The Business, January 2002

Next week [31 Jan-4 Feb], the 'Davos” meeting of big business will be held in New York. This is of course being sold as a mark of solidarity with that victim of terrorism. Almost certainly, something else is at work as well. The World Economic Forum, the host of these events, has in recent years been the target of anti-capitalism protestors. In the wake of Seattle, Prague, Genoa, and of 9/11, it must have seemed like a good idea to meet where only barmy eco-terrorists will dare to do more than politely wave banners which criticise business and globalisation.

All would be well if the change of venue meant that the Davos meeting produced, just where it would resonate best, a striking, thoughtful defence of the merits of full-on capitalism – its value not least to the very poor - in the face of trendy dissidence found now all over the world. Instead we will get capitalism-lite.

The modern corporation has preferred to accommodate its critics. The biggest of the myths corporates have accepted is promoted by Naomi ('No Logo') Klein, Noreena ('The Silent Takeover”) Hertz and George ('The Captive State”) Monbiot. This suggests that corporations have grown overmighty, and the state has become weak. Seeking to minimise the risks to the bottom-line posed by protestors, firms have bent over backward to find NGOs – campaigners – with whom to discuss peace terms. They have accepted the new language by which anyone who takes an interest in their affairs, however ignorant, misguided or malicious, is now a 'stakeholder” to be schmoozed with the same vigour as the actual risk-takers, many of them quite poor, who bet their futures on the firms' share prices.

Next week, we will see the result. Firms will declare that they are in love with Corporate Social Responsibility. Actually, most already agonised on these subjects quite effectively, and did a good deal socially. They can't say so, because otherwise how can they claim to have seen the light?

In the Third World, CSR tends to mean bribing more locals with hospitals and schools. Oddly, it is little noticed that it also means that big firms are made to behave like local government, which does little to help real local government grow. Besides, hang on, weren't they being criticised for wanting power and creating dependency?

Think of Northern Ireland at its most viciously sectarian and you get a glimmer of how parts of Colombia work. Nigeria's main oil country isn't a lot better. Of course, BP in Colombia and Shell in Nigeria still rightly stress till they are blue in the face that they do an important job when they make a profit whilst turning a country's oil into huge amounts of revenue for those countries' coffers (just like they do in the UK). Often they volunteer extra revenue to be channelled back to localities. Of course, how much good the state's revenue does anywhere depends on the state (on the brink of very good in Colombia, and getting better in Nigeria).

Corporations build sophisticated industrial capitalism wherever they go. They hugely encourage the (cheap) indigenous workers to become world class. But the big thing they do is this: they are mighty engines for the production of upwardly mobile, professional middle classes. It is educated, mildly affluent locals who will make bad, dangerous countries pleasant and safe. The rest tends to be pie-in-the-sky stuff. In short, there is only a weak case for taming capitalism, but there is a very strong one for letting it rip.

In rich countries like ours, the idea of social responsibility is a bit easier to expose. Here, capitalism ought to be able to say that nearly everyone is a shareholder (if only through pensions), so maximising profit is a whacking great good in itself. And then there's the hyper-active state syphoning off huge amounts of money to do what the voters think is good and imposing rules to civilise – sometimes to neuter – enterprise. Here, we really can say that making wealth is what firms do if they're lucky, and doing good is what voters and private citizens are welcome to do if they fancy it.

If a Barclays bank manager wants to give his or her free time to help the disadvantaged in one of Prince Charles' Business in the Community schemes, that's fine. But if it's personal time, then what's the firm got to do with it? And if the firm has donated the manager's time, what – really – is the case for an activity which raises the firm's costs and keeps prices high, and diminishes profits? Don't some of their own shakier paying customers deserve any TLC that's going spare?

If firms are going to do good works in the community because in some weird way it's good for business, again, fine. But in what sense would that be Corporate Social Responsibility as opposed to the much less grand-sounding self-interest? And if the whole enterprise is necessary because the firm wants, say, to shut local branches and needs to have something to soothe the opposition, then how much have we lost when firms can't honestly say and do the things which are right for them, but have to run around fudging things? Maybe it is right that there are expensive, do-gooding firms. And especially so if we soon see no-frills firms whose chief virtue is the old one of being cheap.

It is the element of spin which matters so much. The West got rich and free by learning how to have good honest relationships between large numbers of people whose interdependencies were a matter, variously, of contract and charity, of greed and generosity, of self-interest and self-denial. We didn't Third-Way the distinctions into the ground, blurring them in guff.

Now we've got a lot of protestors and campaigners who can't be bothered to do good by making wealth or getting elected. Instead, one tough lot steals the reputation of as many firms as won't stand up to them, and whilst another suited lot sells the reputations back to the firms as expensively as possible. But the reputations which are put in trade in this way are false: falsely bad when firms are criticised for self-interest, and falsely good when they claim virtue.

And the big losers? The young, who hear great firms talking tripe because the bosses find it much more convenient to say 'we want to give something back”, than to point out that they are really the great contributors to human well-being.

The author is media fellow of the Institute of Economic Affairs and publishes at www.richarddnorth.com

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