The New Prophets of Capital

by Nicole Aschoff

  We could spend fifty years lobbying seventy-five national governments to change the regulatory framework for the way these commodities are grown and produced. Or these folks at Coke could make a decision that they’re not going to purchase anything that isn’t grown or produced in a certain way—and the whole global supply chain changes overnight.33

  Big environmental groups may criticize neoliberalism and transnational corporations, but these days their strategic agendas look very similar to those of companies like Whole Foods and Walmart. The state is viewed as a suspect, ineffective force, while the firm becomes the key vehicle for change.

  In light of these global trends, doesn’t it make sense to expand eco-business practices and scale up the Whole Foods model? If companies act consciously and responsibly, can we free ourselves from the vicious production and consumption cycles that currently exist and develop a healthier relationship with the planet? The Whole Foods model is, without a doubt, a better way of doing business than Walmart deploys. But despite its appeal, conscious capitalism is not a solution to the destructive impact of corporations or the environmental crisis on the horizon.

  There are two interrelated problems with the model. First, it claims to produce virtuous growth that outsmarts and escapes the competitive tendencies of capitalism that are currently destroying the planet and impoverishing billions of people. Mackey’s central argument is that his philosophy of capitalism is not dominated by broad imperatives, like profit and competition. David Harvey contends that competition is inescapable in capitalism: Firms must grow and generate profits in a system characterized by “the coercive laws of competition.” Harvey notes: “If I, as a capitalist, do not reinvest in expansion and a rival does, then after a while I am likely to be driven out of business. I need to protect and expand my market share. I have to reinvest to stay a capitalist.”34 When many firms invest in the same thing competition gets fierce, and profits go down.

  Mackey acknowledges that firms must make a profit, but brushes off the necessity off trade-offs, the centrality of the profit imperative, and the problems posed by competition. In his model profits arise naturally from innovation and the virtuous feedback loop of honoring stakeholders, and competition is thereby outsmarted.

  If Whole Foods Market, for example, had to compete with Walmart strictly on the basis of supply chain efficiency or distribution economies of scale, it would be impossible for us to win. But what we can do is be more nimble, more creative, and more innovative and provide higher-quality service while creating a better store environment. By the time Walmart figures out what we are doing, we will have moved on to newer and better innovations that create new value for our ever-evolving customers.”35

  Mackey cites Raj Sisodia’s Firms of Endearment study to show that over a fifteen-year period, twenty-eight conscious businesses outperformed the S&P 500 index by a factor of 10.5. The curious thing about Mackey’s story though, is the dearth of old conscious firms. When he looks back in history he sees companies that were great for a while (General Motors, IBM, Kodak) and then failed or became less profitable. Mackey chalks this up to both the novelty of his entrepreneurial vision and his belief that the older companies simply lost their way, abandoned their core values, got greedy, lazy, etc. Many businesspeople have shared core elements of Mackey’s business philosophy over the years. The fact that none of these principles has stood the test of time is indicative of the long-term effects of competition, not greed or laziness.

  Whole Foods has prospered so far. No doubt this is related, in part, to the virtuous feedback loop it has established and the wealthy tranche of the population it supplies. But the company also has a rapacious appetite. It has bought and absorbed dozens of companies and hundreds of free-standing health food stores in its short life. It has grown from one store in 1980 to 373 stores today (with 107 more in the pipeline).36 This fact cannot be separated from its prosperity. Today it is the world’s largest retailer of organic and natural foods. But its ability to maintain its monopoly is not unlimited. If we look at the decline of a firm like IBM, which once seemed invincible, whose workers were virtually guaranteed lifetime employment, good wages, and a decent place to work, the imperatives of profit and competition (and the shelf-life of monopoly powers) become clear. No matter how conscious or high-minded a business owner, if faced with a competitive market where profits are declining, her only choices are to abandon her principles or perish. Competition trumps philosophy every time.

  Maybe Mackey has discovered a magic formula that will keep Whole Foods profitable for the long haul. If so, will the model still work? The answer is no. Even if, miraculously, all or most firms could maintain their principles, stay in business, and eke out profits through constant innovation, diversification, and creativity, the sum of all this activity is still an ever-expanding capitalist market, in which the environment always loses.

  Ideas of conscious capitalism, sustainable capitalism, or eco-business all mask the essential need for firms to keep producing more. Moves by firms to improve relations with suppliers and reduce resource use and waste are not designed to slow down production and consumption. Eco-business practices are a way for firms to speed up growth, speed up their ability to enter new markets, gain new customers, and make more profits. As Stacey Mitchell, co-director of the Institute for Local Self-Reliance, argues:

  Walmart is accelerating the cycle of consumption, speeding up how fast products move from factory to shelf to house to landfill. Even if Walmart does reduce the resources used to make a T-shirt or a television set, those gains will be more than outstripped by growth in the number of T-shirts and TVs we’re consuming. It’s one step forward and three steps back.37

  Ultimately, Whole Foods operates within a capitalist world economy in which firms must expand if they are to survive. Sustainable business practices sustain the ability of firms to exist and expand in an increasingly competitive, resource-starved global economy. Eco-practices don’t change the nature of production, consumption, or disposal. They don’t decrease the ecological footprint of firms (or humans). Sustainable practices enable firms to make bigger, deeper footprints as they expand into new markets and tap new sources of supply. As long as production is designed to increase profits, as it must be in capitalism, rather than to meet the needs of humans, the environment will never escape and never be healed. As geographer Neil Smith argued: In capitalism “nature becomes a universal means of production in the sense that it not only provides the subjects, objects, and instruments of production, but is also in its totality an appendage to the production process.”38

  Competition is a defining feature of capitalism, one that will eventually steamroll all warm, fuzzy versions of capitalism, and even if long-term, virtuous growth were possible, the imperatives of the profit motive require that capitalism keep expanding and growing, consuming and destroying the planet as it goes. Sustainable production and eco-business practices do absolutely nothing to challenge this maxim.

  This leads to the second problem with the model, which is that it relies on the notion that all stakeholders can be honored equally. This is, quite simply, not possible within capitalism. Consumers and investors must always be prioritized over the environment and over workers. The firm is not a democratic institution, and it can’t be the centerpiece of a radical project for environmental justice.

  In Mackey’s framework the market is the central organizing institution and relations of exchange are what bind people together. He believes that in a competitive market, these relations of exchange are always benevolent because they are “based on the principles of equality and freedom.” Investors trade their money for more money and workers trade their ability to work for a wage to buy the things they need. “No matter how large a business becomes, it never acquires coercive power over customers, team members, or other stakeholders. All the business can do is offer each of its stakeholders a menu of choices; the stakeholders have the freedom to choose.”39

  But as Marx argued, even thoug
h workers and investors meet each other in the marketplace, they do not confront each other as equals. Focusing on processes of exchange hides the class basis of society. Workers are free to sell their ability to work for a wage, but history has also “freed” them from owning the means to support themselves in any other way.

  Mackey in fact understands this. He never says that all stakeholders should be equal. Instead, he maintains that conscious capitalism “optimizes value” for all stakeholders—meaning to make it as good as possible within the system or structure of relationships in place. But optimizing gains for stakeholders in capitalism has built-in limits: some stakeholders, like investors, will always have much more power than other stakeholders, like workers. Mackey claims this is necessary because investors are paid last, and without that power, the stockholders will inevitably be exploited by management or some other stakeholder of the business.

  Whole Foods workers are better off than many retail and fast food workers.40 Permanent, full-time employees earn considerably more than minimum wage, and both part-time and full-time workers receive health insurance: part-timers working at least twenty hours a week can buy full-cost coverage after working 400 hours, and full-timers can get lower-cost coverage after working 800 hours. Executive pay is kept in check, relative to other major corporations, and the management structure is more horizontal than vertical. However, wages for many Whole Foods employees fall far below a living wage. Cashier wages range between $8 an hour to $14 for permanent employees, while workers in other parts of the store make between $10 and $15 an hour. Despite its claims that Whole Foods honors all stakeholders, many team members, including full-time workers, are forced to rely on food stamps, and a recent study found that 17 percent of Whole Food’s Massachusetts employees are enrolled in Medicaid.41 The company’s “gainsharing” program bumps up this pay rate for some workers, but bonuses and promotions are contingent on competition between workers: teams compete against other in-store teams, and stores and regions compete against each other, on benchmarks including profitability and customer service.

  In July 2013, Chicago Whole Foods workers joined striking fast food and retail workers in the Fight for $15 campaign, demanding a living wage, an end to the points system (workers who commit infractions, such as calling in sick, collect penalty points that can lead to termination), and the right to unionize. Mackey has expressed ambivalence toward unions on numerous occasions, memorably likening them to having herpes: “The union is like having herpes. It doesn’t kill you, but it’s unpleasant and inconvenient.”42 Whole Foods, Starbucks, and Costco were vocal opponents of the Employee Free Choice Act, proposing a “third way” option that preserved the employer-dominated secret ballot system. Lobbying against the bill, Mackey declared that card-check neutrality “violates a bedrock principle of American democracy.”43 At stores where union murmurings occur, workers report being forced to attend “Union Awareness Training” meetings to warn them against the dangers of union “infiltration.”44 A 2009 investigation by Mother Jones found that Whole Foods managers threatened workers at closed-door meetings with losing their benefits if they voted for a union. According to the investigation, one of Whole Foods’ “six strategic goals” for 2013, as outlined in company documents, was to remain “100 percent union free.”45

  It’s worth remembering that, while the slightly better pay, benefits, and working conditions enjoyed by Whole Foods workers seem rare in today’s job market, this wasn’t the case just a few decades ago, when many unionized supermarket chains offered decent livelihoods to their workers. The Whole Foods model is better than Walmart, but it’s hardly a utopian vision. It is not democratic and is in no way defined by equitable power relations. As Mackey claims, workers are offered a “menu” of choices. The menu is decided by him and Whole Foods investors. When profits decline or competition increases, as they tend to do in capitalism, workers are at the whim of the company, just like workers at any other company. If team members don’t like it, they are free to work elsewhere. But in a system where workers have no other means to support themselves without a wage, the freedom to work elsewhere is not much freedom at all.

  Environmental Justice Needs Radical, Democratic Institutions

  Conscious capitalism, while attractive in some respects, is not a solution to the environmental and social degradation that accompanies the system of for-profit production. The “coercive laws of competition” are inescapable in capitalism, which means that conscious business philosophies will be shortlived. More important, even sustainable production in a for-profit system will consume and destroy the planet’s resources. Sustainable business practices are designed to make global production easier and more profitable for companies in an increasingly competitive global environment. While they make consumers feel good and improve efficiency and waste at the unit level, eco-practices don’t slow down production and consumption at the systemic level. They speed up these processes, devouring resources at an ever-expanding rate.

  The widespread popularity of ethical consumption and lifestyle politics is a clear indication that people care about the environment and don’t want to destroy the planet. But the firm can’t be the driver of a radical project to reduce humanity’s ecological footprint. Firms are not democratic institutions, and they cannot escape the imperatives of capitalism. When consumers and environmental NGOs channel their desire for environmental justice through the firm, their desires get absorbed into business strategies for growth and expansion. By focusing on the firm, we legitimate its centrality and the entire for-profit production architecture.

  Society must decide what kind of world it wants to live in, and these decisions must be made through democratic structures and processes. Buying better things is not a substitute for the hard political choices that societies need to make about limiting consumption and resource use, and finding a replacement for the psychological crutch of consumerism. States seem toothless in the face of environmental degradation, but they are not inherently weak. They simply represent the existing balance of class forces. If we don’t want to live in an environmental wasteland, we must build up democratic institutions to organize production and consumption around the needs of humans, not the needs of capital.

  ________

  1John Mackey and Raj Sisodia, Liberating the Heroic Spirit of Business: Conscious Capitalism, Boston, MA.: Harvard Business Review Press, 2013. This book is the primary reference for “conscious capitalism” in this chapter. It is co-written by Mackey and Sisodia, alternating between a first-person Mackey voice and a joint Mackey/Sisodia voice. My interest lies in the story Mackey tells about Whole Foods, and because the book is primarily about Whole Foods and builds on previous discussions of conscious capitalism developed by Mackey, I refer only to Mackey in this chapter. The reader should note, however, that general views about conscious capitalism are shared and developed by Sisodia.

  2See www.wholefoodsmarket.com/.

  3Mackey and Sisodia, Conscious Capitalism, p. 236.

  4For example, see Michael Strong, Be the Solution: How Entrepreneurs and Conscious Capitalists Can Solve All the World’s Problem’s, New York: Wiley, 2009.

  5Mackey and Sisodia, Conscious Capitalism, pp. 264–5, 230.

  6People and the Planet Report, Report 01/12, London: Royal Society Science Policy Centre, 2012.

  7“Use It and Lose It: The Outsize Effect of US Consumption on the Environment,” Scientific American, September 14, 2012.

  8Mackey and Sisodia, Conscious Capitalism, p. 3.

  9Ibid., pp. 14, 27.

  10Ibid., pp. 16, 21; Mackey is not alone in his emphasis on crony capitalism. See also www.againstcronycapitalism.org/.

  11Ibid., pp. 16, 18.

  12Charles. Fishman, “Whole Foods Is All Teams,” Fast Company, April/May1996.

  13‘Trader Joe’s Top Survey of Best Grocery Chains, Walmart Lands at Bottom of List,” Huffington Post, July 23, 2013.

  14Gert Spaargaren and Arthur P.J. Mol, “Greening Global Consumption: Re
defining Politics and Authority,” Global Environmental Change 18, 2008, 350–9.

  15John Boli and George Thomas, “World Culture in the World Polity: A Century of International Non-Governmental Organization,” American Sociological Review 62: 2, April 1997, 171–90.

  16Josée Johnston, “The Citizen-Consumer Hybrid: Ideological Tensions and the Case of Whole Foods Market,” Theory and Society 37, 2007, 229–70; see also Josée Johnston, Andrew Biro, and Norah MacKendrick. “Lost in the Supermarket: The Corporate-Organic Foodscape and the Struggle for Food Democracy,” Antipode 41: 3, 2009, 509–32.

  17Graham Hill, TED Talk, 2013; Elizabeth Warren and Amelia Warren Tyagi have written a book challenging the veracity of American overspending. See The Two-Income Trap: Why Middle-Class Parents Are Going Broke, New York: Basic Books, 2004.

  18Mackey and Sisodia, Conscious Capitalism, p. 14.

  19Ibid., p. 31.

  20Neil Smith, Uneven Development: Nature, Capital, and the Production of Space, Athens: University of Georgia Press, 2008, p. 69; see also Erik Swyngdeouw, “Impossible Sustainability and the Post-Political Condition,” in David Gibbs and Rob Krueger, eds., The Sustainable Development Paradox: Urban Political Economy in the United States and Europe, New York: Guilford Press, 2007.

  21Mackey and Sisodia, Conscious Capitalism, pp. 151, 31.

  22Ibid., p. 31.

  23Bernard E. Harcourt, The Illusion of Free Markets: Punishment and the Myth of Natural Order, Cambridge, MA: Harvard University Press, 2011.