Michael J. Baker

Michael J. Baker

Social Business:

Business

as if

people

mattered

The pursuit of ‘economic growth’ has promoted materialism and over-consumption

It

is not sustainable

But 2.5 billion people live below the poverty line

Michael J. Baker

2

‘Big Business’ and Capitalism are responsible and the ‘villains of the piece’

I believe this misunderstands the role of both

Potentially they are the solution, not the cause

Michael J. Baker

3

“Consumption is the sole end and purpose of production”

Adam Smith, 1776, the ‘Father’ of Economics

Michael J. Baker

4

Michael J. Baker

5

Smith’s emphasis on task specialisation and

exchange in ‘free markets’, facilitated by

c

ompetition and capitalism, was founded on

the

concepts of mutual benefit and

satisfaction

Michael J. Baker

6

Benefit, satisfaction, value etc. are all

subjective states

of mind particular to individuals’,

ie

.

a

qualitative

judgement

or

‘measure’

Michael J. Baker

7

Smith’s successors – the nineteenth centuryneo-classical economists – abandoned qualitative measures as ‘unscientific’ in favour of quantitative (objective) measures. [‘physics envy’]

In doing so they removed the human element

f

rom economic analysis and policy formulation

Michael J. Baker

8

Economic growth is measured in terms of the ‘Gross Domestic Product’ (GDP) which is the aggregated monetary value of all the goods and services produced annually by a nation

It takes no account of the quality of life enjoyed

b

y individual citizens,

ie

. the aggregated

value

o

f consumption; nor does it take ‘externalities’

into account

Michael J. Baker

9

Vicious circle-Recession-unemployment-lessdemand-more unemployment-deeper recession

Virtuous circle- increased consumption-economic growth-more jobs-more demand-more growth

Concern over the sustainability of policies

promoting economic growth began to gather

momentum

in the 1960s

Michael J. Baker

10

International recognition of the need for concerted

action was

prompted by the

Brundtland

Report (1987

). Its

Key Recommendations were

:

Reviving growth

Changing the quality of growth

Meeting essential needs for jobs, food, energy,

water and

sanitation

Ensuring a sustainable level of population

Conserving and enhancing the resource base

Reorienting technology and managing risk, and

Merging environment and economics in decision making

Michael J. Baker

11

Effectively, Brundtland took up Shumacher’schallenge “Small is beautiful” with its theme “Economics as if people Mattered”

Simultaneously (1987), Lutz and Lux

published

Humanistic

Economics

challenging

mainstream economics

with its emphasis on quantification

to the

neglect of qualitative factors that

influence human

consumption behaviour – the

concept of

the “dual-self”

Michael J. Baker

12

Put simply, the dual-self recognises that basic physiological

needs

are moderated by social and psychological factors

identified

in Maslow’s Hierarchy of Human Needs,

viz

:

Higher Self Growth Needs

Lower

Self Deficiency Needs

Self-actualisation

Ego-aggrandisement

Truth seeking

Self-interest

seeking

Reasonable

Rational

(economic)

Principled behaviour

Instrumental

behaviour

Altruism and love

Selfishness

Objective

Subjective

Transpersonal

Personal

(

individual)

‘Some Basic Characteristics of the Dual-self’

(

Lutz and Lux Table 1.1

,

page 17)

Michael J. Baker

13

In essence, the dual-self is motivated by self-interest - survival depends on it - but is enlightened by the knowledge that collaboration and co-operation will result in better outcomes than selfish self-interest that ignores the needs of others

The

Golden Rule

Michael J. Baker

14

Adam

Smith’s original conceptualisation of

capitalism

and free trade was based on the

assumption of collaborative exchange

behaviour guided

by moral principles and regulated by

laws to

control/punish those who ignored

or broke

them

Michael J. Baker

15

By replacing the needs of individuals with the‘objective’ notion of demand, laissez-faire(Anglo-Saxon) capitalism enabled Business topursue profit by any means within the Law

But

, democratic governments failed, to a

greater

or lesser degree, to regulate the

market

and prevent businesses from

a

dopting unethical practices and

unprincipled behaviour

Michael J. Baker

16

There is growing evidence that younger people -’Millennials’- are more socially engaged and concerned with ethical and moral issues. This is reflected in the changing curricula of major Business Schools and the PRME initiative

It is also apparent in the growing emphasis given

to Corporate Social Responsibility in business

strategy and practice

Michael J. Baker

17

Governments establish and regulate the environment in which economic growth occurs but it is Business that decides what will be produced and for whom

Social Businesses accept responsibility for the needs

of all

their stakeholders and for the environment on

which all

depend