December 21, 2004
Book Review--Capitalism at the Crossroads: The Unlimited Business Opportunities in Solving the World's Most Difficult Problems
by William Baue
According to author Stuart Hart, sustainable global enterprise holds the key to reducing poverty,
reversing environmental destruction, and even counteracting terrorism.
Cornell and University of North Carolina Business Professor Stuart Hart's Capitalism at the Crossroads perfectly complements University of
Michigan Business Professor C. K. Prahalad's The Fortune at the Bottom of the Pyramid, perhaps even surpassing
it in significance. The two professors collaborated from 1998 through 2002 on the seminal article
that gave birth to the "bottom of the pyramid" (BOP) concept that Prof. Prahalad explains so
eloquently in his book (see related book review). The BOP market
theory holds that multinational corporations (MNCs) can simultaneously profit and help
reduce global poverty by serving a market they have largely ignored until recently: the 4 billion
people in the world living on less than $2 a day.
As good as Prof. Prahalad's book
is, however, it leaves unanswered the question of how the BOP theory fits into the larger context
of sustainability, particularly environmental sustainability. Prof. Hart's book not only answers
this question, but also presents a comprehensive and compelling argument that capitalism cannot
afford to ignore sustainability--indeed, that capitalism will thrive by embracing sustainability
(and vice versa).
"This book takes the contrarian's view that business--more than either
government or civil society--is uniquely equipped, at this point in history, to lead us toward a
sustainable world in the years ahead," writes Prof. Hart. "Properly focused, the profit motive can
accelerate (not inhibit) the transformation toward global sustainability, with nonprofits,
governments, and multilateral agencies all playing crucial roles as collaborators."
Hart introduces the book describing how the shift in the relationship between capitalism and
environmentalism from antagonistic to (sometimes) complementary forces mirrored his own shift from
distrusting capitalism to respecting its power to leverage positive social change. The "greening"
revolution of the 1980s demonstrated that companies could profit by employing more environmentally
benign processes, such as recycling or waste reduction.
However laudable the greening
approach is, it became apparent in the 1990s that reducing the environmental impact of existing
business models would prove insufficient to address the imminent environmental and social crises,
according to Prof. Hart. He was among those who at that time promoted moving "beyond greening"
through "creative destruction" of environmentally and economically wasteful processes, replacing
them with environmentally (and economically) beneficial processes.
"Unlike greening, which
works through the existing supply chain to effect continuous improvement in the current business
system, 'beyond greening' strategies focus on emerging technologies, new markets, and
unconventional partners and stakeholders," writes Prof. Hart. "Such strategies are thus disruptive
to current industry structure and raise the possibility of significant repositioning, enabling new
players to establish leading positions as the process of creative destruction unfolds."
The primary business strategy that promises to arise from the ashes of creative destruction is
the BOP approach of serving the needs of the poor in ways that are culturally appropriate,
environmentally sustainable, and profitable, to paraphrase Prof. Hart's definition. One key to
leveraging the BOP market strategy is for multinational corporations to "become indigenous."
"By hearing the true voices of those who have previously been bypassed by globalization, and by
learning to co-develop technologies, products, and services with local people, MNCs can become
native to the places where they operate," writes Prof. Hart. "This requires a healthy dose of
humility and respect, as well as greater appreciation for the many and varied ways that people
choose to live."
"Through bottom-up innovation on a human scale, MNCs effectively become
part of the local landscape," he continues. "In so doing, the corporate sector becomes a primary
driving force for global sustainability."
Perhaps the most interesting aspect of this line
of reasoning is that it simultaneously addresses the problem of terrorism, which Prof. Hart
considers a symptom of the more primary underlying problem of unsustainable development. On
September 11, 2001, terrorists used violence to attack the symbolic epicenter of capitalism, the
World Trade Center. While using violence to counter violence may seem necessary, Prof. Hart
alternatively suggests we look to the terrorists' target, not their tactics, to solve the problem.
Reforming capitalism to create sustainable global enterprise may hold the key to eradicating the
underlying problems of poverty and exploitation that breed terrorism while simultaneously reversing
the looming environmental crises.