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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."

Prof. 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.

 

 
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