Seeing The World of Business: Challenges And OpportunitiesArticle / External content not produced by TOW Project
The business leader faces a world characterised by a complicated mix of factors. To try to understand them, we need to follow the guidance given in the document Gaudium et Spes of Vatican II; that is, we have the task “of scrutinizing the signs of the times and of interpreting them in the light of the Gospel”.1 Some of these signs point to factors that limit what leaders can do to realise the good by constricting their behaviour and closing down avenues of creativity. Other factors create new opportunities for managers and entrepreneurs to serve the common good and the potential for new circles of solidarity to infuse our social, political and economic life. The world around us, therefore, presents a complex interplay of light and dark, of good and evil, of truth and falsehood, of opportunities and threats.
Christian business leaders must be able to see this world in a way that allows them to make judgements about it, to build up its goodness and truth, to promote the common good, and to confront evil and falsehood. The judge section of this paper offers help in this kind of assessment. Here the aim is to present a short summary of some key factors affecting business activity today, indicating where possible their good, bad, and context-dependent aspects from the perspective of the business leader.
Among the many complex factors that influence business locally and globally, there are four which stand out as worthy of special mention, having fundamentally changed the context of business over the last quarter-century. The first three are closely related to each other: globalisation, (2) new communication technologies, and the financialisation of the economy. The fourth factor, cultural changes—and, in particular, the challenge of individualism and accompanying moral systems of relativism and utilitarianism—may arguably present the greatest dangers to Christian business leaders. There are of course many other factors that have a bearing on business today state regulation, the role of international authorities, unions, environmental issues, work/family tensions, and more), all of which deserve analysis, but in an effort to be succinct we will only examine these four.
Globalisation: The rise of a global economic order is one of the distinguishing features of our age. The term “globalisation” points to a worldwide process of intensification of the movement of both outputs and inputs, especially labour and capital, bringing with it a growing web of social interconnectedness. With the end of the Cold War and the opening up of many emerging markets, the marketplace for businesses around the world has expanded enormously. This has created new opportunities and new threats. Whole peoples who were previously excluded from the world economic system can now participate in and benefit from it. Greater efficiencies have made more products and services affordable for more people. At the same time, greater world output has been accompanied by greater inequality in the distribution of income and wealth, both within countries and between them. Regional economic zones, with free movement of goods and even single currencies, encourage trade and stimulate innovation. They are not, however, always accompanied by equally free possibilities for the movement of working people in search of employment. Especially where there is a single currency, the resulting limitations that national or local governments encounter when trying to promote an effective economic policy, especially during a localised crisis, may put whole political systems under strain. At the same time, markets have gone from being relatively homogeneous culturally to highly diverse. This is positive in that it brings different cultures into greater communication with one another; however, considering the effects of aggressive competition and the global marketing of standardised products, the dangers of cultural imperialism and loss of diversity should be carefully examined. Pope Benedict XVI has summarised these divergent forces by observing that, “as society becomes ever more globalised, it makes us neighbours but does not make us brothers”.2
Behind all these changes is the fundamental reality that capital has acquired new freedom: no longer does it have to account to the people in the countries where its profits are made.3 It is as if economic power had acquired an extraterritorial status. Companies are able to react to profit opportunities quite independently of their national authorities—and in so doing they play a key role not only in the organisation of the economy but of society. Thus globalisation is modifying the foundations of the economy and the polity, reducing the degrees of freedom of nation-states: the familiar nation-state’s politicaleconomic instruments are tied to a well-defined territory, whereas multinational companies can produce goods in one country, pay taxes in another, and claim assistance and state contributions in yet a third. Business has become much more influential in this changed context and consequently carries the potential for great good or harm.
Communications technology: 4 The revolution in communications technology brought by the Internet has had significant effects, both positive and negative, upon business management. On the positive side, Internet-based collaboration is developing new products and solutions to age-old problems. Such products and solutions have reduced the costs for people to connect globally. New business models combine collaboration and competition in unique ways to meet needs that previously were inadequately served or left completely unsatisfied. Consumer/stakeholder groups are empowered to apply pressure on global businesses and highlight poor practices in issues ranging from respect for human rights to environmental protection in poorer parts of the world. This activism reduces the cost penalty borne by those companies that have always aimed to behave responsibly in these parts of the world.
On the negative side, we now live in a world of instant gratification and an overabundance of information. In such a world, as is commonly noted, the urgent can drive out the important. Every message becomes a priority when instant communication insists on our attention. We seem to have no time for well-studied and thoughtful decisions on complex matters. Decisions—even important ones—are increasingly made without adequate consideration and with too little shared information. Faced with more difficulty in preparing for and explaining decisions, leaders rely on their experience. Thus, their personal values and beliefs become even more critical in framing their decision-making.
Financialisation of the economy: The combination of globalisation with its expansion of markets and earnings and new communications technologies has brought the financial sector to great prominence in business. The term “financialisation” describes the shift in the capitalist economy from production to finance. The revenue and profits of the financial sector have become an increasingly large segment of the world-wide economy. Its institutions, instruments and motives are having a significant influence on the operations and understanding of business. While the recent financial crisis has brought about a wave of criticisms of the negative effects of financialisation, the financial sector has also: given millions of people easier access to credit for consumption and production; sought to spread risk through derivative instruments; created ways to leverage capital to make it more productive; and more. The financial sector has also produced social or ethical funds allowing investors to apply their values in supporting or avoiding certain industries or certain companies. This sector represents an important and fast-growing development that is set to grow further after some promising results during the financial crisis. Caritas in Veritate points out that this type of investment should be the norm: “Efforts are needed—and it is essential to say this—not only to create ‘ethical’ sectors or segments of the economy or the world of finance, but to ensure that the whole economy—the whole of finance—is ethical, not merely by virtue of an external label, but by its respect for requirements intrinsic to its very nature”.5
But despite these positive developments, financialisation has contributed to a whole assortment of negative trends and consequences. We will address only two—commoditisation and short-termism. Financialisation has tended to completely commoditise businesses, reducing the meaning of this human enterprise to nothing but a price. In particular, the financial sector has contributed to this commoditising trend by equating the purpose of business to shareholder wealth maximization. Shareholder value has become virtually the sole metric by which business leaders determine their performance and their worth. In the current climate, the call to “maximise shareholder wealth” remains dominant and is the leading theory taught in many business schools. Along with this commoditisation have come short-term mentalities under which leaders are tempted to become fixated on the upside potential for short-term success, and to undervalue the downside risk of excessive risk-taking and strategic failure. It is perhaps not surprising that the opportunity to acquire enormous wealth in relatively short timeframes provides a strong incentive for dysfunctional behaviour. Pope Benedict XVI noted these dangers when he wrote: “Without doubt, one of the greatest risks for businesses is that they are almost exclusively answerable to their investors, thereby limiting their social value…. It is becoming increasingly rare for business enterprises to be in the hands of a stable director who feels responsible in the long term, not just the short term, for the life and results of the company”.6
Cultural changes: As already discussed, the impact of new levels of contact between nations through globalisation, and between individuals through technology, has resulted in significant cultural change. For the Christian business leader, two related key cultural changes have been the turn to individualism in the West and higher levels of family breakdown than in the past. With a strongly utilitarian view of economics and even of society on the rise, whole populations are encouraged to focus on achieving “what works for me”, independently of the effects on others, with results that negatively impact family life. “Values” are seen as relative, measured by their contribution to individual preferences and business gains. Work becomes simply a means to afford the pleasures of life that each person chooses. Rights become much more important than duties; sacrifice for a larger good is no longer considered. These attitudes fuel the drive of top management to claim a disproportionate share of the wealth created, for employees to nurture an attitude of entitlement, and for customers to foster a culture of instant gratification.
Fortunately, new movements and programs have been developed in an effort to take moral and spiritual life more seriously in relation to business. Faith-and-work groups, spirituality of work programs, business ethics training and social responsibility projects, are all helping business leaders to manage their companies in the spirit of St. Paul’s exhortation: “But test everything; hold fast what is good" (1 Thes 5:21).7 Many of these groups and movements are enabling business leaders to recognise their work as a vocation and the role their businesses play in contributing to the common good.
There is no doubt that globalisation, enhanced communication and financialisation can have positive consequences for the human community. A healthy respect for short-term financial performance can also be positive if it contributes to decision-making rather than being its sole driver. All these trends, however, need to be guided by ethical social principles, illuminated for Christians by the Gospel, and embedded in sound cultural institutions. Without such a constant influence, they risk being detrimental to “integral human development”.8 This is where the social teachings of the Church and our belief in God’s love can offer an authentic perspective, enabling business leaders to fulful their Christian calling.