Democracy, Profits, and Good Corporate Citizens

I read an interesting interview with Neville Isdell, CEO of Coca-Cola, on allAfrica.com.  He sheds light on why some countries on the continent have growing economies while others languish, as well as the role of democracy in economic development.  Here’s a brief excerpt:

…we have been having good growth in South Africa but if you take the rest of Africa, there is good growth coming out of the likes of Tanzania, out of Egypt, out of Ghana. I’ll just take those three – you’ve got east, west and north – and in all of those countries you’ve got economies that are growing. And they are growing because of good economic policies and sound government. We’re not growing as well… [in] areas where the structures and the governmental policies are more restrictive.

Is there a correlation in your experience between democracy and good governance? Have you had growth in oppressive societies?

Oppressive societies – that is always a problem. You don’t get good growth out of those. Where you have a deficit of democracy as defined today by Western elites, you can still have very good growth because they’re putting in place sound policies. Not just economic policies – educating their people, having good rule of law, building infrastructure.

I think the real qualifier for democracy to be not just a vote once, but really to take root is a functioning middle class. That is the democratic stabilizer. There’s a little bit of a chicken-and-egg situation here. You do not get a functioning middle class unless you have got a growing economy, unless you’ve got the right economic policies, and those can be put in by governments which don’t meet the current Western democratic norm.

As a former entrepreneur, I found this interview quite encouraging. I agree strongly with Isdell’s comments about the impact of stable, non-oppressive societies on economic growth. Companies of all sizes and nationalities, from the street hustler to the mega-multinational, look for places where they can see a future, where they can feel confident that the investment they make today will pay off not just once but over and over again. For that to happen, there needs to be infrastructure as he defines it–not just roads and rail but education, health care, and civil stability. There also needs to be a rule of law (not rule BY law, which is little more than governance by fiat) and an objective, independent judicial system to enforce individual rights. Keep in mind that a corporation is a “person” in most legal systems, which makes enforcement of individual rights a concern of businesses, too.

I also agree with him that democratic government as usually defined in the West isn’t necessarily the be-all and end-all for crating stable, well-functioning societies. Elections are good, but not an end in themselves. Enforcement of the rights of free expression, respect for the person and property of the individual, the ability to make personal choices about work, travel, lifestyles, etc., can all happen in societies governed by non-Western methods.

I’m sure Isdell would agree that the profit motive per se is neither good or bad. It is the character of the people pursuing it that determines whether a company is a good citizen or not. When they are good people, great good can come from their long-term investment in underdeveloped economies. Companies like Coca Cola, General Electric, and many of the other mega-multinationals are closely governed by many forces–their shareholders, U.S. and other government regulation, the stock markets–as well as their very high public profile. It behooves them to be clean operators, to do good when they can, and to avoid morally-repugnant behavior. It is the quick-buck artists who give foreign investment a bad name, not large, stable corporations looking to build future value for their shareholders.
Dave Donelson, author of Heart of Diamonds

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