WSJ.com – The Do-Good Marketplace – Feb 2, 2009

FT.com – The hot air of CSR – Feb 2, 2009

Leave it to the Journal to bash social entrepreneurship.  I guess they talked to no one at Fuqua’s Center for the Advancement of Social Entrepreneurship.  But it wouldn’t be the Journal unless it equated philanthro-capitalism with being able to break the Fortune 500.  Such is its ideology…

I’ve not read the book Creative Capitalism, though I’m familiar with it… the FT has also book reviewed it and referred back to it on occasion.  I’ll respond to the Journal‘s article, as sent to me by my colleague Julio:

 

1) The Richard Posner/Steven Landsberg argument (as described) is also similar to that of Robert Reich’s Supercapitalism.  It is Friedmanian in certain aspects, but moreso because the belief is that SR is the responsibility of G instead of the C’s.  Get people to become more involved in their governmental affairs and maybe it’ll ripple back to corporations.  Since companies compete, and it’s all about costs and profits, the only way to impose good ESG (environmental, social, and corporate governance) principles is by government leveling the playing field for all the companies so that no company is preferentially advantaged in the market.

 

2) The David Vogel argument (as described) sums to companies not doing CSR for altruistic principles.  Well personally, I think companies should employ CSR for altruistic principles, but I’m not that idealistically naive.  So… who cares if CSR isn’t necessarily altruistic?  This is about making labour conditions better in Bangladesh… It’s about making sure that the speed of putting toxins in our atmosphere doesn’t outstrip our biological evolution…  Whether you’re profit maximizing or not, the third law of thermodynamics is real.  Entropy exists (and you see it in the current market environment).

 

3) The dichotomy between these two arguments is the reason why, in the corporate world, many of the larger companies try to institutionalize CSR via their CSR reports.  And several of these reports try to show their ESG committments alongside profitability by via a “triple bottom line” (people, planet, profits).  In the respect that corporations tend to be good at maximizing capital and profits, then yes, they would be better suited to enhance social responsibility.  Nonetheless, that should not marginalize the need for philanthro-capitalism, nor its successes (ref: Grameen Bank or Ashoka).

 

4) Michel Albert’s Capitalisme Contre Capitalisme is a good read for seeing why the “Rhenan” form of continental capitalism tends to be better suited toward welfare states and enhancing the value for all stakeholders, rather than just corporations (ref: MPIfG Working Paper 97/6, June 1997; “The Future of Continental Socio-economic Models”).  This is in contrast with the Anglo-Saxon (free market) form of capitalism, where free market principles tend to focus solely on differential taxation that doesn’t provide the same welfare benefits.  Its libertarian-rooted ideology is what widens the gap of income distribution and has also been considered one in the line of potential causes for the current economic collapse.

 

A focus on excesses rather than a reallocation of excess to where it is needed for reducing poverty, improving labor standards, and cleaning up and maintaining the environment got everyone into this mess.  Does the prescription sound socialistic?  Perhaps, but “socialism” and “social responsibility” take their root from “society,” which in turn takes its meaning from the Latin socius, meaning “partner, associate, ally, fellow, sharing.”  Who cares if its philanthro-capitalism or CSR that gets it done… it’s about ameliorating society.