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Capitalism at the Crossroads: Using the Resources of Capitalism to Solve The World's Most Difficult Problems

Submitted by: Wharton School Publishing

Categories: Community Development

Posted: Apr 05, 2005 – 12:00 AM EST

 


  • Use the assets and innovations of capitalism to revolutionize the environment. Environmentalists have been fighting for years to win small battles in the courts to add slight limits to regulations on industry. The battle for sustainability can only be won by working with multinational corporations, not against them.
  • Existing multinational corporations ignore the vast majority of the world's population. Use these vast untapped markets to develop disruptive technologies that can reshape the global economy.
  • Develop smart globalization. For many in the world, globalization has come to mean westernization. Multinational corporations must understand the cultures they are entering to develop technology and infrastructure that fit their needs.


    Despite decades of unprecedented growth and the expansion of capitalism into most of the world, prosperity has only spread to a fraction of the earth's population, while pollution and corruption has encircled the globe. As Stuart Hart proposes in Capitalism at the Crossroads: The Unlimited Business Opportunities in Solving the World's Most Difficult Problems (April 15, 2005; Wharton Business School, $27.95), the most powerful institutions in the world, the multinational corporations, must devise innovations to create sustainable global capitalism. Otherwise it won't get done.

    The problems facing the world today seem daunting. Populations across the planet are exploding, doubling and tripling in the course of a lifetime. Terrorism has become a major threat to the existence of democracies and the free market. The enormous economic growth during the 1990s did spread some prosperity, but the enormous increases in consumption have sent the earth hurtling to an unsustainable environmental future. Against these impending disasters, governments, both First and Third World, have proved only capable of modest victories, delaying disasters instead of solving problems. Government regulations are written with no concern for cost-effectiveness, and thus corporations feel it necessary to sacrifice financial performance to meet societal obligations.

    Stuart Hart, S.C. Johnson Chair of Sustainable Global Enterprise at Cornell's Johnson Graduate School of Management, says the enormous problems of the world will be solved by uniting the ambitions of profit and sustainability. The multinational corporation, with its efficiency, assets, and capacity for innovation, is the only institution with the resources necessary to produce a sustainable global economy. Through the process of creative disruption, Hart shows that environmental concerns can be alleviated while spreading prosperity to those at the bottom of the pyramid, the vast bulk of humanity that is ignored by the global market.

    For instance, the non-profit company Light Up The World has recently developed an affordable rural lighting system which combines solar photovoltaics with light-emitting diode (LED) technology. Despite being more energy efficient, longer-lived, and more durable than traditional lighting, LED has been unable to make a dent in the light market in the top of the pyramid economy. However, when one focuses on the billions all over the world without electricity, LED can revolutionize the lighting systems for the majority of humanity. When one considers that this new technology would be much cheaper than the amounts people already pay for candles and battery-lighting, there is a tremendous opportunity for profit.

    To truly tap the potential of these markets, multinational corporations must first embed themselves in these cultures. The global elite look at the poor of the world as lazy and inefficient, presenting no opportunity for investors. However, only by understanding the daily difficulties in surviving in a Third World environment can corporations develop products that will truly enhance the lives of impoverished people. The world will not oppose globalization is if it is truly a global economy, and not simply Western imperialism. By being reactive to the needs of the poor, corporations can create smart globalization, a movement that would spread prosperity beyond the confines of Western elites while attaining sustainability for the world's economy.

    The following companies have made enormous profits by solving the world's problems:

  • Collins & Aikman Floorcovering (US based international company) became the first commercial carpet manufacturer to convert old carpet and post-industrial PVC waste into carpet backing for a new product line. The new material is cheaper and possesses superior functionality, while ridding the company and the planet of costly industrial waste.

  • KX Industries (US based international company) has created a revolutionary new water filter that cheaply and effectively produces purified water from virtually any source. It costs less than $10 per family per year, and dramatically reduces the amount of deaths and diseases brought about by unsafe drinking water.

  • Hindustan Lever Limited (Indian subsidiary of Unilever) requires that all employees spend six weeks living in rural villages in India. They actively seek local consumer insights and preferences for new products, and gets raw materials from local producers. The corporation became a reflection not just of the culture from which it sprang, but also of the society it was serving.

  • Cemex (Mexican construction company) took an enormous hit in business during a recession in 1994. However, when they realized that sales to the poorest tier of the population were hardly affected, they realized they needed to research this section of society. Their teams lived in townships and realized that people were doing the best with what they had, and that a small loan could help them finish their houses in a much shorter period of time while making profit for the company.

  • Grameen Bank (Bangladesh) has gone against most established assumptions about banking by giving credit to the poorest people in Bangladesh. Building personal relationships with the loan recipients instead of depending upon mountains of paperwork and legal documentation that often end up costing more than the loans themselves, the bank achieved a 98.9 percent repayment rate, higher than most American and European banks.

    These companies, along with many others illustrated by Stuart Hart, show that the route to sustainable global capitalism lies not in idealism, but in innovative, efficient business practices.

    STUART HART is one of the world's top authorities on the implications of sustainable development and environmentalism for business strategy. He is currently the Samuel C. Johnson Chair of Sustainable Global Enterprise and Professor of Management at Cornell's Johnson Graduate School of Management; and Hans Zulliger Distinguished Professor of Sustainable Enterprise at Kenan-Flagler Business School, University of North Carolina. Hart founded both the Center for Sustainable Enterprise (CSE) at the University of North Carolina's Kenan-Flagler Business School, and the Corporate Environmental Management Program (CEMP) at the University of Michigan. He currently does a wide range consulting work with numerous organizations and companies that include DuPont, Hewlett Packard, Procter and Gamble, Shell and many more. He has written over 50 papers and authored or edited five books. His very influential article, "Beyond Greening: Strategies for a Sustainable World," won the McKinsey Award for Best Article in the Harvard Business Review in 1997 and helped launch the movement for corporate sustainability. Along with C.K. Prahalad, Hart co-authored the path-breaking article "The Fortune at the Bottom of the Pyramid," which articulated for the first time how businesses could profit while serving the needs of the world's 4 billion poor within the developing world.

    CAPITALISM AT THE CROSSROADS
    The Unlimited Business Opportunities in Solving the World's Most Difficult Problems

    by Stuart Hart
    Published by Wharton School Publishing/Pearson, April 15, 2005
    Price: $27.95 hardcover U.S.
    ISBN: 0-13-143987-1

    To read a PDF selection of Questions and Answers with Professor Hart, click here.

    About Stuart L. Hart

    Professor Hart is one of the world's top authorities on the implications of sustainable development and environmentalism for business strategy. He is currently the Samuel C. Johnson Chair of Sustainable Global Enterprise and Professor of Management at Cornell's Johnson Graduate School of Management; and Hans Zulliger Distinguished Professor of Sustainable Enterprise at Kenan-Flagler Business School, University of North Carolina. Hart founded both the Center for Sustainable Enterprise (CSE) at the University of North Carolina's Kenan-Flagler Business School, and the Corporate Environmental Management Program (CEMP) at the University of Michigan. He currently does a wide range consulting work with numerous organizations and companies that include DuPont, Hewlett Packard, Procter and Gamble, Shell and many more.

    Stuart Hart has written over 50 papers and authored or edited five books. His very influential article, "Beyond Greening: Strategies for a Sustainable World," won the McKinsey Award for Best Article in the Harvard Business Review in 1997 and helped launch the movement for corporate sustainability. Along with C.K. Prahalad, Hart co-authored the path-breaking article "The Fortune at the Bottom of the Pyramid," which articulated for the first time how businesses could profit while serving the needs of the world's 4 billion poor within the developing world.

    About Wharton School Publishing,Knowledge@Wharton, and the Wharton School

    Wharton School Publishing is dedicated to presenting the world's foremost business thinkers in print, audio and interactive formats. All titles must be approved by a senior Wharton faculty review board to ensure that they are timely, important, conceptually sound, empirically based, and implementable. The editorial focus is on applicable knowledge, along with multi-media publishing, enabling readers to gain new insights into the issues shaping the future of business, and plan and take action to achieve their goals. Wharton School Publishing is a partnership between Pearson Education, the world's leading education company, and the Wharton School of the University of Pennsylvania

    Knowledge@Wharton (http://knowledge.wharton.upenn.edu is a free biweekly online resource that captures knowledge generated at Wharton through such channels as research papers, conferences, books, and interviews with faculty on current business topics, and distributes that knowledge online to a global business audience. The website contains more than 1,500 articles and research papers in its database and more are added every week. Over the past five years, Knowledge@Wharton has been featured in the Wall Street Journal, Financial Times, Business Week, Economist Intelligence Unit, Information Week, and several other publications.

    The Wharton School of the University of Pennsylvania is recognized around the world for its academic strengths across every major discipline and at every level of business education. Founded in 1881 as the first collegiate business school in the nation, Wharton has approximately 4,600 undergraduate, MBA, and doctoral students, more than 8,000 participants in its executive education programs annually, and an alumni network of more than 80,000 worldwide.

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