaced by onslaughts of new business in a region; and the disparity between haves and have-nots is strongly emphasized by the continuing increase in the divide and the obvious prosperity of those who have. Disparity spawns militants determined to undermine the system.

One challenge to capitalism is to control its fast paced march forward into developing countries, and to try to bring the disenfranchised into the economic system. It is entirely to capitalism's benefit to do this, in that every wage earner becomes a buyer, which increases the flow of money and prosperity, and those benefiting from the system are then not becoming those who undermine it.

Another challenge for capitalism is to appreciate the social contract in which responsibility is a two-way street. Businesses must take responsibility for their role in the world, and for their actions. So must individuals.

Another challenge for capitalism is leadership. Businesses are encouraged to be highly competitive, and it is "every man for himself," with the mission to gain the most you can even if you have to lie, cheat, and steal. These actions and attitudes are the antithesis of a social contract. The best role for business is to make us all winners. The leadership challenge for business is to learn how to do that.

Another challenge for capitalism is accountability. Leadership and responsibility mean nothing if in the end the oil company crew tears up the environment and is not accountable for its actions. Such failures simply invite legal repercussions, such as legislation against company interests, failed bids for opening resources and markets, and law suits.

A sea change is necessary in our entire society. Our culture, government, legal system, and businesses all need to emphasize that responsibility and accountability are fundamental things that should form the social contract. We are all responsible, not just one party or another. We are all accountable for our actions.

Setting examples, organizing, assisting, effective listening, assuming responsibility and accountability, are all parts of the leadership role. Leadership requires the vision to know not just what is a popular direction, but what is a necessary direction, and then having the ability to articulate this effectively to rally support, and then effectively implement it and sustain it in the face of strong opposition and diversions. The vision of leadership is not formed by dwelling on past lessons, but by looking constructively at future solutions and attainments.

- Scott

Article 5 footnotes, references, bibliography

1. Horovitz, Bruce. Under fire, food giants switch to healthier fare, USA TODAY, 7/1/2003.

2. Kissinger, Henry. Does America Need A Foreign Policy?: toward a diplomacy for the 21st. Century. (Simon & Schuster, 2001.) p289.

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