Post of the Day
October 14, 1998

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Socially Responsible Investing Folder

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Subject: Re: SRI
Author: KellyFord

"Are we, by investing in the stock market, even if we are investing in socially responsible stocks, perpetuating a system that is not socially responsible?"

As far as generating wealth, we all know that capitalism works. As was correctly pointed out in the last post, no other economic system has even come close to generating the wealth that has been generated by American style capitalism and the political circumstances in which it has thrived. Other systems have failed historically, while the standard of living here has been raised tremendously over the decades.

  "At its heart, Socially Responsible Investing is about using capitalism to its fullest potential."

Of course, we know that there are some glitches in the system. Historically, we have seen things get out of whack with unfettered capitalism (monopolies, etc.) and when the health of the market has been threatened, we have intervened and altered the system in order to preserve the basic tenets of the capitalistic growth engine. The system has not worked for everybody at all times. We all know that those born into a life with capital ownership have a far greater chance of faring well than those born into families who do not own many assets. Furthermore, the system has been partly responsible for non-economic impacts, such as the deterioration of the environment. (Not that other modern systems have fared any better -- look at the environment in the former Warsaw Pact nations.) I could go on and on, but the basic point is that while it certainly is good, it ain't perfect and we do have quite a few annoying side effects to deal with.

At its heart, Socially Responsible Investing is about using capitalism to its fullest potential. Not just relying on an Invisible Hand, but adding an intentional, visible element to capitalism. This is not government-mandated social action, but individuals realizing that just as they can use their own time, talent, and money to lead a life as a decent citizen, corporations can do the same. SRI is a very "conservative," voluntary, individual initiative that strives to achieve what are often considered "liberal" goals. You said correctly:

"Capitalism can be a very bad thing. It can alienate the worker, commodify the laborer and encourage companies to seek profit at the expense of ethics, morals and integrity."
  "As Socially Responsible Investors, we act in a way to encourage a capitalism that strives for these goals and keeps these intentions in mind when making business decisions."

. . . And it can also be a very good thing. It can provide the worker with a decent wage that will support a family and provide fuel for future economic growth. It can stimulate research and development of more envrionmentally friendly products and business practices. It can generate income for healthy charitable donations to feed those who have not been able to share in the good fortune. As Socially Responsible Investors, we act in a way to encourage a capitalism that strives for these goals and keeps these intentions in mind when making business decisions.

Capitalism is an engine, and a strong one at that. It is up to us as investors, the owners of capital, to determine how we want the engine to be used.

Kelly


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