What roles and responsibilities do corporations, non-profit organisations, donors and investors play in society?
Professor Paul Hudnut at Colorado State University ponders such questions in his research. Do the four play different functions in the global and local economy?
What role do the pillars play in international development, social enterprise ecosystem and in your own business venture?
The 19th century saw a radical shift in global political economies. The world began implementing the earlier views of Scottish economist Adam Smith who in 1776’s The Wealth of Nations says countries gain power through competition and mutual trade rather than through acquisition and hording of gold and precious stones.
The 20th century saw the struggle between two dramatically different economic schools of thought: communism and capitalism.
By the end of the century, Marxist communism proved ineffective and Keynesian capitalism versus Classical Economic capitalism ruled from lecture halls to central bank offices.
At the start of the 21st century, from 2002, former President Mwai Kibaki tussled between Keynesian government involvement to stabilise the Kenyan economy and classical economics, which lets markets take care of themselves, avoiding meddling too directly so that the economy could grow.
His policies worked and Kenya’s GDP per capita finally outpaced the economy during colonial British rule for the first time; our GDP grew faster than nearly every country in the developed world.
By the 2008 global financial crash, however, Keynesian economics took a hit as governments tried but failed to stop the meltdown. Kenya dodged the crisis due to a fairly less intertwined financial system and a lower acceptance of home mortgages in the Kenyan market.
In the post-financial crisis world, great thinkers now struggle with new forms of economic debate.
The first, as writer and CNN television personality Fareed Zakaria puts it is the rise of the rest of the world beyond of Europe, North America, Japan and Australia.
Kenya certainly moves forward along a growth trajectory unimaginable even 20 years ago. Each year hundreds of thousands of Kenyans join the ranks of the growing middle class.
The second big post-financial crisis debate involves the actual role of corporations and investors. As the world moves through the 2010s, the lines get blurred often between the role of corporations, NGOs, donors, and investors.
Do companies inherently possess a socially conscious responsibility to society? If not, should companies only focus on their core competencies and let governments, NGOs and donors pick up the pieces?
The debate draws from three widely different schools of thought. The first encompasses University of Chicago economist and Nobel Prize winner Milton Friedman.
Friedman famously advocated for independent free markets. He argued that “there is one, and only one, social responsibility of business — to use its resources and engage in activities designed to increase profits…”
Friedman did not believe in corporate social responsibility, social conscious business products or socially protective labour practices.
He fully believed that businesses should only be about the business of making money. The government, NGOs, donors, and foundations, therefore, should pick up the rest.
The next great thinker on the far other side of the spectrum is prolific author and Claremont Graduate School professor Peter Drucker.
He stood decidedly against the profit motive of corporations: “The rhetoric of profit maximisation and profit motive are not only antisocial. They are immoral.”
Through his 39 books, he delineated innovative management practices as he pounded away against greed and corporate selfishness.
The final impactful thinker in the debate is multi-billionaire Microsoft founder and philanthropist Bill Gates.
Gates stands between the two extremes of Milton Friedman and Peter Drucker and advocates for a new type of corporation that goes deeper than the public relations stunts deemed as CSR: “Even with all the problems we face today, we are at a high point of human well-being.
The world is getting a lot better. The problem is, it’s not getting better fast enough and it’s not getting better for everyone.”
Where do you fall? When surveying executives in Nairobi, USIU notices that nearly half subscribe to the Milton Friedman view about the role of corporations that revolve purely around profit.
Few executives view Peter Drucker’s anti-corporation rhetoric as correct. Then, the largest number of executives, slightly over half, believe that Bill Gates’ position is the right one. Corporations should make money, but in a socially conscious way.
If corporations acted in accordance with Bill Gates’ beliefs, would we need NGOs and donors any longer? You may have noticed that even the essence of donors continually changes.
Kenya previously experienced more bilateral donors like USaid, DfID/UKaid, Danida, Cida and the like.
Bilateral aid revolves around countries who desire to assist Kenya, but also serve their own domestic agendas. Multilateral donors including the IMF, World Bank and UN programmes receive no shortage of criticism, particularly for the IMF’s structural adjustment programmes under President Moi that forced multi-party democracy in the early 1990s.
Now billions of shillings come from the Chandaria Foundation, Coca-Cola Foundation, Safaricom Foundation, KCB Foundation and others. How is private charity changing the donor landscape?
What are the boundaries between corporations, investors, NGOs and donors? Further, where is the next big debate? Perhaps how do we permanently end all poverty?
Continue the debate on Twitter: #KenyaEconomicFuture. Your comments and examples shall form the basis of next week’s Business Talk.
Professor Scott serves as the director of the New Economy Venture Accelerator at USIU’s Chandaria School of Business and Colorado State University. Contact: [email protected] or @ScottProfessor.