BUSI­NESS BOOK­SHELF

Los Angeles Times - - BUSINESS - By Morgen Witzel Witzel is a fre­quent con­trib­u­tor to the Fi­nan­cial Times of Lon­don, in which this re­view first ap­peared.

Crit­ics of cap­i­tal­ism are not in short sup­ply. Most are well-in­ten­tioned, but many are badly in­formed and make their ar­gu­ments so poorly that cap­i­tal­ism can ig­nore them.

But when the critic is Philip Kotler, cap­i­tal­ism needs to sit up and take no­tice.

Kotler, a pro­fes­sor at North­west­ern Uni­ver­sity’s Kellogg School of Man­age­ment, is best known to gen­er­a­tions of stu­dents as one of the au­thors of “Mar­ket­ing Man­age­ment,” the text­book that over sev­eral edi­tions has ed­u­cated man­agers and lead­ers around the world about mar­ket­ing.

Less well known is that Kotler trained as a clas­si­cal econ­o­mist. His tu­tors in­cluded Mil­ton Fried­man and Paul Sa­muel­son, and he knows the strengths and weak­nesses of mod­ern eco­nomic the­ory as well as any­one alive.

“Con­fronting Cap­i­tal­ism: Real So­lu­tions for a Trou­bled Eco­nomic Sys­tem” is Kotler’s cri­tique of the cap­i­tal­ist sys­tem along with sug­ges­tions for re­forms. Pub­lished by Amacom, it is both a philo­soph­i­cal book and a prag­matic one, mak­ing log­i­cal ar­gu­ments on a case-by-case ba­sis.

“I’m not look­ing for an al­ter­na­tive to cap­i­tal­ism,” he says. “I ac­cept that cap­i­tal­ism may be a poor way to run an econ­omy, ex­cept for all the other forms that have been tried and failed.”

The prob­lems with cap­i­tal­ism, Kotler says, are com­plex and in­ter­con­nected.

There is a mild re­buke to econ­o­mist Thomas Piketty, who fo­cuses pri­mar­ily on in­equal­ity. This is im­por­tant, but only one of many is­sues that need at­ten­tion. Kotler is also gen­tly crit­i­cal of leg­is­la­tors and pol­i­cy­mak­ers — and by im­pli­ca­tion, econ­o­mists — who of­fer sin­gle-fix so­lu­tions. Most cause more prob­lems than they solve.

But there must be a start­ing point, and Kotler iden­ti­fies it as the prob­lem of low wages and poverty; here he agrees strongly with Piketty.

Kotler takes is­sue with the moral­ity of low wages, but he also makes a prac­ti­cal point: Low wages are bad for the econ­omy. “Cap­i­tal­ism de­pends on con­sumers hav­ing enough money to buy the goods and ser­vices that the cap­i­tal­ist ma­chine pro­duces,” he says.

When com­pa­nies pay low wages, they in ef­fect take money out of the sys­tem. This leads to a damp­ing down of de­mand, over­pro­duc­tion, de­clin­ing in­vest­ment and low rates of eco­nomic growth, which in turn lead to ris­ing un­em­ploy­ment.

Kotler does not ad­vo­cate strong state in­ter­ven­tion, although he would like to see a fairer tax sys­tem and an end to off­shore tax havens.

It is up to the cap­i­tal­ists, he says, to re­form them­selves. They need to re­al­ize that self-in­ter­est is at stake here. Re­duc­ing in­equal­ity, elim­i­nat­ing poverty and mak­ing con­sumer goods freely avail­able to peo­ple who can af­ford to pay for them is, in his view, what the cap­i­tal­ist sys­tem is all about any­way.

The endgame for any cap­i­tal­is­tic so­ci­ety should be “a broad level of hap­pi­ness and well-be­ing in its cit­i­zens.” Happy, pros­per­ous peo­ple spend money, and when they spend money, the cap­i­tal­ists pros­per too.

Kotler is not ad­vo­cat­ing any­thing rad­i­cal. He is merely say­ing: Stop, look at who you are and what your busi­ness is for. If you be­lieve that it is a ma­chine for mak­ing you rich, you are go­ing down the wrong road. If you be­lieve your pur­pose is to make the world a bet­ter place, then do so, and wealth will come to you.

Hin­dus­tan Times

PHILIP KOTLER, known as one of the au­thors of a mar­ket­ing text­book, trained as a clas­si­cal econ­o­mist.

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