Eventide Asset Management, LLC 60 State Street, Ste. 700 Boston, MA 02109 877-771-EVEN (3836) WWW.EVENTIDEFUNDS.COM DECEMBER 21, 2014 A Tale of Two Capitalisms It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way . These are among the most famous opening lines in all of literature, probably rivaled only by “In the beginning God created the heavens and the earth.” They are, of course, the first lines from A Tale of Two Cities by the great nineteenth FAITH & BUSINESS century English novelist, Charles Dickens. Interestingly, they could serve equally TIM WEINHOLD well as the introduction to another popular work of fiction — It’s A Wonderful Life by Frank Capra . a mid-twentieth-century film that is now almost as much a part of our American Christmas holidays as Santa Claus himself. Tim Weinhold serves as Director of Eventide's Faith The two cities to which Dickens’ title alludes are London and Paris. More than & Business Initiative, and has served in a faith and Alexandre or Lucie Manette, more than Charles Darnay or Sydney Carton, it is business/investing thought leadership capacity these two cities that serve as the story’s principal protagonists. Together, they with Eventide since its founding. Since relocating provide the motive power for Dickens’ meta-narrative about social justice: that from Boston to Seattle a few years ago, Tim has the bloody and brutal French Revolution was an all-but-inevitable consequence served on the Executive Advisory Council of the of the aristocracy’s oppression of, and indifference toward, the poor and working School of Business and Economics at Seattle Pacific University, and on the Executive class . and that London risked following Paris down that same fatal pathway. Committee of the school's Center for Integrity in At its most straightforward, Capra’s film seems entirely different. It tells the story Business. of George Bailey, an everyman torn between ambitious longings and compassionate instincts. George wants to see the world and, just as much, longs to leave his mark on that world. He has big plans and bigger dreams. But he also can’t help but respond to his neighbors in need. By the end of the film, George’s story imparts at least two heart-warming lessons: that the life of even an ordinary individual can accomplish much good (much more than might be obvious), and that, rather than finances, it is family and friendships that constitute true riches. But, like Dickens, Capra has a larger story to tell. And, like Dickens, he uses two different communities or, to be precise, two different versions of the same community — Bedford Falls and Pottersville — as protagonists for his own social justice narrative. But where Dickens’ target was an oppressive and corrupt aristocracy, Capra’s is a version of capitalism that he found equally destructive and distasteful. Capra’s meta-narrative is, therefore, both a tale of two cities and a tale of two capitalisms. In turn, it has much to say to anyone interested in practicing a biblically-enlightened version of business. A great deal of foolish commentary flows from the idea that when it comes to economics there is only capitalism or non-capitalism, i.e., only capitalism or, alternatively, socialism or communism. From this vantage point, any critique of contemporary capitalism is automatically viewed as pro-socialist, or pro- communist. Frank Capra sees through such naive nonsense. He understands that Eventide | Faith & Business Blog Tim Weinhold on It’s a Wonderful Life 2 just like there are good and bad marriages, and good and bad governments, so Frank Capra sees too there are good and bad capitalisms. Business, in Capra’s view, can be practiced in ways that bring either blessing or blight, in ways that cause humankind to either flourish or flounder. It’s a Wonderful Life puts both on vivid through such naive display. nonsense. He George Bailey is a businessman. He runs Bailey Bros. Building & Loan Association, a firm originally founded by his father and uncle. His ‘good ole Building & Loan’ seems to be (modestly) profitable, providing a middle-class living for George and understands that just a few employees. And it provides real benefit to the community, particularly by making mortgage loans to blue-collar working people, something the local bank is loathe to do. As a result, the Building & Loan gives poor workers a toehold like there are good and toward the middle class, and toward their own little piece of the American bad marriages, and Dream. Henry F. Potter is the film’s other main character. He is a businessman as well — president of the local bank and also a landlord, though clearly of the slumlord good and bad variety. Interestingly, he is entirely reminiscent of Charles Dickens’ most famous literary creation, Ebenezer Scrooge. And like with Scrooge, for Potter profits are his absolute priority — and, as a result, often come at others’ expense. Potter’s governments, so too approach to business is clearly predatory, in marked contrast to George’s version where profits come from helping others prosper. there are good and bad Capra paints a vivid picture of the radically different outcomes that flow from these alternative versions of business. Bedford Falls, where most of the film takes capitalisms. place, is Capra’s vision of the good society. Here there is a palpable sense of community — a sense of ‘neighborliness’ and that ‘we’re all in this together.’ There is, as well, a modest but growing prosperity as more and more working people escape Potter’s slums for home ownership in Bailey Park, made possible by mortgages from the Building & Loan. Despite the fact that he still longs occasionally for travel and grand achievements, as the film progresses, George’s life, and the lives of his Bedford Falls neighbors, prosper nicely — filled as they are with family, friends, and an economic trajectory that points gradually upward. There seems to be good reason for George and his fellow citizens to view the future with optimism. Suddenly, though, catastrophe looms. Just as the bank examiner arrives, Uncle Billy loses a large cash deposit needed to keep the Building & Loan solvent. As a result, George faces bankruptcy and prison — and, in despair, wishes he had never been born. Enter Clarence, a bumbling but benevolent guardian angel. Clarence allows George to see what Bedford Falls would be like had he never lived. Renamed Pottersville, the town is barely recognizable. It is a place where, to quote Nick the bartender, they “serve hard drinks . to men who want to get drunk fast.” In fact, most of the business establishments serve that same escapist impulse — Main Street is now an unbroken strip of saloons, dance halls, burlesque theaters, sleazy nightclubs, strip joints, pawn shops and the like. Neighborliness has all but disappeared, replaced by relationships that have a harsh and mercenary edge. Cynicism and desperation abound — whether in the feverish entertainments of those with money or the feverish survival efforts of those without. At first blush, Capra seems to be making his points about good and bad capitalisms none too subtly. For Potter, profits are paramount, and people are simply a means to that end. Pottersville portrays just how predatory and toxic is For more Faith & Business content visit: EVENTIDEFUNDS.COM/FAITH- AND- BUSINESS/ Eventide | Faith & Business Blog Tim Weinhold on It’s a Wonderful Life 3 that greed-driven version of business. It makes clear that the trajectory of that When business does a capitalism is a downward spiral of social decay and disintegration. George Bailey practices an entirely different capitalism. The effect of his business good job of loving its is that ordinary working people can, for the first time, afford a car, a house . can grab hold of that oh-so-important bottom rung on the ladder to a better life for neighbors, it both sows themselves and their children. The Bailey Bros. Building & Loan adds real value to the lives of many — so much value, in fact, that Capra shows us Bedford Falls and reaps blessing — would be a bleak and brutal place without it. OK, it’s Christmas-time and it’s always good to be reminded of the biblical view that business (and all other forms of human endeavor) can be practiced in ways the Bedford Falls that either fulfill or violate the ‘Love your neighbor’ First Principle of God’s moral universe. And to be reminded, as well, that when business does a good job of outcome. loving its neighbors, it both sows and reaps blessing — the Bedford Falls outcome. But when it prioritizes profits over people it sows and reaps blight — and we end up in Pottersville instead. There is, however, more to why I wanted us to reflect together on Capra’s message about good and bad capitalisms. It’s a Wonderful Life, for all its seeming simplicity, embodies a deeper and more nuanced understanding of the divide between beneficial and harmful business than appears at first glance. In particular, Capra gives insight into the crucial distinctions between selflessness, self-interest, and selfishness in the practice of business. These are distinctions economists and business people have been misunderstanding ever since Adam Smith published The Wealth of Nations in 1776 — misunderstandings for which we continue to pay a very high price.