Arnold Kling  

Jagdish Bhagwati on Creative Capitalism

The Case for Libertarian Frien... Humility Reconsidered...

The professor who taught my international trade course back in graduate school writes,

what CSR (corporate social responsibility) does is to extend the traditional practice of the Burghers-Jains-Calvinists -- where families that made the moneys spent them directly on social projects -- to the corporations where families do not usually run the show. CSR is the modern counterpart of the wonderful family-owned businesses.

The gist of the post is: charitable, low-key, frugal capitalists good; lavish, ostentatious capitalists bad.

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CATEGORIES: Income Distribution

COMMENTS (3 to date)
Brad Hutchings writes:

His #3 examples are just strange. Soros is polarizing, not universally loved or universally hated. Bill Gates, on the other hand... In the United States I live in, it seems that few have a nuanced view of him and fewer see him as any kind of a hero. Bill Gates seems desperately to be trying to be Warren Buffet. And the reason it doesn't quite work and looks tremendously tortured is because he's not Warren Buffet. Speaking of which, Buffet would have been a far better example in the argument than either Gates or Soros.

Your professor's conclusion just kills me though. The attitude I've seen among the most capable people I know is that the do-gooderisms are all wonderful, so long as we're getting paid. Make them take a pay cut or be compensated below market value so the corporation can be a socially responsible citizen, and the doers will move to greener pastures. Just like the investors.

Acad Ronin writes:

At Caja Navarra (CAN: a savings bank in Spain that is mutually-owned, or at least not shareholder-owned), they have introduced what they call Civic Banking. One aspect of this is that once a year, CAN notifies its customers of how much profit it made from them, and allows them to allocate 30% of that amount to up to three not-for-profit projects or institutions from a list of over 2000. (Customers can also propose institutions and projects that CAN may add to the list after vetting.) Traditionally, the directors of the Cajas in Spain allocated some amount of their institutions' profits to worthy charities; when CAN transferred the allocation task to its customers and away from the directors, priorities shifted towards social projects and away from cultural ones, such as museums or symphonies.

One may suspect that directors generally like giving their institution's CSR funds to charities that have neat events such as balls and the like to which they then get invited. The customers give the money to much less elite charities.

Transferring the allocation task to the customers also depoliticized the allocation process. Now, the governments of Navarra province or the city of Pamplona (where the head office is located), can no longer suggest to the board what the Caja should fund.

It would seem that CAN's Civic Banking model permits not-so-wealthy individuals to engage in the sort of activity that Bhagwati is endorsing, without some of the usual CSR principal-agent problems. Still, CAN does not fully meet the Milton Friedman critique in that it does not permit its customers to nominate themselves as the recipients of the 30%. That said, they can also bank with another institution if they find that institution's policies more congenial.

PacificGatePost writes:


While Gates has faith in technological advances to heal the pain of world poverty, the long-term answer really lies in shifting human consciousness, and on the capitalist front, broadly affecting behavior at the corporate level. As he continues to promote progress, Bill Gates should adjust his challenge to include such paradigm shift in consciousness over the longer time horizon.

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