Monday, April 29, 2013

Misguided Approach to Creating Shared Value


The capitalist system is alive and well, contrary to what Michael Porter and Mark Kramer write in “Creating Shared Value.” Companies continue to “prosper at the expense of the broader community,” politicians vie for the title of “business-friendly” to reap the campaign contributions it brings, and so-called economic developers push their politicians to give more incentives to companies to locate in their district in the name of attracting jobs. These patterns have been in place for the past, um, few centuries at least. If the capitalist system is “under siege,” it may well be the longest siege on record.

Resource extraction companies from colonial powers led the modern method of taking advantage of communities, mining and drilling without regard for local communities. Terms like “exploitation” and “indentured servitude” come to mind. Before you start thinking that times have changed, think about George W. Bush’s Treasury Secretary Paul O’Neill’s description of the process of deciding to invade Iraq in 2001.[1] This happens locally, too. Gas pipeline companies use eminent domain lawsuits to acquire land when the deed-holders do not want to sell it amicably.[2] This is, of course, not confined to resource extraction either. The Congressional Budget Office is documenting the increasing wealth that goes to the already-wealthy relative to the not-so wealthy,[3] the media covers the obnoxiously high salaries and bonuses of those in the financial sector, and the government rescues the economy from the poor decision-making of the bankers. It is not simply the perception, as Porter and Kramer think, that companies are prospering at the expense of society; it is fact.

Moreover, companies know which politicians will be more and less malleable to their machinations. The moniker “pro-business” or level of “business-friendliness” seems to be code for “willingness to give higher incentives and lower regulations.” No politician wants to be labeled “anti-business” because no politician is actually anti-business, but they need to be seen as pro-business in order to attract contributions for future campaigns. This is even more important after the Citizen’s United decision. Moreover, economic developers engage in a race to the bottom to attract businesses that they think bring jobs. But those businesses eventually leave and the local communities then suffer. Since I have described this phenomenon earlier on this page, I will not go into it again.

Porter and Kramer describe how companies should invest where they work because it is in their own self-interest.  This is true. But they draw the causal conclusion that as more businesses engage in social responsibility, they are blamed for more of “society’s failures.” Companies are part of society, they argue, but they write as if there are two separate entities: a capitalist system and the rest of society. They make a reasonable push to make explicit and convey the importance of the relationship between companies and place, but their approach is misguided.


[1] Leung, Rebecca. “Bush sought “way” to invade Iraq?” 60 Minutes February 11, 2009. Accessible at http://www.cbsnews.com/8301-18560_162-592330.html
[2] Lord, Richard. “Eminent domain plays a key role in U.S. pipeline projects” Pittsburgh Post-Gazette April 27, 2013. Accessible at http://www.post-gazette.com/stories/local/marcellusshale/eminent-domain-plays-a-key-role-in-us-pipeline-projects-685203/
[3] White, Mercedes. “Increasing income inequality is changing the way people in the U.S. live, new research says” Deseret News January 11, 2013. Accessible at http://www.deseretnews.com/article/865570486/Increasing-income-inequality-is-changing-the-way-people-in-the-US-live-new-research-says.html?pg=all

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