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The Challenges in the World Today and Some Developments

Structural Adjustment Program

• Privatization
o Advantage:
▪ Private decision is the improvement in the efficiency of operations and
improvement in facilities of enterprises under private ownership.
o Disadvantage:
▪ Healthcare, that was used to be offered almost for free by government owned
hospitals, are now priced more under private ownership which many people
find difficult to afford.
▪ Services are priced at market
• Trade liberalization
o Advantage:
▪ Free flow of goods and services across the globe
o Disadvantage:
▪ Some players begin to feel that it is not a Level Playing Field
▪ It is difficult to compete
▪ Since tariff rates were reduced to encourage free trade, some government
agencies lost a significant amount of revenues.
• Deregulation
o Advantage:
▪ Corporations operate with minimal intervention.
▪ Freedom for corporations
o Disadvantage:
▪ Large-scale corporate abuse that affected many people and the natural
environment.

Free Market

• “Let the market seek its own level without government intervention.”
• the most influential theory towards the end of the 20th century and the beginning of the 21st
century until it showed it flaws in the market failures.

Free Market Failures

• Corporate and financial scandals

o perpetrated by many big companies (Enron, Arthur Andersen, sub- prime mortgage)
o This corporate greed leveled up to not only at the level of companies but to a level of
what you can call a grand corruption
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• Social Inequity or Inequality

o This is the growing disparity between the rich and the poor.
o This data shows inequity at all time high- share of worlds private consumption:
▪ Poorest 20%- consume 1.5%
▪ Middle 60%- 21.9%
▪ Richest 20%- 76.6%
o Inequity
▪ The GDP of the 41 heavily dead indebted poor countries (567 million people) is
less than the wealth of the world's seven richest people combined.
▪ “The price of inequality is too costly.” -Joseph Stiglitz a Nobel prize winning
Economist-
➢ In an unequal society, growth in economies are not shared.
➢ Most of the benefits of an economy's growth goes to the top and very
little goes to the bottom.
➢ Hence, prosperity is not a shared prosperity as the rich becomes richer
and the poor cannot even provide for their children's education.
▪ How will the future look like with that?
➢ Inequality also spells instability.
➢ Demand will also be lower because you have less people who can get
good jobs that will allow them to provide for their needs
• Environmental Challenges
o Much of our environmental problems today is caused by:
▪ irresponsible business operations
▪ pollution
▪ too much carbon emission in atmosphere that traps the sun's heat and thus
causing global warming
▪ climate change
▪ extinction of species

Stark Realization

• Market cannot be left to itself.

• Hence, the growing demand for transparency and corporate social responsibility.
• Because of this market failures some enlightened developments can be observed in recent
times:
o Heightened consciousness on the need for corporate social responsibility
▪ Emphasizing that managers and business Leaders are not only responsible to
the shareholders but also, the wide range of stakeholders namely the customers
suppliers, employees, the government, as well as the general public and the
environment
o Business Ethics and CSR was integrated in the curriculum of universities
o The Rise of Cooperatives and Social Enterprises
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▪ There is a growing movement for corporativism and social entrepreneurship

because financial wealth is concentrated in the hands of the few.
▪ Fifty percent of the world's wealth is owned by corporations who belong to a
few families and individuals.
▪ Corporativism intends to build capital that is being owned by the members of
cooperatives and not just by one or a few persons.
▪ Social Enterprises are put up to benefit its stakeholders and the larger society
while maintaining a reasonable profit.
o The 2030 Agenda for Sustainable Development (17 SDGs)
o Sustainability reporting among corporations
o Growing movement pushing for solidarity tax or the wealth tax
▪ This is being imposed by the labor coalition in the US.
▪ This initiative is being welcomed positively by many prominent rich people in
the US
o Vocation of a Business Leader