In September I attended the Concordia Summit as the guest of a young Boston College alumnus. The Summit convened political and industry leaders from across the United States and around the world to discuss and promote industry/government initiatives in developing economies. This august group included U.S. political leaders President Clinton and Senator John McCain, Woodrow Wilson Institute leader and former congresswoman Jane Harmon; current and former world leaders, including Aleksander Kwaśniewski, former president of Poland, Laurent Lamothe, prime minister of Haiti; leaders of organizations that routinely intermediate between public and private interests, including Luis Alberto Moreno, president of the Inter-American Development Bank, and Ian Bremmer president of the Eurasia Group; and leaders from corporations including Donna Karan (represented by herself), Kate Spade New York, and Abbott Pharmaceuticals. Much of the discussion centered on how companies might think about their global citizenship and the need for private investment.
Videos from the event proceedings can be found here. Themes that emerged in the discourse of the day largely centered on the need for investment in developing economies. McCain and Clinton both pointed out that foreign aid comprises less than 1 percent of the federal budget and is likely to be reduced to less than that. Both cited that 1 percent as a critical investment if we are to promote a participatory global economy.
Both Clinton and McCain discussed the role of U.S. businesses as ambassadors – and agents – of America in the age of globalization. McCain remarked that the future of the world would rest not only on governments but also on private sector investment. Referencing the Arab Spring, he observed that many in the Middle East region (and other parts of the globe) want a different world.
McCain noted that there will be an inevitable reduction in foreign assistance and aid from the U.S. government. Because economic dislocation will only increase instability, commercial involvement in foreign markets is crucial. The problem is that commercial interests are not that eager to go to places that are unstable if there are less risky places to invest, nor do they necessarily see themselves as responsible for creating stability over profit.
Recent research by Robert Eccles and George Serafeim shows that 1,000 businesses are responsible for half of the total market value of the world's 60,000 publicly traded companies, going on to point out that they virtually control the global economy and their promotion of environmental and social sustainability is critical to any significant change.
According to the research as reported in Bloomberg News, in 1980 the world’s largest 1,000 companies made $2.64 trillion in revenue, or $6.99 trillion in 2010 dollars, adjusted using the consumer price index. They employed nearly 21 million people directly, and had a total market capitalization of close to $900 billion ($2.38 trillion in 2010 dollars), or 33 percent of the world total.
By 2010 the world’s largest 1,000 companies earned $32 trillion in revenue. They employed 67 million people directly, and had a total market cap of $28 trillion – with some individual companies outpacing national economies.
For all of the discussion about our need to pull together, the language characterizing foreign and emerging economy investments in terms of betting struck me. Clinton observed the need for political risk insurance noting that nobody wants to “go to a really bad place to start a business” and if everyone was required to kick in a little, these foreign investments might be considered like “going to Vegas on a bad weekend, not betting more than you can afford to lose.” These attention-getting comments were followed by a more serious assertion that governments need to support whatever it is that makes it easier for companies to think beyond quarterly earnings and contribute to social and environmental solutions that can create a 21st century middle-class economy.
Ian Bremmer noted that private enterprise has rebounded much faster than governments out of the current crisis. He noted that the United States is the world’s largest military security provider but we need to work on economic statecraft. Across most of the sessions, participants agreed that health care and education are what matter. They are what will drive ability to build and preserve infrastructure and create stability. We don’t have social or industrial policy built out. We have great bureaucratic diplomats with no track record in business. We need both. This is a place where people in the corporate citizenship field can make real contributions. Many of you are working in the areas of health and education on a global scale. You can help your companies connect this important work to the global policy agenda – and emerge as leaders in the process.
Given the scale of our largest global companies, I am reminded of Eisenhower’s 1961 farewell speech and his warning to U.S. citizens of the need to guard against the military/industrial complex. Fifty years later, it seems that most of his fears are borne out. If foreign aid is critically important, why is it only 1 percent of our budget? If business is the answer to solving global problems, how do we create systems of incentives and accountability that work to make this so? We talk about nations and companies as if they were monolithic entities. It is we, the people in the nations and the companies, who must hold our elected officials accountable to creating these incentives and accountabilities and to consider the seeds we are sowing today that we will harvest in our business context tomorrow. Corporate citizenship can help to create more productive global markets. Joint government/industry initiatives can multiply the positive effects of the investments of either independently. Help your company lead the way.