Peter Georgescu Wants Capitalists To Rise Up And Do Right
By Paul Brandeis Raushenbush
Peter Georgescu believes he owes America and he is ready to pay back his debt.
Georgescu is Chairman Emeritus of the global marketing communications firm Young & Rubicam, yet his gripping life story starts 10,000 miles away in Romania. Georgescu’s childhood included resisting the Nazis, a labor camp under the communists, and his family displaced and separated. At 15, he and his brother were brought to America through the extraordinary intervention of Congresswoman Frances Bolton from Cleveland, Ohio. He came not knowing a word of English but made his way through high school, college, business school and eventually rising to head one of the most powerful advertising agencies in the world.
“Obviously, I owe this country everything, because I got to live the American dream. This is what motivated me to really write this book, because I’m concerned about the fact that our current situation is not sustainable.”
The book is called Capitalists Arise and the title reflects Georgescu’s urgent sense that the American dream is in peril and that corporate America needs to wake up and take action to keep the dream alive.
“We have two Americas, and the other America lives in tragic conditions, and they’re frustrated, they’re angry; and I am appealing to business leaders to say we absolutely must do something.”
Georgescu is convinced that the business community has the most potential, as well as responsibility, to solve the wealth disparity that America faces.
“We keep forgetting that government doesn’t create wealth, doesn’t create prosperity. They can foster it, they can help it, but only the business sector produces wealth, produces prosperity. The public sector is worth about $4.5 trillion and the private sector is worth about $18 trillion.”
The big question is why the business community, which is doing quite well right now, should care about income inequality or economic inequality? The answer involves how and why corporations came into being and the purpose Georgescu believes they serve, which he explained to Voices:
“Why should businesses care? Corporations came into being because it was more productive for a group of people to get to work together rather than for us individually to toil the field in agriculture. Later, as the industrial revolution took place, there was no way a single individual could do what corporations could do.
In return for trying to be a good citizen in the community, a deal was struck that corporations would get significant tax breaks, which we have, and on top of that, a limited liability. Corporations were, in fact, created to help society. That was the deal. That was the idea. It worked magnificently well.
From 1945 to about 1980, America became the most powerful nation with the strongest economy in the world, with the biggest market which was America’s middle class. Free market capitalists did that by satisfying the five separate stakeholders: 1) the customer, 2) the employees, 3) the corporation itself, 4) the community and the nation, and 5) the last one is, of course, is the shareholder. The shareholder brings to the party money, and that used to be terribly important at one point in time, more important than it is today.
Optimizing those five stakeholders is what created the powerful economic force. Then about 1980 or so, free market capitalism got hijacked. It started with the epistle from Milton Friedman, saying that the role of business is to produce shareholder value, which morphed, turbocharged into maximizing short-term shareholder value, with the evil words being ‘short-term’ and ‘maximization.’
Today, we have $0.90 out of every operating dollar going to the shareholder. This really has turned into a cancer. It’s eating corporations from the inside and destroying our employee and corporate relationships because people have become a transactional entity, they’re a cost, and there’s only one thing you do to cost, you squeeze it out.
For the last 40 years or so, wages have been flat, productivity, innovation went up dramatically. The shareholders benefited almost exclusively. Our research and development investment in corporation is down, basic research is down. Our share of R&D compared to other developed nations is down.
The nation as a whole became the most unequal of the developed world in terms of inequality, and have the horrible distinction of being the most immobile nation in the world in terms of socio-economic growth, that is the ability to move from the last quartile of the society to the top in one generation. We are the most immobile and the most unequal of the developed world, and that’s the problem, and the other America. Close to 60% of American homes have to borrow money to put food on the table at the end of the month. Your upper middle class, at the end of the day, if you strip all the expenses, has about $8,500.00. That’s it. That’s your upper middle class, $8,500.00 left in the kitty.
As Joe Stiglitz, Nobel Prize-winning economist said, “Four out of five living Americans today are likely to experience some form of poverty.” Janet Yellen about a year or so ago said, “A $400.00 unplanned expense, and the vast majority of America cannot cope with it.” The numbers triangulate. That’s a tragic situation. We, the 20%, have become a class of plutocrats. We control great education. We control most large corporations. We have an impact and basically control what happens in government. The rest of America suffers, and this is an unsustainable situation.”
What Georgescu is proposing is an ethical capitalism that is actually business in the service of the common good. In his book he offers some examples of how corporations like Costco and Tylenol do well by valuing employees and customers as much as shareholders.
In the end, Georgescu has hope that capitalists will wake up.
“The good news here is, there’s a moral imperative and there’s an economic imperative and the two of them combined together is where the answer lies, and we can do it.
I love the notion of the definition of genius which is the sudden cessation of stupidity, and what we’re doing here is truly stupid. It’s even worse, it’s evil, but it’s also stupid because we can do so much better for us as business people, and we can take care of our communities and that we can take care of our nation so much better. That’s why there are so many good reasons for capitalists to arise and begin to take action, and action is very urgent.”
Capitalists Arise!: End Economic Inequality, Grow the Middle Class, Heal the Nation is available on Amazon and in books stores across the country.