Ethical Capitalism

The Economist, 19 Jan 2008, p12

How wonderful to think that you can make money and save the planet at the same time. “Doing well by doing good” has become a popular business mantra… the idea that firms can be successful by acting in the broader interest of society as a whole even while they satisfy the narrow interests of shareholders.

For these are high times for what is clunkingly called corporate social responsibility (CSR)… One huge push for CSR has come from climate change: ‘sustainability’ is its most dynamic branch. Another has been the internet, which helps activists scrutinize corporate behavior around the globe. But the biggest force is the presumption that a modern business needs to be or at least appear to be good to hang on to customers and recruit clever young people.

Thus for most managers the only real question about CSR is how to do it.

The main contribution of companies to society comes precisely from profits (and the products, services, salaries and ideas that competitive capitalism creates). If the business of business stops being business, we all lose.

Most recent disasters have come from politicians seeking to offload public problems onto business: American healthcare is one sad example.

Be wary: businesses do not always adhere to voluntary rules; they naturally want ones that help them make money. Above all, it is governments, not firms, that should arbitrate between interest groups for the public interest.

So the apparent triumph of CSR should prompt humility, not hubris. There is money to be made in doing good. But firms are not there to solve the world’s political problems. It is the job of governments to govern; don’t let them wiggle out of it.