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Socially Responsible Business

A Mandarin’s Lament

SMALL CHANGE: Why Business Won't Save the World by Michael Edwards

Small Change: Why Business Won't Save the World

Michael Edwards

127 pages, Berrett-Koehler Publishers, 2010

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A mandarin, according to Webster’s Dictionary, is a “powerful official or senior bureaucrat, especially one perceived as reactionary or secretive.” Michael Edwards has had a long career that has featured top positions at Oxfam, Save the Children, the World Bank, and 10 years at the Ford Foundation. Although it is clear he is not a secretive fellow, those beliefs have been poured into his new book, Small Change.

Small Change is a follow-up to, and an amplification of, Edwards’ 2008 monograph, Just Another Emperor? The Myths and Realities of Philanthrocapitalism, which was a hives-like reaction to the book Philanthrocapitalism: How Giving Can Save the World, by The Economist’s Matthew Bishop and Michael Green (who interestingly enough has had a career similar to Edwards’).

Edwards makes no bones about what Small Change is about: “The claim that business thinking can save the world is a convenient myth for those who occupy positions of great wealth and power; and the constant celebration of rich and famous individuals is a dangerous distraction from the hard, public work of finding solutions, all of us together.” Edwards further states in the preface, “Social transformation is not a job to be left to market forces or to the whims of billionaires.”

Clearly, Edwards has a bee in his bonnet about Bono, Bill, and Buffett, and their role in the world—especially in the developing world. Edwards also sees the issue in black and white: Either you believe that business thinking is good and will save the world or you don’t. The reality is that the world is quite complex and is also quite gray. Given his vast experience, it is shocking that Edwards sees the world as starkly as he does.

Edwards wants the reader of this slim volume to firmly believe that business and business leaders have little to no role in solving social problems. Business leaders are too tactical; are far too focused on outcomes; and really don’t, well, feel. “The profit motive is not a dirty word,” writes Edwards, “but is it a different word from solidarity and caring with no expectation of return.” He goes on to describe this division and relies on stalwarts like Adam Smith and Milton Friedman to reinforce his point of view. For a seasoned reader this all feels a bit “been there, done that.” We have heard these antibusiness arguments before, and in 2010 they just don’t resonate as they once did.

In the 21st century, corporations of all shapes and sizes know that they cannot risk operating unilaterally. Businesses certainly cannot ignore the concerns of their shareholders, nor can they ignore the concerns of their other stakeholders—including civil society. Even Edwards quotes Lee Scott, CEO of Wal-Mart Stores, “The question of how to assure that American capitalism creates a decent society is one that will engage all of us in the years ahead.” Edwards also notes that there are philanthrocapitalists like Mario Marino who are trying and, in the reviewer’s opinion, succeeding because they understand what it takes to find the balance between achieving outcomes and impact with the need to embrace social and political dynamics.

Edwards wants you to believe that philanthrocapitalism is completely misguided. He also wants business-minded donors to leave the messy work of social change to the professionals—that the mandarins of the NGO world can take care of it. Edwards wishes business and its leaders would just leave civil society alone. And he wishes that business would stay within the boundaries of its sector and reform and behave itself.

Perhaps it is only fair then to have the last words of this review come from Bishop and Green: “If philanthrocapitalism is to succeed, it will be because these philanthropists take impact seriously and apply their business talents just as rigorously as they did when they made their money. That is easier said than done, not least because philanthropy lacks many of the market forces that keep businesspeople disciplined, focused on success, and willing to make the tough decisions necessary to survive and prosper.”

Edwards tries to update an old argument and make a plea to leave the heavy lifting to committed people who know better. In the end, he fails to make a convincing argument on either point—an unfortunate spot for any well-meaning mandarin to be in.


Doug Bauer is the executive director of the Clark Foundation. He has more than 21 years of experience in the field of philanthropy and has worked in both the private and nonprofit sectors. He is coauthor of Philanthropy’s New Passing Gear: Mission-Related Investing and teaches at the University of Pennsylvania and Columbia Business School.

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COMMENTS

  • BY Mal Warwick

    ON February 24, 2010 04:34 PM

    Doug Bauer twice refers to Michael Edwards as “reactionary” in his review of Edwards’ excellent little book, Small Change: Why Business Won’t Save the World. I find that curious, to say the least.
    Edwards takes the view that business “won’t save the world” because its dedication to the profit motive, the central enabling mechanism in today’s winner-take-all society, puts it at loggerheads with the only forces that hold promise of the transformative social change essential to “save the world.” So long as society is divided between a small number of haves and a huge number of have-nots, the only path to authentic social change lies in mobilizing the have-nots in popular movements that are antithetical to the world of business. That’s the familiar story behind the achievement of civil rights, the eight-hour day, and the weekend in America; the end of apartheid in South Africa; and the independence of India. 
    Is that position “reactionary?” I don’t think so.
    In fact, Edwards’ classically radical position leads to the inescapable conclusion that none of the traditional would-be agents of change—including not just corporations but also philanthropists, old and new alike, and governments that provide overseas development assistance, or “foreign aid”—is likely to produce genuine change. With all too few exceptions, they’re all top-down actors entrenched in the status quo game that has rewarded them so handsomely. Arrayed against them are the loud, messy, disorganized, bottoms-up movements that question the rules of that game in fundamental ways.
    In Africa, Asia, and Latin America alike, the history of the last century shows that outsiders—whether corporations, foundations, international institutions, or foreign aid agencies—have brought about meaningful progress in only two significant areas: public health and, to a lesser extent, public education. In addressing every other major challenge—such as ending poverty, ensuring human rights, and fostering honest, equitable, and efficient governance—philanthropists and governments alike have sought to impose top-down solutions. And they have failed.
    In Small Change, Edwards only takes on the role of business and business-thinking in the nonprofit sector, not the broader implications of his argument—but give the man a break! The book is only 127 pages long. As a response to the apologists for “philanthrocapitalism,” Small Change is a breath of fresh air in an atmosphere overheated by exaggerated claims.

  • BY Michael Edwards

    ON February 25, 2010 06:53 AM

    I’m not sure which book Doug Bauer is reviewing but it doesn’t appear to be “Small Change”, which makes the opposite of the arguments he claims:

    None of the issues are seen in “black and white”, but through a carefully-calibrated analysis of the “good, the bad and the ugly” that separates out the areas where business and the market can help social change and those where they can’t.

    Business has a tremendous “role in solving social problems”, but not through philanthropy. Their best contribution lies in transforming their core busines practices.

    “Adam Smith and Milton Friedman” are contrasted to show that the father of free-market economics thought much more deeply about social impact of capitalism than those who came later, which is important in puncturing some present-day justifications for business and the market.

    Philanthrocapitalism is not seen as “misguided”, but as effective only in certain areas of work. What’s misguided is generalizing about its effectiveness and impact.

    I argue for taking control away “from the professionals”, not reinforcing it,  under a new paradigm called “citizen philanthropy”, a phrase I borrowed from Peter Dietz in one of his SSIR blogs.

    I hope readers of SSIR will read the book and make their own minds up. Constructive feedback is always welcome at .(JavaScript must be enabled to view this email address) to feed into the next stage of this work which starts in the Spring around an international network for research and debate. If you would like to join in, please let me know.

  • BY Harry Boyte

    ON April 2, 2010 08:56 AM

    On one level it is easy to dismiss Doug Bauer’s review as simply a dishonest distortion. He argues, for instance, that Edwards is an “anti-business” mandarin who proposes that “business leaders have little or no role in solving social problems.” In fact Edwards develops a nuanced treatment of businesses’ roles in addressing public challenges, including what he sees as important contributions of business-supported efforts like the Clinton Global Initiative to addressing public problems such as the AIDS epidemic. To cite another example, Bauer, claiming that Edwards is promoting an alternative elite as the saviors of the developing world, proposes that Edwards “wants business-minded donors to leave the messy work of social change to the professionals…the mandarins of the NGO world.” In fact, Edwards draws extensively upon the considerable body of research and scholarship that have detailed disempowering, technocratic practices and cultures of NGOs, as well as other professional systems.
      On another level, however, Bauer’s distortions can be usefully analyzed as a slight of hand that seeks to deflect attention from his real agenda, which seems to me a model case of what the social critic Michael Harrington once called “crackpot realism.” Crackpot realism accepts the marketplace as the only possible framework and seeks to subsume all reform within its logic. Thus, Bauer descries those within the world of philanthropy who question “the market forces that keep businesspeople disciplined, focused on success, and willing to make the tough decisions necessary to survive and prosper.”
      Marketplace triumphalism like this, also described as technical rationality, Max Weber’s “iron cage,” has long been imagined and promoted in the name of what is called “progress.” Fortunately for our future, a diverse mix of voices and recent works have begun to question its inevitability. These range from Susan Faludi’s Stiffed: The Betrayal of the American Man on the left to Phillip Blond’s “Rise of the Red Tories” in the British publication, Prospect, on the conservative side. The animated film classic by Andrew Stanton, Wall-E, about a future where Bauer’s agenda is triumphant, can be taken as another powerful, dystopian example.
      Edwards’ Small Changes is a splendid contribution to this pantheon of prophetic works which challenge marketplace triumphalism. It is, in effect, a manifesto calling upon philanthropists to join with fellow citizens in the public work of repairing our commonwealth, in the process re-claiming their agency as co-creators of the future.

    Harry C. Boyte
    Founder and Co-Director, Center for Democracy and Citizenship, Augsburg College
    Minneapolis

  • I find the use of the word “mandarin” racially offensive that harkens to an Orientalist interpretation of people of Asian or Chinese descent. I’m disappointed that the phrase is used in this review.

  • BY Steve Barnhill

    ON May 6, 2010 04:52 PM

    After Small Change, I urge readers to pick up Uncharitable, by Dan Pallotta. Dan argues that the paradigm in which nonprofits are locked basiclly ensures that they won’t succeed. In my opinion, Uncharitable is a mind-boggling, ground-breaking book. I work with many fine NPOs and see how this paradigm cripples them. I also work with for-profits that would never tolerate the philosophical and practical constraints placed on NPOs. Oh yeah, these for-profits are the ones that are making gobs of money and producing the fortunes that fund NPO activities. Pallotta wants NPOs to be given access to all of the tools that empower their for-profit counterparts. I am now wondering (and hoping) that, as more and more writers question the operational differences between “capitalism” and “charity,” if a new era is about to dawn.

  • BY Carol Steinfeld

    ON May 6, 2010 05:02 PM

    What about nonprofits that work to keep themselves in “business” by refusing to facilitate community-based organizations, volunteerism, and lasting self-sufficiency? In the past 5 years, I’ve seen nonprofits get in the way of social transformation by telling the citizenry that it should not organize to bring about the changes it wants. Ah no. We are to let these paid nonprofits carry out these outcomes——and pay them substantially for it.  I think it’s time for SSIR to cover this phenomenon.

  • Sylvia Dickinson's avatar

    BY Sylvia Dickinson

    ON May 6, 2010 09:39 PM

    I would suggest that the difference between business and philanthropy is not nearly as divisive as is often argued. As a young(er) professional having worked for over 15 years on both sides of the ‘divide’, I can vouch for the fact that NGO’s are increasingly staffed with young, highly educated, professionals. These staff use the rigorous, capitalist, results-oriented methodologies and mindsets historically associated with ‘business’ in their every day work. AND they care deeply about the issues and people they serve. They choose to use their skills for good and not evil, believing deeply that their skills can change the world.

    If NGO leaders were to let go of the old business vs. philanthropy argument, they might see that their organizations are already businesses staffed with business people. The distinction is moot. NGO’s operate in reaction to the same market forces, they simply use a different vocabulary (e.g. profit = surplus). NGO’s are regulated, comply with the IRS, sell product (program work in exchange for funding), cater to customers (they call them donors, foundations, governments and aid recipients).

    In a predominantly capitalist global economy, it seems common sense for NGO’s to leverage appropriate methods that currently benefit businesses to benefit social problems. Why deny the inevitable? The day will come when the balance will tip completely…the old NGO guard is graying and soon business savvy, socially dedicated staff will become the norm. The outcome may just be a powerful hybrid that surpasses individual capacities of either side.

  • alexapostol's avatar

    BY alexapostol

    ON May 6, 2010 09:50 PM

    Quite a disappointing review, rife with all the signs of poor, biased assessment:

    “Edwards makes no bones about what Small Change is about” - being concise is a bad thing?

    “Edwards also sees the issue in black and white” - sounds like a paper I would have written in the 7th grade. Come on.

  • BY Steve Barnhill

    ON May 7, 2010 02:24 PM

    I urge Ms. Dickinson to re-consider her view: “The distinction is moot. NGO’s operate in reaction to the same market forces, they simply use a different vocabulary (e.g. profit = surplus). NGO’s are regulated, comply with the IRS, sell product (program work in exchange for funding), cater to customers (they call them donors, foundations, governments and aid recipients).”

    This is naive.

    In fact, for-profit organizations provide better compensation; generally can hire better educated and motivated people; can do such things as sell stock to fund growth and development; have entirely different IRS restrictions; can spend many millions on marketing and advertising to create and maintain “need” for their products and services (and never be criticized for it); can make long-term, multi-year investments; are not penalized by their customers (which she deems to be funders) for their financial success; can take significant risks in the course of innovating and experimenting; can afford to hire experienced researchers, strategists, agencies and others to opiimize their chances of success, and so much more.

    If she’s seen a lot of surplus in her nonprofit work, then she’s been working for hospitals or blood banks (they get their products’ raw material for free and then sell the products and services to people who can’t live without them!) Most NPOs live quarter to quarter and pray long and hard every night. They don’t cater to widely recognized, compelling needs; they’re trying to curb child abuse, cure disease, stop genocide and oppression, drill water wells or end hunger!

    The differences are profound and enduring. I will reconsider my view when a for-profit business comes and asks me to provide my services for free.

    Ainal thought: What if the March of Dimes and all of us baby boomers who went door to door got a share of the profits realized by pharmaceutical companies when polio vaccines were introduced?

  • Business does indeed have an opportunity to change the world.  The question is not whether we do so through their philanthropy or our focus on business as is suggested by the reviewer, but rather on how business intertwines the objectives of a civil society into its objectives as a company.  Our business, has determined that our purpose is “To positively impact society and the environment and be financially successful”.  The traditional mantra of “do business, make money and if you have some left give some of it to the NGO world” is not the way business will succeed in changing the world.  The new challenge for business is to “find something good and figure out how to make it good business”.  I submit that as we do that, we will learn how to make the world a better place while providing rich lives and income for lots of people along the way.

  • Tracy Kaufman's avatar

    BY Tracy Kaufman

    ON May 8, 2010 12:51 PM

    An unfortunate review of a smart, thoughtful book. Michael Edwards is one of the very few in the sector who is willing to say the obvious truth aloud: that the selflessness and promotion of social justice inherent in philanthropy is entirely at odds with the for-profit motive. Milton Friedman is basically the godfather of the free market in its current 21st century form, and he said it as plainly as can be back in 1970, “The social responsibility of business is to increase its profits.” While we all know that businesses engage in philanthropy, and lord knows our nonprofits need that money (especially in a recession when many foundations’ grantmaking is down), any progress in social justice is unlikely in any corporate philanthropy endeavor, as the corporation’s overarching goal is not to promote equality in the world, but to maintain its own position of power. No, business executive are not all walking around with little devil horns concealed under their hair, but they do know perfectly well that if this planet actually had a just society, and global poverty and disease were eradicated, they would be out of business.

  • BY richard.laughlin

    ON June 3, 2010 05:17 PM

    the “non profit” phrase, perhaps should be called what it is ” non taxed” Those enterprises are rarely scrutinized and much research groundwork remains to be done.
    Good digging. Remember to wear protective gear. It will get muddy.

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