Business leaders gathering in Davos are uncomfortable: The full force of 2016’s protest votes in the U.S. and U.K. is about to hit, and Donald Trump’s inauguration may signal an abrupt reversal to 30 years of globalization.
These have been golden years for business. Liberalized competitive markets plus new technologies have made it possible for corporations to build profitable global operations.
It’s been an era of unprecedented development success too. Globalization has been instrumental in lifting millions out of poverty in emerging markets. It has shrunk income gaps between developed and developing economies, if not between the people living in them.
If all this is now at risk, what should business do next? Populists promote a return to economic nationalism. But this will shrink the world economy. The losers — including those left behind by globalization today — may take their protest beyond the ballot box. This is not a sustainable alternative.
Last year’s political upheavals surprised many of us. But the Business Commission on Sustainable Development that I convened with Unilever CEO Paul Polman had already been looking for a viable alternative to globalization as we know it for two main reasons.
The global economic model is broken
First, the model that has powered growth for the past 30 years has become politically and physically unsustainable the world over, not just in developed economies where it has led to unacceptable increases in inequality.
People in every region are experiencing some kind of fallout from its failure. Low commodity prices and slower trade are hitting Africa and Latin America. Rapid growth, particularly in Asia, has brought huge environmental and social challenges: life threatening smog in cities, a loss of biodiversity that threatens farmers, unmanageable urban expansion, low pay and minimal rights for workers at the bottom of the pile.
Second, public trust in global business has collapsed, threatening its license to operate. The credibility of CEOs slumped over the past year by 12 percentage points to 37%, according to Edelman. Big corporations and the financial sector are seen to take an obscenely large share of the fruits of globalization compared to what they give out in pay and taxes. Financiers appear to have got away with the 2008 crisis while ordinary people are still paying for it. No wonder many business leaders feel uneasy.
Stop dodging tax and pay decent wages!
The viable alternative detailed in our report “Better Business, Better World” still relies on the market: competition still drives economic growth. But it drives steady, predictable growth whose effects are environmentally sustainable and whose fruits are shared more fairly.
Key to shifting globalization onto this desirable course is forging a new deal between business, government and civil society. Politicians, executives and investors need to agree new rules and stick to them.
For all businesses, the core rules are to pay taxes like everyone else, use their influence to lobby for sustainable, just policies, and make sure the jobs they create offer decent pay and decent work along their supply chains. That includes the first mile where the worst conditions and most child labor are to be found.
Global giants like the companies led by the CEOs on our Commission — such as Ken Frazier at Merck or Jack Ma at Alibaba — are striving to identify and model these standards. A critical mass of businesses must make the shift and keep each other up to the mark for fair and sustainable globalization to flourish.
— Mark Malloch-Brown is chairman of the Business & Sustainable Development Commission and a former United Nations Deputy Secretary General. The opinions expressed in this commentary are solely those of the author.
