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April 19, 2007
J.Pozuelo-Monfort, MSc candidate in economic development at LSE
Recent articles on the Financial Times and Cinco Dias show how western Europe is still lagging behind the current reality of a developing world. J.Pozuelo-Monfort comments on both articles.
The western world increasingly looks like a cage holding westerners and unwilling to receive individuals and produce from the developing world. A cage that has set barriers to trade and to labour mobility, a cage that has established severe restrictions on the variety of produce the developing world can export.
Produce versus products because the developing world excels in one particular industry: agriculture. The western world needs to stop subsidizing farmers, needs to improve its productivity and move up the ladder to consider higher-value industries that require higher levels of education and skill.
If we outsource our call-centers to India, why do we still keep considerable tariffs on basic agricultural produce, which exports could make a huge difference in the developing world?
The principle of productivity gain first explained by economist David Ricardo no longer holds in Europe, or Europe refuses to make it work as many economists claim it should. In the original example Ricardo argues that the England should focus its efforts in manufacturing clothing, whereas Portugal should focus its efforts in growing wineries. Both England and Portugal have competitive advantages and Englad is better off manufacturing clothing and exporting it in exchange for Portuguese wine and vice versa.
However this principle, that on paper works so well, no longer holds. We should let developing economies become agricultural suppliers of an industry that is unfairly subsidized in the western world. Almost half of the current EU budget is spent on subsidies to the farming and agricultural industry. The measure of opening our borders to produce from the developing world would only be politically incorrect. Politicians cannot afford, in the end, to lose the critical support of our farmers that they need to remain in power. But farmers ought to know the reality of a western world that seems to be in the XXIst century for some issues, and in the XIXth century for other. We choose where we want to set our barriers to trade, because we have the power of doing so, call the power political or economical. Other countries simply cannot choose. We choose to set and define the rules of the game that apply to everyone, because we have the power of doing so. Other countries simply cannot choose.
It is an unfair and unequal world. But sometimes, I must admit, it looks like the first world is only willing to stress the level of unfairness and inequality, as opposed to what a rational person would expect from our political class.
April 18, 2007
Bryan W. Husted, Director, IE Alumni Association Chair of Business Ethics and Corporate Social Responsibility
Although corporate social responsibility or variants like corporate citizenship are favorite buzzwords in today’s business world, surprisingly little effort is made by firms to actually measure the impacts of these programs. Do they really do any good? A recent attack by the Economist answers this question with a resounding, “probably not”!1 Unfortunately, current social reports fail to provide answers because of their focus on outputs, rather than on outcomes. The reasons for the failure to provide solid evidence of the efficacy of CSR programs are many. Some non-governmental organizations like Christian Aid have accused firms of using CSR as nothing more than a public relations gimmick 2. Academics have found that firms seem to be satisfied with simply doing something – anything, without worrying about actual impacts. In fact, firms rarely have a clear idea of the objectives they pursue through CSR programs, let alone measure actual impacts 3.
In part the problem has been one of looking for a magical measure of corporate social performance that summarizes a firm’s social impact similar to profitability, which provides a measure of economic performance. In reality it is impossible to encapsulate a firm’s social impacts in one number. I suggest that we need to start at a more basic level and simply examine the social, environmental, and economic impacts of corporate social activity at the level of specific projects. By focusing on CSR projects, firms can begin to use the methods of program evaluation, such as cost-benefit analysis, in order to assess the effectiveness of such projects.
The cost side of the evaluation is relatively straightforward as firms have fairly sophisticated accounting systems that allow them to attribute costs to specific projects, but the measurement of actual benefits is made difficult by a number of factors, including the lack of clear objectives, the lack of planning, and the lack of resources for evaluation.
When firms launch advertising campaigns, they usually have a clear idea of the goal they wish to achieve. There is a certain target audience that needs to be informed about a product or service. The firm can measure the level of awareness of the product or service achieved by the campaign. This level of clarity is often not present with respect to CSR. For some managers, simply doing good is enough. Yet the lack of clarity allows a great deal of managerial discretion in the development of CSR projects, some of which merely benefits the managers as evidenced by the recent scandals at Parmalat and Adelphia. The use of CSR to benefit managers is not surprising given that similar fraud exists within organizations supposedly designed to pursue the social good like churches and NGOs. The failure to establish clear goals only opens the door to this kind of abuse.
Continue reading 'Measuring Social Impacts'
April 17, 2007
Waya Quiviger, Director of Special Projects
Developing a coherent vision of political, social and economic trends is essential for business leadership. The Global Affairs Forum 2007 provides students with an overview of some of the global issues that impact business decision-making. The objective is to explore the ways in which business leaders can help address these problems and effectively become part of the solution.
In this ongoing seminar, outstanding business, political, academic and civil society leaders engage with the students and together analyse current challenges, threats and opportunities such as global terrorism, environmental degradation, the rise of China, and the importance of social impact in business.
Today's Invited Speaker: John Llewellyn, Senior Economic Advisor, Lehman Brothers
In this unique lecture, Mr. Llewellyn will present his recently published report: The Business of Climate Change: Challenges and Opportunities. The publication first analyzes the hard scientific data about climate change, then explores the economic consequences of global warming and concludes with concrete examples of the impact climate change will have on different business sectors and industries. In Llewellyn’s own words: “Global warming is likely to prove one of those tectonic forces that gradually but powerfully changes the economic landscape in which business operate.” Those who seize the opportunity this represents will do well. Those that do not will be left behind.
April 16, 2007
Max Oliva, Associate Director, Social Impact Management
Michael Porter and Mark Kramer’s “Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility” article has been recognized as Harvard Business Review's Top Article of the Year.
Porter and Kramer further build on their previous work on "The competitive advantage of Corporate Phylanthropy", bringing both doing good and doing well into the companys strategy. “If corporations were to analyze their prospects for social responsibility using the same frameworks that guide their core business choices, they would discover that CSR can be much more than a cost, a constraint, or a charitable deed—it can be a source of opportunity, innovation, and competitive advantage.”
They further add: "When a well-run business applies its vast resources, expertise, and management talent to problems it understands and in which it has a stake, it can have a greater impact on social good than any other institution or philantrhopic organization." Porter and Kramer
I close yet with another quote, this being one of my personal favourites: "There is no inherent contradiction between improving competitive context and making a sincere commitment to bettering society". Michael Porter
You can have free access to the article until April 24th. I encourage you to read it; it certainly is worth while.
April 13, 2007
Max Oliva, Associate Director, Social Impact Management
For those of you who are still considering taking the Social Entrepreneurship Track at IE, here's one more incentive to take the step: The BiD Challenge is here again.
The BiD Challenge 2007 is open to start-up or established entrepreneurs with a business proposal for a new, or the expansion of an existing enterprise in a developing country. If you are serious and motivated about creating a business that reduces poverty in a developing country don't miss the opportunity to take part on the competition which brings you close to likeminded people, sharing ideas and best practices, as well as an economic incentive to fulfill your business endeavor. Some criteria to participate follows:
• Focus on creating a new business (start-up companies) or focus on the expansion or diversification of an existing business
• Focus on a developing country
• Require a start-up investment between €5,000 and €500,000
• Seek to be profit generating within 3 years
• Seek to maximize development impact in the developing country of operation
The deadline for the "Executive Summary" or Business Plan Template submission is May 31st. On last year's challenge, Alex Corrie, IMBA Alumni made it to the finals. Perhaps this is the year to come up with one of the grand prizes!
Who can participate?.
Timeline for the BID Challenge.
April 11, 2007
J.Pozuelo-Monfort, MSc candidate in economic development at LSE
Published at Estrella Digital (In Spanish).
Writing about how to change the world, about how to reduce inequality, about how to close the poverty gap between rich and poor is a first step to change the world. Writing to suggest ideas, writing to propose policies, writing to persuade, to convince. But the world of ideas and persuasion is not easy to conquer, the world of conviction and priorities is not a summit easy to climb.
Having the opportunity to spend a few days in the single superpower and having friends on both sides of the political spectrum is a unique opportunity to understand the way Americans think and feel about a challenging issue that deserves very little attention on both sides of the Atlantic.
Surprisingly enough winning the battle of persuasion and conviction is a fight of feasible priorities. Being able to convince that tackling extreme poverty should be among our priorities, and therefore part of our political agenda, seems to be crucial to target a wide audience of citizens on this wealthy side of the globe. And showing that fighting poverty appropriately by raising sufficient funds for development and allocating them efficiently is feasible on the short term is a second must-have in any wanna-be set of principles of how to make this world a better place.
American liberals will argue and acknowledge that extreme poverty is a problem that needs to be incorporated into the political agenda, but this will only happen on the long run. American conservatives might admit global poverty needs to be addressed, but there are many other local priorities that should be taken caren of before.
There are local and global priorities and we need to learn to tackle both. There are local and global priorities and we need to design effective solutions for both. But whereas the former are part of every major party’s political campaign, the latter are ignored, forgotten or postponed. If both local and global priorities can be taken care of simultaneously, why does extreme poverty remain outside the reach and scope of our politicians?
The world is in the end like a big family. Some of the family members are very well fed, but a majority is not only not fed well, but not fed at all. There is a majority of our big family with no access to water or sanitation, to basic infrastructure or healthcare. Being able to deliver the message so that it becomes a priority in our political leaders’ agendas is only a matter of manners, of how to do it. And if our current politicians are not able to understand what global priorities are all about, then I can say I will have lost my faith in our political class and will welcome new leaders able to propose solutions that measure up with the size of the challenges the world population faces.
It is in the end a question of feasible priorities.
April 10, 2007
J.Pozuelo-Monfort, MSc candidate in economic development at LSE
Publicado en Finanzas.com
El mundo actual es un mundo desigual. Es un mundo desigual en el que las principales potencias económicas han creado un sistema capitalista a lo largo de los últimos dos siglos que se ha convertido, tras la caída del comunismo, en la única referencia económica con la que la democracia es capaz de convivir.
Un sistema, el capitalista, que ha acentuado el papel del mercado y de las teorías neoliberales y poco intervencionistas de la escuela económica de Chicago desde la crisis de los tipos de cambio en 1971 y la llegada al poder de Thatcher y Reagan a finales de los 70 y comienzos de los 80.
Unas teorías, las de mercado, que abogan por un estado poco intervencionista y afirman que las ineficiencias del mercado tenderán a corregirse si se eliminan las barreras a la inversión a corto plazo y especulativa, y los aranceles al comercio.
Este sistema que Occidente se ha encargado de construir a diestro y siniestro, es un sistema que funciona de forma parcial y únicamente para unos pocos. Los fallos de mercado son, en el fondo, fallos en las bases del capitalismo que hacen que una economía funcione. Son fallos en los mecanismos que permiten que una sociedad salga adelante, que permiten que un individuo se esfuerce porque existe una relación directa entre esfuerzo y rendimiento social.
Este sistema que Occidente se ha encargado de construir a diestro y siniestro, es un sistema que las economías en vías de desarrollo tienen que introducir paulatinamente. Es un sistema que adolece si no se establecen las bases que permitan su operativa. Pensemos en historias de éxito como Corea del Sur o China, en las que la introducción de las teorías económicas que rigen el capitalismo fue paulatina y controlada, con el establecimiento previo de infraestructuras e instituciones. Pensemos en historias que fracasaron como la introducción súbita del sistema capitalista en Rusia tras el colapso del comunismo, una Rusia anti-democrática y promotora de políticas populistas en las que unos cuantos zares del capitalismo aprovecharon la oportunidad de enriquecerse con la rápida y desorganizada privatización de las joyas de la corona del comunismo soviético.
Un sistema, por último, que Occidente se ha encargado de construir y que tiene, entre sus reglas, numerosas excepciones escritas con letra pequeña por y para Occidente. Un juego cuyas reglas han sido escritas para nuestro propio beneficio. Imponemos la eliminación de aranceles, pero somos incapaces de eliminar nuestros propios aranceles a la importación de productos agrícolas de países en vías de desarrollo. Abogamos por la libertad de movimiento de capitales, pero somos incapaces de eliminar los paraísos fiscales, causantes de la huída masiva de capitales desde países del tercer mundo. Ensalzamos a la corporación multinacional del siglo XXI y somos incapaces de establecer un sistema de seguimiento de sus operaciones para que una multinacional no ejerza un poder tristemente asimétrico en su propio beneficio, imponiendo condiciones de trabajo deplorables en mercados tercermundistas, condiciones que en Occidente serían inadmisibles.
Un nuevo sistema capitalista es un sistema basado en los principios éticos de sostenibilidad y gestión. Un nuevo sistema en el que se somete a la gran multinacional a un escrupuloso análisis de sus operaciones para informar al consumidor de su compromiso con políticas éticas de gestión. Un nuevo sistema en el que el consumidor es capaz de descartar un producto o servicio en función de la calificación ética del fabricante o proveedor del mismo.
Una crítica constructiva a un sistema que ha permitido que Occidente alcance un estado del bienestar impensable tras la conclusión de la Segunda Guerra Mundial.
