Supercapitalism: a splendid book which I advise you to read
January 7, 2008
The book offered me splendid food for thought. Firstly, Reich offers an interesting view on how capitalism and democracy have evolved. Today their fortunes are beginning to diverge, he says. Capitalism is thriving while democracy is struggling to keep up. Capitalism has brought prosperity to many and offers great advantages to us as consumers and investors. Yet, as citizens we don’t like many of the consequences that flow from our transactions as consumers and investors. But in today’s democracy a sense of political powerlessness is on the rise. Democratic institutions have not been able to keep up with the strong rise of capitalism and the boundaries between capitalism and democracy have blurred.
Capitalism should not be blamed for this, Reich explains. The role of capitalism is to increase the economic pie, nothing more. It is the responsibility of democracy to set the rules and protect the common good. Neither companies, nor executives should be entrusted with a kind of social responsibility or morality, he argues. “Corporate executives are not authorized by anyone – least of all by their shareholders- to balance profit against the public good”.
This objection against “corporate social responsibility” (CSR) or “sustainability” is a second element that makes this book so interesting. However, his case deserves some counter arguments:
For starters I think it is important to note that companies have to follow the law, no exceptions accepted. This leads to the conclusion that CSR by definition deals with things that are “beyond legal requirements” (at least that is the common point of view in my country). What we also see is that companies tend to follow single standards in their global activities. A Dutch chemical company will not accept lower standards in its plants in emerging economies. If only for defensive reasons; they don’t want to run the risk of public exposure by NGO’s. But in a more positive fashion; increasingly it is recognised that these higher standards lead to better results (less waste, damage, accidents). I don’t see any objections against companies setting these higher standards, which local democracies have not yet been able to put in place. Moreover, we seem to have to accept that governments are increasingly less effective and efficient in setting the rules. They are simply too slow to follow the markets and moreover they are bound by geographical limitations that the economy doesn’t follow. There is little reason to believe that international or supranational institutions can deliver the rules base that would be needed. Yet every attempt to create a “level playing field” will only be applauded.
Secondly I don’t think that the general public will let itself being fooled by CSR as Mr Reich seems to worry. There is a very active and powerful civil society and this even brings up claims on issues that are strictly legal. Contrary to Mr Reich I don’t see much harm in an open debate in the public domain on such issues. This dynamic does require both companies and NGO’s to strengthen their ability to tell their story and make valid points. Stakeholder dialogue offers companies and NGO’s the opportunity to convince each other and the general public of the strength of their case. CSR increases this dialogue, which adds to transparency.
Lastly, both investors and consumers are increasingly taking into account the non-financial consequences of their behaviour. Brands are “communities of believers”. Living up to high social, environmental and governance standards is crucial for companies to avoid that their “believers” turn away. Companies already know this and act accordingly.
The notion of CSR / sustainability is here to stay. But books as this one of Mr Reich test us and challenge us to improve our line of thinking and our performance. This is very valuable and thus I advise you to read this splendid book.
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