Social value creation: African firms & the SDGs (2)

Rethinking capitalism for development

Free-market capitalism is increasingly being criticized as not fit-for-purpose. When firms have been solely focused on maximizing shareholder value as in Western democracies, inequality rose disproportionately, underpinning the political dysfunction witnessed in America and elsewhere.

In her 2020 book, Reimagining capitalism: How business can save the world, Harvard Business School professor, Rebecca Henderson, wonders “why and how we can build a profitable, equitable and sustainable capitalism by changing how we think about the purpose of firms, their role in society, and their relationship to government and the state (Henderson, 2020).”

This is a pertinent question for our time as “extractive elites monopolize economic activity and systematically under invest (when they invest at all) in public goods such as roads, hospitals and schools (Henderson, 2020).” The subsisting “massive environmental degradation, economic inequality, and institutional collapse” are dysfunctions that may continue to endure if the western-type capitalism that underpins them is not rethinked (Henderson, 2020).

African countries, which see the increasing dysfunction in many Western capitalist societies, must now wonder if they should similarly adopt what had hitherto been dubbed the silver bullet for lifting their teeming populations out of poverty to prosperity. Multinational firms doing business on the continent may yet prove that is still the case.

Besides, “states everywhere are failing. If we are to reimagine capitalism, we need the private sector to be part of the effort to rebuild our institutions and to fix government (Henderson, 2020).” There is nowhere in the world where this is more pertinent than in many African countries. And as Henderson (2020) asserts, “today’s firms have enormous power to influence governments if they choose to use it.” Africa is probably the one place where that influence could be most impactful.

These are not sentimental ideas. For instance, “many of the central institutions of the nineteenth-century American economy – including the New York Stock Exchange, the Chicago Board of Trade, and the New Orleans Cotton Exchange – were voluntary associations formed to address the public goods problems thrown up by the maturing US economy (Henderson, 2020).”

African countries, which see the increasing dysfunction in many Western capitalist societies, must now wonder if they should similarly adopt what had hitherto been dubbed the silver bullet

In Germany, business leaders made the informed decision to cooperate with labour leaders to institute new economic orders at critical post-war junctures that endure to this day (Henderson, 2020). Consequently, “Germany now has one of the world’s strongest and most equal economies (Henderson, 2020).” Similar business-labour cooperation in the face of political vacuums has been associated with Denmark (Henderson, 2020).