Philip Kotler: Part 2 of an interview by Bob Morris

KotlerPhilip Kotler is the S.C. Johnson & Son Professor of International Marketing at the Kellogg School of Management, Northwestern University, Evanston, Illinois. He received his Master’s Degree at the University of Chicago and his PhD Degree at MIT, both in economics. He did post-doctoral work in mathematics at Harvard University and in behavioral science at the University of Chicago.

Kotler is the author of 57 books including: Marketing Management: Analysis, Planning, Implementation and Control, the most widely used marketing book in graduate business schools worldwide; Principles of Marketing; Marketing Models; Strategic Marketing for Nonprofit Organizations; The New Competition; High Visibility; Social Marketing; Marketing Places; Marketing for Congregations; Marketing for Hospitality and Tourism; The Marketing of Nations; Kotler on Marketing, Building Global Biobrands, Attracting Investors, Ten Deadly Marketing Sins, Marketing Moves, Market Your Way to Growth, and Winning Global Markets. He has published over one hundred and fifty articles in leading journals, several of which have received best-article awards.

His latest book, Confronting Capitalism: Real Solutions for a Troubled Economic System, was published by AMACOM (April 2015).

He has traveled extensively throughout Europe, Asia and South America, advising and lecturing to many companies about how to apply sound economic and marketing science principles to increase their competitiveness. He has also advised governments on how to develop and position the skill sets and resources of their companies for global competition.

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Morris: When and why did you decide to write Confronting Capitalism?

Kotler: I have always favored Capitalism as the best economic system and Democracy as the best political system. They both have the most potential for improving the lives of people. However, both systems need to be reexamined and refreshed so that, in fact, they do serve the majority of people. The first stark fact is the growing gap between the rich, the middle class, the working class and the poor. Most of the productivity gains appear to go to the top 1 percent. Most people don’t have enough income and as a result, they borrow additional money by using their credit card and they fall into high debt. The result of the growing income gap is a slower growing GDP (too few people with money to spend) and a rising tide of indebtedness.

Morris: Were there any head-snapping revelations while writing it? Please explain.

Kotler: I began to realize that each of the 14 shortcomings of Capitalism has attracted many proposals. We are not lacking solutions. We are lacking a two-party system that is willing to agree on solutions. Part of this is due to rigid ideological positioning that substitutes for really thinking about the facts and solutions.

Morris: To what extent (if any) does the book in final form differ significantly from what you originally envisioned?

Kotler: Actually, there is no difference between my original concept of the book and its current form.

Morris: There are so many serious problems in the world today. At one point, you suggest that, “in working on any one problem, such as higher minimum wages, so many other issues come into play, such as some businesses possibly closing down, thus creating fewer jobs and more unemployment and incentivizing companies to import more goods from abroad, which leads to even less employment at home, and so on.”

This seems like Whack-a-Mole problem solving. Is there a better way?

Kotler: Not really. Requiring the payment of higher wages will lead to a loss of some jobs and a raising of prices which drives companies to search for automation to reduce costs. On the other hand, those receiving higher wages will spend more (the marginal propensity to consume is close to 1 for low income earners) and this will increase demand for additional goods and services. Henry Ford had the clearest vision of why companies can actually benefit by paying higher wages.

Morris: What are the most common misconceptions about what capitalism is and isn’t? What in fact is true?

Kotler: The most common conception of capitalism is that it is an economic system consisting of privately owned businesses and large corporations that are run for profit. The profit comes from running the business efficiently and keeping the products and services up to date and competitively priced.

Morris: Of all the shortcomings of capitalism, which seems to have created the most problems? How so?

Kotler: The root cause of several of the other shortcomings is the growing income gap. Too much of the income gains go to too few people, even though all of the stakeholders worked together to make their companies successful. By failing to put enough income into more hands, the GDP grows slower and consumers manage to meet their needs by incurring high levels of debt.

Morris: Which of the causes of poverty will be the most difficult to eliminate? Why?

Kotler: One of the major causes of poverty is a lack of family planning. Governments and nonprofit organizations need to encourage poor people to use birth control so that they don’t have unexpected babies, which will only make poorer families poorer. In Thailand, a major campaign was launched to encourage the use of condoms. Over time, the average family size went from 5-7 children to 2-3 children. Another important step is to invest more money in delivering a higher education to the women in that country.

Morris: In your opinion, what is Thomas Piketty’s unique significance?

Kotler: Piketty’s did not discover the growing income gap but he gathered the numbers to prove its rising level and he offered an explanation in terms of when the return to capital exceeds the return on average growth of the economy. He went further and warned that the growing income gap will hurt the economy and even the democracy. He took the position that we need to make the income tax system more progressive and we should increase the wealth tax on estates.

Morris: About which of the dangers of economic inequality are you most concerned? Please explain.

Kotler: A country’s middle class is its bedrock. Yet the size of the U.S. middle class has been shrinking. Wages have been stagnant. We don’t have those factory jobs that paid a living wage and enabled a family to have a home where the wife did not have to work. But we sent our factories abroad and there is no likelihood of getting them back. Equally worrisome is that some managerial jobs and professional jobs (such as lawyers) which support middle class life are threatened by automation.

Morris: In your opinion, which policy for reducing the great differences in income offers the greatest promise for success? Please explain.

Kotler: I would favor three policies: raising the minimum wage to $12, closing the tax loophole where persons only pay a 15% income tax on long term capital gains (tax it at the full tax rate), and institute a progressive tax moving the highest tax rate from 39.6% to 45%. I would favor implementing these three policies in that order, starting with raising the minimum wage, but not stopping there.

Morris: Please explain how technology has been a factor in the significant reduction of jobs.

Kotler: Robots equipped with software can be designed to do repetitive jobs. All that you need in a factory is a set of dials, an expert, and a dog to keep the expert awake. We will be moving shortly to the next stage to robots with artificial intelligence who can “think.” The recent movie called Ex Machina dramatizes this next stage.

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To read all of Part 2, please click here.

To read Part 1, please click here.

Phil cordially invites you to check out the resources at his website.

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