The New Prophets of Capital (6 page)

On the flip side, transnational corporations are stronger than ever. One giant company, like Unilever or Walmart, affects millions of people around the world every day through its global supply chains. Free markets don't exist, but maybe corporations are still the best, most sensible, way to heal the planet. They have reach, influence, and an unrivaled ability to coordinate action quickly. In Mackey's story an enlightened corporation with a positive mission that honors all its stakeholders can heal the planet. He says that a company can create a virtuous cycle of production and consumption that will stand the test of time if it treats its suppliers, its workers, and its community and the environment right.

Many companies like General Electric, Walmart, IKEA, SC Johnson, Pepsi, and Puma seem to be starting down the path of conscious capitalism, particularly in the adoption of sustainable, “eco-business” practices such as supply-chain tracing, auditing, green procurement, certification, eco-labeling, and life-cycle assessment to radically streamline their operations, reduce their waste, and raise profits. These eco-business practices improve the image of big corporations through “greenwashing.”
³⁰
But an even bigger part of their appeal stems from their utility in helping companies gain control over their supply chains (which account for 60 to 90 percent of costs at big companies) in an increasingly competitive and uncertain global economy. More efficient and transparent supply chains allow companies to support the suppliers they like (and need) through logistical and financial support and dump the ones that produce shoddy, toxic products that cause embarrassment and lawsuits. Eco-business practices also boost profits that are then channeled into developing new, lower-cost products to compete in emerging markets and cutting costs on existing products for established, wealthier markets.
³¹

At the same time that big companies are building in sustainable business practices, environmental NGOs (such as Greenpeace and the Sierra Club) are moving to embrace the eco-business model. The probusiness environmental message of the 1987 Brundtland Report, in combination with the weakened power of states to control the actions of corporations, have pushed big environmental NGOs to change their stance toward corporations over the past decade and to focus on the marketplace as the most viable lever of change.
³²
As Gerald Butts, CEO of World Wildlife Fund Canada, explains about WWF's decision to partner with Coca-Cola:

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 though 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