Tuesday, February 22, 2011

A nice capitalism , not a nasty one.....

An interesting article in the Financial Times by Andrew Hill about "constructive capitalism" or “shared value” promoted by Michael Porter and Mark Kramer as well as Umair Haque. Porter and Kramer make the claim that profits with a long-range social purpose represent “a higher form of capitalism”. They some of the same examples: Hindustan Unilever’s Shakti initiative for distributing its products through a network of poor female entrepreneurs in Indian villages; mobile phone-based methods to encourage micro-businesses in Kenya or Bangladesh. But is this higher form really that different from the self-interested variety that Milton Friedman backed when he wrote that “the social responsibility of business is to increase profits”?

But many of these initiatives are not that new and the impetus behind them isn’t either. Porter and Kramer urge companies to see their decisions “through the shared-value lens”. But business leaders must still calculate if a new market or a new way of sourcing will improve efficiency, productivity and profitability, whether the new market consists of poor villagers rather than wealthy yuppies or the new supplier is round the corner rather than halfway around the world. The pursuit of shared value plainly cannot eliminate the greed, excessive risk and bubbles that caused the Enron scandals and, later, the financial crisis. Constructive capitalists are still capitalists. Like all markets, these new ones will eventually become subject to diminishing returns. At that point most investors will choose the higher return available elsewhere, even if it yields the “wrong kind of profit”. More companies are learning to reap commercial benefits from strategies that have a wider social value. That’s great. But the basic job of coaxing capitalism in the right direction is the same as it always has been: find ways to harness society’s needs to companies’ self-interest and hope the two stay together.

The above is a pro-capitalist's assessment of the constant search for a humane capitalism , and in the end SOYMB can only judge as a forlorn one. What has been the most pernicious lie of this century is that hope for the future lay in the amelioration of capitalism through the process of reform. The false hope of piecemeal improvement of an essentially cancerous system in the reformist struggle to humanise the profit system. Whether the changes were to come through company board rooms employing PR departments with their humanitarian slogans and "green" appeals for a nicer, gentler world, the system which puts profit before need has persistently spat the hope of humane capitalism back in the face of its advocates. As Hill pointed out in his Financial Times piece under the profit system profits always come first! This is why the Earth's non-renewal resources are plundered. This is why natural balances are upset and the environment destroyed. Society is turned into one huge market-place. Capitalism can't help doing this. It's the only way it can work. Which is why it must go.

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