Volume 5, Issue 3, 2005
Business, Legitimacy and Community
George C. Lodge
The Legitimacy of Business
As the world moves into the 21st century, business managers face new and daunting challenges to their legitimacy. Those who run the world’s 72,0000 multinational firms and their 828,000 subsidiaries face special difficulties.
These firms constitute a global economy that has produced much that is useful, including wondrous technologies and great wealth for many. Nevertheless, one in five of the world’s six billion people lives in extreme poverty, surviving on less than $1 a day. Half the world lives on less than $2. In spite of roughly $1 trillion that has been spent to fight poverty around the globe in the last 50 years and vastly increased trade and investment, most people in Latin America, the Middle East and Central Asia are poorer today than they were ten years ago, and most Africans were better off 40 years ago.2 Environmental degradation increases, as do disease and violations of human rights.
Unreasonable as it may be to blame business for the world’s ills, the blame sticks, because the ills – like multinationals – transcend national boundaries and are in many ways beyond the power of existing governments to affect. And global government has yet to evolve. Furthermore, the governments of many countries lack either the will or the ability to reduce poverty within their jurisdictions, meaning that if MNCs do not do it, it won’t be done.
In addition to the undesirable costs of the globalisation they have helped to create, managers are concerned also with the greed, crime and scandal in their own ranks. So it is appropriate to help them inspect the assumptions that have been used to justify their power and authority, and to consider whether those assumptions need renovation. This I shall do in Part I of this essay. In Part II I shall seek a historical perspective, because in many ways the criticism of business and globalisation today echoes the debate in the 1930s about which economic system was best, communism, socialism or capitalism. Capitalism, we suppose, has won, but if so, what is it? Is it the same everywhere – in China, Japan, Europe, Mexico, the United States, and elsewhere? If not, is the very word not misleading?