Anticapitalism and ESG gain traction at Harvard

At Harvard University’s School of Business Administration, a group of students were debating what makes capitalism true and pure capitalism.

What are its essential components? Property rights. Financial markets.

“But what about scarcity?” asked Andrew Gibbs, 32, a sophomore who joined Harvard after a stint in the military. “Would there be capitalism if people were comfortable?”

Professor Debora Spar, who teaches a hotly contested course on capitalism and the state, turned to Gibbs with a twinkle in her eye. “Would you go so far as to argue that scarcity, which drives inequality, is a necessary condition for capitalism?”

Gibbs stopped to think. “I would say yes.”

On the blackboard, someone wrote: Capitalism. Scarcity. Inequality.

Each year, around 250,000 young people step off the treadmill of their jobs, most of them in consulting and investment companies, to take courses in search of credentials that will boost their resumes.

They learn about DCFs (Discounted Cash Flows) and the three Cs (company, customers and competitors), and acquire the ability to at least pretend to have a deep understanding of the patron saint of shareholder primacy, Milton Friedman.

But today’s business school students are also learning the social obligations of business and how to rethink capitalism, a shift in the curriculum at elite institutions that reflects the shift in the broader corporate culture.

Political leaders on the left and right are asking business people to reconsider their social responsibilities.

On the left, they argue that business needs to play a role in combating daunting global threats — global warming, the fragility of democracy. On the right, they criticize executives for putting aside the pursuit of profit and getting involved in politics.

The business phenomenon ESG (acronym for good social, environmental and governance practices) has become the center of contention – but also a sector that moves US$ 40 trillion a year (R$ 207.8 trillion).

Elon Musk called it a hoax after Standard & Poor’s dropped Tesla from its ESG index. Mike Pence, who was Donald Trump’s vice president, recently urged US state governments to “put reins” on ESG. The BlackRock group released a letter in September in which it tried to rebut critics by pointing out, essentially, that the fact that the investment group focused on the environment did not detract from its main purpose: making money.

Meanwhile, many workers are pressuring their employers to take stronger positions on social issues such as racial injustice and abortion.

Against this backdrop, top-tier business schools are entering the political arena.

Harvard created its Institute for the Study of Business in the Global Society a month ago. Nearly half of the core curriculum at the Yale University School of Business is devoted to ESG. In the coming academic year, the Wharton School at the University of Pennsylvania will begin offering MBAs in Diversity, Equity, Inclusion and ESG.

Graduates of these elite schools tend to wield disproportionate influence over businesses, shaping the values ​​and policies of the companies they may one day lead.

“We’re at Harvard Business School — it’s a bastion of capitalism,” said Ethan Rouen, who teaches a course on reimagining capitalism at Harvard.

“But I have no hesitation in saying that if you consider the courses that are being offered, the institutes that are being created, and the speakers that we are bringing to campus, there is a huge demand from both faculty and students about rethinking the obligations of companies to the society.”

Within classrooms, the range of opinions about corporate political involvement has been widening in recent years. Assumptions long embedded in curricula are now being questioned — neither the mantra of profit maximization nor the defense that the American version of capitalism works properly is spared.

In Harvard’s “Capitalism and the State” course, Spar asked his students to turn their badges over if they believed that globalization is a good system.

After a few seconds of grumbling and paper clattering, around 80% of the students turned their badges over, signaling approval for globalization. A student who grew up in Nigeria was one of those who didn’t. He asked his colleagues to rethink the vision that gave rise to the world as we know it — the International Monetary Fund (IMF), Hyatt hotels around the world, and the golden arches of McDonald’s at every airport.

“The reality is that we import the opposite of liberalism as the price of having good things,” said another student, Alan Xie.

Still, the majority of the room remained in favor of a globalized economy. Spar summarized their arguments succinctly: “We have growth. We have beautiful things,” she said. “It worked”.

To which Rachel Orol, 29, who was sitting in the front row, countered: “It worked for us.”

An anti-capitalist is likely to be as comfortable at the Harvard Business School as an atheist would be at the School of Divinity. Yet business professors find that their current students are looking for lessons beyond accounting more often than in previous decades.

Harvard’s Rouen said that demand for classes on social impact and ESG had been so high that these topics had been integrated into almost all introductory courses. Curtis Welling, a professor at the Tuck School of Business at Dartmouth University, asks his students each year whether capitalism needs reform. A decade ago, about a third of them said yes. This year, it was two-thirds.

“The biggest trend in management education over the past 15 years has been to look at the social contract,” said Welling.

This is not the first time of turmoil that has seen business schools undergo serious cultural renewal. In 1959, the Ford Foundation published a report in which it concluded that “the gap between what society needs and what business schools are offering has grown wide enough for everyone to see.”

The first months of the pandemic gave rise to a new existential crisis.

When Spar was quarantined at home in the fall of 2020, Harvard administrators asked professors to propose new courses that would lure restless students, many of whom were pursuing MBAs online, out of their rooms.

Spar was watching the news — markets in crisis, companies releasing statements about the Black Lives Matter movement, pharmaceutical companies racing to develop vaccines — and decided to try to put together a course that would answer the fiercest questions she herself felt, in her words. “Why is capitalism under attack? And how valid are these attacks?”

Business school officials—probably aware that donors pay attention to what they say—emphasize that their new courses and emphases are simply meeting the demand for political debate in the business world, and are not imposing a progressive vision.

“It’s not that we’re ‘woke’ [progressistas]or that we’re pushing an ideological agenda,” said Witold Henisz, deputy director and head of faculty for Wharton’s ESG initiative. “It’s because economics dictates so.”

Translated by Paulo Migliacci