Capitalism up for scrutiny at elite business schools

Social justice has joined cash flows on syllabus for aspiring capitalist leaders

By Emma Goldberg

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Published: Wed 21 Dec 2022, 7:05 PM

At Harvard Business School, inside a seminar room with a smattering of button-down shirts and puffy fall jackets, a group of future corporate managers were talking about capitalism. What makes capitalism truly and purely capitalism? What are its essential components? Property rights. Financial markets.

“Maybe this is almost so foundational that it’s too much to put on the board — but scarcity?” said Andrew Gibbs, 32, a second-year student who came to Harvard by way of the military. “Would it be capitalism if people were comfortable?”

Debora Spar, who teaches the widely sought-after course “Capitalism and the State,” turned to Gibbs with the eye glimmer of an instructor who knows the conversation is about to get heated. “Would you go so far as to say a necessary condition for capitalism is scarcity, which is going to drive inequality?”

Gibbs paused, contemplating. “I would say so.”

On the blackboard it went: Capitalism. Scarcity. Inequality.

Every year, some 250,000 young people step off the treadmill of their jobs, many in consulting and private equity, to chase skills and credentials that will turbocharge their future roles in consulting and private equity — by going to business school. They study accounting and negotiation. They learn about DCFs (discounted cash flows) and the three C’s (company, customers and competitors). They emerge with the ability to at least feign intimate knowledge of the godfather of shareholder primacy, referred to in one classroom as “our buddy Milton Friedman”.

But today’s business school students are also learning about corporate social obligations and how to rethink capitalism, a curriculum shift at elite institutions that reflects a change in corporate culture as a whole. Political leaders on the left and right are calling for business leaders to reconsider their societal responsibilities. On the left, they argue that business needs to play some role in confronting daunting global threats — a warming planet, fragile democracy. On the right, they chastise executives for distracting from profits by talking politics.

The corporate phenomenon of socially responsible investing, or ESG, has become a point of contention — as well as a $40 trillion industry. Elon Musk called it a “scam” after the S&P 500 removed Tesla from its Environmental, Social and Governance index last spring. Mike Pence, the former vice-president, recently urged states to “rein in” ESG. BlackRock issued a letter in September trying to stave off critics by noting, essentially, that the investment firm’s focus on the environment wasn’t detracting from its core purpose: making money.

Meanwhile, many workers have spent recent years demanding that their employers take a more decisive stance on social issues such as racial injustice and abortion.

Top-ranked business schools are stepping into the political arena. Harvard started its Institute for the Study of Business in Global Society last month. Nearly half of the Yale School of Management’s core curriculum is devoted to ESG. Next fall, the Wharton School of the University of Pennsylvania will start offering MBA majors in diversity, equity and inclusion and in environmental, social and governance factors for business.

What happens at Harvard, Wharton and other elite campuses offers a small glimpse of the changes in the corporate realm. But at the same time, their graduates tend to have outsize influence on business, shaping the values and policies of the companies they may one day run.

Business schools are not generally known for their radicalism, but their students and faculty are grappling, sometimes ambivalently, with fast-changing expectations of business’ role in society. Most students are frank about the prestigious jobs they want, with hefty salaries attached. Now, though, they’re facing sharper questions from classmates about how to balance their ambitions with some sense of responsibility to the public good. “We’re at Harvard Business School — it’s a bastion of capitalism,” said Ethan Rouen, who teaches the Harvard class “Reimagining Capitalism”. “I will say, though, that if you look at the courses being offered, the institutes being created and speakers we bring on campus, there is a huge demand both from the faculty and the students for rethinking the obligation of the corporation to society.”

Inside classrooms, the range of views on corporate political engagement has broadened in recent years, according to people across leading business schools. Assumptions long woven into the syllabus are open for questioning: the wisdom of maximising profits, the idea that America’s version of capitalism is functioning properly.

“There’s a conscious shift happening with professors wanting us to question: Is profit the only thing corporations should care about? How should businesses use their influence?” said Chinedum Egbosimba, 27, who studied engineering and then worked at Bain & Co. before winding up at Harvard Business School and in Spar’s class. “The classic school of thinking that businesses should only make money is very much alive,” he continued. “But many of my classmates look at the world we have today and say, ‘Yeah, there’s clearly some things about this system we need to fix.’”

At Harvard, in ‘Capitalism and the State’, colloquially known as CATS, Spar asked her students to flip their name cards sideways if they felt globalisation was ultimately a good system. She paced excitedly, cheetah-print shoes roving the classroom floor.

After some mumbling and paper shuffling, about 80 per cent of the students flipped their placards, signalling a thumbs-up on globalisation. Egbosimba disagreed. Leaning forward in his back-row seat, he asked his classmates to rethink the view that had given rise to the world as they knew it — the International Monetary Fund, Hyatt hotels around the world and McDonald’s golden arches at every airport. “I’m from the global south, the old colonies of the West,” said Egbosimba, who grew up in Nigeria. “Maybe there’s some version of this idea that could have led to acceptance and peace, but it’s not the one we built. As a victim of it, I can say that with confidence.”

His classmate Alan Xie, 28, piped up in agreement. “The distrust of elites connected to capitalism undermines the whole globalisation project,” he said. “We’ve actually imported illiberalism as a result of having nice stuff.”

Still, most of their classmates remained in favour of a globalised economy. Spar summed up their arguments succinctly: “We’ve got growth. We’ve got nice stuff,” she said. “It worked.” To which Rachel Orol, 29, seated in the front row, replied: “It worked for us.”

A committed anti-capitalist might feel as comfortable at Harvard Business School as an avowed atheist across the river at the Divinity School. Still, management professors have realised that their students, more than in previous decades, are looking for lessons that go beyond accounting. They want to discuss business’ role in society, how it has created social ills and how it may help solve them.

Rouen, at Harvard, said the demand for classes on social impact and ESG had been so high that those themes had been integrated into nearly every introductory class, including accounting. Curtis Welling, a professor at Dartmouth’s Tuck School of Business, asks his students every year whether capitalism needs to be reformed. A decade ago, roughly one-third said yes. This year, two-thirds said yes.

“The biggest single trend in management education over the last 15 years has been examining the social contract,” Welling said.

At Wharton, in a class called ‘Responsibility in Business’, students debated whether the cryptocurrency company Coinbase had misstepped in telling its employees in 2020 that they could not discuss politics in the workplace. Yuta Kato, 29, who previously worked as a trader, suggested that Coinbase could evaluate the merits of its decision by looking at the historical effect of similar policies on stock prices.

“Why is that the right answer?” asked Kevin Werbach, a Wharton professor.

“Because the company is beholden to its shareholders,” Kato said. “Obviously.”


At this notion, the class chuckled. Kato later explained that he had volunteered this Milton Friedman gospel only because he figured that nobody else would. His interest in a class about ethics and social responsibility, he explained, was seeded by following different scandals in business: Elizabeth Holmes’ tenure at the now defunct blood-testing startup Theranos, Martin Shkreli’s conviction on securities fraud.

“Five years ago I never would have considered this a core part of business school,” Kato said. “It’s just as important to learn how to think about ethical problem-solving as it is to learn about strategic problem-solving.”

This isn’t the first moment of tumult prompting business schools to undergo serious cultural renovation. The Ford Foundation in 1959 published a report concluding that “the gap between what society needs and what the business schools are offering has grown wide enough for all to see.” Business schools started to expand their focus on ethics and society.

The early months of the pandemic provided the impetus for another existential crisis.

When Spar was quarantining at home in the summer of 2020, Harvard administrators asked their faculty to consider what new courses might entice a flock of restless students, who might be doing MBAs online, from their bedrooms. Spar was watching the news — markets going haywire, corporations putting out statements on Black Lives Matter, pharmaceutical companies racing to develop vaccines — and decided to try to put together a class answering her own most fiery questions, as she put it: “Why was capitalism under attack? How valid were those attacks?”

She thought students might be dissuaded by the hefty syllabus she had assembled: Adam Smith, John Locke, Karl Marx, Friedrich Hayek. Instead they ended up asking her to add Thomas Hobbes, Vladimir Lenin and Friedrich Engels.

Spar wanted to cap it at 30 students this year, but was oversubscribed and allowed it to reach 35. Largely forgoing the traditional business school case study method, she oversees lively debates, some set off by cultural prompts like a 1971 Coca-Cola ad (“I’d Like to Teach the World to Sing”) and a Grateful Dead song (“Truckin’”).

But Spar is the first to acknowledge that the questions animating her class remain outside business school norms. Administrators, after all, tend to be less attuned to the demands of young progressives than they are to the interests of the employers poised to hire their graduates.

“In the dean’s view, the business community is their primary stakeholder,” said Jim O’Toole, a former executive vice president of the Aspen Institute, a think tank. “The ranking of the business school is reflected in who hires the students. In their reading, most businesses are not trying to hire woke students.”

Business school leaders — most likely knowing that donors are listening — emphasise that their new courses and concentrations are simply answering the demand for political conversations in the corporate world, not pushing a progressive view. “It’s not because we’re woke. It’s not because we’re driving an ideological agenda,” said Witold Henisz, Wharton’s vice dean and faculty head of the ESG initiative. “It’s because it’s economics.”

And many of the students taking courses about challenging capitalism aren’t letting those big classroom questions overtake the ambitions that landed them in business school in the first place.

“Basically, once a day I’ll have a conversation with someone trying to convince them not to do consulting or banking,” said Aaron Sabin, 27, a Harvard Business School student who is working in climate technology. “It’s usually not successful.”

Spar asked her students to conclude the class thinking about problems far larger than any single embattled business. “If I hadn’t blown the time so badly, this is the question I was going to end on,” Spar said. “One hundred years from now when we teach globalization at Harvard Business School, what’s the story going to be? Is it going to be ‘We had some bumps along the way, but we got there’? Or, ‘That was a disaster’?”

The students began to pack up. On the blackboard remained the notes from their wide-ranging debate. “Winners,” read one corner. “Elites in west.”

– This article originally appeared in The New York Times

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