Wednesday, February 02, 2005

The Economist and CSR

The cover story in last week’s Economist took a skeptical look at corporate social responsibility (CSR). The author made a number of excellent points and a bunch of shitbrained ones as well. It needs a response, though, because even at its strongest moments the argument against CSR smacks of neo-con self justification. And since it’s a well-written article in a respectable magazine, I can’t just say “forget this bullshit, I’m gonna go eat an ice-cream sandwich.” Hence the observations below.

The basic point of Clive Crook’s article is that CSR, while sometimes well-intentioned, misunderstands capitalism and ignores economic processes and impacts. Plus, it’s not the natural or appropriate arena for business. According to The Economist, CSR is “based on a faulty – and dangerously faulty – analysis of the capitalist system [it is] intended to redeem.”

The article argues against CSR in part because it assumes a dichotomy between the shareholders and the public, negating the possibility that what is good for one may be good for the other as well. The editorial section also strongly asserts that “without trying, [a company] does ‘good works’ by conducting honest business.” I don’t know to what degree advocates of CSR would actually dispute this claim, but even so the article presents a few supporting examples:

1. “Employees willingly work for the company in exchange for wages; the transaction makes them better off.” Though the pronoun’s a little indeterminate, let’s assume they’re talking about the employees being better off, and let’s also respectfully suggest that the idea of a universally willing workforce is a little passé, as is the implication that being “better off” is the same thing as being “happy” or “secure.” Having money is better than not having money, but that doesn’t mean that paying poverty wages constitutes an act of “good works.”

2. CSR is unnecessary because “well-run companies will strive for friendly long-term relationships with employees, suppliers, and customers.” Depends on your definition of “well-run.” There are plenty of companies, especially in hospitality and retail, that operate on business plans geared towards a turnover market. Plus, if “loyalty” is what’s being cultivated by the well-run business, wage and price pressures have an unfortunate tendency to make people “loyal” out of necessity. A full-time waitress, hospital employee, or janitor can have a “friendly, long term relationship” with the Armani Exchange window display but their economic circumstances are gonna make them "loyal" to Walmart.

3. Finally, “the selfish pursuit of profit serves a social purpose…this is not the fatal defect of capitalism, as CSR-advocates appear to believe; it is the very reason capitalism works.” See, I personally would argue that it’s both. I’d also point out that it’s not the selfish pursuit of profit that raises (or lowers) our standard of living, it’s the amount of justice and sensibility we use to regulate it.

Okay, so even if we ignore the contrary evidence and hypothetically grant the premise of a one-to-one relationship between private profit and public good, most of us would still like to see some support for this claim. The full survey (later in the magazine), does offer two necessary criteria for private profit to translate into public welfare. According to Clive Crook (this guy’s name is too good to be true), the process requires free competition and accurate social pricing. Well, we have neither, Clive. Free competition is, of course, a theoretical myth, like pure communism. It works at a lemonade stand (or a kibbutz), but not in any form of modern economy. And -- on the subject of accurate social pricing -- despite the article’s lengthy arguments to the contrary, many of our most valuable “commodities” simply cannot be accurately priced, but are regularly underestimated. For easy, do-it-yourself examples of inaccurate social pricing, try applying for a job as a childcare worker or calculating the "value" of not dying from mercury poisoning. Environmental costs and labor value represent two of the many mis-priced items in today's (and yesterday's) economy. One last thing on private profit and public good: even if we could achieve Crook’s two conditions, we’d still have to eliminate all the social structures that affect opportunity and standard of living. I’m talking about wealth concentration, segregation, immigration policy, sexism, etc. etc.

So forget granting the hypothetical premise. I don’t believe there is a one-to-one relationship between private profit and public good. Which, I suppose, makes me automatically more sympathetic to anything that tries to even out the gap, like CSR. But I’m open to examining that, because God knows I don’t have enough training in business operations or market economics to evaluate whether CSR actually does any good. Unfortunately my lunch break’s over, so you’ll have to wait till tomorrow for the second half of this response, which will feature a similar degree of scintillating, incisive analysis.

I’ll try to work more enraged cyberspace trash-talk into the next post, as well. Don't worry, I know what side my bread is buttered on. In that spirit, I'm gonna go out on a limb and suggest that some divine presence confiscated Oren Hatch's conscience, humanity, and self-respect, replacing them with a half-eaten churro.

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