Company Profits Cure To US Financial Woes

If only American companies were more profitable, many of the problems with the economy and access to social services would disappear. That is the claim of a new research document from Dalberg Global Development Advisors.

The research argues that:

With a long enough time horizon, many social benefits created by the operations of for-profit companies can generate private benefits for the companies themselves. As a result, executives planning for the long term create social benefits in the most efficient way when they target a single bottom line – profit.

Dalberg says that when a company merely seeks shareholder value or splits profit initiatives among social, environmental, and financial returns that corporate goals get muddied. Profits yield a tendency for companies to “make investments that generate social benefits because these investments serve the interests of their companies.”

The spirit of capitalism has not seemed to yield much in terms of important benefits to society unless employment and the generosity of rich CEOs to give gifts to non-profits are taken into account. The Dalberg research would seem to argue that companies will take care of creating a better environment and other benefits to society at large. It is hard to find that companies like GM (NYSE: GM) have done more that sponsor the local opera in Detroit and pass out a few scholarships on the side.

In reality one of the businesses of government is to curb the desires of business to create profits in ways that hurt the common good. No one needs to go much beyond the pollution of the Great Lakes in the latter part of the last century or the mass layoffs to which large companies resort regularly when their profits are threatened.

Businesses act in the own interests. Social initiatives are not on their lists of things to do to make more money.

Douglas A. McIntyre