Oct 2010 27

A blog post entitled Companies are not charities for The Economist magazine’s Schumpeter Blog endorses the opinion of one South African academic who believes that less developed countries cannot afford to hold multinational corporations to as high a standard of social responsibility as they would be subject to in the their richer home countries.

“Ann Bernstein, the head of a South African think-tank called the Centre for Development and Enterprise, thinks that advocates of corporate social responsibility (CSR) tend to miss this point. In her new book, “The Case for Business in Developing Economies”, she stresses the ways companies benefit society simply by going about their normal business. In a free and competitive market, firms profit by selling goods or services to willing customers. To stay in business, they must offer lower prices or higher quality than their competitors. Those that fail disappear. Those that succeed spread prosperity. Shareholders receive dividends. Employees earn wages. Suppliers win contracts. Ordinary people gain access to luxuries that would have made Cecil Rhodes gasp, such as television, air-conditioning and antibiotics. (emphasis added)

These are not new arguments, but Ms Bernstein makes them fresh by writing from an African perspective. Citizens of rich countries often fret about the occasional harm that corporations do, yet take for granted the prosperity they create. People in developing countries do not have that luxury...” (emphasis added)

She is effectively saying that people in poorer countries cannot afford to hold the large multinational corporations who go there primarily for their cheaper wage labour and raw material endowment, to the same standards of social responsibility that they are subject to at home because they are poor. There are a number of things that are wrong with this position in my view. It assumes that wealth and services created by foreign direct investment will “trickle down” to all to the most needy within those societies, when in light of corruption and gross inequality within the third world, this is far from certain. New services and luxuries introduced by said corporations may be out of the reach of “ordinary people”. By saying let them make their profit and don’t get in their way Ann Berstein inadvertently invites these corporations to exploit third world economies and their people. This is all the more worrying considering that they have already acknowledged that “companies are not charities” and are prepared to tolerate harmful externalities and social costs in the pursuit of their profits.

The people of the Gulf of Mexico do not consider guarantees of safeguards from oil spills as a luxury and neither should those of the Niger Delta in Nigeria (where people have suffered daily from the consequences of oil spills), or should they? Or how about… other examples.  She goes on to trivialise efforts to ensure that economic development stemming from corporate investment will be sustainable and equitably distributed by pointing out difficulties with their implementation.

In South Africa, where more than a third of the workforce is jobless, the problem is not that corporations are unethical but that there are not enough of them. One reason is that South Africa’s leaders blithely heap social responsibilities on corporate shoulders. Strict environmental laws cause long delays in building homes. This is nice for endangered butterflies, but tough for South Africans who live in shacks. Such laws also slow the construction of power plants, contributing to the rolling blackouts that crippled South Africa in 2008. South African labour laws make it hard to fire workers, which deters companies from hiring them in the first place. And a programme of “Black Economic Empowerment”, which pressures firms to transfer shares to blacks, has made a few well-connected people rich while discouraging investment. Ms Bernstein ducks this last topic, which is highly sensitive in her home country.

If you can’t beat them join them. After all a job in a sweatshop is a still a job right? It seems to me that this kind of talk fuels the race to the bottom in terms of international labour and environmental standards which advocates of corporate social responsibility are fighting against. She also argues that civil society should step out of the way and leave Governments to regulate corporations, neglecting to recognise that these Governments especially in less developed countries are likely to be corrupt and  willingly complicit in the side stepping of responsible standards. The buck has to stop somewhere and I wonder who has missed the point.

1 Comment

  1. […] corporations implying that if they exist oil companies will be held to high standards of corporate social responsibility etc because we don’t want exploitation in our future). Not one to rest on laurels, he also […]

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