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Capitalism at the Crossroads – Mapping the Terrain
From Obligation to Opportunity
Having grown up in western New York in the 1950s and ’60s, I have memories of family vacations spent at destinations like Niagara Falls. Although the Falls themselves were indeed magnificent, equally memorable for a 10-year-old was the soot from nearby factories that accumulated on the porch furniture, requiring that we cleaned the furniture daily, lest we ruin our clothes. The accompanying stench was also something to experience. I still remember asking why, in a place of such natural beauty and splendor, did it have to be so polluted? The answer, accepted wisdom in those days, was that this was “the smell of money.” If we were going to have economic prosperity, then we would have to put up with some minor inconveniences, such as soot, stench, rivers that catch fire, and mountains of waste. It was the cost of progress. I remember being singularly unsatisfied by this response.
Fast-forward to 1974. As a freshly minted college graduate headed to Yale for graduate work in the School of Forestry and Environmental Studies, I was convinced that corporations were the “enemy” and that the only way to deal effectively with environmental problems was to “make them pay” through regulation—to internalize their externalities, in the jargon of economics. This was probably a correct perception at that point in history: Large corporations, by and large, had been unresponsive to environmental issues, and it appeared that the only way to deal with the problem was to force them to clean up the messes they were making. The Environmental Protection Agency and scores of other regulatory agencies were created precisely for this purpose. A mountain of command-and-control regulation was passed during the decade of the 1970s, aimed at forcing companies to mitigate their negative impacts.
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About the Author
Stuart L. Hart, author of Capitalism at the Crossroads
, is the Samuel C. Johnson Chair of Sustainable Global Enterprise and Professor of Management at Cornell University’s Johnson School of Management. Professor Hart is one of the world’s top authorities on the implications of sustainable development and environmentalism for business strategy. He has published over 50 papers and authored or edited five books. His article “Beyond Greening: Strategies for a Sustainable World” won the McKinsey Award for Best Article in the Harvard Business Review for 1997 and helped launch the movement for corporate sustainability. To read Stuart’s complete biography, click here.
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Common sense suggests that individuals and organizations would only seek to borrow or be lent money that they could with reasonable assurance repay. In the wake of the housing market crash of 2008, we learned that financial institutions frequently provided mortgage loans to those they knew could not afford to repay them. Common sense certainly did not prevail and, in this case, contributed to the devastating economic conditions we now face.
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