Beyond “Small is Beautiful:” Buddhism and the Economics of Climate Change

In pursuit of climate justice it can be easytoo easy—to grasp onto the idea that corporations are the “Other.” How can Buddhist practice inform the way we think about the economy and economic systems? If our economic systems impact global systems, and thus help spur climate change, surely we need to reform them?  In this article, economist and dharma teacher Julie Nelson suggests that we start by examining pervasive myths about the  “essential” nature of economic systems.

Phosphate fertilizer manufacturing in Florida. © J Henry Fair/IndustrialScars.com

By Julie A. Nelson

Many Buddhists—as well as many non-Buddhists!—have raised concern and alarm about the climate crisis and other crises facing our society and our world.  Clearly, we need to take urgent action.  As Buddhists, we have a pressing moral obligation to do what we can to relieve the suffering of all beings on the planet, both now and in the future. Our hearts yearn to make things better.

And clearly much of the climate change disaster is caused by economic activity. If you graph carbon dioxide emissions and industrial output over a long period of time, the two graphs look pretty much identical. The development of large scale, fossil-fuel burning industries was accompanied, in Western societies, by the rise of large corporations, global markets, and a rising emphasis on consumption as a source of well-being. Great wealth has been created, but this wealth has been very unequally distributed, and has often come at the cost of environmental and social sustainability.

We urgently need to change how our economies work—But how?

It’s abundantly clear that we can’t go on with “business as usual.” People and other sentient beings are already feeling the disruptive effects of a set of historical and social developments that, as a whole, have taken far too little account of the effects of our production and consumption on the rest of nature. We urgently need to change how our economies work. But how?

What’s Wrong With the “Replacement Economy” Approach?

One popular idea these days, and including among Buddhist social activists, is what I’ll call the “replacement economy” approach. You can find this spelled out clearly in such writings as David Loy’s chapter, “The Three Poisons, Institutionalized” in Money Sex War Karma, And in Joel Magnuson’s book Mindful Economics. Language suggesting a similar analysis crops up in Ken Jones’ The New Social Face of Buddhism, in the 2002 edited volume, Mindfulness in the Marketplace, and in many other recent works. E.F. Schumacher’s 1973 book Small is Beautiful, was a generative work for Buddhist economic critique, focusing on issues of scale. Today the slogan might be updated to “local is beautiful.”

In the “replacement economy” approach, our environmental and other ills are seen as the inevitable outcomes of values, principles, and institutions that are of the very nature of our current economic system. For example, the problems are said to be caused by market values, profit-maximization, global corporations, consumerism, and a growth imperative—all assumed to be inherent in capitalist or market economic systems. Clearly, then, in order to stop the suffering, a  dismantling of the old system is prescribed. It is said that we need to create a brand new replacement.

This new economy, it is reasoned, must be based on values, principles, and institutions that are radically different from—in fact, diametrically opposed to—those that characterize the old system. It should be based on values of compassion and cooperation, the principle of mindful interdependence, the principle of sufficiency, and on institutions that will be, for the most part small, local, democratic, and non-profit. Nothing less than a wholesale change of people’s hearts and the structure of the economy, politics, and society, it is claimed, will do.

The proposal for a replacement economy is neither good economics nor good Buddhism

I would like to offer a different perspective. I’m afraid that, from my viewpoint as an economist and as a student of Zen, I find this proposal to be neither good economics nor good Buddhism. Concerning economics, rather than being truly radical, it actually buys into some very old stories about “the nature of” our current economic system. Concerning Buddhism, it is at odds with what I’ve come to feel are some very basic and very important insights of Buddhism about ourselves and the world.

First, economics. I initially began studying economics, as an undergraduate, with the idea that an understanding of it might help me do something about global poverty and hunger.

What I was taught, in college and grad school, was consistent with how those who look to replace our economic system characterize the “old economy.” That is, people in our current economy are driven by self-interest. Firms are entities whose essence is to maximize profits. Individuals maximize satisfaction from consumption. Markets are arms-length and impersonal “mechanisms.” I also had to learn a lot of math, since it is taken for granted that understanding the “mechanisms” and “drives” of the economy requires physics-like techniques of analysis.

But perhaps what drew me further into the study of economics was the same thing that later drew me to Zen: a tendency to entertain doubt, trying to look afresh at the world with a “don’t know mind.”

And so I became curious about how economists figured out that self-interest, competition profit-maximization and so on were the fundamental laws and principles underlying economic activity. All that I, or anyone else, can directly observe are specific, concrete, historically contingent, emergent realities—as Buddhists should know. So how did economists get a handle on the invisible, intangible, essential, persistent nature that underlies these phenomena? In general, we economists don’t like to talk about where our assumptions come from. My explorations took me into many areas, from contemporary corporate law, to the history and philosophy of science. And what I discovered is that economists made this stuff up. Really.

In Zen practice, we are encouraged over and over to be intimate with what is actually in front of us, and to develop a healthy suspicion about the stories we endlessly create on top of what we see. The whole concept of the inherent nature of our current system lies squarely in the realm of story.

Let’s just look at one example: the common belief that corporations must maximize profits.

The common belief that profit-maximization is mandated by law is simply wrong. Corporate charters state the purpose of business as running a business, and you won’t find a word about profits or returns to shareholders in them. Nor do shareholders regularly force corporate executives to act in their interests, by bringing lawsuits against them, as is sometimes asserted. The courts regularly apply the “business judgment rule” that pretty much leaves decision-making to the executives. For a good explanation of these points, see legal scholar Lynn Stout’s book The Shareholder Value Myth. Nor, in many cases, does intense market competition, in goods markets or capital markets, force companies to pursue every last dollar of profits. Large parts of the economy are dominated by relatively few firms, and many firms fund expansion from retained earnings, leaving them with a much wider degree of choice than you might expect.

The idea that firms are always running after the last dollar of profits was also not derived from observation of actual businesses.  Some corporations are more oriented towards innovation, or expansion, or maximizing CEO compensation. Others focus on preserving a tradition, serving a community, or providing a beneficial, quality product. Still others are rather a mess and don’t seem to effectively pursue any goal at all.

Economists  invented the notion of profit-maximization. Why?

In Zen practice, we are encouraged over and over to be intimate with what is actually in front of us, and to develop a healthy suspicion about the stories we endlessly create on top of what we see. The whole concept of the inherent nature of our current system lies squarely in the realm of story.

Economists have always wanted to be more like high-status physicists, than like lower-status sociologists. The dogma of “profit maximization” allows us to analyze “the firm” as though it were an autonomous entity that finds the highest point on its mathematical profit function. This is much easier than dealing with corporations as complex social organizations involving many different people working together. It avoids noticing that their leaders and workers may have a multiplicity of goals. It avoids having to recognize that businesses have unique cultures and histories.

And why has economists’ fanciful theory had such staying power? I think part of the explanation, especially for the image’s popularity, has to do with power. The standard story, and its obfuscating cloak of mathematics, can be used to justify greed and silence opposition. But there’s another layer—a gendered layer—to the explanation as well. What economists chose to notice in economic activity was elements of competition, self-interest, autonomy, rationality, precision, and mechanism. What was ignored? All the equally present elements of cooperation, other-interest, connection, emotion, complexity, and sociality. Notice that that the former have an aura of masculinity and toughness about them, while the latter seem more soft, more feminine. In a sexist culture, they are easily dismissed as of lesser importance.

It is also worth noticing that the core theories of the discipline have treated the economic contributions of the natural environment in a way that is exactly parallel to its treatment of women’s traditional unpaid work of maintaining a home and caring for children, the sick and the elderly. Natural resources just “show up” on the scene when needed for production, require no maintenance, and disappear when no longer needed. Issues of resource depletion,  degradation, or waste disposal do not appear in the core theory. Workers, likewise just show up and disappear. The traditional work of women in raising children, maintaining workers, and caring for the elderly do not appear in the core theory. Both natural and caring processes have been assumed to go on infinitely, effortlessly, and silently, in the background.

Profit Maximization and Other Popular Myths

“Profit maximization” is not the only idea invented by economists. Let me just briefly mention a few more mythical creations. A “free market” has never existed, and could never exist. Markets are totally entwined with government and other forms of social regulation. Neoliberal or “market fundamentalist” doctrines are, in practice, mostly ideological smoke screens for power grabs. “Imperatives to grow” are also a fiction, whether we are talking about individual firms or larger economies. Episodes of non-expansion or contraction are common occurrences, and do not necessarily lead to collapse. The degree of “consumerist” values displayed in capitalist societies is historically and culturally variable. For example, “planned obsolescence” didn’t become common until well into the 20th century. (If you’re my age, you can remember when the useful life of a telephone could be measured in decades.) There are, in fact, many “capitalisms,” depending on where and when you look, not just one. Cooperation and trust, not just “self-interest and competition,” are essential to any economic system. If you can’t cooperate with your suppliers or coworkers, how can you ever create anything? If you can’t trust who you’re dealing with, how can you ever make a market transaction? Is greed the first thing on your mind when arranging your child’s daycare? A regard for ethics is absolutely required for sustained business and market functioning. Modern capitalist economies have probably functioned as well as they have, so far, only to the extent that many people in their daily lives have not bought into the “greed is good” mentality. I’ve explored these myths and their consequences in Economics for Humans.

Cooperation and trust, not just “self-interest and competition,” are essential to any economic system.

So, to recap my first point, I think the “replacement economy” approach, that prescribes replacing the current economy (characterized by bad principles) with a new economy (characterized by good principles), has gotten its facts wrong. It has made a category error, or fallen into the “fallacy of misplaced concreteness.” It has taken abstract ideas about what “the economy” is (as invented by economists), and confused them with the actual current economy.

If we fully recognize this category error, we should change the way we talk about our economy. You have probably seen the  terms “corporatization” and “market values,” used as shorthand for the abstract values of narrow financial interest, greed, shallowness, treating people as objects, and general evilness. Yet, when we look deeper, we see that these values are not intrinsic to markets and corporations. Nor, by the way, are they unknown in non-profit, governmental, and cooperative organizations.

When Corporations Behave Like Rats

So I would advocate shortening “corporatization” to “ratization” when we are referring to dehumanizing, perverse actions. Corporations can (and sometimes do) also choose otherwise. Acting like a rat is a choice, not a mandate. And instead of calling greed a “market value,” we could call it a “rat value.” Not every market transaction is motivated by greed. Acting like a rat is an choice, not a mandate. And not only should we protest the ratization of businesses, we should protest the ratization of nonprofits—including universities—as well.

Furthermore, if we don’t move away from the fallacy of confusing abstract values with actual phenomena, I’m afraid that we actually encourage ratization! Assuming that corporations must act like rats gives corporate leaders an ethical free pass, if they want one: “the system made me do it.” It is also becoming a self-fulfilling prophecy. When the fallacy is repeated over and over, in economics classrooms, in the media, and even in Buddhist social activist writing, it encourages people to believe that greedy, opportunistic behavior is not only acceptable in business, but expected. If we then see more rat-like behavior, the blame is partly on us.

Now, you might come up with a counterargument, pointing to any of the very many (distressingly) true stories of abusive and oppressive corporate behavior. These, you might say, prove that corporations have a fundamentally negative effect on the world.  But if this is your approach, you might want to reflect on how you would defend Buddhism to a hard core secularist. Your secularist friend can trot out endless stories about abusive and oppressive actions by religious groups, from the medieval Christian Crusades to the contemporary Islamic State—and not forgetting the recent anti-Hindu, Buddhist-monk-supported, violence in Myanmar. Your friend says that these incidents prove that religion is a fundamentally negative influence on the world. How can you reply, except to say that your friend doesn’t see the whole picture?

Why the Replacement Economy Model is Contrary to Buddhist Principles

What about Buddhism and the “replacement economy” model? I believe that that model is not, actually, very consistent with Buddhism’s tenets and values.

Buddhism tells us that ignorance—sometimes translated as “certainty”—is one of the three poisons that adds to suffering. It advises us to keep doubting, keep looking at things with a “don’t know” mind. We can take up the economy as a koan, and perhaps relax some of our prior beliefs.

Buddhism tells us that one of the basic marks of existence is non-self, or that all phenomena lack any essential nature. Yet the “replacement economy” story is firmly based on a set of beliefs about the “essential nature of capitalism.” Releasing those beliefs allows us to recognize that our current economy is emergent and ever-changing—just like everything else.

Try as we might to resist it, the “replacement economy” model tempts us towards another of the three poisons, anger. It is very difficult not to be consumed by anger, when observing, for example, ExxonMobil’s disinformation campaign about the contribution of fossil fuels to climate change. It’s very easy to see ExxonMobil as motivated by greed, and our own anger as righteous. Yet we are told that we also have beginningless greed, that anger is a poison, and that “us versus them” thinking arises from a deep delusion of separation. Perhaps we can soften around some of this if we recognize that the impetus to positive change can come from both inside and outside of organizations. When we engage in activism such as letter-writing campaigns, boycotts, and shareholder resolutions—as we should—we could recognize that if change happens it is likely because we’ve had allies inside all along. If we tend to see the people “inside the system”—and especially “corporate elites”—as no more than weak, deluded, role-playing robots, we deny them their humanity.

And if we think that “they” are uniquely motivated by greed, and we are not, we deny our own humanity.  Greed, we learn in practicing Zen Buddhism, can come in all sorts of varieties, with the greed for money only being the least subtle one.

If you are like me, you not only want climate change to stop, you want child abuse, unemployment, sexism, racism, war, the arms trade, and nuclear weapons to go away. I have long struggled, within myself, with a sense of personal failure that I have not been able to make any of this go away. And this is tightly linked to a sense of heroic over-responsibility that I should be able to do so. So it came as a great revelation to me when, during zazen practice, I realized that my desire to “be good” is, itself, another variant of greed. It’s not that I simply aspire to do good actions, I have extra desires—demands, really—that I pile on top of that aspiration: “I want to feel good about myself,” “I want to be virtuous,” and “I want to be free of guilt.” When I have my desire to feel good about myself front and center, when I’m trying hard to preserve my identity as a good person, it  really gets in the way.  The requirement that I try to put on the universe—“Be such that I can be good!”—separates me from it.

Keeping our eyes on that imagined “good economy,” created by “us, the good folks,” can cause us to overlook what we can do, and need to do, here and now.

So, while our hearts yearn to make things better, I think we need to be very careful about how we go about acting on this, and keep our actions well-informed by Buddhist insights. The “replacement economy” vision of a “new economy” based purely on principles of sufficiency and cooperation, strikes me, I’m afraid, as more of a harmful distraction, than an inspiration. Much as we would love to imagine that we could live in an economy that is infinitely sustainable, equitable, and oriented to true well-being, it seems to me that this aspiration comes perilously close to denying the Three Marks of Existence. We want a “new economy” with a good essential nature, though we have been told that all phenomena lack any essential nature (anattaa). We put our hopes on a idealized end to suffering, when our Buddhist teachings tell us that suffering (dukkha) is ever-present. We may envision society enjoying the “replacement economy” as a sort of end point or culmination of human social justice endeavors, while Buddhism teaches us about the inescapability of impermanence and change (anicca). Keeping our eyes on that imagined “good economy,” created by “us, the good folks,” can cause us to overlook what we can do, and need to do, here and now.

I am also doubtful about its pragmatic possibilities, because so much of the plan seems to me to depend on a faith in the inherently redemptive power of small-scale, non-profit, and/or spiritually-directed institutions. I am afraid that I do not believe that any sort of institution—business, government, non-profit, local enterprise, community, family, or, alas, even a Buddhist sangha—has an essential “nature” that makes it automatically serve good ends. The newspapers every day carry stories of domestic violence. Sanghas are far from immune to scandals over money and sex. The three poisons are everywhere.

Buddhist teaching tells us that suffering and impermanence are fundamental marks of existence.  Recognizing these marks doesn’t at all mean that we sit on our hands and don’t do anything. But I think we want to look twice at a plan that is built around imagining an existence without them.

So what can we do? I came to Zen hoping that it would make me happy, and good, and certain about my decisions, forever…and it has not quite worked out that way. But Zen practice is gracing me with something much better. I am developing a way in which I, without becoming somebody else, can live in this world, without demanding that it become something else. I suggest we look into doing this together.

Image courtesy J. Henry Fair. Learn more about Fair’s surprising photographs of industrial pollution in our One Earth Sangha Artist Profile.

Facing climate change, I suggest, is a situation in which we have no hope of feeling good about ourselves. We have no hope of creating an ideal society. Right here is where we are, and only by facing into this reality can we respond.

I believe we should aspire to make things better, but not be too rigid about the specifics, or too greedy about having things go our way. I’ve learned to be suspicious of the thought, “If only people would listen to me and do things my way, things would be great!”

How to Act for Systemic and Structural Changes

We need changes in our hearts. And then we need to take these out into the world. While we do not need to swap our “old economy” for a diametrically opposed “new economy,” this doesn’t mean that we don’t need “systemic” and “structural” changes. But they  need to be at a different level. Within any nation, community or organization are systems and structures that shape the flows of information, the values, the decisions, and the patterns of activity. This is where we can take action.

Corporations need to develop systems that gather information about the environmental and community impact of their actions, and structure themselves so that responsible decision-making can be based on this information. National governments need to create regulatory structures, and systems of taxation, that move us away from fossil fuels and planned obsolescence, and towards sustainability. We need to restructure our cities, farms, energy generation, and transportation structures, transforming how we consume and how we commute. As individuals, we need to act from wherever we are to make these changes happen.

Take the Economy as a Koan

In conclusion, there seems to be widespread certainty out there about the principles and laws that (presumably) drive our current economy. My invitation here is to take the economy as a koan, and inquire more deeply into what is, in fact, in front of us. When we do, I believe we can recognize that economies, markets, and corporations, like human individuals, or like any other institutions, have no essential nature. They arise contingently, historically, and in deep interdependence. I believe that this recognition opens many possibilities for wise, compassionate, pragmatic, and deeply engaged action, in the messy and painful world here-and-now.

(A video of this talk is available at Buddhism, Climate Change, and Economics: Video)

Based on a talk given at Harvard Divinity School, sponsored by the Religions and the Practice of Peace Initiative, on Feb. 18, 2016.


Julie A. Nelson is a Professor of Economics at the University of Massachusetts Boston; a Senior Research Fellow with the Global Development and Environment Institute at Tufts University; and a Dharma teacher in the Boundless Way Zen school. Dr. Nelson is the author of Economics for Humans, as well as many other books and articles on gender, ethics, economics, and ecology. Her work has been published in journals ranging from the American Economic Review and Econometrica to Ecological Economics, Ethics & the Environment, and the Journal of Feminist Studies in Religion. She lives in a cooperative household in Arlington, is the mother of two grown children, and an avid dancer.

9 Comments on “Beyond “Small is Beautiful:” Buddhism and the Economics of Climate Change

  1. “Corporations need to develop systems that gather information about the environmental and community impact of their actions, and structure themselves so that responsible decision-making can be based on this information. National governments need to create regulatory structures, and systems of taxation, that move us away from fossil fuels and planned obsolescence, and towards sustainability. ”
    Why is this any more “realistic” than working toward creating any of the proposed “replacement” economies that you reject? The Trump Administration is in the process of dismantling every economic and environmental regulation that stops corporations from destroying the environment, and protect the well-being of workers and consumers. Global corporations have shown that they can afford to buy the governments they want that will “free” them from regulations so they can pursue profit without restraint. The Trump administration is filled with staff from Goldman Sachs, Exxon, and banks involved with criminal money laundering. These corporations now “own” the government and they are doing everything they can to shred every regulation that controls their profit-making ability.

    I’m not saying that your attempts to reform corporations is in vain. I think it could help in some cases. But why tear down and denigrate the work of so many other Buddhist authors who propose an alternative approach to economics? What do you gain from that? It’s mean-spirited and sets up the “us against them” approach that you say is so un-Buddhist.

    • I’m sorry you see my essay as “denigrating” fellow Buddhist, when my intent is to try to open up our minds to some actual facts and some broader alternatives.

      Yes, the situation right now is exceeding grim.

      But please be careful about who you categorically label as being on the “right” or “wrong” side of climate issues. We tend to idealize Democracy (with a capital D), and often demonize Capitalism (with a capital C). But our current democratically-elected U.S. President wants to withdraw the U.S. from the Paris accords, while recent headlines in the New York Times have read “Trump Critics on Climate Policy Hope Executives Can Sway Him” and “U.S. Companies to Trump: Don’t Abandon Global Climate Deal.“ We actually live in much more messy democracies and capitalisms (lower-case) than our too-easy mental concepts would suggest. Un-rigidifying our minds about this would, I think, lead to wiser action.

  2. As usual, I’m grateful to Julie Nelson for her thoughtful perspective on economic issues, and agree with many of her points in this article. But I’m also puzzled by some of her claims. For example, at the beginning she cites “The Three Poisons, Institutionalized” (a chapter in my book Money Sex War Karma) for recommending what she calls the “replacement economy” approach: that we need to dismantle the “old system” and create a “brand new replacement.” That article recommends no such thing. Later, in the conclusion to that book, I state that Buddhist teachings do not give us an answer to the question “is a reformed capitalism consistent with a dharmic society, or do we need altogether different kinds of economic institutions?” (p. 140), and then I devote several pages to offering some suggestions about how corporations might be reformed, especially by rewriting corporate charters.

    To a small extent, that’s already happening, with the advent of “b-corp” or “benefit-corporations, which explicitly recognize and emphasize the importance of more socially-responsible goals in addition to the traditional concern to maximize shareholder value. My understanding is that new b-corp charters were necessary because otherwise stockholders could sue corporate boards for not focusing exclusively on financial gain. The Wikipedia article on b-corps explains the rationale for this new type of charter:

    “Historically, United States corporate law has not been structured or tailored to address the situation of for-profit companies who wish to pursue a social or environmental mission. While corporations generally have the ability to pursue a broad range of activities, corporate decision-making is usually justified in terms of creating long-term shareholder value. A commitment to pursuing a goal other than profit as an end for itself may be viewed in many states as inconsistent with the traditional perspective that a corporation’s purpose is to maximize profits for the benefit of its shareholders.
    “The idea that a corporation has as its purpose to maximize financial gain for its shareholders was first articulated in Dodge v. Ford Motor Company in 1919. Over time, through both law and custom, the concept of “shareholder primacy” has come to be widely accepted. This point was recently reaffirmed by the case [in 2010] in which the Delaware Chancery Court stated that a non-financial mission that “seeks not to maximize the economic value of a for-profit Delaware corporation for the benefit of its stockholders” is inconsistent with directors’ fiduciary duties.
    “In the ordinary course of business, decisions made by a corporation’s directors are generally protected by the business judgment rule, under which courts are reluctant to second-guess operating decisions made by directors. In a takeover or change of control situation, however, courts give less deference to directors’ decisions and require that directors obtain the highest price in order to maximize shareholder value in the transaction. Thus a corporation may be unable to maintain its focus on social and environmental factors in a change of control situation because of the pressure to maximize shareholder value.”

    In accordance with traditional Buddhist emphasis on impermanence and insubstantiality, Julie emphasizes that corporations do not have “essences” or “inherent natures.” Of course not: like everything else, they are processes, and my concern has always been to examine how those processes have been functioning. The point made above in the Wikipedia article is that, historically, maximizing profitability has been legally accepted and enforced—which is why the new “b-corp” model is an important development.

    Something else emphasized in Buddhism is our motivations or intentions. The main point of my article on “The Three Poisons, Institutionalized” is that our economic system, as presently organized, institutionalizes greed (“maximizing shareholder profit”)—quite apart from the personal motivations of the people who work for corporations. Investors normally invest because they want the value of their investment to increase; for CEOs this expectation is normally experienced as constant pressure for profitability, which trumps other possible priorities. I am quite happy to agree with Julie, and Buddhism, that this does not need to be the case, but my sense is that the changes we need won’t be easy to make.

  3. I am pleased to have the opportunity to dialog with you again, David.

    Alas, this is a case where Wikipedia is not a reliable source. In a recent article in Trike Daily (https://tricycle.org/trikedaily/opinion-corporations-anti-dharma/) Jeff Seul, a lawyer dharma buddy of mine, and I describe the (widely misunderstood) facts about the goals of corporations. The “normal” or “traditional” view that you describe—about profit maximization being legally mandated for ongoing businesses—is not, in fact, true. As I described above, it is instead an invention of economists who wanted to make businesses fit into their mathematical models. As it turns out, shareholder suits against boards are rarely successful, due to invocation of the business judgment rule. The Dodge vs. Ford case mentioned in the Wikipedia article is not as legally binding as often imagined. (See Lynn Stout’s work.) But, unfortunately, the more that a sole goal of profit maximization is popularly believed and reinforced, the more it is becoming a self-fulfilling prophecy. The 2010 case in Delaware regarding Ebay, as well as an earlier 2005 case regarding Disney, were both decided by one particular judge who has, unfortunately, drunk deeply at the poisoned well of radically narrow economistic thought. While, as Jeff and I describe, it is true that shareholder interests legally take precedence at the moment of sale of a publically-traded corporation, this says nothing about how the company must be run at any time other than the moment of sale.

    So the B-corp movement is great—getting social goals down in writing is a good thing! But it’s also not strictly necessary. And to the extent that advocating for it feeds that myth that “regular” corporations are unable to do anything but maximize profit, it has deleterious effects. The more we believe that, the more we may passively accept “the system made me do it” as an excuse for all sorts of moral outrages, instead of actively demanding more responsible behavior from existing institutions.

    About whether you advocate a “replacement economy”: I apologize if I have mis-represented your work. But you are, at least, advocating a replacement corporate form which—while not denying that certain kinds of legal change (such as repeal of Citizen’s United) would be very helpful!—I see as something of a red herring.

    Thanks, again, for choosing to engage in dharma dialog!

    • Julie, I wonder if the main point you are making – that profit maximization is not legally mandated – is as important as you think. As the Wikipedia article emphasizes, and the Dodge vs. Ford case supports, and your poison-well-drinking judge illustrates, if enough people (judges, CEOs, corporate boards, etc.) believe in the legal priority of profit maximization, then it is reality – a socially-constructed one, of course, but very real in its consequences. This remains true whether or not it is an invention of economists, as you claim. The problem is not that such maximization “is becoming a self-fulfilling prophecy,” but that it is already firmly imbedded in the ways that corporations operate and judges rule, and has been for some time. It’s difficult to understand how mega-corporations such as Exxon, Goldman Sachs, Monsanto, etc. function in any other way.

      We agree that the present, common focus on profit maximization is problematic. In that case, the important issue is what will be necessary to transform that focus so that corporations promote the common good, rather than damage it. One implication of your argument is that we should not waste our time trying to rewrite corporate charters, but the point of such rewriting efforts is to MANDATE social responsibility, rather than simply to leave that available as one possibility for CEOs and boards to embrace (or not). That is why my suggestion – and the concern of many others (see, for example, http://spiritualprogressives.org/visionary-strategies/environmental-economic-and-social-justice/) is not a “red herring.” Otherwise, how can we realistically expect to reform how our economic system operates? Are you hoping that the CEOs and corporate boards of big corporations will have a “change of heart”?

      That’s not a rhetorical question, but a request (to all of us!) for concrete ideas.

      with thanks for your work,
      David

  4. Hello again, David. Thanks for continuing the conversation. I find your last question, “Are you hoping that the CEOs and corporate boards of big corporations will have a ‘change of heart’?” though, quite disturbing. Correct me if I’m wrong, but I detect a mocking tone to this, suggesting that I could hardly propose anything more ludicrous.

    To be clear, I don’t for one minute believe that we can just sit back and wait for leaders of companies doing disastrous things to voluntarily change their ways. We need to engage in demonstrations, in consumer boycotts, in advocacy for regulations, in research and writing and speaking, and so on, to create a strong movement for change. We have work to do, and the work will not be easy.

    But we have options about how we understand our human nature, and the extent of Buddha nature, while we engage in our activism. We could hold fast to a belief that “CEOs and corporate boards” are of a nature to have no hearts, or at least have no hearts of a sort that could be changed. (“Dogs and Buddha nature, okay. But CEOs? That’s going too far.”) We could choose to be the kind of activists who bathe in our own self-righteousness, and are convinced that the world would be great if only others would follow our “MANDATES.”

    Or we could act from a different base. I’ve been reading Gandhi and Martin Luther King lately. The theme that runs through their writing is that non-violence means refusing to dehumanize—to hate—to treat as outside of the circle of love—even those who are committing acts of violence and oppression. Martin Luther King wrote that we are “All…caught in an inescapable network of mutuality, tied in a single garment of destiny. Whatever affects one directly affects all indirectly. I can never be what I ought to be until you are what you ought to be, and you can never be what you ought to be until I am what I ought to be.”

    So, no, I’m not just sitting around hoping that the CEOs and boards of Exxon, Goldman Sachs, Monsanto will have a change of heart. But I do believe that they have hearts. I refuse to see those CEOs as less than human. If Buddha nature is everywhere, it doesn’t stop at the board room door.

    And I believe that recognizing the—some already very active—hearts of others involved in business, rather than dismissing the whole business community as a lost cause, would be a good idea. Perhaps businesspeople might even have a useful thing or two to teach us.

    Regarding the economic, legal, and business facts, I’m afraid there is informational bubble surrounding many Buddhist (and other) social activists. If I read only what you read, of course I’d agree with you. What I’m asking is that those of us who want to work for change open up our information base…and our hearts.
    –Julie

    • Julie, you are reading too much into my question about “changing hearts” – but in the process you’ve answered it. Please don’t patronize me as someone who self-righteously dehumanizes business leaders who can’t change, or who believes that the business community is a lost cause. (Some of my best friends are successful businessmen … and some of those businessmen are also Dharma teachers!) I agree with the values you express and the concerns you raise, but I don’t believe that approach by itself can be successful in bringing about the changes we need, because there are institutional dynamics that are very hard to address. To say it again, that’s why we need new types of corporate charters, which do not just allow for the possibility of some corporate social responsibility, but integrate that social responsibility into the basic fabric of the institution. To incorporate legally, corporations need charters granted to them by governments (acting on behalf of society as a whole), and society has the responsibility and the right to determine the constraints on corporations, to make sure that they operate for the common good. Which, in many cases, they do not now.

      As sociologists like to point out, people create institutions (institutions are social constructs…) but institutions also create people (…that perpetuate themselves by conditioning people). That’s the main point of my article on “The Three Poisons, Institutionalized”: institutions such as corporations tend to take on “a life of their own.” And that’s why we need to work on both sides, structural as well as personal.

      (For an unsuccessful attempt to dialogue with a CEO, see:
      http://www.buddhistpeacefellowship.org/can-mindfulness-change-a-corporation/ )

      • Hi David and Julie,

        I’m chiming in with a couple of thoughts to add to the mix. I think your respective, successive comments are coming a bit closer together through your exchange, much in the direction I think we need to go. I mainly want to pick up on the thread about reforming the corporation as an institution, and to make a point our two about that.

        First, and for my part, I want to acknowledge very explicitly that I don’t know which strategies, and which combination of strategies, ultimately will contribute most to addressing the climate change crisis, if we do succeed in averting a catastrophic escalation of the crisis. A range of strategies – protest, boycott, litigation, policy advocacy, institutional engineering and reform, negotiation, etc. – were deployed during the civil rights movement and many other reform movements, and each contributed to some extent (though much work obviously remains to be done).

        In our Trike article, Julie and I express some misgivings about the B Corp movement, but I want to emphasize that I truly do applaud the intentions and objectives of this approach, and I need to acknowledge that I don’t (and can’t) know the extent to which it can or will contribute to change. As an awareness raising approach, I think it is making a genuine contribution, and that is non-trivial. Time will tell whether this particular effort to reform the corporation as an institution of contemporary economic, political and social life will make a meaningful contribution in other ways. I do agree with those contemporary Buddhist thinkers who are critical of the tendency of many Buddhists to ignore or discount the need for institutional innovation and reform, as if the individual changes in consciousness/perspective/heart that can happen on the cushion need be our only concern and practice.

        But nor can we ignore the potential of any given engagement strategy to work against our objectives unintentionally. I am genuinely concerned that the B Corp movement, some of the rhetoric and action emanating from climate change activists (including some Buddhist activists), and other allied activities unwittingly may push the very norms and institutions they critique in the wrong direction, in part because they (mostly unreflectively) are attached to an overly-certain, polarized, caricatured perspective on those norms and institutions. My own perspective on this issue is informed by nearly 30 years of practice as a corporate lawyer who has tracked the B Corp movement from its earliest beginnings, has formed B Corps, represents and serves on the boards of renewable energy companies, and has done pro bono work for major environmental and conversation organizations. I can honestly say that things inside the corporate world, and the world of corporate law, aren’t quite like many activists picture them.

        This is my biggest, current, practical concern: There eventually will be even more focused litigation, at least partially because of the B Corp movement, about the extent to which corporate directors and managers of non-B Corps (and B Corps) are entitled to factor the interests of stakeholders other than shareholders (including the environment) into corporate decision making. The B Corp movement began with changes to individual corporate charters (of mostly small, private companies), but since has successfully advocated for a growing number of states to enact enabling legislation for an entirely new class of corporation that’s in line with the B Corp ethos. Judges being asked to review this question are compelled to look to what legislatures have done and are doing in this domain, since legislatures, not courts, are our primary lawmaking institutions.

        I think many judges ultimately will conclude that legislatures must have created this new class of corporation because they wanted there to be two different corporate institutional domains: one in which corporate directors and managers are entitled to factor the interests of stakeholders other than shareholders into corporate decision making and one in which they are not. If this happens, that will be a major, decisive and unfortunate shift in our norms and institutions regarding corporations. Though it is hard to sum up a large domain of corporate law in a single sound bite, a basic point of our Trike article is that, contrary to what some believe, corporate directors and managers currently are compelled to privilege the short-term financial interests of shareholders over all else only in very rare, isolated situations. Some in the traditional corporate world are working within the existing legal framework to drive the change we want, and I hope that framework does not change in the wrong direction. I recently discussed this possibility with one of the leading academic experts on corporate law. In his view, the B Corp phenomenon eventually is all-but guaranteed to produce years of litigation that is likely to have unintended and undesired consequences.

        (And, as Julie and I note in our article, B Corps (and even non-profits) also must make a profit (i.e., remain financially sustainable) to continue to serve their missions. There also most likely will be lawsuits against the leaders of B Corps contending that these leaders are not emphasizing social or environmental objectives enough.)

        At any rate, I believe we also must continue to work to try to change perspectives and actions within existing institutional frameworks. At the risk of sounding Pollyanna – and to amplify a point David makes in his most recent post – I see from life inside some big, profit seeking organizations, and decades of advising the senior leaders of many other profit seeking organizations, that relatively few of these senior leaders are crassly focused on maximizing profits at the expense of all else, at least in my experience. As a corporate lawyer, I have daily conversations with corporate leaders who want to “do the right thing.” They often are called upon to make very complicated decisions in which multiple, legitimate values are at stake and, at least to some extent, in competition. We can’t completely leave it to them to drive the change we want to see, but nor should we write them off – and, with them, their considerable ability to contribute to change. This is not David’s view, I know, yet I do think we hear this sort of thing from many social and environmental activists.

        I also think it’s helpful to remember that the climate change crisis we are facing is, in substantial part, a byproduct of prior efforts – including efforts in the corporate sector – to address pressing human challenges and aspirations of past eras, like stabilizing the food supply, increasing access to some goods and opportunities that help make this creaturely life more safe and less burdensome, and supporting the development and dissemination of the communication technologies that enable us to have a conversation like this over great distances. Sure, we can see in retrospect that many of the ways we’ve pursued these objectives have generated costs and problems that we didn’t anticipate. In some cases, yes, costs and problems that were or could have been anticipated were minimized, or sometimes even cyclically disregarded, in ways we no longer can allow. And, yes, there has been and continues to be an excessive focus on financial profit by too many individuals and organizations. But it would be unfair and unhelpful to attribute our current situation entirely – or, I am willing to say – even mostly to the actions of prior generations of corporate leaders, all or most of whom are assumed either to have been cynically focused on producing financial profit at any cost or to have been subject to institutional constraints that required only profit maximization, despite their desire to serve other values. I think the story mostly is, and remains, more complex than that.

        For a host of reasons too complex to get into here, very few, if any, big corporations are going to convert into B Corps, but they can transform their thinking and actions to emphasize increasingly the same sorts of non-financial values and goals that many B Corps emphasize – if the law and others norms that govern traditional corporations are not pushed further in the wrong direction, whether by those few greedy ideologues of profit maximization, by those who earnestly (but wrongly) believe financial profit is a good proxy for all we should value, or, perhaps counter-intuitively, by those who are working to ensure we don’t value financial profit over all else.

        Thanks for all you both (and so many others) are doing, in your different ways, to advance this important discussion. And, let’s hope I’m wrong about how the B Corp phenomenon eventually plays out in the courts . . .

        Deep bows,

        Jeff

  5. Jeff, thanks for this. I have no personal experience of B Corporations, so what you explain is helpful. My sense before was that B Corp charters are a step in the right direction, but not nearly enough. If I understand your comments, they may end up being a step in the wrong direction, in some ways. That reinforces my belief that corporate charters need more fundamental reform. And also that such institutional reforms by themselves will not be enough, which I think we all agree on. Individual transformation (such as Buddhism has traditionally emphasized) and social transformation (the social justice that the West has traditionally emphasized) are both needed, and indeed they need each other to be as successful as we need them to be today.

    Thanks to both of you for this interesting and valuable conversation, and for all your important work on these issues.

    with gassho, David

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