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Profit is Charity – guest post by Dipinder Sekhon

23 August 2011 2,931 views 43 Comments

Dear All, it my pleasure to publish this guest post by my friend and FTI colleague, Dipinder Sekhon on why businesses would do well to focus on generating profits (ethically) and enhancing shareholder value rather than spending money on charitable causes (emphasis added).

*** Profit is Charity by Dipinder Sekhon ***

Profit – legally and ethically generated – is one of the best measures of social value-add.

Clients buy services and products only when they can extract value from them. Example, if a company sells asoap for Rs 10 (when it costs it Rs 8 say), the customer buys it only because s/he can extract more than Rs 10 ofvalue from it (say Rs 12). Hence while the company generates profit in the transaction, the customer also gains. Acompany’s profits therefore are a measure of the cumulative value it injects into the society. If the soap makingcompany is earning crores of rupees in profits, it is doing so by adding value to millions of people.

A business need not do any traditional ‘Corporate Social Responsibility’ (CSR) activity for contributing to the society. In fact traditional CSR – like donating to schools or hospitals – may not be a very economically efficient or effective way of impacting developmental outcomes. As long as a business keeps generating higher and higherprofits ethically and legally, it will be making greater and greater social contributions by injecting value to its customers, and helping them inject value into their own lives or into the lives and businesses of their customerswho are next in the chain.

Donating to a school or a needy child or family produces immediate visible outcomes. Therefore, these are typically more satisfying personally, and may be necessary for keeping one motivated towards social welfare. However, these may not be the most effective and efficient ways for achieving desired outcomes. For example,the same effort, time and money contributed towards governance reforms in education may help create more schools (reference #1) and raise more people out of poverty.

Perfect markets require information symmetry between buyers and sellers, and absence of monopolies etc. Long term complex developmental outcomes – like reduction of corruption, governance reforms, environmental sustainability etc – whose benefits are spread across several people and are difficult to quantify may not find easy market based solutions.

Even though these things will be economically beneficial for many individuals andbusinesses, it may be difficult for these objectives to raise business investments (reference #2) due to complexity of information involved, long term diffused results, collective action problem etc. Such efforts therefore may still largely dependon traditional charitable and philanthropic support. Individuals (rather than business organisations) should consider philanthropic donations (out of their personal bank balance, rather than their organisations’ profits) towards solving such social problems which do not find market solutions.

***

Please watch the following video interview by Nobel Laureate Prof. F. A. Hayek’s for more on these lines.

References:

  1. Pl refer to this seminal paper – Reinikka, R., & Svensson, J. (2004). Local Capture: Evidence from a Central Government transfer Program in Uganda. The Quarterly Journal of Economics , 119 (2), 679-705.
  2. There are some interesting attempts though. Check this out: http://www.ted.com/talks/shaffi_mather_a_new_way_to_fight_corruption.html

P.S. Also read another FTI colleague and friend, Sanjeev’s views on charity (part of his forthcoming book). Please bear in mind that these are “cut and paste extracts from across the entire book, and so these points, below, are not paragraphs that flow into each other”:

We are born to be fiercely independent; self-reliant. Thus, we are deeply offended by charity thrust upon us when we can fend for ourselves (no matter how feebly) with our own effort.

…Charity can, at best, give someone a fish for a day, but can’t teach the person to fish. It has to be ‘administered’ each day, whereas teaching how to fish is a durable cure. Unless a desperate emergency arises, charity must therefore be abjured.

…There has never been a time in history when private charity was sufficient to feed and educate all the poor.  The liberal believes … that … everyone [be] provided with a reasonably level playing field (reasonable equality of opportunity). Any enhancements beyond this income based social minimum should be left to the fine tuning of private charity and social relationships (such as between parents and children). …it is inappropriate for a society to assume that all taxpayers will voluntarily pay taxes for the welfare of others. But on the other hand, we also know that private charity has never succeeded in sheltering everyone who may be in desperate need. In other words, although empathy is not good grounds for a social minimum, we look for a rational system that will not be entirely incompatible with our empathies. True, government provision of public goods and the social minimum (as part of social insurance) will necessarily displace some voluntary communitarian effort and charity.

In sum:1) Except for someone in deep distress, TEACH. Don’t “give”.  2) Have a state that runs a FRUGAL social insurance program (NOT a welfare state) to bring about a reasonable equality of opportunity. Therefore, unless you are involved in helping those who are starving or badly sick or handicapped and have no resources to help themselves,  DO NOT give charity. Instead, teach – either for free or for profit (I recommend FOR PROFIT teaching, which is more sustainable and by which you can multiply your efforts a thousand-fold). Set up a primary school for the poor. Set up a branch of Adharshila where you educate the community in ideas about classical liberalism and economics.

43 Comments »

  • 1. Vijay Mohan said:

    Great work Dipinder..

    Professor Milton friedman once said .. the only CSR for a business man is to earn more profit…

    Our culture also promotes profit by with the phrase “SHUBH LAABH”

    Thanks!!
    Vijay

  • 2. Dipinder said:

    Thanks Vijay. Shubh Laabh :)

  • 3. Ranganaathan said:

    Shantanuji, am working on a crazy model of kids helping their junior’s. Its very tough on the outside, but a good model on the inside. Will share with you by mail. Jai Bharat …Vande Mataram

  • 4. Sudhav said:

    This is an interesting perspective, but I am not entirely convinced. Profit is clearly not charity , it’s not even close- check the dictionary definition, and your own personal experience. The MNCs can make huge profits and do a bit of charity work, which hardly has any impact on the profits for the shareholders.It’s a bit different for smaller business. How and who will check that the profit is being made in an ethical way.It’s hard enough to check and verify the accounts alone.
    And we all know that what is legal is not necessarily ethical. Mr Gates and Branson have huge multibillion dollar empires… they would benefit many by reducing( even in a small measure)the cost of their products to the average man.
    I do agree that ‘teach,don’t give’ is the gold standard of charity..it was written in the Hindu scriptures aeons ago. However the ‘West’ in particular, is so good at spouting these lofty ideals on the one hand , and going around bombing countries and regime changing at the same time. What other nonsense do we need to hear from the MNCs and NATO etc

  • 5. Khandu Patel said:

    As political economies go, I am interested to disentagle the freedom Hayak espouses from its Western conception with the freedom which is derived from our origins as it is so much tied to the Hindu religion. This has special signifcance if we attach our understanding of the ideal Hindu society as orthodox and traditional in nature, then it cannot transcend to the one where capital and its utilization for profit assumes special significance. Conception of freedom also means, that the institution of caste cannot have any place in a society which is freely delivering goods in the most efficient manner.

    Charity and public service is what distinguishes great societies from those that do not make the grade. India was historically known for its fabulous wealth which was raided by foreigners in search of loot. No one could say that the freedom to make profits was not in good order. England at the time with the enclosures process was trading profitably. But the Christian religion ensured the proliferation of churches, schools, hospitals etc. With one eye to the persons displacedby by enclosures, other gainful employment was provided in the armed forces and in a policy of uplift of the English population in every sense of the word.

    It should be clear that the wealth producing capability of a country is just one important parmeter among many others which comes under the head of political economy.

  • 6. Sanjeev Sabhlok said:

    @Sudhav, an extract from my draft manuscript, DOF:

    Bill Gates will try to do his very best to serve us only when he is able to profit from his service. He knows he can only make a profit if we agree to buy his products. He doesn’t control us. We control him. By succeeding in becoming our servant (for purposes of the software we need), he achieves his profitilty goals. In the process he employs thousands of people, and his software improves our productivity. Social benefits all around. His profits are usually a miniscule fraction of his total contributions to society. His profits (wealth) will in any case ultimately return back to society, as investment, charitable activity, tax, or bequest. Therefore, the whole increase in value from what he creates will irrigate mankind. Our contributions build the world, one brick at a time.
    Instead of this, had Bill Gates given away his software, he would have failed to attract outstanding talent to improve his products. As a result, his creative genius would have not achieved its potential, thus leading to the worst outcome for everybody.

    It would have been even worse had society compelled him to give away his products, but then he would have lost all his incentive to serve our needs.

  • 7. Sanjeev Sabhlok said:

    here’s an image i’ve just created:

    If the above doesn’t work, pl.just click this:
    http://sabhlokcity.com/wp-content/uploads/capitalism.jpg

  • 8. K P Ganesh said:

    India from an economic perspective is still trying to find it’s feet. A lot of trial and error methods are still going on. But the most important thing is that we aren’t changing a lot of Colonial British carried forward laws (including tax laws) which have been just tinkered upon by presuming that it will suit Indian needs. But how wrong we have all got on that front. The failure to address this ground reality has forced politicians to look towards private sector to the extent of forcing them to do CSR rather than allowing them to do quality CSR. All this can change when Government makes quality rules and regulations that GOVERN rather than CONTROL everything.

  • 9. Sid said:

    I too have a slightly divergent view…the gains you make in Capitalistic ways are often way beyond imagination and results in a huge Carbon footprint of those privy to the excess cash and resources…say a Bill Gates e.g. Does it in anyway benefit a poor villager in Bihar e.g…(of course Gates goes and does charity in Bihar and UP but that is his personal thing and not part of a capitalistic more) the wealth is culled out of millions of consumers who often pay at a monopolistic or oligopolistic price. So, what Bill Gates gets out of society does not go back to benefit the society commensurately;it only bloats his personal finances or for a coterie in his company. The point is Wealth Creation ought to be for the Society as a whole…note that I am not advocating any alternative nor extolling Socialism which has patently failed.

    Two: often by capitalistic means one can perpetuate proliferation of commodities which mankind does not require…e.g. Junk Foods, pernicious stuff on the internet etc…but by advertising creating an allure in people’s mind, such products are promoted…so in capitalism the ends often justify the means which may not be purely ethical or salubrious

    Here probably we need to mix Capitalism with our ancient Shastra (or the Toltec tradition or Tao te Ching …) e.g. what I mean mix it with time-tested systems of knowledge like Yoga etc etc and promote a life style which is self-enhancing and eco-friendly and consonant with cosmic principles, not just focused on aggrandizement.

  • 10. seadog4227 said:

    How true and apt!
    “Satyam vada, dharmam chara”!
    Speak the truth and follow dharma because everything good ensues therefrom.
    Not so long aqo, the Slimes commented that profit generated from companies must be reduced by reducing the cost of their products.Who knows(or cares!) what they are smoking today?
    See how hard JRD worked to make Air India the no. 1 airline-with a healthy profit line and excellent service- and see how quickly the kkangress’s socialist garbage has reduced it to nothing. See how Mumbai’s dabbawalas promote and maintain excellence- and a healthy profit- without attending any IIM. That is pure Indian genius which I think is touched upon in this bit on healthy, ethical profit.

  • 11. Dipinder said:

    Dear All, thanks for your comments. I am travelling at the moment and may be able to respond in detail only in about a week’s time. Meanwhile, please continue the discussion.

    Sanjeev – thanks for responding to some of the queries, issues.

  • 12. Sudhav said:

    @S Sabhlok.. I think you have completely missed the point I was trying to make, and yet Sid has picked it up. You know that Microsoft made a $20billion + profit last year? That is a lot of money, made mainly from the aam admi globally. Of course the products of Microsoft are useful for society and now have become an essential in nearly everyones’s lives.I think Microsoft product price should should be lower, to reduce those huge profits which are not really justifiable.I have no option but to pay the price when I go to buy the product which has become a necessity. They have a monopoly and are charging far too much,as their bloated profits clearly indicate. There is a trap as well. The fact that these and other products are so expensive means, I have to work even harder to buy those products, and I need to ask for a higher wage.One has to keep running just to stand still.
    Lets take another example. I don’t think footballers and cricketers improve people’s lives to the extent that those footballers and cricketers are paid in millions.It cannot be denied that they are overrated, especially in light of the Indian team losing so drastically, and overpaid.

  • 13. Khandu Patel said:

    Japan when it decided to engage the world at the turn of the 20th Century sent its brightest to study philosophy etc. With that they whole heartedly accepted capitalism adapted to Japanese characteristic and they have never looked back. Indians have not had to make the journay to the same extent when the British established universities in India. Capitalism is a settled fact which the whole world has to live with. What remains is to make sense of it to the extent that it works for India but it has also to be recognised that it is not detached from political economy. This should be clear from the corruption that is appearing to derailing FDI which has done so much to transform India’s economy. The debate and the fact of a political economy fit for the purpose needs to be settled once for all. I recognise the importance of the contribution made by Hayak and Friedman to the debate on freedom in economic and political affairs. The operation of the free market they describe with any necessary constraints put in place recognising our national heritage is one thing. It also has to be recognised that Indian companies are not on a charity mission when they are battling for India for supremacy in the market place, just as the Microsofts of the world do so for the Americans. It is another version of freedom that embraces the national interest and it can never be ignored.

  • 14. Patriot said:

    For everyone cribbing about Microsoft and their “extortionary” pricing, and their “super-normal, monopolistic” profiteering, here is a 100% FREE alternative:

    http://www.openoffice.org

    You do not have to pay a dime, and it works on your desktop and is compatible with all MS products.

    And, yet in office productivity suites, OO has less than 10% market share – I wonder why?

    cheers

    Patriot

  • 15. Sudhav said:

    @K Patel… I completely agree that capitalism is a reality and at times probably works better than other systems. However my argument is that rampant unchecked capitalism is one of the main problems facing emerging economies.Microsoft has a huge monopoly on the global level.It has not ‘allowed’ a free and fair market.
    The debate on ecomonic and political freedom would obviously be spouted by the MNC types, coming from the Ivy league business schools. The precise point is that rampant profit seeking working with the political class, has lead to the various messes in the world that we see today.The ‘economic class’ is not freestanding from the political class, and never will be.Their mutual dependence is partly glued together by the money.Forgive me for being very simplistic.
    The other problem with using Gates and Branson as role models is that there are many others out there aspiring to be like them, and others who are supporting them to keep the status quo. THAT is unsustainable.

  • 16. seadog4227 said:

    Pls read http://robertlstephens.com/essays/shafarevich/001SocialistPhenomenon.htmlin order to be clear about “Socialism”.

  • 17. B Shantanu (author) said:

    Thanks all…Hope to respond to some points later this evening…

  • 18. Prashant Serai said:

    "Individuals (rather than business organisations) should consider philanthropic donations (out of their personal bank balance, rather than their organisations’ profits) towards solving such social problems which do not find market solutions."

    Why not businesses also ? Especially in cases, where they may find some synergies with their business or it serves some other purposes like, brand building, or sizeable number employees really enjoy involving in grassroots activities through their company, so this serves an HR purpose.

    Yes, social responsibility integrated into the core business of the company is probably the best kind of CSR.

  • 19. Sudhav said:

    @P Sarai.. You ar eright about individuals should conider doing philanthropic donations. However there are very many occasions when an individual is,completely or largely the business organisation.Sometimes there are only a few shareholders, and they may be mostly family members eg Sainsbury, News Corp/Int

  • 20. Khandu Patel said:

    The freedom that Hayak espoused has to be seen in the context. He was a European with an anthropology with a specific interests in identifying the factors that led to the Austro-Hungarian Empire of which he was a citizen. As a European entity whose national ambitions was aroused as inheritors of the Roman Empire it was more a case of what worked best that mattered. Slavery was disproved in favour of freedom with capital and technology harnessed to provide Western nations with the edge over the rest of the world. Rampant exploitation was bound to be destructive of gains of freedom, so even though the market was free, regulations of it was accepted with price control. In contrast, India’s Hindu society has been despotic with little thought for the future to for capital investment as a national entity. The uncertainties of political life for the Hindu mean that his life was given to conspicuous consumption. This is so evident today that it is distasteful and immoral. I do not think Hindus need to learn many lessons in freedom but are in great need of understanding that they need to put in investment of their time and money for the public. As for the situation that brought about the collapse of the economies in the West, it can be in a great measure attributed to the global extension of the free market with no appreciation of the moral hazard of unrestrained pursuit of profits.

  • 21. Prashant Serai said:

    @Sudhav I too am of the opinion that businesses should not be discouraged from doing philanthropy..

  • 22. Chandra said:

    Dipinder,

    Nice topic. It’s amazing how many, even in business schools, are told that somehow what they do for living is not worthwhile or satisfying unless one works for an non-profit/NGO or perform charity.

    But you missed the key point that profit solves – the need for charity itself. Profit alone create sustainable jobs, those that do not depend taking money from other people by force, as government does through taxes, or voluntarily through charitable giving. A job, of course, is great removal of poverty, sustaining a person’s (and one’s families) health, education, and any other needs. Only profitable enterprises, both big and small, can invest in expansion and new businesses to create and sustain jobs. So anyone working for a profitable company should be proud of their “charity” and enjoy their free time instead of worrying that they are not charitable enough.

    Ditto for profitable companies.

  • 23. Vijay Mohan said:

    HI

    Very good point Chandra..

    I have put a graphic on my blog for the same

    http://vijayinternationalist.blogspot.com/2011/08/welfare-state-vs-private-charity.html

    Thanks & Regards,
    Vijay

  • 24. Dipinder said:

    @Sudhav#4 – Agreed that legal need not the same as ethical (hence the need for legal reforms?), also that it might be difficult to check easily whether the profits of a firm have been made ethically and legally. However, the point remains, profit – legally and ethically made – is a measure of social value added.

    @everyone – I am wondering …. this value add is attributable to the direct customers … who in turn may be unethical enterprises … in which case the value gets lost or becomes unethical?
    Further, lets say one wants to direct social value add to ‘Indian society’ or ‘people in gurgaon’ say … one needs to follow the chain of profit and see what proportion of value add ends up at people in the ‘Indian society’ or ‘people in gurgaon’ … ?

    @Khandu#5 – could not understand your comment fully…

    @sanjeev#6, #7 – thanks … great pic!

    @K P#8 agreed that we badly need legal and governance reforms … I feel that ‘CSR’ is useful only to the extent that it enhances profits (in the long term or short term)

    @Sid#9 – please see my comment above meant for @everyone. Here are some ways in which Bill Gates’ software (and related profits) could be related to value add to poor people in Bihar:
    1. Using that software (say Windows OS or MS Office), a drug making company is able to make better quality drugs and make them cheaper, and also distribute them cheaper to eventually reduce medical costs and accessibility of these drugs for many poor people in Bihar
    2. … similar for pesticides which poor peasants in Bihar may use …
    3. … similar for clothes they wear … the soap they use …
    etc
    There may be lot of indirect benefits which eventually flow to poor people in India via the chain of profits via Microsoft’s customers …
    Regarding advertising …. I am a great fan of ‘junk mail’ … it is becoming more and more intelligent everyday … I have to leave a small hint on the web and I automatically start receiving very targeted information about what I need. False information/claims are bad, unethical and hopefully illegal … could be taken up in consumer courts…

    @seadog4227#10 – thanks.

    @Sudhav#12 – how do you think one can determine the right justifiable amount of profit or remuneration to sports stars? How would you respond to Patriot point in #14?

    @Khandu#13 – Again, not sure whether I understand your post completely ….. I am out of depth.
    A question for you and everyone: An American or Pakistani company – highly profitable and ethical/legal – with all its (end) customers in India Vs An Indian company – equally profitable and ethical/legal – with all its (end) customers outside India …. which is better for the Indian society?

    @Patriot#14 – very well said… cheers!!

    @Sudhav#15 – agreed that monopolies, which hinder free and fair market are bad.

    @seadog4227#16 – will do. Thanks for sharing.

    @Prashant#18 – agreed …. but CSR should compete with other options of investment based on RoI … CSR is useful to the extent it enhances profits (directly or indirectly, in the short term or long term)

    @Sudhav#19 – even if there is a single individual who owns 100% shares of a company, the profits that the company makes is still a measure of the value added to the society ..

    @Khandu#20 – difficult for me to comment … the categories Hindu, Western etc are too broad …. And heterogeneous..

    @Prashant#21 – see my comment above in response to #18

    @Chandra#22 – “profit solves – the need for charity itself” … perhaps in a ideal world …. agree with your sentiments

    @Vijay#23 – Great pic Vijay! Thanks for your efforts.

  • 25. Dipinder said:

    I am repeating my questions from above … will be grateful if you all can share your thoughts on these:

    I am wondering … this value add is attributable to the direct customers … who in turn may be unethical enterprises … in which case the value gets lost or becomes unethical?

    Further, lets say one wants to direct social value add to ‘Indian society’ or ‘people in gurgaon’ say … one needs to follow the chain of profit and see what proportion of value add ends up at people in the ‘Indian society’ or ‘people in gurgaon’ … ?

    An American or Pakistani company – highly profitable and ethical/legal – with all its (end) customers in India Vs An Indian company – equally profitable and ethical/legal – with all its (end) customers outside India …. which is better for the Indian society?

  • 26. Khandu Patel said:

    @ Dinpinder

    The economic freedom that Hayak talks is woven in the political freedom which was the backdrop to his life. He took up the study of economics because he wanted to know why his country Hungary lost its empire. Apart from that, freedom is a significantly different thing when slavery is an established fact. The ideals of liberty and freedom have their origins with the ancient Greeks where the democratic experiment took place. Liberty and freedom can have no place in a caste ridden society because it is only in a true democracy that the consent of the people can be manufactured. To give an example of how this worked with the ancient Greeks, the venture by Athens to exploit mines came from the pooling of the city states resources (notably the treasury) was only possible because of the consent obtained from the free citizens of the state: it came about with the incentives embedded in their value system which was to enlarge the power of the state, and through it their own power. The movement led by Anna Hazare to challenge corruption only has meaning within the idiom of freedom and liberty. I am less certain where it would be manufactured in orthodox Hindu society where everyone has their fixed and immutable positions. By its nature, democracy and freedom is predicated on an established order being open to challenge. We have seen that India’s Parliament has become the fixed and immmutable fixture of Hindu orthodoxy. For Hindu’s to be truly free, the orthodox needs to give way to the truly free society that it was at first in ancient times. The Greek example shows that the object of the country’s mining enterprise was to maximise income for war making and diplomacy. The war that just toppled Libyan leader Gaddaphi has been attributed to French displeasure at his policy of putting to detriment French interests and investments. This is the clearest proof that any consideration of ethics of profit maximization is confined to the academic area.

  • 27. Vasudevan said:

    In an ideal world, where everyone is enjoying an equal opportunity to develop their skill and to go about their lives without any hindrance, charity is not required. However, we are not living in an ideal world or ideal society, so there are people around us, who in spite of their best efforts, are struggling to come to the survival level. It is our duty to help such souls to come up to their potential – and this is what charity is all about.

    Charity is not necessarily spending money. Non-monetary / non-materialistic charity is also possible. Basically, everyone is enjoined to look upon other humans (and all other living beings) as part of the cosmic whole, which is the fountainhead of the “charitable” attitude. When this is missing, the imperfection in the society begins. All of us contribute to the imperfections in the society in our own way and therefore, charity is a way of mitigating – making good – for the imperfections we introduce into the society.

    For example, when one is working in a team, there may be less experienced or less skilled co-workers who are part of the team and who are struggling to produce the level of output that the team needs. In such situtations, instead of blaming them, if someone helps them out either by advising them on the correct way or working or by offering some training, this is also a form of charity, though we do not normally treat it as charity. This is charity in kind.

    Making profits makes it easy for a person to be charitable, but profits can never substitute charity as long as there is an imperfect society / nation / world.

  • 28. S said:

    “The Indians who came under the sway of the British soon internalised the British judgments on the Indian discipline of sharing; the very first issue of Keshub Chandra Sen’s Sulabh Samachar, dated November 15, 1870, carried an article against the evil of giving alms. “Giving of alms to beggars is not an act of kindness,” the article proclaimed, “because it is wrong to live on another’s charity.” And the article went on to suggest that incapacitated beggars should instead be trained to do “useful things for society.” This attitude of demanding work of those who do not have enough to eat has over time become a cliche among the relatively well-off Indians, especially those who claim to have acquired a modern, rational consciousness.”
    (http://www.cpsindia.org/art_food.html)

  • 29. Khandu Patel said:

    @Vasudevan & S

    What you say comes back to what I said earlier which is that not everything can be reduced to a calculation of profits in the determination of priorities for a country, things have to be seen in the context of the political economy. The basic for the UKs power originated first in the establishment of the English navy which opened the door to her prosperity in from merchant trade. This wealth was fed into charity into universities, churches, schools, hospitals etc. This was a virtuous cycle of profits making charity possible, and charity repaying the kindness by providing increased capability to the people of the country to pay their way in life. It is hardly reasonable to talk about one without talking about the other.

    Paying alms has not improved the lot of the Hindus. It has allowed Hindus to escape their obligations of the real world with the adoption of esoteric philosophies. The practice of seeking alms is not because they were necessarily poor in the first place. The pursuit of a monastic given to prayer or learning is better way of paying the country.

  • 30. S said:

    @Khandu,
    “The basic for the UKs power originated first in the establishment of the English navy which opened the door to her prosperity in from merchant trade.”

    merchant trade is ‘too-nice’ a word. Their ‘prosperity’ came from their use of ‘licensed pirates’.

  • 31. Sudhav said:

    I think one needs to define what is charity and alms, and which people should or should not recieve it. Charity is written about in most schools of thought and religions, as something pious and something that should be done by caring societies. It is inconceivable that one would not give charity to people who are physically/mentally handicapped to a significant degree. They cannot be ‘trained in self-sufficiency. The giving of money etc to able bodied poor people is a quick fix, with no long term planning in place- they are the ones who should be trained to be self sufficient. The paradox is that in the UK there are millions of able bodied people on ‘benefits’ and they will continue to be perpetually so…with migrant Europeans and others coming in at the lower end of the unskilled/semiskilled group. So I object to Indians being told they have a caste ridden society, as there is much in the West that is class-ridden(and looslely based on birth) and likely to stay entrenched with little scope for mobility upwards.

  • 32. Sudhav said:

    ‘India’s Parliament has become the fixed and immmutable fixture of Hindu orthodoxy’. The paradox is that the current ruling party Congress of India or UPA2, has a significant number of non-Hindus in key positions at the Centre and in the States. It is they who are dividing society further on ‘caste’ and economic status.So it is unfair to criticise the Hindus alone and blame it all on the caste system.The equation is quite complex.

  • 33. B Shantanu (author) said:

    Dipinder, All: Thanks for a great discussion! I hope to find some time to respond soon.

  • 34. Khandu Patel said:

    @S

    The English navy was established by Alfred the Great to ward of Viking invaders which pillaged his country. Not pirates as you are imagining: the Vikings were the pirates. The master stroke was when the English Parliament went over the head of their own to appoint Viking King Canute to the English throne on condition that he converted to Christainity. That would be the equivalent of Mahmud of Ghazni giving up Islam to become a Hindu of sorts. Since Hinduism teaches that there are many paths to god, there could not have been any compulsions on him to take that course; and profit in removing anyone who stood in his way to the loot of the country. To those of you from whose lips such platitudes roll of the lips so easily, there should be pause and reflection instead. There has been only one principle for the position of king in English history, and that has been that if he was not pre-eminent on the battlefield, he should have sufficient political sagacity that holds him firmly in place on the throne. Even then, there have been many powerful kings who have been displaced by even more ambitious ones. The Mahabharat by English standards is quite tame. The mettle of the English kings had to be tested on the battle field to persuade any doubting Thomases. This is also the reason why every Prime Minister would not turn down an offer to do battle. I believe there is more profit in Indians learning English history, perhaps then India might not allow Pakistan and any small minnows humiliate it at every turn.

    @Sudhav

    It is a sign of a great country that a minority community (as the Jews in the UK and throughout their history) have given their best in honour of the country they have made their home. In India we have ensured that they have worked at India’s destruction (and we forbidden even to say so). The fact that we had a Muslim President during Nehru’s Prime Ministership who was doing all could to help Pakistan prbabably says as much about the failure of Hindu leaders to obtain the allegiance of minorities in general and Muslims in particular, and ever increasing sops dished out has not changed this state of affairs. Hinduism only credited itself with its own persona when Muslims decided it delete it and its believers. That has been enough to leave the space wide open for someone like Sonia Gandhi to assume control of the leavers with her coterie of hatchet men and women of all types. I can assure you that the incapicity of Hindus to stand at the head with the backup of fellow Hindus has been proved time and time again as to appear to be a self blame characteristic of victims of abuse. We have deluded ourself by the construction of religious philosophies that only provide avenues for escape and not advancement. You and I may understand this reality, but the institution of Hinduism if it even exists an an entity has not identified tipping points when meaningful actions are necessitated. That tipping should have been reached when India’s Parliament first refused to address corruption. It is hard to see things will change when the personnel in charge remain ensconed in power.

  • 35. S said:

    @Khandu,
    ” There has been only one principle for the position of king in English history, and that has been that if he was not pre-eminent on the battlefield, he should have sufficient political sagacity that holds him firmly in place on the throne.”

    Please give some references for this scholarly discovery.

    “The Mahabharat by English standards is quite tame”

    Please tell us how you arrived at this scholarly conclusion.

    “The basic for the UKs power originated first in the establishment of the English navy which opened the door to her prosperity in from merchant trade. This wealth was fed into charity into universities, churches, schools, hospitals etc”

    Try reading
    http://www.channel4.com/history/microsites/H/history/pirates/rogue1.html

    http://www.elizabethan-era.org.uk/famous-elizabethan-pirates.htm

  • 36. Sudhav said:

    @K Patel
    I agree with much of what you have said.
    ‘We have deluded ourself by the construction of religious philosophies that only provide avenues for escape and not advancement.’ I think this is a generalisation which has actually filtered and fixed in the psyche of people, as a laid back attitude to the concepts of karma mixed with the acceptance of the yogi. The totality of Hinduism/Sanatan Dharma is complex and some of it is just stories for the average person. However one needs to tailor to each individual’s requirement. One could debate what constitutes advanceent and not arrive at a consensus point of view.There is much activity in current day India, and probably elsewhere,that is a reflection of trying to fit a square peg in a round hole.. eg F1 racing in India, Big Boss on TV, the promotion of the American Way etc etc. It has very little to do with intrisic values, let alone Hinduism.
    The situation in Britain has evolved over the centuries from the King being supreme on the battlefield, to the monarch being a figurehead holding hands with a so called democratically elected parliament.The devil is in the detail. I can’t elaborate further.

  • 37. Dipinder said:

    There is a subtle point which I realised while reading Mr Gurcharan Das’s “Difficulty of being good”.

    While organisations need not spend on CSR, they should avoid ostentatious display of wealth (or control ‘wasteful expenditure’) and instead focus on maximising profits. Also, they should remain respectful and empathetic to the communities they are located within and people they interface with.

    This is important in the context of the post above.

  • 38. B Shantanu (author) said:

    An excerpt from THE DANGERS OF QUASI-CAPITALISM by Howard Husack:
    The most damaging outgrowth of the new quasi-capitalism, however, may be the degree to which it lends credence to the notion that the traditional model of private enterprise produces no benefits to society at large. As researchers Julie Battilana, Matthew Lee, John Walker, and Cheryl Dorsey argued in the Summer 2012 issue of the Stanford Social Innovation Review, hybrid businesses represent a “blend of social value creation and commercial revenue,” providing “products and services that, when consumed, produce social value.” The obvious implication is that the traditional commercial model does notproduce such social benefits, and so should be replaced by one that does.

    But the experience of societies with robustly capitalist systems belies this assertion. From scientific and technological innovation and medical advances to widespread employment, generous philanthropy, and higher standards of living across all income groups, economies oriented around profit do in fact create “social value.” To the extent that we seek to change the defined purposes of the corporate structures central to a free-market economy and to replace them with untested alternatives, we risk undermining the broad benefits that capitalism can be shown to provide.

    Today, the far-reaching quasi-capitalist vision expressed by Drayton and Elkington manifests itself in different forms, the most limited of which is commonly termed “profit-donation capitalism.” It might as well be called “profit-diversion capitalism”: Firms practicing profit-donation capitalism simply redirect capital from private interests to public ones, donating surplus revenues to organizations offering the social benefits that traditional businesses are assumed to be incapable of providing.

    Profit-donation capitalism allows for neither: Both a firm’s customers and its investors forgo some amount of money they would otherwise control, simply trusting that it will eventually make its way to some good cause.

    Furthermore, it is not difficult to see how the work of serving as a de facto charitable foundation might not be done well by a company fundamentally dedicated to other purposes — like bottling water — or how it might distract from and come at the expense of the company’s profit-generating activities. The model of profit-donation capitalism thus risks undermining the nimbleness and efficiency of both straightforward charity and for-profit capitalism.

    CSR has become so fashionable, and indeed so expected, that champions of quasi-capitalism have developed several certifications to help companies prove they are truly committed to a triple bottom line. One thinks here of the Fair Trade certification regime, which avers, through its branding, that products such as coffee, tea, and fruit have been grown in environmentally “sustainable” ways (not, for instance, through slash-and-burn agriculture) and that their producers have been paid a “living wage” (often above market). Many CSR certifications are environmental, such as the near-ubiquitous LEED labels identifying that business takes place in “green buildings.” Others focus on human resources, such as Social Accountability International’s SA8000 standard. That label, according to the organization, attests that a firm’s “management system supports sustainable implementation of the principles of SA8000: child labor, forced and compulsory labor, health and safety, freedom of association and right to collective bargaining, discrimination, disciplinary practices, working hours, remuneration.”

    traditional capitalism has its own specific stories to tell. Consider, for instance, the 2007 analysis by University of California, Los Angeles, economist Robert Jensen (then at Harvard) of the introduction of cell phones to the fishing industry in the Indian coastal state of Kerala. Historically, the fishermen catching sardines in the Arabian Sea faced a conundrum: They had no way to know at which of many commercial ports their competitors had already sold their catch, and thus no way to know where they might get the best price. Indeed, they often had no way to know where to sell their catch at all before it spoiled: Between 5% and 8% of the catch was typically wasted.

    But in his paper “The Digital Provide,” Jensen found that the simple introduction of cell phones — technology developed in the robust for-profit sector, and distributed through traditional commercial channels — changed the situation dramatically. Armed with mobile phones, fishermen could call ahead to ports and determine where their catches would fetch the best prices, thereby increasing their incomes and avoiding waste of environmental resources. As Jensen explained it, “Using microlevel survey data, we show that the adoption of mobile phones by fishermen and wholesalers was associated with a dramatic reduction in price dispersion, the complete elimination of waste, and near-perfect adherence to the Law of One Price. Both consumer and producer welfare increased.” The Kerala example illustrates, in other words, how traditional capitalism is capable of producing profits and social and environmental benefits, contrary to the quasi-capitalists’ claims.

    The key here — and for any proposal that might seek to direct financial resources to organizations undertaking good works — is a recognition that business and philanthropy are essentially distinct. Confusing and confounding their goals risks undermining the efficacy of both. Quasi-capitalists are right that markets cannot meet all needs — especially the needs of individuals who lack the skills and habits to participate in those markets. They are profoundly wrong, however, to assert that the fruits of private enterprise are solely private, and that traditional capitalism meets no social needs at all.

  • 39. Dipinder said:

    Thanks for sharing this (Dangers of Quasi Capitalism) Shantanu ji. I was not aware of this. Complements the article very well.

  • 40. B Shantanu (author) said:

    Placing this link here for the record: The great armtwist by Pratap Bhanu Mehta, 29th Nov 2011.
    I will request Dipinder to respond

  • 41. Dipinder said:

    Thanks for sharing Shatanu Ji. I cannot agree more with Pratap Bhanu Mehta. Compulsory Corporate CSR is likely to do more harm than good.

  • 42. A said:

    I suspected that these unwanted laws are being created to open more holes that corruption can milk.

    What is the need for a law to mandate CSR spending ? Ridiculous. Governments should do just the minimum regulatory function and crack down on fraud etc ruthlessly but leave the rest of morality to individuals and companies.

    If CSR spending is mandated by law, crooks will spend a lot of money on CSR (conveniently blaming it on the law) and have it diverted to their own kitties. This is not speculation, it has allegedly happened with Madras Cements as reported:

    http://www.indiacsr.in/en/?p=11960

    Many of those organizations giving out CSR awards are suspect. This is the same with Quality awards that can be purchased ! Recall ‘Vedanta’ being awarded ‘Golden Peacock’ some years ago ( http://hillpost.in/2009/06/activist-protest-golden-peacock-award-by-wef-to-vedanta-alumina-in-himachal/13576/ ) and while the many SEZ’s are becoming sites of human rights violations the law on CSR is probably intended to whitewash these aberrations.

  • 43. Dipinder Sekhon said:

    http://new.ted.com/talks/dan_pallotta_the_way_we_think_about_charity_is_dead_wrong

    Relevant for the discussion above. The balance, boundaries and nuance between for-profit and not-for-profit.

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