How For Profit Corporations Are Better Than Non Profits In Helping Society
For years corporations have held a polarized position in the eyes of the world. To the staunch capitalist, corporations show the growth of industry and progress, frequently taking on undertones of national pride. On the other side of the spectrum, the socialist sees corporations as a means of exploitation, where humanity and the environment are sacrificed in pursuit of the dollar. Both sides are well founded in their beliefs and both sides are right to a degree. Corporations frequently make up the vanguard of a capitalist society’s hungry march for progress, and when one thinks of a big corporation one typically imagines the oil, tobacco, or pharmaceutical industry and the negative connotation associated with them.
This way of life is entrenched into society. It is unlikely that it can be removed. While it is unlikely that a society can fully remove the greed and hunger of corporate interests, it is possible to change what these corporate interests are. Karl Marx once said that each societal transition will be marked with bloody revolution, but perhaps he is only half right. Perhaps the real revolution will occur through a shift in the very forces that have perpetuated corporate hegemony.
Corporate Social Responsibility (CSR) is a business model in which companies will lace their workings with ideas founded in the well being of society and the environment. Frequently a business is not marketed without its commitment to community development. It has become a type of status quo to show that a business gives back and it is no longer the age where corporations sought only to increase the profits of the shareholders. However CSR is often feigned by businesses who claim to bestow a benefit on the people or environment they are also harming. This is seen in oil companies as Chevron and Shell have been repeatedly accused of destroying ecozones in Latin America and Africa, displacing indigenous people, and poisoning the water supply of communities, yet still promote the image of being the benefactor of society. CSR can be, and is, more than a simple song and dance. It is a tool to influence change. For example, during the Civil Rights Movement, business leaders in Atlanta did not want to honor Martin Lurther King Jr. for his Nobel Peace Prize. Coca Cola, a growing international company, threatened to leave the city if such attitudes did not change. This simple act was pivotal in Atlanta conforming to the more progressive ideas of the day.
Now Corporate Social Responsibility has gone a step further to not only be a type of side-motive, but to be at the very heart of corporate strategy.
Tesla Industries is among the corporations that can be deemed “benevolent”. It is constantly hunting for a means to make energy production and the auto industry more efficient, and environmentally friendly. This is typical business modeling, to constantly strive to become better than the competition. What makes it unique however is that this competition contains elements of environmentalism and social justice.
In the fall of 2016, Tesla made more money in one quarter than all U.S oil companies made in 2015 according to the US Energy Information Association. As Tesla rose, the fossil fuel industry fell. Tesla gained a profit of about $22 million while the oil industry lost an estimated $67 billion, due in part to the falling price of oil and the graduate weaning of the world’s dependence on it. Fossil fuels are becoming less competitive.
The success of Tesla and Google shows that if we want to enact a greener change in society, we should not only look to constantly reprimanding fossil fuel companies, but instead let the market render them obsolete. For example when company X does something to constantly disturb the social conscience, company Y will come in with a more efficient approach, and supported by the investment of the people. So when oil companies constantly ravage the environment, displacing and wiping out many indigenous populations, a company that markets itself on the utlization of renewable energy will arise as the counter force. Corporate greed therefore has a yin and a yang.
Above: A Chevron advertisement; Toxic sludge created by Chevron in the Amazon rainforest; A parody of Chevron’s advertisement to show the feigning of its Corporate Social Responsibility
When companies hire contractors to tear down large swaths of the rainforest to make way for land development, they could find the push back of other businesses who have a monied interest in its preservation, like a pharmaceutical company, thereby entering Lawfare — a form of warfare, consisting of using the legal system against an enemy, to deter or compel certain actions. As the rainforest species disappear, so do many possible cures for life-threatening diseases. About 121 prescription drugs sold worldwide come from plant-derived sources. While 25% of Western pharmaceuticals are derived from rainforest ingredients, less that 1% of these tropical trees and plants have been tested by scientists. Due to ceaseless deforestation, entire species go extinct, some of these species could hold the secrets to medical breakthroughs. The pharmaceutical industry should therefore be the muscle that can protect the rainforest. As species go extinct, medical research is hindered and mankind is deprived of a multitude of potential cures. While non profit organizations can help with conservation efforts, the real help will come in the form of businesses using their funds in the application of corporate social responsibility. When a cause has a financial incentive behind it, one will see quicker progress.
This situation is similar to that of the singer Akon providing electricity in his native Senegal. For years, non profit organizations have been asking for money for the sake of creating a better standard of life in Africa. Despite the numerous donations, conditions seemed to remain the same with little progress. Akon used his own money for the sake of making electricity and energy more available in Africa. He took his own private investments and teamed up with fellow Senegalese-American Thione Niang and Malian entrepreneur Samba Bathily to create Akon Lighting Africa. Since its inception this group has installed 100,000 solar street lamps across 480 communities in 15 countries, along with 1,200 solar micro-grids and 5,500 indirect jobs created. The electricity problem became apparent when many places in Africa were not able to generate the power needed for Akon to do concerts the same size as those he does in the United States. Part of the reason for Akon Lighting Africa is for the sake of being able to maximize the profits he makes when he does shows in Africa by allowing for larger concerts. His for profit initiative has ultimately driven more investment in development than the approach of many non profits. This is because for profit companies need to fix the problem for their own profit. Their own future is dependent on resolution of the problem at hand, whereas non profit organizations need chaos in the world because this is what gives them their donations.
Ultimately profitability controls the paradigms of social justice. In the United States, private prisons have become widely adopted because they present the illusion of money being saved by the government and the taxpayer while in reality they present no effective change in cost. These prisons have essentially created a system where they get paid for each person who remains imprisoned. This system has created a callous and racist environment in the justice system which promotes a harsher penalty for even menial crimes thereby ensuring private prisons meet their quotas and are able to fill their prisons and maximize their profits. However, this too can be offset by creating a system that can derive greater profits through more ethical and efficient means.
Frequently private prisons are compared to slave plantations. Slavery was a cruel and racist institution that was inefficient from its first days. Slaves are a source of labor that were coerced and subjugated. This was not an incentivized workforce. The threat of beatings did not incentivize people to do better in the way that a promotion and greater income did. Ultimately corporate practices that reel negative societal impacts are bound to be replaced with the more efficient. This is because social utility and and profits are directly proportionate. Private institutions therefore must be invested in the well being society whether they like it or not.
Private prisons, much like slavery are an inefficient and immoral means of gaining profits. A Forbes article described an investigation performed by the Department of Justice (DOJ) on the efficiency of private prisons. The DOJ’s investigation found more safety and security incidents per capita at private prisons than at comparable government-run facilities as well as more sexual misconduct and higher rates of assault. In addition, audits of the private prisons revealed millions of taxpayer dollars used in ways that were either “unallowable or unsupported” by their contracts.
Private prisons make money from stipends paid by the US government. They run on the idea that it is cheaper keeping prisoners in private facilities than keeping them in public ones. While there is truth in this statement, part of the reason is because private prisons are willing to cut back on things that allow for better sanitation and well being. Their inefficiencies are becoming more and more apparent and this is why the Justice Department has begun the process of phasing out private prisons by reducing the amount of privately held prisoners to fewer that 14,200 people.
Above: A political cartoon summarizing how the profit motive of private prisons affects legislation.
Despite its ability to run a prison. The private sector has done so in a cold, calculating way. They have focused on their own profit and eliminated elements of humanism. Keeping warm bodies in prison is what generated their profit, so seeing a decrease in recidivism meant a decrease in their overall profit. Because less people in prison meant a lower profit, prison companies and investors worked hard to ensure that legislation would lead to more arrests with longer sentences and contracts would be made guaranteeing a stipend for the amount of prisoners behind bars. This system became the exact opposite of corporate social responsibility, and as a result it is beginning to fall to the wayside.
The problem isn’t necessarily privatization, the problem is where the incentive for profit lied. The incentive for these prisons lied in keeping people in prison, and making their incarceration a cheap endeavor. Prison is perhaps one of the areas that is best managed by the public sector. Government run prisons work more like a non profit organization. The profit motive is ultimately detached from keeping people in prison. Instead of managing prisons, private parties should instead create an industry of rehabilitating convicts and get a bonus with a decrease in recidivism. This falls in line with a correlation between social welfare and corporate responsibility.
The Take Aways
For profit companies and private parties have an inherent advantage over non profits and NGOs. It is their profit motive that spurs them to develop faster. When their profit is dependent on a better tomorrow, therefore they will work hard to ensure the problems of today get fixed and are willing to use their own funds to do so. While non profits can operate with good intentions, they can only exist so long as the problem persists. Although they are able to receive donations from concerned parties, frequently they are unable to create any real change quickly, the problem therefore persists and gives the non profit purpose and more time to ask for more funds.
Although for profits can be more efficient than non profits in the way they can create development, non profits still have value in society. Non profits shed light on the lesser known issues of the world and they are not as constrained to the drive for profit, thereby allowing them to take on a more humanitarian perspective and provide, not for the sake of profit, but to give to those in need.
Ultimately, with corporate social responsibility, for profit companies are taking on more characteristics of non profits because humanitarianism and environmentalism are contributing factors to profits. Perhaps socially responsible corporations will render non profit organizations obsolete in the future.