Five years ago it would have been unthinkable, but today there is one global movement convinced that the world’s largest corporations are engaged in stealth warfare to transform liberal democracies into neo-communist dictatorships.
At the heart of this business-led Marxist revolution is apparently the trend towards companies not only focusing on profit maximization, but also taking into account environmental, social and governance responsibilities (called ESG for short).
According to ESG opponents, this puts democracy at risk road to socialism – or worse.
At the center of this sinister plan is the American company BlackRock and its CEO, Larry Fink. BlackRock is the world’s largest fund manager and regulator over 10 trillion dollars in investments on behalf of clients, such as pension funds. Fink receives more than $30 million a year, and his net worth is estimated at more than $1 billion.
You might think that this would make Fink a very unlikely advocate for the destruction of capitalism. But because of his support for ESG – especially for companies taking action on climate change – he has been accused of promoting a form of “corporate socialism”, criticizing ESG as “socialism in sheep’s clothing”.
All the way to the president
Concerns about the “woke” politics of ESG do not only exist in the dark corners of the internet. In the US it has become a mainstream fixation. Anti-ESG advice abounds on the pages of The Wall Street Journal and on the infotainment network Fox News. It’s a hot battleground in the culture wars.
In 2020, the Trump administration proposed a rule that would require pension funds to put “economic interests” above “non-pecuniary” concerns – in other words, to force them to ignore issues of long-term social and environmental sustainability and to concentrate on the short term. term profit.
Read more: Sustainability rankings don’t always identify sustainable companies
The Biden administration reversed this plan. But last month the The US Congress has passed a bill to reverse that reversal, with support from two Democrats in the Senate. Biden then used his presidential power to veto the bill — the first veto of his presidency.
In all likelihood, ESG will be a major campaign issue in the 2024 presidential elections. The Republican-majority Speaker of the House of Representatives Kevin McCarthy, has accused Biden of wanting “Wall Street to use your hard-earned money to fund a far-left political agenda.” Republican presidential candidate and Florida Governor Ron DeSantis has been too hard railing against the “woke financial ESG scam”.
A brief history of stakeholder capitalism
What’s striking about all these emotional condemnations of ESG is that they demonstrate little understanding of how capitalism works.
This point was made by Fink in his 2022 annual letter to the CEOs of the companies in which BlackRock has invested client money.
In today’s globally connected world, a company must create value for and be valued by all its stakeholders in order to deliver long-term value to its shareholders. It is through effective stakeholder capitalism that capital is allocated efficiently, companies achieve sustainable profitability and value is created and sustained over the long term. Make no mistake: the honest pursuit of profit is still what animates the markets; and long-term profitability is the measure by which the markets will ultimately determine the success of your business.
The idea that business owners have responsibilities to the broader society is not new. At least it dates back until the 17th century when the modern corporate form began to emerge through innovations such as joint stock ownership and the legal privilege of limited liability.
The origins of the corporate social responsibility and ethical investing movements also date back hundreds of years – usually to groups and individuals motivated by religious values – and have been a mainstream business. ideas for decades.
Why? Because attention to social and environmental sustainability, ESG proponents argue, delivers better long-term investment returns. Otherwise companies wouldn’t be interested.
Arguing about the best way to do capitalism
This is not to say that the application of ESG principles is not above criticism – for going too far, or not going far enough – for being a mere sham for the status quo.
Read more: ESG investing has a blind spot that calls into question the industry’s $35 trillion sustainability pledges: supply chains
But such arguments are over the best way to do capitalism. It’s all about so far from interest in one neo-Marxist uprising as one can imagine. Debating the best way to create shareholder value has nothing to do with wanting a ‘revolutionary dictatorship of the proletariat‘ and to see private property abolished – key features of Marxism.
Capitalism is changing, that’s for sure. But it does so in a way that accepts, and is prepared to commercially exploit, changing public sentiment regarding the climate and changing social inequalities.
This is what companies that make money do. They listen to customers and other stakeholders: their employees, suppliers, the communities in which they operate and the governments that regulate them. They make plans for the future. They limit future risks.
What then explains this fantastic rhetoric about ESG as the path to Marxist tyranny? In my opinion, this shows how much the intellectual foundations of conservatism and liberalism have been eroded in a media market that favors reactionary emotionalism over tempered thinking.
Economic conservatism (rooted in the belief in free markets, globalization and small governments) has become disconnected from social and political conservatism (especially in relation to climate activism, social justice and diversity and inclusion).
All of this is a fatal distraction from the broader political and economic problems we face both locally and globally. It stimulates serious discussions – like what we should do about it economic inequalitypolitical polarization and declining social capital – fade into the background.
Read more: Hijacking fear: how Trump weaponized social alienation in a ‘racial economy’
There are sharp criticisms of ESG that do not make the headlines. It’s not often you hear of business-friendly ESG proponents campaigning for minimum wage increases, progressive taxes, worker solidarity or the need to rein in the runaway train of executive pay. Climate and social justice are certainly pressing issues. But they should not take fair economic distribution and shared prosperity off the agenda.
Ironically, the false labeling of ESG as a Marxist conspiracy also contributes to this. It serves the interests of the very populist pundits and politicians from the elites who claim to oppose it. It goes against the interests of the working class that they claim to care about. That is not socialism.