Capitalism at Risk, Updated and Expanded by Lynn S. Paine & Herman B. Leonard & Joseph L. Bower

Author:Lynn S. Paine & Herman B. Leonard & Joseph L. Bower [Lynn S. Paine]
Language: eng
Format: epub
Publisher: Harvard Business Review Press
Published: 2020-06-29T16:00:00+00:00

8

Rethinking the Role of Business

WE LIVE in extraordinary times. Remarkable social, political, and economic forces are at work in the aftermath of the violent confrontations between fascism, Soviet communism, and democracies in the West. The relative peace since the end of World War II has seen unprecedented economic growth despite a nearly constant low level of regional war. A host of nations—including the People’s Republic of China—have chosen to join the market system and have prospered mightily. A global network of enterprise has emerged, linking giant enterprises in major nations with small businesses in emerging nations. Increasingly, the world operates as one economic system.

At the core of this system are independent companies, primarily private companies owned by families or the shareholding public. The controlling managers of these companies have evolved from sea captains and foundry owners to be the stewards of complex enterprises sometimes employing hundreds of thousands of people. The economic scale of the larger of these companies dwarfs the size of many national economies. These companies’ leaders are engaged in a kind of management work that could not have been imagined when the corporate form of organization was introduced or even when general incorporation statutes were widely enacted in the mid-nineteenth century.

In this book, we have proposed that for the sake of the system, these enterprises and their leaders need to adopt a new understanding of their role. Plausible forecasts such as those we presented suggest that market capitalism is likely to face serious threats from within and without in the years ahead. Troubling imbalances between positive and negative forces generated by the functioning of the system—particularly the growing income disparities within and between nations and regions—threaten to undermine the conditions necessary for the system’s ongoing health and sustainability. As we have discussed, at least ten major forces may disrupt the system, and they are unlikely to be addressed successfully by existing mechanisms and institutions.

Perhaps surprisingly, significant numbers of the business leaders with whom we discussed these forecasts believe that the predictions are quite credible and that some of the disruptive consequences identified are already with us. Many believe that these problems are the most important issues facing companies and are therefore the challenges that Harvard Business School should take most seriously on the occasion of its centennial year as it makes its plans for the coming century.

Our research has led us to a series of radical conclusions. First, the global economy and its social, political, and physical conditions should not be regarded as exogenous to the firms that we study and that our forum participants lead, but instead should be viewed as materially affected by the actions of these firms. Second, these external circumstances therefore cannot be viewed as outside the appropriate purview of management. Third, business leaders must, for the sake of the health and sustainability of the very system on which they depend, become better positioned to ameliorate the disruptive forces that may otherwise impinge on market capitalism.

Finally, and most critically, leaders can address these challenges through the core activities of their firms.

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