Written by Osman Mansur, CRB Student Advisory Board Member and B.S. ’20

In the Spring of 2019, I took a one-of-a-kind class at Berkeley-Haas titled “Sustainable Business in the Nordics”. Taught by Professor Robert Strand, the course deconstructed common misconceptions for why Nordic countries enjoy high living standards, such as having homogenous populations or “socialist” government systems. During the course, Professor Strand repeatedly instructed that whenever we hear the terms “capitalism” or “socialism”, we must demand clarity on what is meant. More often than not, those terms are misapplied or misunderstood. I was recently reminded of this specific insight while reading Matt Stoller’s book, Goliath: The 100-Year War Between Monopoly Power and Democracy. In today’s highly polarized political climate, American capitalism is a Rorschach test, either understood as an irreparably broken system that breeds inequality, or as an imperfect but preferable promise of freedom against the tyranny of socialism. But as Stoller emphasizes, this false dichotomy of capitalism versus tyranny has always been incoherent. Rules, regulation, and governance exist in all free market systems; the question is whether the rulebook is written by democratically elected representatives or by wielders of concentrated private power. 

Early on in my class with Professor Strand, we read Milton Friedman’s infamous 1970 essay: “The Social Responsibility Of Business Is to Increase Its Profits”. Friedman’s writing is an excellent foil to modern sustainable business thinking. Sustainability is defined as meeting the needs of today without sacrificing the ability of future generations to meet needs of their own. As such, the concept of sustainable business diverges from Friedman’s theory of shareholder primacy, and calls on private corporations to act in the shared interests of all stakeholders, including workers, consumers, the environment, and civil society at large. But Friedman’s titular argument includes an important qualifier: a business should use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game. This is why I think the idea of shareholder primacy alone should not serve as the countervailing force that motivates the sustainable business movement. There is a broader discussion to be had about what constitutes the rules of the game, and how they are written. 

A holistic understanding of our political economy requires not only a critical look at Friedman’s doctrine, but also the teachings of one of his Chicago School colleagues: Robert Bork. A legal scholar by profession, Bork built his reputation as a staunch opponent to antitrust regulation. Counter to the philosophy of New Deal era progressives who preceded him, Bork believed that monopolies were inherently good as long as they offered low prices. To Bork, efficiency was the name of the game. Bork and the Chicago School subverted the moral question of monopoly power with the palatable scientific rhetoric of laissez-faire economics, and his ideas were adopted and spread by lawyers, economists and historians across the political spectrum. Under this pro-monopoly framework, both Democratic and Republican administrations from the late 1970s onwards contributed to a frenzy of deregulation of industries including banking, oil, airlines, automobiles and telecommunications. This new rulebook gave Big Business free reign to conduct mergers & acquisitions, gut middle management, cripple labor unions, relocate manufacturing abroad, pollute the environment, and, in defiance of Bork’s grand plan, increase prices all in pursuit of record profits. This pro-monopoly rulebook has been self-reinforcing: as companies have grown in power, so has their ability to lobby policymakers to continue writing the rules in their favor. 

This is where sustainable business comes in. The unbridled globalization of the 1980s and 1990s, marked by incidents such as Nike’s “sweatshop labor” scandal, galvanized the public to hold corporations accountable for their actions. This movement for “corporate social responsibility” (CSR) gained steam in business circles across the country. The underlying premise was that in the emerging neoliberal global system, it was up to transnational corporations to regulate themselves and voluntarily behave in an altruistic manner. Today, many thought leaders in the space are refocusing their attention from CSR to the trendier framework of sustainable business. While there are some differences in how these frameworks are conceived (more on that later), the idea of putting purpose over profit is at the heart of both. For all the fervor CSR and sustainability discourse has generated, however, the impact on how corporations act in reality has been limited at best. In 2019, the Business Roundtable issued a statement signed by almost 200 CEOs promising to lead their companies for the benefit of all stakeholders. Recent research by Wharton professor Tyler Wry found that at the outset of the COVID-19 pandemic, companies who signed on to the statement paid out 20% more capital to shareholders via dividends and stock buybacks, and were almost 20% more likely to announce employee layoffs than companies who did not sign the statement. This is just one example from a plethora of evidence suggesting that corporate commitments to purposeful business often only amount to virtue-signaling fluff in practice.

It should go without saying that corporate goodwill alone will not remedy the negative social externalities of modern business. As long as the legal environment rewards companies for anti-competitive and socially harmful practices, many will continue to exploit them. Additionally, the more concentrated power that companies have, the easier it becomes to act in the interest of financiers and shareholders without actively delivering value to consumers and society. Take the example of Boeing, which used its political connections to monopolize the American aerospace industry in the 20th century. It now operates more as a financial engineering firm than an aircraft manufacturer, and while it spends tens of billions of dollars on stock buybacks, it is notoriously struggling with producing and delivering safe planes. This is why business leaders who truly care about a sustainable future should appreciate and advocate for the merits of anti-monopoly thinking. To be clear, discourse around monopoly power concerns more than just industry giants like Boeing. Monopolization also takes place in quiet yet crucial corners of our economy like hospital networks, and involves a sprawling web of enablers like investment banking, private equity, management consulting, and accounting firms. One may rightfully ask, why should business leaders engage with this issue beyond merely appreciating its importance? After all, the politics of monopoly are taught in law schools and not business schools because it is lawyers, not businesspeople, who handle such issues in the real world.

In the same vein, one may point out that sustainable business discourse focuses on ideas within a business leader’s realm of authority: transitioning to carbon-neutral supply chains, increasing diversity in the workplace, and the like. However, separating politics and business in this fashion is dangerous. By shelving the political conversation about power and regulation, the question becomes limited to how businesses can unilaterally do more good. What projects can we launch as a company? What initiatives can we spearhead moving forward? As author Anand Giridharadas notes in his book, Winners Take All, the conversation amongst elite corporations is always about how to “give back” and be part of the solution. It is rarely about how to cause less harm and cease being part of the problem in the first place. This isn’t to say that sustainability practitioners within corporations aren’t doing important work. But as Giridharadas warns, the net effect of such efforts may be negative if they only serve to whitewash and exonerate the broader harms of Big Business.

Fortunately, I believe an anti-monopoly lens fits naturally into the framework of sustainable business. Unlike frameworks such as CSR, sustainable business explicitly disavows corporations having a unilateral responsibility to do good. This is because sustainable business is a subset of the broader theory of sustainable development. In fact, the recent popularity of sustainability in business circles can be attributed to the UN Sustainable Development Goals launched in 2015. The 17th and final SDG calls for multilateral partnerships, and sees the private sector as a piece to the broader puzzle of development. In this sense, the framework of sustainable business uniquely appreciates the role of government and understands that corporate benevolence is not the answer to social problems. Furthermore, sustainable business is inherently about taking a long term view, which is conducive to understanding the importance of anti-monopoly. Given that current U.S. antitrust law is designed around the consumer welfare standard, it can be difficult to articulate the threat of monopolization in the short term. It’s a tough case to argue that the services of tech giants such as Amazon or Google have been bad for the average U.S. consumer. However, the long term perspective of sustainability encourages assessing the risks of concentrated corporate power to all stakeholders, including future generations. It encourages asking questions regarding the impact of Facebook on our elections and democracy, or the threat of gig economy players like Uber and Lyft to the working class. Business school faculty and students like myself that are interested in sustainability must begin having these conversations in our classrooms. Once we graduate, we must carry these conversations into our workplaces. As sustainability-minded business leaders, we must not only avoid practicing predatory capitalism ourselves, but also call upon government to write anti-monopoly rules that sow the seeds for a sustainable future.

About the Author

Osman Mansur, B.S. ’20

Osman Mansur, a member of the CRB Student Advisory Board, graduated from UC Berkeley in December 2020 with a B.S. in Business Administration and a minor in Data Science. He has work experience in corporate finance and product management, and is broadly interested in the political and ethical contexts of American business.

Connect with Osman on LinkedIn.

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