Philip Kotler (Confronting Capitalism)

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INTERVIEW WITH Philip Kotler (Confronting Capitalism)
(Professor of International Marketing, Northwestern University Kellogg Graduate School of Management in Chicago)

Premise

Capitalism. No other words in the economic field have been so widely used and discussed. Since its birth (1850), this economic model has been criticized by many activists. They say: it leads to a significant loss of political, democratic and economic power for the vast majority of the global human population, due to the large concentrations of money and property at the hands of a relatively small minority of people. Some other activists, economists and scientists say: capitalism is the root-cause of climate change and the wider ecological crisis. 

Are these statements true? Is capitalism itself to be blamed for, or the way it is managed? One thing is certain. Now, more than ever, we need a sustainable economic model, one that grant ecological, economic and social stability. So the question is: can that model still be represented by capitalism? What’s wrong with capitalism? Are capitalism and democracy decline linked? Philip Kotler, a well-known marketing professor and author of  Democracy in Decline (2016) and Confronting Capitalism (2015) answered to these and other questions.
 
 
Philip Kotler is the S.C. Johnson & Son Distinguished Professor of International Marketing at the Northwestern University Kellogg Graduate School of Management in Chicago. He is hailed by Management Centre Europe as "the world's foremost expert on the strategic practice of marketing." Kotler is known to many as the author of what is widely recognized as the most authoritative textbook on marketing: Marketing Management, now in its 13th edition. He has also authored or co-authored dozens of leading books on marketing. Among his latest books:
 
Democracy in Decline (2016)
Confronting Capitalism (2015)
Winning Global Markets How Businesses Invest and Prosper in the World's High-Growth Cities (2014)
Market Your Way to Growth: 8 Ways to Win (2012)
 
 
For further details, please visit the following web-site
 
 
INTERVIEW - (December 2016)
The interview was made published in December 2016. 
Subject
: Confronting Capitalism and Democracy in Decline.

Acknowledgement
: thanks go to Marina Ripoli for her help in phrasing the questions.
 
 
 

Highlights 

  • I am not for replacing Capitalism with Socialism or Fascism.  My wish is to fix Capitalism so that its benefits flow to a greater number of our citizens.
  • The big cancer of Capitalism is “growing income inequality.”  …If this continues, it will hurt the rich as well as the poor..
  • I prefer to continue the present unemployment assistance approach where jobs are offered to unemployed persons.  If a person continues to reject a large number of jobs, his assistance payment should go down until he or she doesn’t find it attractive enough to remain unemployed. 

  • I would argue that businesses, NGOs and government organizations would all benefit from spending money on renewables and green economy…I would add that many jobs will also be created by rebuilding our infrastructure.

  • “Capitalism with a heart” tries to balance profits with people and the planet.  

  • Capitalism has a way of “eating” democracy.  It puts so much money and power into the selection of  our political representatives that fewer of them pay much attention to the needs of the poor or the working class.
 
 
 
Question 1: Hi Prof. Philip Kotler and welcome. First of all let me congratulate on your very interesting latest two books (Confronting Capitalism and Democracy in Decline). In the first one you propose to address some known problems of capitalism and use the word “Confront”. Why do we need to "Confront capitalism"?
 
Answer
I chose “confront” because most people accept Capitalism without realizing that it doesn’t serve a vast number of our citizens in its present form.  Capitalism has the character of a winner-take-all system.  The rich and highly educated take a very large share of its benefits.  I am not for replacing Capitalism with Socialism or Fascism.  My wish is to fix Capitalism so that its benefits flow to a greater number of our citizens.  I run a blog called fixcapitalism.com that features articles and proposals on spreading the benefits of Capitalism more widely.
 
 
Question 2: Some well-known authors (e.g., Jerry Mander and Naomi Klein) see this economic model as the cause of the main current social (poverty, inequality, unemployment, low birth-rate), and environmental (climate change and ecological footprint) problems. What do you think about that? Is your criticism of Capitalism different from that of the above authors?
 
Answer
I share many of the same criticisms of Capitalism and cover them in my book.  My book goes further and arrays and evaluates the major proposals for correcting each shortcoming of capitalism.
 
 
Question 3: In your book you make a deep analysis of Capitalism, outlining 14 shortcomings. One of these is economic inequality (see also Thomas Piketty). Why does Capitalism create inequality? Does sustainable Capitalism require greater equality? How to achieve that?
 
Answer
The big cancer of Capitalism is “growing income inequality.”  Thomas Piketty did a thorough data-based analysis of the growing rate of income and wealth concentration.  If this continues, it will hurt the rich as well as the poor.  If workers are paid too little, they won’t buy much which will hurt company profits and lead to factory and retail closings.   If the workers decide to take on credit card debt, they will buy more but their growing debt burden will ultimately doom the economy.  Only the financiers will make out from this over-borrowing and recessions would be inevitable.  My argument is that we must pay living wages to workers.  All of their higher earnings would go into buying more goods and services which benefit the producers and which produce a healthy recirculation of economic opportunity.
 
 
Question 4: Let’s keep on with the social issue. It seems that Capitalism is no longer able to solve the problem of unemployment. Does the solution lie in a restyling of the current capitalist model? Or do we need a new and enforced welfare policy (e.g., basic income guarantee)?
 
Answer
The old theory of Capitalism was that growing unemployment would solve itself by wages and prices falling until companies find it profitable to hire more workers.  Government should not intervene.  Along came Keynesian theory that held that when workers and businesses fail to spend enough money, it is time for government to increase its spending on unemployment assistance and on infrastructure even if it requires printing more money.  This should kickstart the economy and increase the number of jobs.
 
Even if government stimulus increases the number of jobs, some unemployed persons may prefer to remain unemployed and  live with their families, and do what interests them, and take on occasional jobs.  The government should provide enough economic insistence to those in need through food stamps, unemployment payments, disability payments, and many other programs.
 
Some have proposed eliminating the large number of public assistance programs with a guaranteed income.  I prefer to continue the present unemployment assistance approach where jobs are offered to unemployed persons.  If a person continues to reject a large number of jobs, his assistance payment should go down until he or she doesn’t find it attractive enough to remain unemployed.
 
 
Question 5: Some economists (e.g., Jeremy Rifkin) say investment in sustainable economy (renewables and green economy) will give rise to a new (probably last) wave of employment. What do you think about that?
 
Answer
I would argue that businesses, NGOs and government organizations would all benefit from spending money on renewables and green economy.  Every effort should be made to reduce waste, to recycle and reuse, and protect the quality of air and water.  I would add that many jobs will also be created by rebuilding our infrastructure.
 
 
Question 6: In your book you say citizens can choose between three types of economic systems: unregulated capitalism; capitalism with a heart; strict socialism. You do choose capitalism with a heart. Why? What does it consist in?
 
Answer
Free market economists prefer unregulated capitalism where companies operate as profit making machines searching for the lowest costs of labor, energy, land, and capital.  This is capitalism without a heart where manufacturing continuously moves to lower cost areas and no compensation is paid and no retraining is offered to those who lose their jobs.  Capitalism with a heart tries to balance profits with people and the planet.   I like the new movement called Conscious Capitalism which takes a more elevated view of what caring and responsible companies do to serve their investors, employees, partners, and their communities.
 
 
Question 7: Your latest book is entitled Democracy in Decline. Can you explain to us what do you mean by that? Can we assume that this phenomenon is tied to the failure of capitalism?
 
Answer
Democracy is based on the theory of one-citizen, one-vote.  Every citizen over 18 years of age can vote in city, state, and federal elections.  This includes men and women and different races and nationalities, as long as they are citizens.  Increasingly, we are violating this principle in a number of ways:

1. Some states are practicing voter suppression by limiting the number of voting hours or locations or disqualifying citizens because they can’t show the right papers for registering.

2. Congressional districts are being gerrymandered so that a political incumbent gets regularly reelected because the district is designed with the voters who would ordinarily vote for him or her.  If the district had been more evenly represented, many incumbents would be voted out.

3. Many would-be candidates receive inordinate amounts of money to run their campaign, leaving less money-backed candidates to lose. The winning candidates then tend to vote first in the interests of their donors, second in the interests of their party, third in the interest of lobbyists, and last in the interest of their voters who were already predetermined.  Few politicians try to vote for what is in the public interest rather than in their parochial interest.

Capitalism has a way of “eating” democracy.  It puts so much money and power into the selection of  our political representatives that fewer of them pay much attention to the needs of the poor or the working class.
 
 
Question 8: What are the risks of a failing democracy? How can we reverse such a process?
 
Answer
A democracy that is run mainly to advance the interests of the wealthy amounts to a plutocracy.  Consider recent talk that President-elect Trump wants to cut the taxes on the wealthy (from 39.6% to 33%) and eliminate the estate tax, both of which would increase inequality.  Many citizen groups feel powerless to advance their interests when the power is so concentrated in the hands of the rich.
The major solution would be a more progressive tax system putting more of the social burden on the shoulders of the rich who can afford it.  Those against this say that the rich would have less incentive to invest and the economy’s growth would be slowed down.  I would argue that there is so much capital looking for uses and so many entrepreneurs looking for capital that we could have both high growth and greater income equality.
 
 
Question 9: You are one of the most important experts in the field of marketing. The current economic, social and technological scenario is uncertain and characterized by frequent changes. How and in what sector do you think a young would-be entrepreneur should invest his money and stamina?
 
Answer
The role of an entrepreneur is to find a way to make some product or service better or cheaper or both.  Entrepreneurs aim to disrupt some establish pattern of doing things.  Entrepreneurs will find many opportunities for disrupting our health system or our energy system.  Other entrepreneurs might prefer to invest in advancing new technologies such as nanotechnology, robotics, bioengineering, artificial intelligence, or virtual reality.
 
 
 
 
 

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