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Social Entrepreneurship and the State- Bossing Capitalism for the right reasons

Like a leopard with those recalcitrant spots, the fundamental tenants of capitalism will not change without the interventions of the State.

In her  blog , “Why social entreprenurship has become a  distraction: it’s mainstream capitalism that needs to change”, Pamela Hartigan rightly asserts that “every entrepreneur needs to become a social entrepreneur “ to remove the “false separation  between ‘this is where we make money and this is where we do good”.

Advocating greater social responsibility through business education will, of course, do a great deal to shape the minds of tomorrow’s CEOs, but this will only go so far to influence the blinkered, corporate culture of profit first, daylight second.

If capitalism is to be tamed to address contemporary social issues such as climate change, it is the State who will be centre stage and they’ll need to be carrying a rather large stick.

For better or worse, governments have indeed demonstrated this ability to exert influence over capitalism historically. Whether it be the retreat to protectionism after the Great Depression, taxpayer funded bailouts of banks during the Global Financial Crisis or even the recent Brexit decision (on behalf of the people), the notion that States are powerless to shape their own destinies in the face of global capitalism is misplaced.

The Australian government also demonstrated this ability when imposed a price on carbon dioxide emissions in 2012. Advocated by economists the world over – most notably Sir Nicholas Stern – the government sought to place a cost on polluting the environment that was otherwise ignored by the market.  This is in line with Hartigan’s point, that ‘the way business has operated in the last 50 years must be disrupted because we will not survive as a society or a planet if we do not tear down the walls that compartmentalise economic, social and environmental activity.’

As result of this policy, Australia’s greenhouse gas emissions dropped 1.4% in the second year of the carbon price.  Furthermore, a good portion of the revenue went to the establishment of the clean energy finance corporation to foster investment and innovation in the renewable energy sector.

In effect, by generating funds through taxation and simultaneously addressing a pressing socio-environmental problem, the government had inadvertently developed its own social enterprise. In addition, like all good States should, they had engineered favourable conditions for entrepreneurs in this area. All this was achieved and the Australian economy didn’t even break a sweat.

Of course, this legislation has since been repealed and the politics surrounding this issue is another subject entirely. But it does represent a great example of what an activist state can achieve in shaping capitalism for beneficial social outcomes. Entrepreneurs indeed have role to play in this area however states -as the overarching social enterprises- bear the ultimate responsibility to overcome the great and difficult challenges facing our world today.