A new era in which the private company could become the pivot around which the economies of the world will turn is envisaged by Professor Donald Denman in a paper published by the Foundation for Business Responsibilities(*).
Centrally planned economies in the developing countries would be replaced by private sector-orientated ones. This means, he says, that the companies that take the lead will need a heightened sense of responsibility.
The concepts of the Gross National Product and the Gross Domestic Product are, at best, half truths which can be misleading distortions, Professor Denman says. To illustrate the argument, he gives the example of two houses, costing the same to build, which are up for sale at widely different prices: one, the more valuable, crests a hill overlooking the sea, while the other flanks a roaring motorway. Each, when built, would add an equal amount to the GDP: the unequal market values expressing differences in amenity would not be recorded.
Cars give another illustration. GDP figuring adds up the number of cars rolling off the production lines. Years later these same cars, now old and done with, are tipped into the sea to pollute the oceans or left to rot and rust in some countryside field. “Even in their heyday they aggravated street congestion and added to the costs of coping with it.
“In short, the plus of amenity and the minus of pollution and congestion, vital to human living conditions, do not appear on the GDP graphs.”
The idea that an economy, to be healthy, must grow and grow by adding more and more to its GNP in an endless progression has provided an economic morality by which the newly independent countries of the 1960s and those who aided them distinguished “good”, or developed, from “bad”, or undeveloped, Professor Denman suggests.
Primary producers of the Third World were encouraged to turn away from customary ways, especially farming, and to invest in and build industrial, manufacturing and commercial capacities far beyond their abilities to use efficiently, and to accumulate vast foreign debts in the process.
Successes were registered in places like Singapore and Hong Kong, where there was no natural agricultural base. But, in the main, investment in capital-intensive development meant the relative neglect of the historical and natural economic base, especially of agriculture. “In the extreme, cities and towns became bloated and rural areas declined, to the impoverishment of both environments and the waste of natural resources, not excepting the human workforce.
“The pathways along which we have traced the run of current ideas and movements converge to a future where the private company must come to play a dominant role in development and social advance. Economic growth, the creation of wealth in ever greater abundance, is essential, if only to keep pace with expanding populations. But economic growth must be tempered to harmonise with the conversion of natural and human resources. Decisions must be more intimate with the human environment and with those who have to live within it. The goal of sustainable development, as past evidence shows, cannot be left to the central command of government.”
But if companies are to lead development into the new century they will need to pay more than lip service to the understanding of and care for the human environment. “Care of it will have to rank equally with profit-making. This is no romantic notion, for environmental qualities in assets, resources and products will acquire economically justifiable market values.”
Among the points made in an action programme, Professor Denman suggests: devising a formula for measuring the environmental consequences, both good and bad, of all forms of economic development and introducing the formula into official and international statistics.
Relating the consequences of the production, servicing, investment and other functions of private companies to the human condition and environment and encouraging companies to accept responsibility for these consequences; introducing environment impact studies related to business management into the curricula of business management courses; and establishing policies to make it economically possible for private companies to pursue environmental conservation in their enterprises.
Donald Denman is Professor Emeritus of Land Economy in the University of Cambridge. He has acted as adviser and consultant to governments, universities and professional and business interests throughout the world and is the author of books on property theory, history of land ownership, land policy and seabed resource use.
(*) Survival and Responsibility – the Place of the Private Company in the Third World. Foundation for Business Responsibility, 40 Doughty Street, London WC1N 2LF. £2.50.
