BEYOND THE BOTTOM LINE!

The first responsibility of a business is to make a profit. Some say it’s their only responsibility. Milton Friedman, who has been very vocal about shareholder rights, said in the Financial Times about the current fashion to promote corporate responsibility that, “the stakeholder notion is a very dangerous notion. It is a socialist notion. It says that employees are major stakeholders. It is really a movement towards employee-run enterprises.” Yes. Without profit there are neither jobs nor revenue to tax. However, business must live in a wider world where social and environmental issues do impact upon how they do business - business cannot prosper in societies that fail.

Corporate responsibility, shareholder, stakeholder rights are a growth industry given the criminal excesses of Enron, WorldCom and others. However I disagree with Friedman because Labour is not just another product, the wider environment cannot be ignored. Standards, transparency and commercial honesty can raise all ships. This is both the responsibility of business and government. Robert Reich, in his book “I’ll be Short”, said that, “each year of education or job training after high school, whenever it occurs in the course of a career, increases average incomes by 6 to 12 percent.”

Companies that introduced formal employee training programmes experienced a 19 percent larger rise in productivity than firms that did not train their workers. The question then, is should governments direct business to do what’s good for them or should it be left to the market, and let business get rewards for good practices? With a mobile workforce it gets more difficult for companies to capture the return they need on investment in training. The state has a role to provide training, education and skill upgrading in partnership with business. Especially in times of economic restructuring, otherwise the social even political costs are too high. Friedman would disagree. Yet business skills can play a role in making things happen in poor countries.

Failed states also sometimes function as breeding grounds for disease with 2 million people crossing national borders every day. As we saw from the SARS scare, health problems can travel very quickly. If one person falls ill or is infected, the whole world is at risk. Only when every child is vaccinated will polio be eradicated. Only one disease, smallpox, has ever been exterminated worldwide. Two million children die every year from diarrhea alone. Gro Brundtland, as Director General of the World Health Organization, commissioned a team of economists to price out the cost of health failures in dollar terms. By substantially scaling up investment in health we could save around 8 million billion dollars by 2015, she claims.

Those states that are close to anarchy, failing, and dangerous to their own people and to the rest of the world. True, if they had honest politicians, competent bureaucrats, true property rights and open economic policies, they would not be in the trouble they now suffer. I went to Africa 7 times in 30 months, I’ve sat in hotels and heard gunfire, looked out the window and watched gangs of angry young males walk down the main road with weapons, menacing and dangerous.

In these troubled states, the future of delivering social services may best be done by private, public partnerships. What’s the point of giving free medicine, millions of dollars, if it’s ripped off by politicians, bureaucrats, or phoney capitalists? A number of private, public partnerships have been launched in Africa. Microsoft is providing free software for all of South Africa’s 32,000 schools. And here’s an inspiring programme launched by Peter Watson, past President of OPIC (Overseas Private Investment Commission) and an ex-pat. Kiwi. They announced a project to provide treatment for HIV-positive homeowners in South Africa, enabling them to keep their homes by guaranteeing banks against the risk of defaulted mortgage payments. Here’s the deal - you must be HIV-positive to get the coverage, but you must take treatment. Here’s the next part of the deal, the drugs are made available from U.S. foundations. Bypassing Governments and Ministries and getting to the real need is where the business community can deliver. Perhaps we are becoming globally what Victorian England became. It was no use being rich and having a mansion if the cook or cleaner brought influenza or disease into your home. Thus municipal socialism was invented, clean water, public sewerage and education systems were necessary to preserve the rich. An inter-connected world now demands global action. General Electric are investing heavily in sustainable energy projects, efficiency is just another word for conservation. GE expects its clean technology projects will earn it $30 billion by 2010. BP now proudly says “BP stands for Beyond Petroleum” to position itself in the Green market.

Virtuous business practices are not only actions of profitable self-interest, they may be the best short-term way of helping the victims, preserving the environment and producing the better world we old social democrats still dream of. Not the way I thought we’d do it in my youth.