In his last post Todd raised some interesting questions about how social enterprises can have a wider impact on society and escape the compartmentalised box they are sometimes placed in. Mike responded by arguing that separating social enterprise and the wider business world creates a false dichotomy. Instead he argued what matters is making enterprise in all its forms a force for progress.
This debate is highly topical. The financial turmoil around the world has provoked many questions about the sustainability and desirability of the current capitalist system. The success of globalisation and economic development has anesthetised most of us to the problems it causes and left us resigned to the status quo. That anaesthetic is wearing off and giving us a chance to re-evaluate our most fundamental beliefs.
How does this relate to Todd and Mike’s discussion? My reading is that they are both making the same fundamental point. What matters in business, whether it is defined as ‘social’ or not, is the value that it adds to society. Google may not be a social enterprise but its innovation has added great value to people’s lives. In contrast Lehman Brothers made huge profits but little else. In other words greed is not always good.
The problem with the capitalist system is that it offers rewards to people and businesses even when they do not add value. The public are angered by huge city bonuses because these very people have destroyed, not created, value. Where wealth is earned by adding value most people are happy to see people rewarded for their work.
The challenge then is to rewire our economy to reward value. How you do this in practice is a much harder question to answer. But Todd and Mike are definitely onto something. The divide between social enterprise and enterprise as a whole is more ephemeral than is generally recognised. People working in the ‘social enterprise sector’ need to look out as much as they look in. They can help businesspeople in every sector recognise that all companies should be driven to add value as well as make a profit.
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A thoughtful and conciliatory post. It is not that the capitalist system offers rewards even to those who do not add value. It is the corruption of the capitalist system through complicated financial products and the excessive gambling on share prices that provides unwarranted rewards.
The Fountainhead – by Ayn Rand is epic on this topic!
However I am not pro capitalism per se – just pro enterprise – the creation of value under whatever economic system!
The problem is that corruption of the capitalist system is almost inevitable where rewards are not linked to the creation of value. People will find ways to earn rewards regardless of the effects on value.
Ultimately you are right though that the economic system is not the issue. That debate belongs in another sphere. The question then is how to encourage value creation within the capitalist system.
The key is changing the way people think – the focus should be value not just profit. People in the ’social enterprise sector’ are (or should be!) driven by value, so they could play an important role in changing the perceptions of others.
Interesting posts, but to an extent I think the system is precisely the issue!
If I remember my Adam Smith and Marx correctly, the driver of capitalism is the accumulation of profit. Profit is the realisation of surplus value – i.e the difference between the value that human labour (including that embodied in machinery) creates and that which is required for the reproduction of the ability to labour.
As I understand it, much of the current crisis has been driven by secondary markets, effectively betting on predictions of creation of future surplus value in the form of both physical and service commodities.Some people have made obscene amounts of money out of that because, by its nature, capitalism is set up to reward those who own and/ or control wealth and the process of its creation, rather than its real, physical creators – those who sell their (mental/manual labour because they own no other significant /wealth/worth/value-creating instrument.) The corruption is the system!
Like Mike, I’m not against the creation of surplus value. The issue, for me, is the extent to which, this side of the revolution(!), its ownership can be socialised and the form that socialisation of profit and capital takes. It’s clear that, under capitalist relations of production, the state (whether it calls itself Communist, or Democratic) , isn’t good at the holding and creation of common wealth. Nor, generally, (pace Mike) are private businesses. I do think that social enterprise offers possibilities for the creation and common ownership and control of wealth/value. However, I think we should be under no illusions about the competitive pressures that we will face within our own sector,(never mind between sectors!) precisely because we operate within a capitalist economy. And that in an economic downturn these pressures will intensify.
try the romantic economist by bronk for a different perspective.