This story is Part II of a two-part essay on the “Pursuing the Good.” Read Part I.
“When we think about poverty, we can think of the immediate problem and the long-term problem,” says Jason Brennan, Professor of Strategy, Economics, Ethics, and Public Policy at the McDonough School of Business at Georgetown University. Think of the immediate relief of a Christmas toy, a hurricane shelter, warm socks for the homeless, or a hot meal. “A person is starving right now, they need a meal today, and maybe they don’t have the money to do it, and that’s where things like charity are often quite effective at intervening on a short-term basis.”
“The goal is to get people in a position where they don’t need charity at all,” says Brennan. “That’s where markets and economic development come in. They create capital accumulation, opportunity, and economic growth—so people are in a better position to begin with.”
Brennan points to South Korea’s transformation. In 1971, South Korea’s GDP per capita was around $250. “By the turn of the century, it had reached European standards of living. This didn’t happen because of massive charity. It happened because businesses sold VCRs, cars, and other goods.” Well-functioning markets, he explains, provide a built-in mechanism for aligning value with costs, something charities can struggle with.
His examples include a church fundraiser where members donate $10,000 of goods that are then auctioned off for half the price they paid. Or the hard, even “mean” questions such as, “What is the value of training a guide dog that will improve the life of one blind person for approximately $40,000 vs curing between 800 and 2000 people of trachoma-related blindness in the developing world for approximately $20-$50 each?”
Philanthropy, though well-meaning, may also frequently prioritize donor desires over recipient needs. For example, “Donors want their names on new buildings, but no one wants to fund mold remediation,” says Brennan.
Social businesses and social enterprise: Customers for good
“The intention behind a social business is to look at a problem that we normally think of as something for government or charity or an NGO to solve, and the social business tries to solve it directly,” says Brennan, adding that a charity tries to make people beneficiaries and a social business tries to make them customers.
“A charity might raise money to buy laptops for people who can’t afford them,” says Brennan. “A social business would ask, ‘Can we produce a laptop at a price they’d be willing to pay?’ He says that this model ensures that value is created and measured, as customers willingly pay for goods or services that meet their needs.
As interest in social business skyrockets, individuals and organizations seek to better understand the landscape. For example, a group called Enterprise Solutions to Poverty produced a field guide for faith-based organizations who aim to deploy market-based approaches to combat poverty. Additionally, a University of New Orleans project examined and supported entrepreneurship in urban minority communities in the southeastern United States. Other organizations aim to serve citizens through business, investing, wealth-building strategies, and self-sustaining “accelerators for prosperity” rather than charity models.
Another idea of social business, “which is a little bit broader,” says Brennan, is running a business for the purpose of raising money and then donating some of that money to charity. Patagonia is an example. Their website states, “We give our profits to the planet.” Even though Nobel-Prize winning economist Milton Friedman famously criticized corporate social responsibility, his full quote is, “There is one and only one social responsibility of business–to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”
Entrepreneurs and small business: Nimble and creative
“Organizations large and small, privately and publicly traded, have a unique discipline focused on outcomes—maybe an impact—and can garner resources and coordinate them in non-trivial ways that governments, nonprofits, and other types of other organizations aren’t necessarily as capable of doing,” says Dr. Jennifer J. Griffin, Professor of Business Ethics and Strategy at Loyola University Chicago.
She emphasizes that entrepreneurs and even small businesses are not little big businesses. They’re unique to themselves with the ability to pivot quickly and effectively,
Griffin notes that smaller, privately held firms, such as family-owned businesses or those backed by private equity, can address social issues like homelessness or poverty through deep community connections. “They have partnerships with nonprofits and can do amazing things larger companies often can’t because they have to respond to a different set of stakeholders,” she explains. For instance, a neighborhood business whose ethos is ‘We take care of our suppliers’ might call their suppliers, who are vanilla farmers in Madagascar, and ask what they need. “If they say raincoats and tents to protect fields, they get them,” Griffin says.
There is an opportunity to reimagine globalization and caring for the individual and the greater good. “A business has to be in service to others in some way; otherwise, they won’t thrive,” says Griffin. It’s about profit and purpose.
As far as action-oriented corporate impact. “Stop the harm–let’s start there. But what are you doing that’s innovative, helping to enable others, not just selling your widget or product or service,” says Griffin. For select classes, she’ll ask. “How are you as managers within any type of organization, employing and enabling prosperity, common prosperity, to flourish?”
Intentions vs. outcomes
Brennan warns against conflating good intentions with good results, citing programs like Scared Straight and DARE that, despite noble goals, have been shown to backfire. “Every dollar given to Scared Straight causes about $200 in social costs because participants are more likely to commit crimes,” says Brennan. “Literally, the fact that you went through Scared Straight makes you more likely to commit crime rather than less likely…It turns out that being exposed to DARE makes you more likely to do drugs, not less likely to do drugs.”
Businesses and charities don’t always hire the cheapest people or have the lowest overhead. The CEO who gets paid $300,000 a year as opposed to $100,000 may add more value than they’re costing you. “They hire the people who are the best bang for their buck…And that might mean hiring the more expensive person,” says Brennan, adding that certain charitable activities, like cancer research, may be expensive.”
“I think one of the problems we have with evaluating business versus social enterprise versus charity versus government is the bias people tend to have, which is that they assume that if people have noble intentions, they do good things. And if they don’t have particularly noble intentions, they don’t do particularly good things,” says Brenan.
A business can also unintentionally be doing a lot of good for the world “just by doing that business,” says Brennan. For example, “FedEx reduces the transaction costs of people for doing business around the world. It allows people to sell to one another in distant markets.”
“People can have good intentions and make the world a worse place. They can have selfish intentions and make the world a better place, and they can have every mix of those sorts of things,” says Brennan. Look past intentions, be it people, businesses, legislators, charities, or governments and look at the results of what they’re actually accomplishing. “Measure your actual results and then find a way to commensurate the value of what you produce with the cost of what it took you to produce it.”
Similarly, “Most people, when they measure generosity, measure in terms of sacrifice…Frankly, I think that’s a mistake,” says Brennan. “The point of beneficence is to actually help people. It’s not for you to incur a loss.”
Conditions for goodness
Governments play a vital role in creating the conditions and infrastructure where people can invest in themselves and foster growth. These include stable institutions, inclusive governance, property rights, and open markets with a reliable currency. However, tackling global issues like climate change, poverty, and public health require coordinated action from governments, corporations, nonprofits, and individuals.
“Some people think the principles that ought to guide government action are fundamentally different from those that ought to guide actions by individuals or corporations,” says Brian Berkey, Associate Professor of Legal Studies and Business Ethics at Wharton. “At the most fundamental level, we should think the same principles apply to all agents.” While the actions of each differ, the moral imperative to foster collective well-being is universal.
Regulatory structures are critical, especially for reducing environmental and social harms. Berkey explains that government policy can realign incentives for firms to act in socially beneficial ways. Yet, businesses can also bear responsibility by being foresighted and proactive in mitigating or preventing many harms.
In the Stanford Social Innovation Review, Mark Kramer and Steve Phillips argue that philanthropy can have unintended consequences, excusing government and corporations from necessary reforms and deflecting attention from the need for a stable, representative democracy. Some government aid and philanthropy also flow to corrupt governments.
“But to my mind, that doesn’t support any fundamental principle that says governments don’t have an important role in promoting economic development. It just shows some methods haven’t worked as well as we would have liked.”
While many highly-touted, one-size-fits-all approaches have fallen short of their lofty expectations, charity, business, and government each have strengths and important roles to play in addressing and combatting deeply entrenched societal problems. Pursuing the good requires thoughtful, coordinated, and ethical action at every level of society, a willingness to identify and learn from mistakes, and a dogged commitment to building a better future.
Alene Dawson is a Southern California-based writer known for her intelligent and popular features, cover stories, interviews, and award-winning publications. She’s a regular contributor to the LA Times.
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