God Bless the Private Sector

Those who read this blog know that I favor free markets as the engine of economic growth, but only when properly governed and regulated to provide real competition, ensure wide distribution of benefits, and limits on short-term risk.   In recent years, foolish policies of excessive austerity and over-reliance on self-regulation have produced the current fiscal crisis — so I have emphasized government policies in most of my blogs.

However, this past weekend I was privileged to spend time with some of the most creative, energetic, insightful people I have met.  They were not scientists or academics (although many were engineers by training).  They were Corporate Social Responsibility executives from Fortune 500 companies, and we met at the Aspen Institute, under the auspices of their Business and Society program, to discuss what business can do to improve society.

You may say “why should business improve society?  That is not their role, which is simply to maximize gains to shareholders.”   But that is a misreading of both history and the future.  Historically, America has flourished with limited government becauses businesses and business leaders have done much more than their European counterparts to support the communities and broader society in which they work.  Whether through gifts to the arts and education, or providing health care for their employees, American businesses routinely supply many of the social benefits that are provided by government in other societies.   America’s system of higher education, led by prestigious private universities and liberal arts colleges that depend on gifts from corporations or business leaders or foundations created by those leaders, much of its hospital system, and many community initiatives for transportation, recreation, sanitation, energy and environmental protection are guided, managed and often funded by the private sector.

It is also a misreading of the future to say improving society is outside the purpose and purview of business, as their only proper goal is profit.  In fact, the latter will not be possible without the former.  My role at the meeting was to highlight for the corporate executives some of the key future trends that will shape the business environment:  accelerating climate change with a larger number of more extreme weather events; massive aging of the workforce in rich countries along with a shrinkage of their working age population and a decline in younger workers and consumers; a surge of global urbanization; and still-booming population growth swelling the ranks of potential migrants and job seekers in the poorest and currently worst-governed countries in the world.

The challenges that these trends pose to business are immense.  Companies will need to find ways to utilize older workers and keep them productive and minimize their health costs; they will have to find a new generation of educated and productive workers to fill key roles while cultivating the world’s best talent; they will have to deal with societies in which increased immigration is necessary and inevitable; and they will have to negotiate to find raw materials and new markets in countries with increasingly varied and tumultuous regimes.  Firms will have to balance their relationships all along the supply and marketing chain among today’s rich countries, today’s fast growing emerging markets, and today’s weak and fragile states that are sources of key materials and the bulk of the world’s future work force, and which will likely be the most severely impacted by accelerating climate change.

Unless business solves these problems, they will not have the workers they needed, they will be saddled with enormous pension and health care costs, they will lack customers and suppliers, and they will face constant disruptions and fluctuations in their markets.  So ‘improving society’ is a matter of sheer survival for business; unless firms start to shape the environment in which they operate, they will not be around to make profits twenty or thirty years from now.

While all the executives faced people in their own firms who had a narrow view of business purposes as merely chasing profits (the bottom line of Profits & Losses), these executives really ‘got it.’  They knew that if today’s youth do not find jobs, their firms will not be able to find the experienced workers and consumers with discretionary income that are vital to their future.  They knew that if business doesn’t contribute to improving and adapting to climate change, people will scream for their heads when climate change starts to bite sharply into their lives (as the Colorado wildfires just a few hundred miles from us made painfully clear), and that business will increasingly bear the costs of disruptions and damage to land and supplies of renewable resources.   They knew that their skilled and experienced workers are a key asset, and if they don’t find a way to keep them productive, but just let them turn into expenses through retirement and health costs (which they would have to finance by taxes or in-house obligations), their own bottom lines will suffer. They knew that if they didn’t promote the education and economic activity of women in societies where they worked, those societies would never reach their full economic potential.  And they recognized that if they don’t help combat corruption and foster rule of law in developing nations, then the most promising global arena for their own future profit growth will fail to materialize.

Yet enormous and daunting as these problems are, these executives saw them as opportunities – opportunities to gain in reputation, to cultivate future customers and workers, even to save lives by supporting everything from emergency services and health care to augmenting food production and moving food and energy to where they are most needed.   Moreover, each of these outstanding executives already had projects at their companies that were addressing these problems; the real need was to scale them up, sustain them, and make them core elements of their overall corporate strategy.

All of us recognized that these problems were so large, so pervasive, and so woven into the operations of firms that government alone could not solve them; government alone does not have all the resources or the knowledge required to do the job.  Yet everyone also deplored the degree to which business and government have become at loggerheads today.   It is going to take public-private partnerships, as well as corporate initiatives, to develop solutions to these global problems that will be effective, sustainable, and efficient.   The current atmosphere of mutual distrust and enmity between business and government has itself become a problem that needs to be resolved for America to move forward.   It is dreadful that the Democratic/Republican partisanship that is paralyzing our government is now paralleled by a government/business partisanship that is a drag on our economy and an obstacle to solving major social problems.

Still, I came away confident that the private sector is up to the challenges.  If these executives represent the future of private initiatives, and continue to have the backing of their boards and CEOs, America will have good reason to say “God Bless the Private Sector.”

About these ads

About jackgoldstone

Hazel Professor of Public Policy at George Mason University
This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s