Doing good via the profit motive?

In what seems like eons ago, back in graduate school, when I began my formal intellectual exploration into the role of market and planning (government) in society, I read Amartya Sen's "The profit motive."  Since then, I have attempted to read Sen's works whenever he writes at levels much lower than he is capable of so that even blokes like me can pretend to understand.

The only book of Sen's that I ever purchased was The Argumentative Indian, which is right now on the bookshelf in my office.  A student, "Z," often jokes--yes, more than once it has been--that I should pretty much wear that book title as a name-tag so that strangers will immediately walk away from me.

Oh, I have digressed far away from the profit motive.  One of the challenges has always been with situations, which are in plenty, when the profit motive alone doesn't seem to work.  In fact, in quite a few contexts, the pursuit of profit generates a whole bunch of headaches too.  Troubling issues.

A couple of years ago, as we were struggling to recover from the Great Recession, Sen commented in this essay:

The economic difficulties of today do not, I would argue, call for some “new capitalism”, but they do demand an open-minded understanding of older ideas about the reach and limits of the market economy. What is needed above all is a clear-headed appreciation of how different institutions work, along with an understanding of how a variety of organisations – from the market to the institutions of state – can together contribute to producing a more decent economic world.

In other words, there is a lot yet to be understood regarding the appropriate roles for the state and market in society.  It is ultimate job security in my intellectual interests then!

Thus, it was more than interesting to read in the Harvard Business Review about how a market-based approach can do good to society.  Especially in Africa.

(BTW, I notice that the latest issue of the Economist has a special section on the positive development in Africa.  Will read that through tomorrow.)

This HBR piece begins with: "If you knew how to help feed the hungry — would you?"  Yes.  Of course, yes!

In that essay, the CEO/Chairman of General Mills describes the partnership framework that GM has developed with the UN's bodies, the USAID, and NGOs, and writes:

Though some may see this work as philanthropy, we see it as creating shared value with local African businesses. For example, Nyirefami, in Tanzania, is a company that mills flour. General Mills knows flour. We've been in the milling business more than 140 years, and with Gold Medal, we're still America's leading flour brand. PFS volunteers were able to provide Nyirefami with the technical expertise needed to install a quality control lab, and improve washing and pre-drying operations. With that, Nyirefami increased their milling capacity five-fold, paving the way for the company to buy more grain from local farmers, while also earning the highest level of food certification available in Tanzania.

The fact that he is qualifying the venture with "though some may see this work as philanthropy" itself is a dead giveaway that while not without profits, it is not entirely with profit alone as the motive.  He then goes on to list a few  ways in which businesses can "apply what you do best to reduce poverty and increase economic activity in the developing world."

And then there was another piece in the HBR where the author writes that highly profitable companies like Apple and Google drank a whole lot of milk from the taxpayer teats and now they aren't willing to help the taxpayers.  Reminds me of the many stories I have heard in India of children not helping their aging parents; I suppose this behavior means that corporations are people after all!

Anyway, the author has some sharp words for these behemoths:

Many of the revolutionary technologies that make the iPhone and other products and services "smart" were funded by the U.S. government. Take, for instance, the Internet, GPS, touchscreen display, as well as the latest voice-activated personal assistant, Siri. And Apple did not just benefit from government-funded research activities. It also received its early stage finance from the U.S. government's Small Business Investment Company program. Venture capitalists entered only after government funding had gotten the company to the critical proof of concept.
Other Silicon Valley companies, like Google, have profited in a similarly immense fashion: Google's algorithm was funded by the National Science Foundation. Many of the "new economy" companies that like to portray themselves as the heart of U.S. "entrepreneurship" have very successfully surfed the wave of U.S. government-funded investments. Hence, one secret to Silicon Valley's success has been its active and visible hand, in stark contrast to the Ayn Rand/Adam Smith folklore often bandied about.

In other words, not merely a story of a man, a plan, and an angel investor.  The author raises an important question:

A crucial question to be answered is not just whether the present system is geared toward the government showing a lot of the entrepreneurial courage, but why it is systematically badmouthed, despite its many successes.

Let me remind you that this is in the Harvard Business Review and not Mother Jones!

We are a long way from figuring out the institutional arrangement.  All we know is that we cannot flourish without giving the profit motive the necessary opportunities.  We also know that an excess of that is a disaster.  We are equally aware that government is not all bad, but that too much of it is very bad.  Where does that magical line exist separating government activities from those of the private sector?

Even Amartya Sen can't figure that one out!