07 Aug 2013  Working Papers

Debating the Responsibility of Capitalism in Historical and Global Perspective

Executive Summary — The concept of corporate responsibility is often assumed to be recent in origin. This is far from accurate. Indeed, a recent study has traced the long history of corporate responsibility concepts in the United States back to the eighteenth century. This working paper puts this United States evidence in a wider comparative and global perspective. The paper proceeds chronologically, beginning with the era of the first global economy during the nineteenth and early twentieth century, and going forward to the present day. Overall, the author demonstrates that from the nineteenth century, American, European, Japanese, Indian, and other business leaders discussed the responsibilities of business beyond making profits, although until recently such views have not been mainstream. Key concepts include:

  • Four factors have driven beliefs that corporations have responsibilities beyond making money for their owners. These factors are spirituality; self-interest; fears of government intervention; and the belief that governments were incapable of addressing major social issues.
  • Many of the most forceful exponents of responsibility had strong religious or spiritual values. They did not accept the arguments of Adam Smith, Ted Levitt, and Milton Friedman that they should set aside these values in the sphere of business, and simply take on trust that self-interest and profit maximization would automatically deliver public good.
  • Self-interest also mattered. In the United States, where corporate philanthropy acquired a unique importance, rich business leaders can be regarded as making investments in shaping the future. Less grandiosely, corporate social responsibility and philanthropy could be interpreted as reflecting the desire of business leaders to secure legitimacy for themselves and their firms. In the United States in particular wanting to pre-empt government intervention was important also.
  • While most research has focused on developed countries, historically the non-Western world has produced many pioneers of corporate responsibility. These include Shibusawa Eiichi in late nineteenth and early twentieth century Japan, Jamnalal Bajaj in interwar India, Ibrahim Abouleish in postwar Egypt, and multiple Latin American companies today.
  • Historically and today, there has never been a consensus on what responsibility means, and although the language of corporate responsibility has now diffused globally, there remain wide variations in the relationship between rhetoric and practice. A key challenge now is disentangling the now near-universal rhetoric of corporate responsibility with what is actually happening.

 

Author Abstract

This working paper examines the evolution of concepts of the responsibility of business in a historical and global perspective. It shows that from the nineteenth century American, European, Japanese, Indian, and other business leaders discussed the responsibilities of business beyond making profits, although until recently such views have not been mainstream. This paper argues that four factors drove such beliefs: spirituality, self-interest, fear of government intervention, and the belief that governments were incapable of addressing major social issues. There were always a wide variation concerning the nature of this responsibility, and although the language of responsibility has diffused globally, there remain wide variations in the relationship between rhetoric and practice.

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