Extractives

Small Change - Why Business Won’t Save the World

Commentary, 19 January 2010

By Michael Edwards

What’s the best way for business to contribute to realizing human rights? I’ve been pondering that question over the last few days in the light of Google’s decision to oppose censorship and protect the email accounts of activists in China, going so far as to threaten the closure of its Chinese operations in direct opposition to its own financial bottom line.

Is this a harbinger of hope for the future, or the proverbial exception that proves the rule that companies will always pull back from their social and ethical responsibilities when profits are really on the line? Can businesses internalize human rights criteria at the core of their operations and still be successful, and will they do so of their own free will?

On the surface that seems unlikely. The raison d’être of markets is to satisfy personal wants according to the purchasing power of each consumer, not rights which are universal and independent of effective demand. And if too many social criteria are introduced into the mechanisms of the market, resources may be allocated less profitably in the economy as a whole.

That’s why historically, external pressure and regulation have been so important in moving the human rights agenda forward. As a friend asked me recently, to what extent can markets change, correct, or transform themselves, or would that be like asking someone to pull themselves out of a swamp by their own hair — just as markets were supposed to do prior to the current financial crisis, when self-regulation so obviously failed?

“In the end,” writes James Gustave Speth, a new colleague of mine at Demos in New York, “a responsible company is one that is required to be responsible by law”, and, I would add, has its feet constantly held to the fire by continuous pressure from an active and independent civil society that is able to push, cajole, monitor and reward progress towards human rights objectives.

That’s why the strength and independence of government and civil society is so important, and that’s also why I’m so worried about “philanthrocapitalism”, a movement to inject business thinking into philanthropy and the not-for-profit sector that has been christened by the Economist’s Matthew Bishop.

This sounds like a great idea, except that there’s no evidence to show that it works, and lots of examples that indicate the damage it might do to realizing rights, instead of satisfying wants or even meeting needs. Even worse, it allows businesses off the hook by pretending that they can increase their social impact by reforming other institutions instead of transforming their own business practices.

Small Change: Why Business Won’t Save the World, which was published by Berrett-Koehler earlier this week.

Why am I so critical of the philanthrocapitalist revolution? First, it erodes the independence of non-profits and makes it less likely that they will hold business and government accountable for their actions, or push them to do the things they really don’t want to do.

Second, it threatens the distinctive values of civil society which are based on cooperation and commitment, not the ethics of the marketplace, values that have spurred the creation of social movements from the abolition of slavery to pro-democracy protests in Iran. And third, it privatizes the way we solve collective problems and gives too much power to those who have little or no accountability to the public. That’s got to be bad for democracy. It’s great that business has a social conscience, but that doesn’t give them any right to decide how health and education should be reformed.

Compared to these thorny problems, there are plenty of opportunities to increase the social impact of businesses at the heart of their operations, if they choose to take them. The problem is, these measures are largely absent from the philanthrocapitalist agenda, and that’s why Google’s actions in China are potentially so important.

Personally, I doubt whether others will follow their example, but I’d like to be proved completely wrong. In the meantime, let’s keep business out of philanthropy and make sure that civil society retains the independence it requires to put rights first.

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