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Confronting Capitalism: Real Solutions for a Troubled Economic System

June 7, 2015
ConfrontingCapitalism Every so often a respected economist writes a book that’s not just highly readable but that contains analyses and viable solutions to vexing economic and societal problems. Philip Kotler, Professor of International Marketing at Northwestern University, has achieved this. In addition to being known as a marketing guru, he studied economics at the University of Chicago under free market evangelist Milton Friedman, and later at MIT where he earned his Ph.D. under heavy weights Paul Samuelson and Robert Slow.

Confronting Capitalism: Real Solutions for a Troubled Economic System lays out 14 “shortcomings of capitalism.” Kotler’s approach is almost one of tour guide and provocateur, taking the reader on a journey of eclectic ideas and concepts from some of the world’s biggest thinkers, succinctly presenting them as part of his narrative, but weaving them tightly into each chapter’s theme.

In his introduction he explains why he wrote a book on capitalism, but which, in contrast to most economic-business books on the topic that defend it, Kotler takes issue. This leads to his 14 shortcomings, each of which constitutes a chapter. He also notes that economists have typically ignored the important role that marketing has played in influencing markets, especially since it is a “bedrock” of capitalism.

Kotler clearly explains what capitalism represents. It’s based on a functioning constitutional legal system composed of: a) people having the right to own property, b) their being able to form contracts with others, and c) contracts that are ruled by law. Further, capitalism is enabled by three key entities: legislative, executive and judicial powers (or what are commonly referred to as the three branches of government).

Kotler begins his tour with the persistence of poverty, shifting to income inequality and the pressures facing workers in the next two chapters. He then tackles job creation, the failure of companies covering the social costs of their operations, environmental exploitation and business cycles. He later delves into what he calls “narrow self-interest” and debt burden, concluding the book with chapters on could be called somewhat obscure topics.

Confronting Capitalism is written at the level of the lay person. Kotler has made an effort not to use jardon, or to write in a stilted academic fashion. He wants to reach a wide audience. However, with that laudatory goal comes a book lacking depth. Enumerating 14 shortcomings of capitalism is puzzling, considering that people will not relate to a long list which, one might conclude, could be even longer. Indeed, being a marketing expert one could argue that Kotler should have presented his concepts, ideas and solutions in a more marketable form, one that would help the reader retain the book’s contents more readily.

Kotler While Kotler presents a wide range of data from numerous sources to bolster his arguments, and draws from a multitude of respected individuals from various disciplines, the book maintains a somewhat simplistic tone. Economists, policy wonks, business people and politicians will gain select information and ideas from it. Yet Kotler’s book does have a lot to offer because people will be more likely to read it and, perhaps, explore more deeply some of the issues presented. Contrast Confronting Capitalism to Thomas Piketty’s tomb-like Capital in the 21st Century (one of Kotler’s references), mostly suitable as a showpiece on a coffee table. Few have actually read Piketty’s book.

Kotler’s chapters seven and eight stand out as the book’s true gems: Business Cycles and Economic Instability, and The Dangers of the Narrow Self-Interest. These two chapters are very well done.

In The Dangers of the Narrow Self-Interest, he takes us into Ayn Rand territory to explore the argument for individualism and self-reliance. Rand ‘s two best known books have become the American right-wing’s bible, notably her 1957 book Atlas Shrugged which is based on a society where its most productive citizens reject being subjected to rising government taxation and regulation. Kotler discusses the tension between individualism (liberty) and the best interests of the community and, more largely, society. He ends this overly short chapter on corporate social responsibility.

Workers Under Siege is another excellent chapter. Kotler hits the right emotive buttons by citing familiar statistics. Example: in 2012, the average US household in the bottom 90% of income distribution earned $31,000; in comparison, for the top 1% the average household income was $1.2 million. Kotler holds back from probing further, such as looking into the social costs from allowing a national economy to deteriorate in its income distribution over the past decade.

Yet Kotler does provide some illuminating statistics in his chapter on workers, something that other economists, and the media, have largely ignored: the minimum wage in reference to productivity growth. He explains that 90% of the world’s countries have minimum wage laws, with great variations among them.

“If the U.S. minimum wage had kept pace with the average growth in productivity, it today would be about $17 an hour. But productivity gains have mainly flowed to profits, shareholders, and executives instead of workers. This fact contradicts Milton Friedman’s famous statement that capitalism distributes the fruits of economic progress among all people. It is not true that all boats rise with rising productivity.”

Unemployed That is a bold and compelling assertion by Kotler, which is supported by esteemed economist Paul Krugman and journalist-author Timothy Egan who observe that cities and states that have increased their minimum wages have not lost jobs to other jurisdictions.

Kotler’s albeit brief discussion on the importance of productivity is one of the core points for the reader to retain. More on productivity would have been desirable, such as its vital role in generating wealth for a nation and how it helps sustain a healthy middle class. The same applies to productivity’s cousin innovation, essential to competitiveness at the firm and national economy levels. Yet Kotler fails to delve into the role innovation plays.

On social costs and environmental exploitation (chapters five and six), it’s refreshing that he addressed these two important issues; it would have been preferable to have spent more time examining these two key societal issues. As it is, the topics are treated quickly through a wide angle lens of various contributors to these fields.

On a few occasions Kotler makes some careless editing typos. For example, he states that the Club of Rome’s “Limits to Growth” book was published in 1992. In reality, it was published in 1972. Your correspondent well remembers this concise book as part of his undergrad economics program in the mid-seventies. Hence the importance of strict proofreading of manuscripts.

In all, Confronting Capitalism is a good tour of the inter-connected issues and challenges facing society today and in the coming years. As mentioned, Kotler raises some provocative points which need to be confronted by both government and business. His call to action in the epilogue encourages people to remain optimistic and to become engaged in finding solutions to such intractable problems as poverty, unemployment and income equality.

The fundamental fact of American politics is that we’ve got an alliance between the religious right and the accumulators of great wealth. These are the people who are running things.

– Paul Krugman

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2 Comments leave one →
  1. July 27, 2015 6:03 pm

    Marvellous observations..and for Kotler I love his books..

  2. July 27, 2015 5:06 pm

    Lovely article…I have used this in my class of marketing which I take part time as a hobby…

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