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.

Jo

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.

Business, peace and regulatory approaches

This post comes from Oslo, ahead of tomorrow's 'Business for Peace' award and summit.

The award was initiated by the B4P Foundation to recognise firms and business leaders that have made a special contribution to promoting the prospects for peace, either locally or (I suppose) on a net global basis.

The summit itself seems largely devoted to much broader 'sustainable business' themes. Adopting a nerdy hat, i'd have to say that more research is needed to support the (intuitive) proposition that sustainability approaches are also peace-enhancing ones.

The idea of recognition and other positive incentives reflects a sound regulatory approach that does not simply conceive of business as a source of possible conflict risk.

Much of the literature on business + peace / conflict is on the negative impacts that investment or business activity can have on peacebuilding, for example directed to conflict links in global supply chains, for example in the mining sector.

This is only part of the story. Awards like the Oslo one do not necessarily have significant impact, but the idea of recognition goes to the heart of a regulatory approach that seeks to harness the incentives, resources, etc of business in support of public policy objectives.

This approach informs my book Regulating Business for Peace (see link below) -- captured in this quote at the front of the book (Bardach and Kagan, 1982):

"[T]he social responsibility of regulators, in the end, must be not simply to impose controls, but to activate and draw upon the conscience and the talents of those they seek to regulate..."

The idea of measuring a business's net contribution to peace even in local settings, by the way, is a very complex one. This June sees the publication of our report from Chatham House exploring (in some factual scenarios) the merit of propositions that natural resource development in fragile states can have a 'peace-positive' effect.

This involves some tricky concepts, and for the most part business does not see a role in overt or explicit contributions to consolidating peace. It sees the scope of its proper role as efforts to 'do no harm', in terms of adopting conflict-sensitive approaches.

Public policy should be comfortable with that, while regulatory approaches should look to catalyse continuous improvement in business conduct -- social contributions well beyond mere compliance with minimum standards.

For some previous posts on this topic, and book link, see here. 

Jo