A ticking bomb
JANUARY 2016, Oxfam released a report saying that the huge gap between the rich and the poor has reached new extremes with the world’s top one percent already owning more wealth than the remaining 99 percent combined. Last January, the World Economic Forum (WEF) reported the income and wealth inequality is one of the top risks faced by the global economy.
Dr. Niceto Poblador, Professor Emeritus of the UP College of Business Administration, pointed to that destabilizing fact in a paper entitled “Western Capitalism at the Crossroads: Finding a New Role for Business.” The theme was discussed in a recent roundtable discussion (RTD) organized by the UP Center for Integrative and Development Studies (UP-CIDS), the Management Association of the Philippines (MAP), Centre International de Formation des Autorites et Leaders (CIFAL) Philippines, and the United Nations Institute for Training and Research (UNITAR).
Dr. Poblador states that capitalism is in crisis today mainly because of its “failure to distribute the benefits of economic prosperity equitably to all segments of society, and its inability to make economic opportunities equally accessible to everyone.” In sum, the non-inclusive growth allows the few to accumulate so much wealth while those at the “bottom of the pyramid” languish in poverty.
He cites ineffectual government agencies, corruption in public office, poor political dynamics, and antiquated tax laws as the primary causes for the gross inequality.
He didn’t spare business from the indictment: “The single-minded pursuit of profit is, in our thinking, a major reason, if not indeed the principal one, for the disparity in the economic fortunes of the different segments of society today. By being totally absorbed in pursuing the economic interests of their owners to the exclusion of everyone else, businesses have been mainly responsible for the concentration of wealth and economic opportunities among a very small minority of the members of society — the capitalist class.”
He argues thus: “The sustainability of a business can only be achieved in a sustainable community; a community characterized by widespread poverty and great income inequality is NOT sustainable; therefore, addressing the social and economic needs of society is in the strategic (i.e., long-run) interest of a business.”
Felimon Berba, a successful business executive stated that business must unavoidably maximize profits. For the owner-investors and its firm’s managers and employees. It would be hard to attract investors who will assume the risk without an assurance of a return. It’s equally hard to recruit good managers and loyal staff without a decent compensation package. That’s what enables a firm to maximize profits. And having made money it can then afford to discharge its Corporate Social Responsibility (CSR).
One can see from the entire exchange the difference in perspectives and viewpoints between an academic economist and a hands-on entrepreneur.
I fully agree that the singular socio-political risk the global economy faces is the ever growing gap in wealth and income in our society.
The solution Dr. Poblador prescribes: A “bottom-of-the-pyramid” strategy, an inclusive business model (IBM)
The big question is, who will be the agent of change and by what manner of changeover? Dr. Poblador suggests business, particularly big tech firms like Facebook, Google or big groups like Ayala. I disagree.
Business as an institution is not intended to be a reformer. On the contrary, many of them are largely socially and economically conservative. And in the Philippines, they are mostly family – dominated. The change can only be initiated and championed by the State, governed and headed by a “systems” leader. A consultative chief executive who can draw in business, civil society and academia to work in a collaborative mode.
Reform can begin with reforming the business and management education curriculum so that business schools will produce business entrepreneurs or executives conscious of its firm’s CSR. And for those who had already made it, an exemplary business behavior. edangara)/
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