Note: The following is the full text of former Massachusetts Attorney General Scott Harshbarger’s 2012 commencement speech to the New England College of Business. The themes of this speech are drawn from the article “Turning the Page on the Global Financial Crisis: Civic Capitalism and a Blueprint for the Future,” published in 2010 in the Emory International Law Journal and available for download here.

Allow me to join in the congratulations—to you and to your families—on your arrival at this graduation. The ending of one phase of your career; the beginning of another—now as an alum of New England College of Business (NECB) and, more relevant to my themes today, as a member and soon-to-be leader in the business community—in Boston, New England, and, yes, the USA and globally.

We are all “connected” today in ways few could imagine just a decade ago, pre 9/11, or two decades ago, when I first became attorney general, let alone when we here on this stage “graduated” and entered the professional career phase of our lives. And we are connected not just as business/finance/markets/economics and technology are; in this critical time in our history, we are also connected—and challenged—as citizens, in our communities, politics, and government and as “capitalists”—even though the country and world seem to be more polarized than ever.

Look at Europe. Germany, Greece, Spain, France—the Euro, the common currency which was to bind them together, seems to be dividing them all. The Mid-East: Syria, Iran, Afghanistan and Iraq; Palestine and Israel. And, yes, here in the USA: Wisconsin; Romney and Obama; Wall Street versus Main Street; the 99 percent versus the one percent; “two Americas” in terms of income, education, health care, jobs, security—and views of government, business, markets. Ben Barber noted that our economic crisis is not a failure of capitalism; it is a failure of our democracy. To succeed, both require each other—and in both we have lost our way. We don’t believe that civic capitalism matters. What do I mean by civic capitalism? Let me pose some questions to you before I get to the answer.

Are we still a community? Or are we silos? Is our common good and common cause our self-interest, or the public interest? And does it matter to you or me? I believe we all must find a way “to get along,” that our mutual self-interest requires it, and that we can and we must do well and do good—but only by implementing the concept of civic capitalism, the notion that markets are important and should generally operate freely, but only within a strong democratic framework which fosters civil society, encourages public participation, and regulates systemic risk.{loadmodule mod_banners,Newswire Subscription Plea}

But those are just words. To put those ideas into practice, we need educated leaders willing to take up that charge: people like you. You are the vanguard. You have the capacity and opportunity to rescue and renew civic capitalism, the vehicle for solving the crises in our economy, our corporate and body politic, and the faith and values that shape our ethical culture.

So, why you? Because thanks to NECB, you know the key lessons required to sustain, maintain and energize the core values of corporate and civic democracy. You have the tools and the blueprint to Be The Change.

Lesson No. 1

In the wake of the Enron and WorldCom corporate scandals, and the passage of Sarbanes-Oxley, the path forward in the face of crisis seemed straightforward: government and business would champion an ethical and transparent corporate culture. In theory, this goal seemed relatively simple to achieve. There were clear bad actors. They broke the law. Everyone agreed they should pay the price.

Then came the global financial crisis in 2008, driven by financial deregulation—the housing market bubble, subprime mortgages, securitization—and the same greed. While there was plenty of blame to go around, what these corporations were doing was, at least arguably, “legal” (or at least not apparently clearly “illegal”). And so, unlike in the previous crisis, the DOJ and SEC seemed to find no obvious “criminals” to punish. Instead, the wrath of the collapse was borne by most of us who played no role in its creation.

As Nobel laureate Joseph Stiglitz points out, we cannot have a system that privatizes gains, but socializes losses…that in effect allowed the private corporations to be “too big to fail,” and deemed the individual homeowner “too small to save.” There are lots of lessons to be learned from this game-changing crisis, but I believe the recent global economic crisis unfolded because of a failure of accountability, and is a result of a decade’s worth of lessons not learned.

The economy’s transition through boom-and-bust cycles is nothing new. But, at each turn, we seemed to learn nothing. The obvious solution was to enact strong but limited regulation, allowing firms to operate within a generally free market, and to erect ethical barriers between powerful corporations and regulators. After the dot-com and accounting scandals, and then the financial disaster of 2008, how could we miss the need for regulation that established a firm baseline for corporate and government action? But we did.

The global financial crisis grew out of a breakdown in both individual and institutional accountability. We can only properly reintroduce accountability into our system by fundamentally rethinking the relationship between governments and markets.

Lesson No. 2

Some commentators put the blame for the debacle on a broken but fixable capitalist system. Others believe broad-scale, systemic reform is necessary. More cynically, but perhaps more accurately, Michael Lewis (author of The Big Short) suggests that the problem was not that “Wall Street bankers (or the bankers of Germany, Ireland, Spain, Iceland and Greece) were corrupt” but “that they were stupid” (and, as he notes in his terrific epilogue, Boomerang, greedy; placed in a dark room with a pile of money and no one watching, they took it all).

In any event, business leaders, regulators, and we, as citizens, did not insist or focus on the importance of an ethical corporate culture (except as rhetoric). Everyone became overly, and unnecessarily, antagonistic toward each other. The sizable areas of common interests were not sufficient to spur reform. These lessons have not been learned. Obviously, more than a mere common interest is needed.

This kind of rethinking is necessary for several reasons. First and foremost, the financial crisis laid bare the rift between the high and low ends of the income distribution in the United States as well as worldwide. This “dual track” system is fundamentally unsustainable and threatens not only the viability of the financial system, but also the very ability of a citizenry to engage in productive economic, civic, and social intercourse.

Moreover, the crisis exposed the far too cozy inter-relationships between business and governments. Regulators and the regulated must be two distinct, independent entities. It is not surprising that years of success lulled financial institutions into a false sense of security (“the smartest guys in the room”). But there is no justification for regulators to share that sense of entitlement and complacency, or, as the cop on the beat, to fall asleep. Of course it is important for private firms—including investment banks—to do well, but the government cannot “drink the Kool-Aid.” It must maintain an independent perspective so it can judge when and if private firm actions pose risks to society at large.

Lesson No. 3

The framework is simple: business leaders and regulators must insist on an ethical corporate and nonprofit culture, based on democratic values, because in the long run, ethical breakdowns harm system integrity—and, over time, companies’ bottom lines. Business leaders have an important stake in ensuring an ethical corporate culture, not only because without it competition is not fair, but because a firm’s competitors, creditors, suppliers, and customers could be brought down by its misconduct. The current financial crisis has starkly demonstrated how a single company’s—or even a single trader’s—actions pose a risk to the very sociopolitical systems that enable society to function.

The lack of a broad-based public uproar over the people and practices that have pushed our system to the brink is surprising to me—and bothersome. Surely the equivalent of a multi-class “Arab Spring” seemed more likely to mobilize the “99 percent versus the one percent” than the eccentric Occupy movement. Strangely, the strongest citizen elements that did mobilize, the “Tea Party,” focuses on government excess, even though the latest crisis came largely at the hands of the private sector.

While both groups seem to exist at the edges of political opinion, they are both protesting the same problems: our government is broken and no one in power seems interested in fixing it. And that is critical because it is the government that must create the framework of laws and rules which permits people to engage in voluntary transactions based on trust and confidence that markets are “free.”

This lack of outrage is also surprising because the very people and institutions that got us into this mess are still opposing measures that might get us out of it. As Daniel Gross points out, Corporate America has opposed virtually every form of regulation since the 18th century, and has been wrong on almost every score. One thing is clear: more oversight is needed, and the current way of looking at the world—divided between those who believe markets have the answers to every question and those who argue that the government must take responsibility for all major decisions—is inadequate.

Lesson No. 4

“Civic capitalism” rejects both of these extremes: neither the free market nor the government alone is the solution. The solution is democracy itself, and the values that underlie it. The past decade has highlighted a breakdown in ethics and accountability across nearly all institutions, as the allure of instant gratification displaced a focus on long-term results. This breakdown erodes the values that underlie a constitutional democracy: fairness, equal opportunity, justice, responsibility. Increasingly, institutions are not held accountable for their actions: highly paid boards of directors are not standing up to excessively highly paid executives, and the balance of power is being tilted away from ordinary citizens. Yet these democratic values are critical for an ethical environment in the corporate realm and elsewhere.

At the end of the day, there will be ebbs and flows in regulation; ideologies will come into and out of favor. At the base, however, we must operate within the framework of a constitutional democracy and the civic, societal and ethical culture that it reinforces. In the words of John Gardner, “Freedom, Responsibility; Liberty, Duty. That’s the deal!” This culture is our greatest asset and provides the base for an entrepreneurial, free market system.

This framework—in which a strong civil society is the basis of a democratic, market society—means the free market is not an end in itself. It requires (1) a government referee to establish a system of rules and laws, permitting private and public enforcement; and (2) basic democratic values such as honesty, full information, transparency, and accountability—stemming from an overarching sense of equally available opportunity.

However, over the past decade, we have come to see the private sector—and financial markets in particular—as the engine for the progress of society, instead of the product of a free but regulated society. By “regulation,” I do not refer to a bureaucrat sitting in an office decreeing the price of a flight from New York to London, a salary, or a choice of doctor. I reject that extreme just as I reject the hard-right free market view.

No, by “regulation,” I mean the process by which institutions and individuals are held accountable to each other. The government has a role in this, for example, by requiring that firms make disclosures to their shareholders so that markets operate with full information. Civil society institutions, however, also have these requirements—churches and schools, nonprofits and community organizations, and, ultimately, all of us as citizens. These are the vehicles for building our strength and freedom, for raising all of our standards of living.

These points are not new; Alexis de Tocqueville recognized them almost 200 years ago. More recently, my American hero, John Gardner, cogently explained the need for a vibrant, engaged citizenry and an independent (non-market, non-government) sector, precisely because that civil society provides the context in which entrepreneurs and markets can operate. That is the renewal we call for, and that is the renewal that civic capitalism provides. Until our core values are revived, we are only applying Band-Aid solutions to our problems. There has been a serious breakdown of institutional integrity at all levels over the past decade. If we do not take this task of renewal seriously, we will continue to lurch from crisis to crisis.

Lesson No. 5

To this end, we must accept that there is an important, valuable, and honorable role for government—of, by, and for the people—to play in helping people participate in a democratic society, and vice versa, an important, valuable, and honorable role for citizen engagement.

Yet the political debate today is polarized between two camps. On the one hand, the right tends to argue for unfettered free markets and corporate and financial deregulation. Conversely, the left tends to view the government as having the solution to many social ills. This is a false dichotomy. The missing link is the essence of a constitutional democracy: citizen participation. An engaged citizenry, demanding accountability, is critical to this process. The regulator or policymaker must recognize that entrepreneurs and private firms are essential to a democracy, but the culture of constitutional democracy provides the base of values that makes that market life possible.

At the individual and firm level, we must see civic responsibility as part of economic life rather than something divorced from it. Jack Welch, the famous former CEO of General Electric, wrote in Business Week that “[y]ou have to make money first to give it away.” This perspective considers making money something distinct from a company’s social responsibility. To the contrary, civic responsibility should be part of a company’s mission. That does not suggest that companies should not be profit-oriented and highly successful. But consider the experience of Johnson & Johnson. The company’s famous credo recognizes the firm’s responsibility to the community, its obligation to be a “good citizen,” and the need for the firm to “encourage civic improvements.” But we are not talking about a charity here: the firm also intends to “make a sound profit,” and it does so nicely. Johnson & Johnson is just one example demonstrating how civic responsibility and the profit motive can comfortably coexist.

Simultaneously, our framework demands an active and engaged citizenry. Citizens must participate in the political process and support reforms that enhance accountability, minimize the impact of money in politics, further transparency, and reduce the role of special interests. Without a strong participatory base, government will not be able to fulfill its role as a risk regulator and rule enforcer. At the end of the day, in a constitutional democracy, the power must come from the people themselves.


To reiterate, developing an ethical corporate culture is more important than ever. The market cannot function unless individuals and firms who enter into transactions can—and do—trust each other. Thus an ethical environment is necessary not only on its own terms (“do the right thing”) but also because, in the long run, a properly functioning market requires it. Civic capitalism requires a strong focus on ethics because the very foundations of our social, economic, and political systems break down in the absence of honesty, transparency, and full information.

By this, we do not mean to suggest that it is not profitable to be unethical. In fact, it can be quite profitable to be unethical—for a trader to sell risky products and then cash herself out, for a bank to make business decisions without regard to effects on other citizens, and so on. But those profits are, almost by definition, short-term. In the long run, as we see today, no market economy can sustain itself without basic rules, understandings, and civil society underpinnings.

Government is not the answer. Markets are not the answer. Democracy—with leaders like you—is the answer. And that’s what civic capitalism is all about.

Civic capitalism is all about a robust business community, an engaged citizenry and a government that actively promotes your ability to provide a check on large institutions, from banks to corporations, and on government itself. It is about ensuring that democratic values endure, even as politicians and movements come and go. It is about rooting out corruption and insisting on honesty, opportunity, and full information, not just because it is the right thing to do, but because markets and civil society cannot function otherwise. Civic capitalism takes the long view, and teaches us that the government has a role in minimizing risks to the system—financial and otherwise—because that civil society is the base from which entrepreneurs and firms operate.

We stand today at the bottom looking up as the worst recession in nearly a century slogs on. The last ten years have, in many ways, been a lost decade. But, if I am right, and civic capitalism draws on the best traditions of constitutional democracy to guide us through the process of moving forward, then you, the business leaders and citizens of this generation, are truly the cavalry and, more important, “Together You Can Be The Change.”

Good luck to you. We need you.