Atlas Hugged: Cooperation Is Key to Free Market Capitalism

In his State of the Union Address on December 2, 1930, as the nation was reeling from the Great Depression, President Herbert Hoover railed against monopolies. Calling on Congress to look into the economic inner workings of antitrust laws, Hoover asserted that "competition is not only the basis of protection to the consumer, but is the incentive to progress."

COOPERATION: THE OTHER SIDE OF THE CAPITALIST COIN

Indeed, competition in the free market not only leads to the best possible products, but also maintains consumer-friendly prices. In a competitive marketplace, the consumer wins and the companies that have helped get those consumers what they want and need are duly rewarded. But President Hoover also talked about the other side of the capitalist coin -- cooperation.

"Recovery can be expedited and its effects mitigated by cooperative action," Hoover said. "That cooperation requires that every individual should sustain faith and courage; that each should maintain his self-reliance; that each and every one should search for methods of improving his business or service; that the vast majority whose income is unimpaired should not hoard out of fear but should pursue their normal living and recreations; that each should seek to assist his neighbors who may be less fortunate; that each industry should assist its own employees; that each community and each State should assume its full responsibilities for organization of employment and relief of distress with that sturdiness and independence which built a great Nation."

THE SNUGGLE FOR EXISTENCE: GOING BEYOND THE SELFISH GENE

Over 80 years later, as America struggles to emerge from the Great Recession, Hoover’s words ring truer than ever. And now, it seems that biologists and economists are finding more common ground, as a growing body of research is turning conventional wisdom on its head and finding that Darwin was only partially right: Great evolutionary advances happened not because of the competitive forces of natural selection, but because of cooperation.

Martin A. Nowak, the director of the Program for Evolutionary Dynamics at Harvard University and a leading expert on evolution and game theory argues against the general assumption that evolution has been dictated by the forces of competition. In his new book SuperCooperators: Altruism, Evolution, and Why We Need Each Other to Succeed (written with New Scientist editor Roger Highfield), Nowak uses mathematics to distill how cooperation has been critical to the survival of life on planet Earth, identifying five distinct mechanisms that have made this so: direct reciprocity, indirect reciprocity, spatial games, group selection and kin selection.

Highfield says, "I doubt many realise that, paradoxically, one way to win the struggle for existence is to pursue the snuggle for existence: to cooperate." This new ideology goes beyond the gene-centric view of evolution presented in the seminal 1976 book The Selfish Gene by evolutionary biologist Richard Dawkins.

Nowak also describes the dangerous game of chicken that humans are now playing in regard to climate change, saying that "unless people fully realize the extent to which the planet is in peril, people will fail to do enough to save it...I believe that climate change will force us to enter a new chapter of cooperation."

DROP THE DOG-EAT-DOG RHETORIC, LET’S CREATE VALUE TOGETHER

But while this may be big news for evolutionary biologists, free market economists have long recognized that the dual forces of competition and cooperation -- fueled by a sense of ethics -- make up the twin engine that powers successful free market capitalism.

"You have to think about how people cooperate together to innovate," said Ed Freeman, a professor of business administration at the Darden School of Business at the University of Virginia who originally described stakeholder theory in his 1984 book Strategic Management: A Stakeholder Approach, in a recent phone conversation. (For more with Professor Freeman, see my two-part interview.)

"That's what makes companies work," Freeman said. "We adopt this rhetoric of free markets and competition and dog-eat-dog capitalism and we forget that capitalism is fundamentally about how we cooperate together to create value for each other."

"Competition may drive capitalism, but cooperation is gaining ground as an important business strategy for addressing social and environmental issues that impact companies across the board," wrote Bill Baue, a corporate sustainability expert and the co-founder of Sea Change Media, in a 2007 article on SocialFunds.com, a website about socially responsible investing.

"Increasingly, companies are joining forces not only with business competitors, but also with human rights and environmental activists (formerly considered enemies) as well as socially responsible investors (SRIs), academics and governmental organizations."

CORPORATE SOCIAL RESPONSIBILITY: LEAVING THE REPTILIAN BRAIN BEHIND

In my recent interview with Jennifer Oetzel, a professor of international business at American University and an expert in conflict-zone corporate social responsibility, she noted the advantages of cooperation between companies working in post-conflict zones like Egypt. She said that businesses that partner together to create employment and training opportunities can lift an entire society and argued that cross-cultural collaborations between American and Egyptian firms can go a long way to eliminating the Arab distrust of the United States.

Oetzel cited as an example a 2006 case study in Sri Lanka about International Alert, a peace organization that brought businesses together to facilitate networks of firms across the country to bridge ethnic divides as a way to promote long-term peace and stability.

Another more recent example or competitors' cooperating for the good of all is the Global Network Initiative. Created by Google, Microsoft and Yahoo!, the GNI is, according to their website, "a coalition that includes ICT companies, civil society organizations (including human rights and press freedom groups), socially responsible investors and academics" with an "overarching commitment of the Initiative's members to collaborate in the advancement of user rights to freedom of expression and privacy."

Indeed, the idea that helping each other helps ourselves is rooted deep within the human brain. As co-founder of Yes! Magazine David Korten recently put it, "Layered on top of the reptilian brain is the limbic or 'mammalian' brain, the center of the emotional intelligence that gives mammals their distinctive capacity to experience emotion, read the emotional state of other mammals, bond socially, care for their children, and form cooperative communities."

But just because we have the capacity to work together doesn't mean that the fundamentals of our various social systems are functioning well. Just look at the growing chasm between the rich and the poor in the United States, the broken tax code, the broken health care system, the lack of environmental oversight, the animal cruelty at factory farms, the unfair play (and pay) on Wall Street or the corporatization of the higher education system. These are just a few examples.

"Because the free market system is so weak politically, the forms of capitalism that are experienced in many countries are very far from the ideal," wrote Raghuram G. Rajan and Luigi Zingales in their 2003 book Saving Capitalism from the Capitalists. "They are a corrupted version, in which powerful interests prevent competition from playing its natural, healthy role."

When healthy competition has been hampered by powerful interests, ethical companies should consider spending more time revving that other engine of evolutionary innovation -- cooperation.

image: "Samenwerking," by Hans Hermes, 2007 (photo credit: Luc van Gent, Creative Commons)