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Do Good and Do Good Business

What better place than L.A. for ethical capitalism?

July 24, 2002|TORIE OSBORN | Torie Osborn is executive director of the Liberty Hill Foundation.

First, President Bush's Wall Street backdrop read "corporate responsibility." Then, in Birmingham, it was "strengthening our economy." In both venues the theme was the same: higher standards for U.S. business.

As the president proclaimed: "There's no capitalism without conscience ... no wealth without character."

What Bush seems not to realize is that the ultimate measure of capitalism with conscience is neither ethical accounting nor faith in business leaders. It's whether corporations treat the men and women who work for them and the communities in which they do business fairly, as respected and valued partners.

If Bush's call for capitalism with conscience is to be truly embraced, we need to talk about the elephant in the room: the yawning gap between rich and poor. We have become the nation with the grossest economic inequality of any industrialized nation in the world, and addressing this will take more than anti-fraud SWAT teams and an end to bogus bookkeeping.

What better place to embrace these reforms than Los Angeles, the epicenter of the nation's wealth-and-poverty divide?

Capitalism with conscience will mean reinvesting in strategies to equalize income and opportunity. While it's highly unfashionable to discuss these days, that means higher taxes, not tax cuts. Even Adam Smith, the original free-marketeer, saw the critical role of taxes under capitalism. Writing in 1776, he said: "A goal of taxation should be to remedy inequality of riches as much as possible by relieving the poor and burdening the rich." Locally, business can embrace capitalism with conscience by bringing wages up to par with the cost of living.

The Santa Monica hotels that have opposed that city's groundbreaking living-wage law could heed the president's call for a new ethic of responsibility by ending their campaign to overturn the ordinance that voters and the Santa Monica City Council have endorsed. In the last five years, the living wage has proved to be one of the nation's most successful anti-poverty measures, raising families above the poverty line.

In L.A.'s Koreatown, the highly profitable Assi supermarkets could recognize the union that the men and women who work there have formed in the hope of securing better-than-poverty wages.

The problem of reform is not business' alone to solve. City government can encourage more innovative job training programs like one that received Los Angeles City Council approval last month. In the first year of this $2-million pilot program, L.A. Metropolitan Alliance's Healthcare Careers Program will train 250 Angelenos for health-care industry jobs that come with a future, not French fries.

Next year, Los Angeles Alliance for a New Economy will present its plan for a citywide policy requiring community benefits like living-wage jobs, job training and affordable housing set-asides as a condition for public subsidy in private developments. City Council adoption of the plan would mark another important step toward achieving capitalism with conscience in L.A.

The philanthropic sector also could play a more active role than it has in the past. At its best, philanthropy blows on the sparks of social change. It serves as an incubator for new approaches to social problems. But most foundations spend less than 4% of their assets in grants each year. Nothing except precedent and timidity prevents them from giving away more.

In a recent speech, Lance Lindblom, head of the Nathan Cummings Foundation, called on the nonprofit sector to "redress the imbalance between the incentives for the focused self-interest of our economy and economic institutions; and the self-sacrifice, altruism and compassion of our human essence." This isn't a task for any one sector, but can't we all move in that direction? That would represent true wealth with character.

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