Capitalism Must Develop More of a
Conscience
By Klaus Schwab, President World Economic Forum
NEWSWEEK
In today’s trust-starved
climate, our market-driven system is under attack. Businesses need to adopt
more of a social philosophy
Today,
large parts of the population feel that business has become detached from
society – that business interests are no longer aligned with societal
interests. And it is not enough to
say that business has been discredited by the behavior of some greedy or
even fraudulent CEO’s, and that tightening the rules will demonstrate to
the public that the majority of business leaders are trustworthy. What has come under attack now is the
credibility not only of our business leaders but of business itself – or,
in other words, of capitalism and our market-driven system.
THIS IS
a paradox. The welfare of all people can be increased only if we use
available capital and human resources in the most efficient way. Free
markets, democracy, transparency, global interaction and entrepreneurship
are the only way to boost economic progress and social development. Yet
many people are longing now for different solutions. There has been a
proliferation of simplistic, populist voices condemning the capitalist
system as cold and inhumane. At a time of corporate scandals and economic
stagnation, those voices find fertile ground not only among the traditionally
left-out minorities, but increasingly among large parts of the middle
class.
This
middle-class moroseness can be explained by the sudden fear people feel for
their future. The capital stock has shrunk, retirement benefits no longer
seem secure, health costs are eating away at income and job security is
fading even for the well trained. In some ways this movement against the
system has already infected whole nations: in Latin America, several governments are at
odds with the fundamental driving factors of our free-market system.
The
only way to stop this new wave of anti-business sentiment is for business
to take the lead and to reposition itself clearly and convincingly as part
of society. Business needs to propagate—and live up to—a new philosophy I
would call “society-oriented business.” This philosophy has four elements:
corporate attractiveness, corporate integrity, corporate citizenship and
social entrepreneurship.
Corporate
attractiveness means that a corporation has to prove its social raison d’etre. This requires it not only to maximize
shareholders’ value but to serve all stakeholders, meaning society as a
whole. Responsible management should appreciate the likely long-term payoff
of contributing to the construction of stronger societies and, hence, more
vibrant economies. To build business attractiveness requires a change of
the short-term mind-set of many investors—or, rather, speculators.
Corporate
integrity means that business should be governed not only by rules but by
values. Business leaders will be trusted only if their and their employees’
actions reflect a true culture of corporate integrity, which springs from
individual moral integrity.
Corporate
citizenship means that business has to help find solutions for the big challenges
of our time. Business has to work hand in hand with governments and civil
society in employing its capabilities and its know-how in the fight against
poverty, AIDS and all the other issues on the global agenda that undermine
the dignity of life and threaten our very existence.
And
finally, business and government should support social entrepreneurs who
help attack global problems, from poverty to water shortages, in their
communities. There are thousands of social entrepreneurs at work around the
world (www.schwabfound.org). Some examples: Iftekar
Enayetullah and Maqsood
Sinha run a company called Waste Concern in Bangladesh. They collect waste house to
house, then compost it in local plants, providing
organic fertilizer for the nation’s depleted soils. Or take Bunker Roy (of Barefoot College, India), who identifies poor,
semiliterate youths in rural India and trains them as architects,
doctors, solar engineers and IT specialists.
The
fundamental paradigms change with history and change history. The time has
come to articulate and practice a more enlightened society-oriented
business philosophy. If we have the strength to do so, we can all look
forward to a better future.
