Wednesday, December 9, 2015

Shared Value: Redefining capitalism?

Porter et al.'s article introduces the notion of 'shared value' which basically holds that if companies strategize not just on the profit motive but by taking into account the vast societal impacts of their operations and use technology and innovation to minimize costs and maximize benefits (at a societal level), a new kind of capitalism will be ushered in that surpasses even government in the amount of good it can do for society while simultaneously improving the company's financial successes. Improving vertical productivity in value chains and creating local industry clusters are all prescribed measures in this strategy.

In my opinion, while this notion sounds good in theory, its applicability is limited to countries where capitalism has matured as a robust socioeconomic system and/or to companies that are at the apex of their respective markets. In fact, the examples the article provides are all global giants: Unilever, Nestle, Google, Wal-Mart, Coke etc. These organizations have the economic power to attempt such value chain-strengthening measures as investing in enhanced productivity of African farmers, setting up industrial clusters to buy local and improving labor efficiency or investing in environmentally friendly production while concurrently maintaining an eye on profit. In developed countries, where business and society have reaped the full fruits of global capitalism, it makes sense for business to maximize value socially. It may be argued that the ITC is an example from a developing country with many shared value achievements. The fact remains, however, that ITC itself is a market leader with national and multinational recognition.

The bulk of businesses around the world are small and medium enterprises that do not have the capacity to implement shared value strategies. In fact, survival in global competition is a day-to-day struggle. Furthermore, most developing countries are afflicted with crony capitalism that in the process of integrating into the global economy only enriches and empowers an exploitative elite. Many such countries, which have been repeatedly educated on the advantages of free global trade by the IMF and the World Bank, would actually suffer from value destruction if global businesses for which these developing economies often produce raw or semi-processed goods decide to source locally to reduce carbon emissions from shipping. Shared value would make more sense globally if players like the EU, US and Japan lift their counter-productive barriers to agricultural imports from developing nations, which despite being technologically backward are still more efficient in agriculture, and invest in further enhancing farming efficiency and productivity in these nations. Shared value would also make more sense if global businesses do not on the one hand create shared value at home while on the other fully exploit the institutional 'voids' a la 'Strategies that Fit Emerging Markets' to situate polluting factories and sweatshops in countries with lax environmental and labor regulations.

It is an open question whether 'shared value' can resolve capitalism's inherent contradictions towards a more just system, or whether such a resolution is a necessary precondition for implementing meaningful shared value strategies. In any case, the idea gaining global acceptance and applicability is definitely a far cry.

Muhammed H Haider

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.