MGMT 423 Study Questions: Do Corporations Rule The World ✓ Solved

MGMT 423 STUDY QUESTIONS DO CORPORATIONS RULE THE WORLD?

1. What did Korten say about the relationship of money to wealth?

2. What are “finance capital” and “finance capitalism”?

3. Name two other forms of capital. Do increases in share prices necessarily reflect an increase in productive capacity or output?

4. In order to increase share prices as financial markets demand, what is an example of corporations depleting: a) natural capital, b) human capital, c) social capital, and d) institutional capital?

5. How did the Malaysian Forest Minister propose to increase Malaysia’s wealth?

6. According to Korten, does an increase in GDP necessarily indicate an increase in our well being? What are some specific examples when this may not be the case?

7. Are our political leaders able to assess the economic health of the nation using stock market increases and GDP growth as indicators of economic success? Can they confidently predict that more jobs and increased wages will follow?

8. What does Korten suggest as alternatives to the global capitalist economy (name two)?

Paper For Above Instructions

The relationship between money and wealth has been critically examined by various scholars, including David Korten in his work "When Corporations Rule the World." Korten posits that money serves as a mere tool for the allocation of resources and does not possess inherent wealth. Instead, true wealth is derived from the collective resources and capacities of society, emphasizing that corporate entities often mistake financial capital for true wealth, diverting focus away from the sustainable wealth of communities and the environment (Korten, 1999).

Finance capital refers to the type of capital that is created through the financial markets focusing on monetary assets used for investment purposes, whereas finance capitalism denotes an economic system where the financial sector dominates the economy over the productive sector. This form of capitalism emphasizes trading and speculation rather than creating real value through goods and services, which can lead to economic instability (Harvey, 2010).

Organizations often rely on various forms of capital besides financial capital, including social capital and natural capital. Social capital refers to the networks of relationships among people that enable society to function effectively, while natural capital encompasses the world's stocks of natural assets including geology, soil, air, water, and all living things. Interestingly, increases in share prices do not always correlate with an increase in productive capacity or output, as they might be driven by speculation, market fluctuations, or financial engineering rather than actual productivity (Lazonick, 2013).

As financial markets press corporations to prioritize short-term gains, they frequently deplete various forms of capital. For instance, in the pursuit of higher share prices, corporations might deplete natural capital by over-extracting resources like timber, leading to environmental degradation. Similarly, human capital can be depleted through downsizing or outsourcing, where companies prioritize cost-saving at the expense of employee welfare. Social capital can be undermined as well when companies overlook their responsibilities to local communities and erode trust and collaboration. Institutional capital may also suffer when companies prioritize shareholder value over transparency and ethical governance practices (Elkington, 1998).

In Malaysia, the Forest Minister proposed increasing national wealth by emphasizing sustainable forest management policies, showcasing the intent to derive economic benefit while maintaining ecological integrity. This approach contrasts with many traditional practices that prioritize immediate financial gain over long-term sustainability (Sekhar et al., 2018).

Korten challenges the assumption that GDP growth equates to improved well-being, arguing that GDP merely measures economic activity without recognizing the societal and environmental costs associated with that activity. Situations such as natural disasters can inflate GDP figures while actually diminishing true wealth and well-being, demonstrating a disconnect between economic activity and societal health (Korten, 2015).

Politically, leaders often rely on increasing stock market indices and GDP growth as indicators of economic health. However, such reliance can be misleading, as these figures do not provide a complete picture of economic conditions. The surge in stock prices may occur without corresponding job creation, and GDP growth can happen amidst rising inequality and declining wages, proving that economic indicators alone are insufficient for assessing societal welfare (Piketty, 2014).

Korten proposes several alternatives to the global capitalist economy, suggesting models that prioritize sustainability and social equity. Two notable alternatives include the promotion of community-centered economies, which emphasize local needs and ethical practices, and the establishment of cooperative enterprises where profits are shared among stakeholders, enhancing community resilience (Korten, 2015).

In conclusion, as corporations increasingly influence global dynamics, a critical examination of their relationship with wealth and capital is essential. Understanding how finance capitalism operates, recognizing the limitations of traditional economic indicators, and exploring alternatives can foster a more equitable and sustainable future.

References

• Elkington, J. (1998). Cannibals with Forks: The Triple Bottom Line of 21st Century Business. Capstone.
• Harvey, D. (2010). The Enigma of Capital and the Crises of Capitalism. Oxford University Press.
• Korten, D. C. (1999). When Corporations Rule the World. Berrett-Koehler Publishers.
• Korten, D. C. (2015). Change the Story, Change the Future: A Living Economy for a Living Earth. Berrett-Koehler Publishers.
• Lazonick, W. (2013). The Financialization of the U.S. Economy. In American Economic Association Paper.
• Piketty, T. (2014). Capital in the Twenty-First Century. Harvard University Press.
• Sekhar, N. U., Manoharan, V., & Sathya, S. (2018). Sustainable forest management in Malaysia: Green Growth. ASEAN Journal on Science and Technology for Development, 12(1).
• Stiglitz, J. E. (2012). The Price of Inequality: How Today's Divided Society Endangers Our Future. W.W. Norton & Company.
• Wheeler, D. (2015). Corporate Social Responsibility: Global Perspectives. Nova Science Publishers.
• Yates, C. (2016). Economic Growth, Inequality, and the Environment: Linkages and Trade-Offs. Springer.