Last December, Subaru boasted in TV ads of having donated over $250 million to charity in the last few years. The company specifically claimed that it was the ASPCA’s largest corporate donor. Animal lover that I am, I got a warm feeling from those ads and, when I need a car, I might well turn to Subaru, as my son has done. Not everyone feels this way.
In his new book, “Woke Inc.: Inside Corporate America’s Social Justice Scam”,[1] wunderkind and high-flying tech entrepreneur Vivek Ramaswamy suggests that Subaru and I are woefully misguided. His writing style is so electric that one wants to understand his pain when he reports that attitudes such as ours are damaging the nation, that social justice is America’s economic Achilles’ heel.
An acolyte of Milton Friedman and other conservative scholars, Ramaswamy insists that the only purpose of business is money-making and that other corporate activity is conceptually ultra vires and wasteful. If the ASPCA needs resources, he suggests, individuals can make their own donations (although even if the ASPCA is worthy of additional resources, its limited budget will likely make its fundraising efforts less successful than that of corporate powerhouse Subaru’s). One cannot fairly scorn Ramaswamy for parsimony or self-interest, or, more in-your-face, for drinking capitalist Kool-Aid. He is, reportedly, a generous philanthropist in his own right.
Ramaswamy defines social justice as a philosophy given to “obsessing about race, gender, and sexual orientation,” and he goes on to identify other social justice projects he reviles. Affirmative action, he writes, is “the single biggest form of institutionalized racism in America.” He rebukes Goldman Sachs for funding a giant Malaysian development project, whose ostensible purpose was to rev up a faltering Malaysian economy, when facilitating this project were over $1 billion in bribes and, worse, massive looting by Malaysian officials – something that Goldman should have discovered by appropriately vetting the Malaysian insiders. The implied social justice purpose gave promoters cover to fleece investors. Ramaswamy follows with scores of similar stories of corporate misdeeds.
Why, more generally, does big business promote social justice? One answer might be that “pure” capitalism has lost some of its aura over the years and that this has resulted in a shift to stakeholder capitalism, where employees and communities share in management decisions. This shift, Ramaswamy suggests, has led to the accumulation of vast wealth and power by the technocracy. Nowhere, interestingly, does Ramaswamy, the techie, try to quantify the cost of this change; thus his strong assertions need all the more to be interrogated. Amazon et al. have not triumphed through social justice campaigns.
In any case, Ramaswamy cannot just be written off. Whatever its origins, the social justice movement demands attention. After all, if even conservative writers and executives sign on to social justice, wokeism has achieved the remarkable goal of securing backing from both major political sides. The inevitable consequence is a self-righteousness that has profoundly constrained public discourse. “Once it becomes acceptable to silence people under the banner of fighting hate speech,” Ramaswamy writes, “whatever speech powerful interests dislike becomes hate speech.” And this is no minor matter, especially for Ramaswamy. We are in a period of “cultural totalitarianism,” he says, where democracy’s strength lies not in the number of people voting, but in the “percentage of people who feel free to say what they actually mean.” As Orwell notably asserted, “If liberty means anything at all, it means the right to tell people what they do not want to hear.”
But back to essentials here. Social justice thinking, Ramaswamy insists, imposes its most severe price on American society when business judgments are made for reasons other than direct corporate benefit. Here is the problem, Ramaswamy implies. Unable in recent times to pursue profit openly and aggressively, management has used the social justice campaign as a screen for an overweening greed that is reflected in the stories he tells. How so? The public is highly manipulable: “Pretend like you care about something other than profit and power, precisely to gain more of each.” (Italics in original). In short, Goldman Sachs’ ostensible bona fides was just diverting attention from the harm it was really doing through “reputational laundering.”
This cover-up, per Ramaswamy, begins an explanation of why so many businesses have promoted environmental, social, and governance (ESG) goals. Yet, it is not easy to see exactly how these goals aid company management itself. It cannot be only, as some actually suggest, that Goldman executives are simply preening before the public, exercising in effect bragging rights for the Wokeist-of-the-Year Award. Can such benefits compensate for the cost of social justice practices? Consider: If Subaru were to announce that henceforth it was redirecting its advertising dollars to bolster salaries for disadvantaged employees, such a plan would surely yield some good publicity – but at a high cost. Hard-bitten executives and shareholders would hardly allow such self-sabotage in the quest for the earnings-per-share holy grail.
What Subaru undoubtedly does believe is that in pitching directly to consumers by waving the social justice flag, it is earning a worthy return on its investment by attracting more customers and thus goosing up share price. And who is to say that this is wrong? Consumers for their part seemingly look for more than a good product; they want their consumer lives to have meaning, to be part of a bigger story. “Every time you scrub up with Dove, wake up with Lipton, or clean up with Persil,” Unilever has urged, “you are supporting ‘fempowerment’.” Consumers speak with their dollars. Quoting a market analyst, Ramaswamy reports that consumers “want to buy things from companies who share their values.” To the extent that this is right, social justice advertising does meet important business needs (as long as no terrible cost or publicity ensues from excesses.) Should that be discouraged under any theory of capitalism that venerates profit, let alone by Ramaswamy himself?
Supporting the idea that management generally knows best is the well-established business judgment rule (BJR) that protects businesses from the inevitable legal challenges to their operating strategies: Should Subaru build its new plant in South Carolina or in Texas? Shareholders in those two states will likely disagree. Under the BJR, the law provides management wide discretion to protect against distracting and often stultifying claims from shareholders and others. If the corporation is pursuing profit, again just as Ramaswamy urges, how can giving to the ASPCA warrant opprobrium?
In any case, it is inconceivable that Ramaswamy, the arch conservative and free-speech champion, is inviting more regulation, let alone discouraging appeals to “fempowerment.”
None of the foregoing suggests that corporate advertising needs to be above scrutiny. It means only that targets other than social justice may be needed.
Whether or not SJ advertising actually entices new customers, Ramaswamy details many business advantages to use of the wokeness card. Claiming that business management is shockingly hypocritical, he cites Coca-Cola for fueling an “epidemic of diabetes and obesity among black Americans.” In the process, he suggests, the company has avoided potential regulatory blowback through support from woke groups by training employees (unsettlingly to this author’s mind) “to be less white…less oppressive…less arrogant…more humble” and by paying “a small fortune to well-heeled diversity consultants who peddle that nonsense.”
For sure, Ramaswamy, the businessman, is not out to drive Coca-Cola out of business. Quite the contrary; he wants business to attend to its fundamental needs by resisting wokeist pressure. His priorities are made clear through a hypothetical circumstance he poses that cigarette manufacturers may be facing. Should they include an ingredient that makes their product more addictive? This is a “hard case” for Ramaswamy, who in failing to weigh in further on the issue, justifies the omission with the unsatisfying claim that these kinds of cases come up only rarely, and that the market will quickly correct for dislocations in corporate investment. Perhaps most important for Ramaswamy here is that business is not in principle charged with serving the public good and should be given room (to an unspecified extent) to push its corporate agenda; concerns over addiction just get in the way.
But more to the point, is this really a “hard case” for public policy? Opium and similar drugs are regulated. If we regulate tobacco products generally to discourage smoking, a policy Ramaswamy apparently does not oppose, what is the conceptual hardship in regulating additional addictive properties to tobacco products? Ramaswamy sounds more like a mere pitchman here.
In spite of all the problems he leaves unsolved, Ramaswamy challenges our faith in the efficacy of collective action to solve social problems, at least on the business front. Does this skepticism pertain to all collective solutions? No: Ramaswamy does offer one hopeful idea for binding the body politic together when woke values operate to compromise our unity, an offering that embodies a striking exception to his bedrock free-market ideology. Ramaswamy closes his book with this idea, which also seems to offer an appropriate ending for this essay. What Ramaswamy proposes is compulsory national service for the young. The idea goes back at least 100 years and has been supported by the likes of Franklin Roosevelt, John Kennedy, William Buckley, and more recently by Pete Buttigieg, Stanley McChrystal and, we learn, 49 percent of Americans today.
Details would have to be worked out, but one can take heart from the fact that compulsory national service during teen years is already in effect in mixed ethnic societies like France, Singapore, and Rwanda; Ramaswamy himself rejects the view that national service is a step towards socialism. If we Americans, too, need social integration, why not explore it here?
ENDNOTE
[1] Center Street 2021.
This post comes to us from Professor Dan Subotnik at Touro University’s Jacob D. Fuchsberg Law Center. It is based on his recent article, “Is Social Justice a Corporate Scam?,” available here