Newman's Own as Alternative Economics

10/08/2010 01:51 pm ET | Updated May 25, 2011

Is Newman's brand just more "philanthrocapitalism" -- or something better?

I recently started shopping at a grocery store that is conveniently located near where I live, but that unfortunately doesn't have a lot of organic food options. What it does have is a lot of Newman's Own products.

A company founded by Paul Newman and a friend, writer A. E. Hotchner, in 1982, Newman's Own is known by many people for its flagship line of all-natural salad dressings. But in the past decade or so the brand has expanded dramatically, and it now has products in many aisles of my local store. These range from pasta sauces and instant popcorn to organic lemonade and "sweet enough" cereals. An offshoot company, Newman's Own Organics, was founded by Newman's daughter Nell in 1993. It sells pretzels, dried fruits, olive oils, chocolate bars, coffee, and selections for the cookie section ("Fig Newmans," anyone?). Both companies have lived on after Paul Newman's death in 2008.

What distinguishes Newman's Own from other boutique lines of health food products is that the company gives all of its after-tax profits to charity. To date, it has given away around $300 million. Mostly, the money has supported social service initiatives such as the Hurricane Katrina Relief Fund and the Hole in the Wall Camps for kids with serious medical conditions. But it has also funded some environmental causes and First Amendment advocacy.

Now, there's nothing particularly novel or compelling about the wealthy giving away a portion of their fortunes to charity. Likewise, having a company with a commitment to using natural and organic ingredients, as well as to promoting healthier food, is nice, but it's not exactly revolutionary. However, when it comes to giving away all your profits ... well, that one falls a little further outside the capitalist playbook.

I've been very critical of the trend toward "philanthrocapitalism." This school of thought contends that more business thinking and market-based practices are needed to address social problems, or, in the words of author Michael Edwards, that "more capitalism [can be] the answer to the problems that capitalism has already created." The category of philanthrocapitalism covers a wide range of activity, from microcredit, to socially weighted investment funds, to "social entrepreneurialism" that aims to meet a "double bottom line" of shareholder profit and positive social benefit.

It also includes "corporate social responsibility." A good business-side critique of this idea recently appeared in the Wall Street Journal. There, business professor Aneel Karnani argued:

Large companies now routinely claim that they aren't in business just for the profits, that they're also intent on serving some larger social purpose....But it's an illusion, and a potentially dangerous one.

Very simply, in cases where private profits and public interests are aligned, the idea of corporate social responsibility is irrelevant: Companies that simply do everything they can to boost profits will end up increasing social welfare. In circumstances in which profits and social welfare are in direct opposition, an appeal to corporate social responsibility will almost always be ineffective, because executives are unlikely to act voluntarily in the public interest and against shareholder interests.

For Paul Newman, the Newman's Own company was always a bit of a lark. He coined a tongue-in-cheek slogan for the business: "Shameless Exploitation in Pursuit of the Common Good." This type of language would seem to put him in the tradition of philanthrocapitalism. But his company is quite different from something like Ben & Jerry's. That premium ice cream company projects a liberal image, but it was acquired in 2000 by the multinational food giant Unilever. The people who now run Ben & Jerry's still claim to give a portion of profits to charity, but overall they face the same pressures to turn a profit for shareholders as do other mainstream companies.

Newman's Own, on the other hand, is under no obligation to squeeze out profits for investors. The "shameless exploitation" tag line notwithstanding, I haven't yet seen an exposé about its treatment of its workers or anything charging it with hypocrisy with regard to its proclaimed environmentalism.

Marx argued that the kind-hearted capitalist will always be driven out of business by more ruthless competitors. By being more exploitative, these rivals can more quickly come up with the money to invest in new technology, and soon their more modern operations will have the ability to undercut less hardnosed producers. I've felt that such a fate would befall many efforts at social entrepreneurialism, especially if they ever grew large enough to threaten the profit-making of mainstream corporations in any serious way.

For example, a few years ago Muhammad Yunus, the Bangladeshi "godfather of microcredit" who is also a big advocate of social business, convinced French multinational Danone to join him in launching a nonprofit enterprise to produce inexpensive, nutritionally fortified yogurt for impoverished kids in Yunus's home country. I have little doubt that, should the charity yogurt operation ever become big enough to actually cut into Danone's profits, the multinational could and would use its economic power to drive the start-up into the ground.

With Newman's Own, I'm not so sure. The company seems to have pretty effectively established itself, despite competition from multinationals eager to tap into premium health food and organic food markets. It's possible that being exempt from the obligation to secure a profit margin, in addition to savvy marketing, has given it whatever edge it needs to stay alive.

I think there is something of note here for progressives. When made to point to examples of actually existing economic initiatives that they support, many global justice activists (including Naomi Klein) have turned to champion the occupied factories that emerged in the wake of Argentina's 2001 economic collapse. I'm under no illusion that something like Newman's Own represents a similarly bold alternative. But the occupied factories had limitations of their own. While certainly laudable, these operations were always quite small, struggled to stay alive, and sometimes were not nearly as radical as their international supporters assumed. They, too, were islands in a sea of conventional businesses, forced to compete in a profit-driven marketplace.

More importantly, occupied factories in Argentina are pretty remote to the experience of most Americans, and that limits their resonance here. In a country where "socialism" is used almost exclusively as a scare word, finding clear and relatable ways to discuss what elements of an alternative economy might actually look like is an important task. What's appealing to me about Newman's Own is that, because the salad dressings and pasta sauces are there on the supermarket shelves, it creates an opportunity to talk about building an economy that's not founded on holding up profit and greed as virtues.

[This post first appeared at the "Arguing the World" blog at Dissent magazine.]