Civil society and capitalism: a new landscape

Simon Zadek
14 April 2008

Michael Edwards's essay "Philanthrocapitalism: after the goldrush" (19 March 2008) raises the alarm over what he sees as the hidden failures in applying the power of business to address pervasive social and environmental challenges. The core argument is that "philanthocapitalism" has been hyped too much and delivered too little; and that it undermines civil society, or at best distracts it from its historic task of using the structures and disciplines of democratically controlled governance to hold power to account.

Also in openDemocracy's debate on philanthrocapitalism:

Michael Edwards, "Philanthrocapitalism: after the goldrush" (19 March 2008)

Gara LaMarche, "Philanthropy for social change" (9 April 2008)

Geoff Mulgan, "The new philanthropy: power, inequality, democracy" (10 April 2008)

Michael Edwards's essay draws on his book - Just Another Emperor: the Myths and Realities of Philanthrocapitalism (Demos/Young Foundation, March 2008)

The charges of irrelevance and negative unintended consequences - amplified in Michael Edwards's book Just Another Emperor: the Myths and Realities of Philanthrocapitalism (Demos/Young Foundation, 2008) - need to be taken seriously, not least because of the credentials of the accuser and the undoubted hubris of much that stands charged. The evidence of civil society's inability to force change in key areas is not hard to find. Transparency International's authoritative index of perceptions about bribery, for example, suggests that precious little has been achieved by a decade of voluntary initiatives to combat corruption (though good old-fashioned campaigning enabled The Corner House successfully to challenge the British government's right to abandon the investigation of alleged corruption on BAe in securing major Saudi contracts).

Similarly, voluntary initiatives have done little to curb the arms trade, or prevent tobacco companies from shifting their profit lines from the litigation-friendly and well-informed north Atlantic zone to Asia, Africa and Latin America. Indeed, the "sub-prime" mortgage crisis - driven by obscene, wealth-concentrating incentives to fund managers - is a stark case of the destructive results of an entirely legal form of unaccountability, untouched by two decades of high-profile developments in "socially responsible investment".

So in some respects, the response - for those of us working at the intersection of civil society, business and governance - must be "guilty as charged". But there is also an almost unseemly unbalance in this critique. After all, initiatives such as the publication by leading companies (following Levi Strauss's lead) of their "terms of engagement" - which declare some responsibility for the conditions of workers in companies they neither own nor manage - has improved the conditions of millions of workers. The leadership of Anglo- American in addressing the challenge of HIV/Aids among its workforce has both saved many lives and inspired a generation of similar public-private partnerships. The Body Shop, though in the end ill-fated economically, pioneered what became a generation of businesses aligned with the principles of human rights that the governments and legal systems were failing effectively to enforce.

Simon Zadek is chief executive of AccountAbility, a senior fellow at the Centre for Government and Business of Harvard University's Kennedy School, and an honorary professor at the University of South Africa. He is the author of The Civil Corporation: The New Economy of Corporate Citizenship (Earthscan, 2001) Simon Zadek is co-author of the report Governing Collaboration: Making Partnerships Accountable for Delivering Development, launched on 16 April 2008 and downloadable here. Among Simon Zadek's articles in openDemocracy:

"From the magic mountain: the World Economic Forum" (29 January 2004)

"openDavos: Simon Zadek's blog" (23 February 2005)

"Reinventing accountability for the 21st century" (11 September 2005)

"China's route to business responsibility" (30 November 2005)

"Accountability: the other climate change" (31 October 2006)

"Davos: changing the world from within"(22 January 2007)

"The four faces of the World Economic Forum" (9 February 2007)

"Reinventing global trade: the MFA Forum" (15 April 2007)

"Accountability's global thread" (14 January 2008)

Moreover, ethical or fair trade - which Michael Edwards effectively characterises as too small to count - already amounts to over $60 billion in sales in Britain alone. True, this is still minor in relation to the global economy as a whole; but it still represents a vibrant social economy that has unquestionably helped millions of small businesses and the communities that they support to survive, to earn a premium, and to combat those who would exploit their isolation, lack of information and the vagaries of markets.

The voluntary achievement

But it is valid to ask whether these cases are in the leading current of social change or are merely the lagging results of traditional, hard-edged campaigning. In most instances, business only moves when it's forced to - and civil society has played and will continue to play an indispensable role here. The iconoclastic dynamism of Anita Roddick suggests that moral and political leadership can come from within the business community. But it was labour and human-rights campaigners who pressed for such initiatives as the Fair Labor Association and the voluntary principles for security and human rights; environmental activists whose work made possible the Forest Stewardship Council (FSC) and the Equator Principles. These initiatives, moreover, count in global markets. The FSC provides certified stewardship to over 20 million hectares of sustainable forests, and the Equator Principles apply social and environmental conditionality to an estimated 80% of cross-border project (infrastructure) financing.

The most effective examples of scaled-up responsible business practices are indeed the result of companies accepting that "civil regulation" - rules created outside the statutory realm - has become effective an means by which business can be held to account. It does not mean that companies meekly accept the new deal; and, in complex global markets, corporate free-riding is the most difficult problem in making these new rules stick. Indeed, AccountAbility's new report Governing Collaboration: Making Partnerships Accountable for Delivering Development provides a forensic examination of some of the accountability shortfalls of collaborative-standards initiatives, their implications and how best to overcome them.

But in today's world of global markets, fractured multilateralism and transforming geopolitical changes, even half-workable mechanisms for change should not be dismissed. It seems unnecessarily careless to discard a generation's hard work in building new rules of the game where the rule of law, or the simplistic dynamics of market win-wins, themselves do not deliver much-needed public goods; and where social movements, to be successful, have to be more than a community of purpose or shared values.

Michael Edwards's most serious charge is that the trend towards philanthrocapitalism has undermined civil society's historic role in building solidarity and acting as an accountability agent. It is certainly true that the working habits of many civil-society organisations today (or perhaps more accurately non-profit organisations) are decidedly corporatist. They are professionalised, engaged with business and the state, and can often be more accountable to the market than they are to solidarity networks. In some instances they can indeed be part of the problem: absorbing the energy of civil society on behalf of their clients and partners. But a more interesting cluster of organisations - among which I would (naturally) include AccountAbility - seek to create new pathways to amplify the impact of social movements on the behaviour, and ultimately the underlying foundations, of business and the state.

At their best, these groups do not play the corrosive role of neutralisers of civil society, but help to weave new forms of accountability - sometimes as legal statutes, more often in the middle-earth of "collaboratively governed standards". Where successful, they contribute to creating new business cultures, methods and products, and new, shared, voluntary rules of the game that can also provoke leading businesses to advocacy of progressive legal change.

Only connect

Michael Edwards has performed a service in opening a serious and much-needed debate. The attempt to leverage the potential of markets, reputation, innovation and self-interest certainly comes with risks as well as upsides; behind the haze of hubris, failures persist. But it is also true that civil, business and public institutions and networks are increasingly entangled, as are patterns of solidarity, representative politics and transactional markets. It is no accident that this interconnected world is surrounded today by a plethora of familial concepts: responsible competitiveness, ethical trade, social auditing, the civil corporation, social enterprise, collaborative governance - and, yes, even philanthrocapitalism.

These, after all, can be considered the rhetorical signs of attempts to reinvent how best to connect markets, institutions and the basis on which citizens can have a say in decisions that influence their lives. Such "accountability innovations" may - and indeed at times definitely will - fail. But to step back from such experimentation is not a plan, but a retreat - one grounded both in a romantic vision of solidarity and an unlikely view of the emerging interlinked (if messy) institutional landscape. Governance will be effective in this new landscape to the extent that it embraces rather than resists or denies the interdependencies - as well as the persisting differences - in which it is enmeshed.

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