Thursday, 21 May 2015

Milton Friedman's ghost in Mombasa, 2015

The fashion at corporate responsibility summits is to mock Milton Friedman, the Chicago school economist.

I often wonder how many who do so have in fact read his late 1960s - early 70s doctrine before dismissing his famous line that '... the only social responsibility of business is to make profits...'

(Here it is in a nutshell, and by the way in its full explicit Cold War, capitalism-as-freedom context; a fair full quote would add what he did: '... so long as it stays within the rules of the game ...' engaging in free and fair competition without deceit, and compliance with the laws of the land.) 

Friedman's ghost has appeared a few times to me, in broad daylight too, here.

'Here' is downtown Mombasa, the heaving multi-ethnic port city that has long been the gateway to Kenya, and indeed to the entire east Africa region.

(Through its congested port comes everything from east Africa's oil supply to many of the small consumer goods sold by the region's ubiquitous street traders; too little that is Kenyan besides tea is exported in return -- and too much of its 'exports' consist of ivory poached for Asian markets, but that is perhaps another story ...)

In apparent contrast to Friedman's austere doctrine, we now tend to accept that 'the development challenge is no longer the preserve of government'. So reads an editorial by Kenya's deputy president in a local daily, following remarks he made at a conference in Nairobi earlier this week.

The remarks are an opportunity to reflect on what business the business community has in designing and delivering the development agenda -- globally, nationally and locally. 

There is no doubt, in my mind, that business (however we might define it) both has a significant role to play (within some important limits), and has clear interests in the development agenda succeeding.

The deputy president's remarks raise some consistent issues in topical debates on how the private sector can support development, and how supporting a vibrant private sector can have developmental dividends ... 

Some points he makes are hard to argue against. The private sector stands to benefit from developmental gains; its role goes beyond financing or co-financing projects that have development impact -- it is not just a source of resources; and so on.

And only purists will object to him using the term 'corporate social investment' (which can have a limited CSR-project meaning), where he really means a range of broader impacts that larger firms and funds can have beyond simply Friedman's approach of maximising profits while obeying the rules of the game, especially paying taxes and employee's salaries and complying with environmental and other laws.

Here in Mombasa there are initiatives, for instance, that reveal business groupings taking a more deliberate, engaged, do-not-wait-for-government approach to issues such as finding work for what Friedman called 'the hard-core unemployed'.

Yet call me a heretic, and accuse me of seeing ghosts: Friedman was not totally, as they say, 'on crack'.

In all my meetings with businesspeople here, including (in fact, especially) those with sincere longer-term developmental passion and vision, a message emerges that on its face is uncomfortable for all of us espousing a far greater explicit role for business in development.

This is the inconvenient truth that the greatest developmental impact business could have in places like this is for government to focus on allowing them to succeed as businesses. Not specifically as socially responsible or development-oriented businesses (although there's no trade-off necessary), but to succeed as law-abiding firms creating value, jobs, tax revenues, demand for better governance, and so on.

The developmental impact that a flourishing, open business sector could have in such places (within the natural resource and environmental envelope) perhaps compels one to turn from exploring alignments and partnerships (the current trend) to old-fashioned 'let tax-paying business succeed'.

The public policy issue then is far more about fostering enabling environments for core business activities, than persuading business to seek alignment with particular aspects of the development agenda. 

If so, it follows that contrary to the deputy president's (otherwise welcome) message, the role of government is not to help business identify where it can have maximum developmental impact.

Instead the role of government is to identify where it (government) can create maximum developmental impact by identifying where to help business do what business does best, while upholding the (evolving, more demanding) rules of the game ... cue Milton Friedman's famous quote.


PS -- this approach may of course assume that government has the regulatory, planning and other capacity in particular to tax business appropriately and to make use of those revenues.

No comments:

Post a Comment