Friday, March 6, 2009

Did corporate do-goodism abet the economic crisis?

That question [of corporate charity] animates the recent but largely unnoticed book Creative Capitalism: A Conversation With Bill Gates, Warren Buffett, and Other Economic Leaders, overseen by Slate's founding editor, Michael Kinsley. Beginning with Bill Gates' 2008 Davos speech by calling for "creative capitalism"—a loosely defined "hybrid engine" of corporate do-gooderism and entrepreneurial know-how—Kinsley calls on an all-star panel of economists and capitalists to respond.

If Gates expected his fellow captains of industry to sit in a circle and sing "Kumbaya," it's certainly not what he got. What's remarkable about Creative Capitalism is that the best arguments belong to the tightwads—to those who believe, as Warren Buffett bluntly tells Gates in one conversation, "Basically, I don't feel I've got the right to give away the shareholder's money." By the time Richard Posner comes aboard, the question's not whether corporations should be finding new ways of being charitable—it's whether they should engage in any charity. ...

Yet the most bare-knuckled takedown comes from where you'd least expect it: beardy Berkeley prof and former Secretary of Labor Robert Reich. Corporate charity, Reich charges, is window dressing with a negligible effect on social problems—and it's actually pernicious. "The message that companies are moral beings with social responsibilities diverts public attention from the task of establishing laws and rules in the first place," Reich writes. "Meanwhile, increasingly, the real democratic process is being left to companies and their lobbyists." He's not speaking in hypotheticals, either; Larry Summers, Obama's new chief of the National Economic Council, joins in to point out that the problem behind Fannie Mae and Freddie Mac was that "the illusion that the companies were doing virtuous work made it impossible to build a serious case for regulation."
--Paul Collins, Slate, on why mixing charity and profit-maximizing might be a bad idea

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