Wharton Economic Conference

Posted by Marc Hodak on April 15, 2007 under Economics | Be the First to Comment

That’s where I spent the latter part of last week. Here were some highlights:

Stanley O’Neal, Merrill Lynch’s CEO, spoke about his inspirational rise from a rural Alabama farm to the pinnacle of Wall Street, touching on different topics along the way. Regarding the fall of the Berlin Wall:

“Everyone said it would herald the spread of democracy around the world. I think the experts and pundits got it wrong. Democracy has made inroads, to be sure. But what really took off was the spread of capitalism. It was the opening of markets that has made the most difference to the most people, lifting millions out of poverty.”

Regarding the Wharton School itself:

“Joseph Wharton was a protectionist. He was appalled at the lack of sympathy from politicians for tariffs on the steel products he was trying to make and sell against vigorous foreign competition. He founded the Wharton School, in part, to create a learned basis of support for trade barriers.” Joe would have been alternately thrilled and horrified at the intellectual trends promoted by Wharton’s faculty over the next 125 years in regards to trade.

Rajit Gupta, head of global consulting powerhouse McKinsey & Co. was a little more disappointing. Like a good consultant, he identified a MECE* list of 10 trends that businessmen should be aware of. These trends fell under the general areas of macroeconomic, business, and social factors. Each of the three areas had three trends associated with it; mostly related to demographics and globalization. It would have looked sharp in a powerpoint, which he thankfully spared us.

OK, I know that three trends in each of three areas equals nine trends, and I said he identified ten. His capstone trend was the continued suspicion of business, which he felt was important to overcome. Although I agreed with his diagnosis, I quite disagreed with his prescription; he advocated that businesses should get more engaged with the public on social concerns. When I asked him how business should address a public as ignorant of market processes as they are distrustful of them, he responded:

“I don’t think the public needs to understand the mechanics of how markets work. They need to believe that business cares about them.”

Hmm.

Almost a quarter of a millennium has passed since Adam Smith forcefully pointed out that social welfare does not flow from the benevolence of the butcher, baker, etc. If Gupta thinks it���s too much to expect of the public that they should get it, the evidence is certainly on his side. But I think that several decades of prominent businesspersons demonstrating social concern have done little to assuage the public���s suspicion, and may have in fact nurtured it. It’s hard to hide the profit motive, and most efforts to do so either dilute that motive to the detriment of the companies suppressing it or are exposed as patently cynical attempts to window-dress capitalism as a ���caring��� system.

Sincerity is a transparently inauthentic human emotion. Vanderbilt may have lost points with his “public be damned” comment. Rockefeller insisted that his greatest contribution to mankind was via Standard Oil, not his philanthropies, notwithstanding his genuine concern for his fellow man. But the public-minded appeasers, panderers, and occasional do-gooders done well have done little better in reducing the envy of those complaining about greed. We stopped burning our witches or our entrepreneurs not because of a drop in the general level of stupidity, not cupidity.

* mutually exclusive, comprehensively exhaustive