BOSTON — In a panel discussion led by University Professor Michael Porter at the Harvard Business School (HBS) Centennial Global Business Summit, Sir Ronald Cohen, founder and former chairman of the private equity firm Apax Partners; Thierry Breton, an HBS faculty member and former French finance minister; and former Harvard University President Lawrence Summers offered their views on the future of market capitalism and ways to address the challenges the market system faces.
"We could not have imagined when we put this panel together that this would be such a timely and important issue, and that the stakes would have risen so high," said Porter in initiating the discussion. In the wake of the current financial crisis, "decisions and choices will be made and political processes put in place that will have enormous consequences for those in this room."
Porter reiterated a recurrent theme at the Summit concerning the "agonizing dilemma" of capitalism, which creates wealth while contributing to the inequality of society. "This problem has been almost impossible to address and become worse with globalization," he said, "because Americans now compete with workers from around the globe."
"What do we do and what is our role and responsibility as business leaders and institutions?" he asked the audience. "What do we ask for and what kinds of leadership do we exert at this moment?"
Cohen, bringing the dual perspective of both a capitalist and social innovator, said that market forces and entrepreneurship could be harnessed to address social problems.
"The time has come to create institutions to support social entrepreneurship," said Cohen, who focuses his efforts now on trying to improve the lives of the disadvantaged in Great Britain and the Middle East. "Markets deal with their economic consequences, not their social consequences," he said, adding that "market capitalism will be judged by how the private sector reacts to the human problems that it causes. If we don't try to palliate the social consequences for whole groups of our population, then the backlash will be serious."
Cohen said that he can imagine social venture funds some day becoming a significant element of private equity investment and entrepreneurial finance. "Poor areas are starved for capital and opportunities," he said. "We must address social issues the same professional way we do business ones."
Summers agreed that social entrepreneurship is important, but believes that it alone is not enough to sustain prosperity and economic growth or ensure that the benefits of capitalism are equally shared.
"It's a mistake to suppose that it can all bubble up from particular initiatives and entrepreneurial ventures," he said. "We also need broad, 'covering-everbody' postures of public policy." He urged the business community to step up and vote for the kinds of reforms that have a broad impact and are necessary for the whole system, not just their corporations' projects and interests.
Summers added that businesses should seek profit opportunities in areas such as the environment where they can make contributions to society. "There is lot companies can do that is in their self interest and the broad interest as well."
Breton noted that in the future "shareholder value will be critical, but not the only story." He underscored how the U.S. and European bank bailouts to ease the current financial crisis have changed circumstances and expectations. "We can be certain that the politicians who took control will be extremely tough and act quickly to put regulations in place," he noted, advising business leaders to be the first to propose what they plan to bring to the table or else find the government doing it. "Business must also work with government to create more equality and avoid discrepancies among people," he said.