Why we should be grateful for that $20 block of cheese

Friday, 8 July 2022

Despite its beauty, capitalism isn’t appreciated by all, such as these protesters in Germany.

Damien Grant is an Auckland business owner and a regular opinion contributor for Stuff, writing from a libertarian perspective.

OPINION: The growing influence of the ESG, or Environmental, Social and Governance, movement has become well entrenched on these shores, and we can see this development permeate the increasingly progressive National Business Review as it dropped the Rich from their Rich List.

As NBR senior journalist Maria Slade writes: “A key focus of The NBR List is how entrants give back to their community.”

Now, the NBR is a private organisation and its values reflect that of its owner, Todd Scott, who is emerging as the antipodean Citizen Kane; running a media empire from his Xanadu in Fiji, just as William Randolph Hurst revelled in the splendid isolation in his Enchanted Hill in Northern California.

Scott is part of a new cohort of capitalists wanting to use their capital for more than just profit. As Slade writes, they want to give back to their community.

How to check out the responsible investment policy of your KiwiSaver scheme. (Video first published 2018)

* Ethical investing: Can I invest in a company that previously wronged?

* The Detail: Why New Zealand's annual Rich List is shifting focus to more profit with purpose

This is fine, even noble, but we should not confuse the trivial impact of charity done primarily for vanity with the powerful and transformational effect of commerce.

Capitalism is a relatively recent idea. Throughout most of human history wealth and politics was intertwined. You became rich by owning land and had the power to compel peasants to toil it. Land was, ultimately, a gift from the sovereign.

The beauty of capitalism as it evolved in Europe was the breaking of that link and reducing the absolute power of the crown, a key step in the development of liberal democratic societies. The ESG movement is a step backwards.

The feudal nature of medieval society contained a bargain.

Peasants were bound to the land, but the lord was also bound to those bound to him; for protection, justice, and often welfare. Of course, this bargain was unenforceable, but the concept was there.

As merchants eclipsed the feudal barons in power and wealth, they took on these ideas. Andrew Carnegie articulated the obligation of the capitalist class to modern peasants in 1889 when he published The Gospel of Wealth.

Those who advocate a more caring face of capitalism – such as Prince Charles at a 2014 conference – mistake the essential point of capitalism.

Carnegie didn’t favour charity. “Neither the individual nor the race is improved by almsgiving.”

However, he was in favour of the wealthy bequeathing their wealth to institutions and investing in the infrastructure of society.

He founded organisations to carry on his ideals and sponsor learning, science and even world peace and many live on today.

Sadly, his ideas, like his endowments, outlived him.

Others, notably Henry Ford, became infected with hubris. They assumed commercial success imparted or was evidence of some higher wisdom. They were and they are mistaken.

Supermarkets are things of incomparable beauty in Damien Grant’s eyes.

In 2004 this thinking truly metastasized when it was adopted by the United Nations and an assortment of financial institutions into what would become known as the Environmental, Social and Governance Movement.

The idea is that business should act on its own initiative to support 10 United Nations objectives on areas such as the abolition of child labour and fighting corruption.

Put like that, you might be asking, what sort of idiot could be opposed to such a noble objective?

I think we all know what sort of idiot.

Where do I start?

How about a supermarket shelf.

Despite fretting by the mavens from the Commerce Commission, supermarkets are things of incomparable beauty. You can buy a kilogram of cheese for $20. That is less than the minimum hourly wage.

The Warehouse does more to improve the lives of its customers than anything its founder’s philanthropy will offer them, argues Damien Grant.

Take a moment to consider this. What goes into a kilogram of cheese?

Ten litres of milk for a start. Milk that must be extracted from a cow, who requires grass, a farmer, the milk to be pasteurised, transported, dried and some magic interposed to turn it into cheese before being wrapped in plastic.

The plastic must be dug out of the ground in Saudi Arabia, processed, shipped to New Zealand, and the kilogram of cheese wrapped in it.

A $20 block of cheese has become shorthand for outrage over grocery prices for some, but to Damien Grant it’s a miracle of capitalism.

At all times the milk product must be kept cold, shipped around the country, placed into an inventory system, and staff paid to place it on the shelf and a process of taking your money when you want to buy it.

An accounting must be made for those blocks of cheese that will go off, will be stolen, or dropped and sold at a discount as being shop-soiled, and that $20 includes the GST that the government demands, so they can pay the analysts at the Commerce Commission to tell us how terrible supermarkets are.

All this for less than an unskilled worker can earn for an hour’s work tossing burgers.

You make money in a capitalist system by selling goods and services to other people, and those other people will only give you their money if they are better off after the exchange. Everything else is a waste of time.

The Warehouse does more in any given day to improve the life of the working class in this country that anything the Tindall Foundation has done or will ever do.

Despite all his vast philanthropy, Carnegie’s greatest contribution to mankind was his investments in steel manufacturing and distribution, allowing a huge surge in the quality of living of millions around the world who benefited from his industry.

Governments have embraced this movement because it allows them to enact policy by co-opting private firms to achieve their political objectives.

Government contracts and regulatory engagements now directly or implicitly seek out and favour those firms who embrace ESG or similar policies.

This is a practice we see in New Zealand, as government contracts now come with an expectation that applicants demonstrate their adherence to diversity, the Treaty, climate change, living wage and a commitment to veganism.

One of the great features of capitalism was that it undermined the practice of the economic elite seeking and winning favour from the sovereign as the only mechanism of obtaining wealth.

The ESG movement reinstates this perverse behaviour, and creates the false impression that corporate do-gooding is any substitute for a system that can deliver a block of cheese in your local supermarket for $20.