How business makes a better world

  • Date:01 Aug 2013
  • Type:Company Director Magazine
Addressing the NSW Annual Fellows Dinner in Sydney in June, Dr Keith Suter explained why companies that trade overseas are the modern-day “peacekeepers” of the world.

Here are three ways in which business is making a better world.

First, poverty is gradually being ended. In June 2013, the British magazine The Economist had a cover story, entitled Towards the End of Poverty, in which it examined the global move towards ending poverty.

The United Nations (UN) target of halving global poverty between 1990 and 2015 has been achieved five years early.

Other UN targets (called Millennium Development Goals or MDG) have yet to be met and so there is no room for complacency. But at least, amid all the usual doom and gloom of the media, here is one piece of good news.

The Economist gives most of the credit for this achievement to "capitalism and free trade, for they enable economies to grow – and it was growth, principally, that has eased destitution".

gives most of the credit for this achievement to "capitalism and free trade, for they enable economies to grow – and it was growth, principally, that has eased destitution".

An integrated global economy has now been created for the first time in world history.

China started to join the modern system in the 1980s. Burma (Myanmar) is now joining it.

Cuba and North Korea still remain outside for the moment, but in due course, Cuba and an eventually reunited Korean peninsula will join.

Second, taking an even broader view, we can see how the world has generally become wealthier in the past four centuries.

There has been no one magic key and instead, there are various factors that have come together.

A key factor was the modern social invention of the company in the Netherlands and UK.

The company enabled a trading partnership to survive the deaths of the original members.

It could continue beyond the completion of its original project (such as a merchant’s voyage to Asia) and go on to repeat that operation indefinitely without having to create a fresh legal agreement.

By issuing shares, others could also become involved in a business venture. Investors could be reassured that the total extent of their potential loss would be only what they had put in.

Over time, the original company could mutate into other areas. Examples include Minnesota Mining and Manufacturing (3M) making the Post-It notes or former paper company Nokia going on to make mobile phones.

The company model has created more prosperity than any other single organisation.

It is the main explanation for the West’s dominance of the rest of the world that began in the 16th century.

Other countries have grown wealthy through copying the western idea of the company structure.

Finally, although the media runs many stories of war and terrorism, overall the world is getting safer.

The most dangerous time to have lived in the past 113 years was the period 1900-1950 (outbreak of the Korean War).

Since the early 1950s, there has been a reduction in the number of international conflicts and the number of people killed in them.

There are a number of business-related reasons for this positive trend in human affairs.

First, democracies do not go to war against each other. And, we now have more democracies in the world than ever before.

This expansion has been partly due to the rise of the middle class – people who no longer have to worry about where their next meal is coming from want a say in how they are being governed.

Middle-class citizens prefer to have economic and social progress rather than military glory.

Sporting personalities are the national heroes rather than military leaders.

Conflicts are played out on the sporting ground and not the battlefield.

Second, trade knits the world together. This has been called the McDonald’s Golden Arches Theory of World Peace – countries that sell McDonalds don’t go to war against each other.

Countries can get more from trade than from war.

France and Germany, for example, have fought each for over a thousand years. And now it is inconceivable they would ever go to war again. "Why kill those people? They are our customers."

Similarly in our own region, China prefers to make trade and not war. There was a time when Australian politicians warned of the Red Peril marching south from China. Now we welcome the Chinese and their wallets.

There is unfortunately a continuing risk of countries breaking up, old ethnic rivalries, opportunistic trouble-making politicians wanting to stir up old hatreds and the problems of Islam becoming reconciled to the modern era.

Low-level conflicts will remain, but there will not be a return to the extensive conflicts that scarred the first half of last century.

Business has had a key role in all these developments. People want a better standard of life – and business is a vehicle for providing it.

Companies that trade overseas are knitting the world together. They are the new "peacekeepers".