A Reflection by Our Think Tank of Young Economists
Every episode of the online dialogues between visionary economists, organized as part of the Consultation, starts off with a personal reflection by one of the members of the Consultation’s Think Tank of Young Economists. This is the reflection of Kees Buitendijk at the start of the dialogue on ‘Business as a Force for Good’ (28 September).
Tonight, we talk about “purpose”. “Purpose” is the key-word to both of our guests in their search to transform big business. “Purposeful” corporations are in it for the long-term, they create value beyond profit, treat their employees, customers, suppliers, the climate and society at large with care. And in the end, corporations that put “purpose” first will thrive.
A “purpose” in life is important to all of us. But how does a sense of purpose arise? I would say “purpose” is not formulated a-priori, “purpose” grows in- and through our lives. Therefore, we should not put “purpose” first, we should put context and community first. Let me elaborate.
The word “purpose” alone carries a strong feeling of “text-book ethics” with it. It is quite hard, if not impossible, to formulate universal principles of purpose, public benefit or the common good. And it is even harder to subsequently measure and enforce these principles. Of course, we can agree on some general principles for better business, like reducing pollution, or ending extreme poverty and hunger. These are great principles of no-harm, aimed at the protection of people and planet. But just as we for ourselves would not say that “avoiding poverty” is the purpose of our lives, so is this not a full account of “purpose” for business.
Many of the successful “purpose-corporations” that are mentioned by Henderson & Mayer in their books, are – in my opinion – not unique because they have put “purpose first”; they are unique because they are embedded in meaningful contexts. They carry with them a sense of place, a sense of belonging, a sense of commitment. They are family-owned, have strong local ties, have only a few committed investors and stand in a long tradition of professional quality.
“Purpose” originates in communities; “purpose” exists in places where people meet eye-to-eye; “purpose” grows through practice. Many Small and Medium-sized Enterprises are examples of this kind of “embedded business”. For many local business owners, “doing good” is not an abstract and far-away concept, and contributing to the public benefit is a day-to-day practice. They have a reputation to keep up, a care for their customers and employees, and an involvement with their local communities.
Why is big business devoid of “purpose”? I would say it is because they tend to be disconnected from meaningful contexts; they are places of nowhere; they are system-oriented instead of relations-oriented; they are disembedded. Injecting abstract principles of purpose will not suddenly turn this around.
Two lines of action
If we want business to contribute to a better society and the greater good, I would like to suggest two lines of action, and I’m curious to see how our guests would respond.
- First: strengthen local business. In this regard, Europe can build on a long tradition. Especially in Scandinavia, the Spanish Bask-region and the “Rhineland” area we have long records of cooperative and family-owned business. But as anywhere in the West, we can see local businesses – be it small supermarkets, bookshops or farmers – struggling to keep up. As we move along in the Corona-crisis, governments can support small and medium-sized enterprises and promote entrepreneurship.
- Second: large corporations should strengthen senses of practice, place and community. How? By taking equity financing over debt financing, end tax evasions, strengthen labour positions of employees and democratizing workplaces. These are measures large corporations can take themselves, but if necessary, can be enforced by governments.
I look forward to tonight’s conversation. Let me end by rephrasing one of prof. Mayer’s most important statements: context and communities first, the rest follow.