Capitalism at Risk: Rethinking the Role of Business. Joseph L. Bower, Herman B. Leonard, and Lynn S. Paine. Harvard Business Review Press 2011, pp.254, $29.95 The message of the ongoing Occupy Wall Street protests remains unclear. Nevertheless, it is safe to say that some of the most virulent Occupy Wall Street (OWS) protesters are questioning [...]
Capitalism at Risk: Rethinking the Role of Business. Joseph L. Bower, Herman B. Leonard, and Lynn S. Paine. Harvard Business Review Press 2011, pp.254, $29.95
The message of the ongoing Occupy Wall Street protests remains unclear. Nevertheless, it is safe to say that some of the most virulent Occupy Wall Street (OWS) protesters are questioning the very underpinnings of the American capitalist system. While it is easy to mock the most outrageous elements among the self-described occupiers, those who underestimate this burgeoning movement do so at their peril. Even Republican Majority Leader Eric Cantor backtracked from his original criticism of OWS as a “mob” and has rightly acknowledged that too many Americans are indeed facing an uncertain economic future.
Although the authors conceptualized and wrote Capitalism at Risk prior the advent of the inchoate OWS protest movement, they begin with the premise that capitalism is imperiled and subsequently argue that business itself must take the lead in maintaining the viability of the global capitalist system. In their recent co-authored book, Bower, Leonard, and Paine, all three of whom are professors at Harvard Business School, set forth what they described to be a “radical proposition.” It is their belief that business needs to adapt. “The capitalist system,” write the authors, “has generated enormous wealth in recent decades, but if the system continues to operate more or less as it has been operating, then it is vulnerable to breaking down in serious ways.” Unlike other scholars who would prefer to see governments taking the initiative in ameliorating the excesses of capitalism, while simultaneously preserving its undeniable benefits, the authors want business itself to take the lead in this regard.
Conceptualized as a project to commemorate the centennial of Harvard Business School, Capitalism at Risk is the resultant product of a series of off-the-record meetings, as well as some on-the-record interviews, which the authors conducted with forty-six prominent Harvard MBA program graduates in Asia, Europe, Latin America, and the United States. Although the work would have benefited from a more clearly delineated timeline, detailing exactly when the authors met with the forums’ participants, it would appear that the discussions were conducted prior to the financial meltdown of late 2008. As part of their discussions and interviews with the aforementioned business leaders, the authors presented them with a World Bank Study. This document, also drafted prior to the financial crisis, projected how the global economic system might appear in the year 2030. The authors then asked the participants to reflect upon the report.
Building on these discussions, Bower, Leonard, and Paine identify what they consider ten disruptive forces, both internal and external, to the success and viability of the free-market system: the financial system; the state of trade; inequality and populism; migration; environmental degradation; failure of the rule of law; public health and education; state capitalism’s rise, radical movements, terrorism, and war; and evolution and pandemics. They then add their own argument regarding the inadequacies of existing institutions to cope with the ten disruptors. In light of the spread of the OWS movement to Europe, it is notable that the authors found that the business executives they spoke with expressed deep concern with capitalism’s current tendency to produce gross inequality and how this could give rise to populist, anti-free market political movements.
In phraseology sure to endear themselves to sociologists and to frustrate those readers who would prefer less academic jargon, the authors conceptualize market capitalism as embedded in an ecosystem. “But if market capitalism is viewed in relation to the larger sociological system in which it is embedded, many, if not all, of the concerns voiced by our executives appear to be interrelated and to lie at the interface between the market system and the larger system that supports and legitimizes it.” In other words, businesses do not operate in a vacuum; rather, they function within a broader context and have to be responsive to both internal negative consequences of capitalism as well as to exogenous factors.
In the second half of Capitalism at Risk, the authors make the case for what they term the “business as leader” approach, arguing that “business can and must play a central role in sustaining the market system and improving its performance for society.” They build the case for innovative business models and institutional activism. As an example of an innovative business model, they point to China Mobile’s success in bringing rural Chinese into the market system and also making a profit. In the final chapter, “Rethinking the Role of Business,” the authors argue that, in light of government’s inability to provide necessary public goods, firms will have to find a way to do so, while simultaneously finding a way to be profitable.
Although Capitalism at Risk contains many important insights, its central argument, that business needs to change, is perhaps not so radical after all. Successful corporate executives need to be cognizant of the political worlds in which they work, and successful global businesses have repeatedly adapted to differing geopolitical circumstances. Generally well presented, at times the book’s prose seems uneven; this is perhaps due to the fact that there were three authors. The book’s greatest weakness, however, is that the business executives’ concerns discussed in Capitalism at Risk were expressed prior to the massive bailouts of the financial sector, the sovereign debt crisis in Greece, and the rise of both the Tea Party and the OWS movement. This, it must be stressed, is hardly the authors’ fault. Nevertheless, one wonders what the resultant product would have been had the authors’ conducted the forums in 2009 and 2010.
In conclusion, Capitalism at Risk provides a framework for business executives who are concerned about the state of global capitalism and would like to adapt their firm’s business structures to address new socio-political challenges. The authors are clearly passionate about advancing their argument and should be commended for addressing very serious issues and providing possible solutions. Although some executives may reject the authors’ arguments, it would be far better for business to change on its own, rather than be overtaken by anti-capitalist political forces prone to excess and sloganeering.
Jon Lewis (c) 2011