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In modern market economies, the interaction between business and government forms the basis for how the economy and society is organised. This relationship between government and business is thus a close and interdependent one, forming the basis of what is generally labelled ‘political economy’. This course examines this interaction, both nationally and globally. It compares different political systems and institutional arrangements; considers the impacts of key ideas such as globalisation and neo-liberalism; explores the various models of business-government interaction internationally; and considers a range of contemporary issues that affect business. Successful businesses are aware that a sound understanding of how government functions, and how business interacts politically, are important factors in driving their success. Business thus values employees who can bring such knowledge to their workplaces.

Choose ONE of the following essay topics:

1. A strongly negative reaction to globalization has caused political upheaval in countries around the world, with the main complaint being that the benefits of globalization go very unevenly to different countries and to different sections within countries. Should the globalizing process be reversed or should we seek a new and fairer model of globalization? Discuss, using examples to illustrate and support your argument.

2. Neo-liberalism became the standard model for political economy in the 1980s under the argument that ‘there is no alternative’. But financial crisis and long-term economic stagnation have cast doubt on the benefits of neo-liberalism. Is it time to look for a genuine alternative and how might we go about this? Use examples to illustrate and support your argument.

3. Which political economy model/s do you consider most effective in achieving economic prosperity and citizen well-being. Use country example/s to illustrate and support your argument.

4. ‘Only socially responsible businesses, committed to social as well as profitability goals, will succeed in today’s demanding global political economy’. Do you agree with this statement? Discuss, using examples to illustrate and support your argument.

Negative Reaction to Globalization

With corporate social responsibility (CSR) being considered by more than 90% of companies listed in fortune 500 companies list, it can be said that businesses with socially responsible activities, committed both profitability as well as social goals will survive in contemporary dynamic global political economy. It is the trends that is growing constantly since its inception which have made many contemporary firms respond towards arising social and environmental issues such as growing inequality and climatic change alongside responding stakeholders' pressure to be more accountable and profitable. The 21st century has already witnessed many changes to CSR practice due to ever-demanding political economy and partially due to Enron and WorldCom scandals in the early 2000s ( Ahmadian & Khosrowpour, 2017). Such incidents have received international attention, thereby making most of the global firms strengthen and promote business alongside other forms of social responsibilities among several business activities through globally agreed CSR and labour standards to succeed competently in their respected industries.

Global political economy is more concerned with establishments made between corporates, state and sovereign territorial divisions to coordinate an inclusive mechanism where sellers and buyers' exchanges services and goods at prices which are determined through assumptions made on supply and demand factors. Usually, global political economists integrate the states with political pursuits such as power and businesses with economic pursuits like the accumulation of wealth. However, in general, states have no interest in wealth accumulation and businesses are never completely removed from power influences (Phillips, 2017).  Fundamentally, states provide organizations with infrastructure such as transportation and communication while global unions provide trade agreements between firms to promote international operations and global economic stability. As interdependence between states has increased, many countries have been drawn to address issues arising due to competitive forces present in the world economy which seeks a restructuring of traditional companies and support socially responsible activities besides creating a symbiotic relationship between themselves and competitive marketplace while working in a global village (Cohn, 2012).  

While managing the global political economy, accountability is one term which demonstrates how a company or an organizational leader acknowledges integrity. In global stakeholder society, one key challenge faced by most of the firms is accountability that makes them more concerned towards aligning and reconciling interest, need and values of communities, government, society, employees and non-government institutions among several others. To perform successfully, companies keep a track of records in terms of accountable CSR activities while maintaining internal and external business environment. Further, literature reflects an increasing demand for revealing good practices in CSR accountability alongside pressurizing more to exert themselves as ethical and transparent to those from whom they seek to influence (Amato, Henderson, & Florence, 2009).  One successful company showing social responsibility in its business practices in BHP Billiton, operating in the Australian mining industry. The CSR approach undertaken by the firm gives an overview of how their corporate actions responded towards arising issue in public interest during the Fundao tailing dam project failure in 2015. The subsequent steps taken by the firm included rehabilitation and settlement of the local community as well as the entire area. The company also keeps a track of indigenous people and women working for the company to ensure creating a gender balance according to Australian labour guidelines (BHP, 2019).

Doubts Surrounding Neo-liberalism


One popular model that makes a distinction on several kinds of firm's social responsibilities is Carrol CSR Pyramid which suggests that a line of responsibility moves from monetary to legal goals, following social responsibility. Moral and other humanitarian responsibilities further posits that organizations are basic economic units that have economical responsibility while working within society. According to the model, profitability or economic responsibility is the primary concern for the firm through which they recognize economic gains by providing society with goods or services as per demands. The legal responsibility and political support make them succeed which makes most of the companies attempt to following required legal compliances to be socially responsible (Carroll, 2016). However, Omran & Ramdhony (2015) argues that social responsibility in developing countries organization differs from Carroll's traditional pyramid. In developing nations even though economic responsibilities are given more preference, philanthropy remains the second-highest priority after following ethical and legal responsibilities. This can be said because traditional attachments are seen towards philanthropy to improve living standards of immediate surrounding and for assisting political development.  

BMW, a popular German car manufacturing company which complies with GRI Standards and German CSR Directive Implementation Act reveals how socially responsible act results in achieving success in businesses. The company takes into account minutest detail regarding environmental and social responsibility. The firm's leaders are thoroughly convinced that to gain economic success, acting responsibly and with social acceptance is very important to thrive in today’s dynamic business environment (BMW Group, 2018, p. 10). Accordingly, the firm accomplishes competitive advantage through resource-friendly and efficient business processes along with problem-solving behaviour of the firm's management. For instance, the company conducts an internal workshop where sustainability experts and strategists are invited to discuss stakeholders' dialogues outcomes. This makes the firm update list of issues from stakeholders' perspective and narrows down their focus upon issues like social, ecological and economic impacts due to BMW Group. The given case example shows that the concept behind social responsibility has changed dramatically from the beginning to date. From universal ethical egoism perspective, it can be said that the behaviour of economic agents and individuals is determined by self-interest which further makes them comprehend different ways to maximise profit earning and business interests through making several compromises and considering interest of every associated party, stakeholders (Ojasoo, 2016).

Alternatively, the opponents of CSR argue that organizations emphasize more on economic development at the costs of ‘misguided virtues’ mentioned in their social responsibility agendas.  The example of Nike reveals how the company spends around $10 to $12 million every year for hiring CSR staff and to go beyond sustainability in front of the world. Moreover, Kanji & Chopra (2010) claims that the Australian government forces the organization's directors to meet specific social responsibility levels. Mandating such initiatives through legislative interventions further entails risks of reduced creative and innovative approach in many Australian firms. Critics of CSR also claims that organizations pay increased taxes to the states to ascertain that environment and society are not impacted by the business operations adversely which often leads them towards crisis precipitation while focusing upon socially responsible activities.  An example that can be provided here is General motors case analysis where the company have not removed residues from the Hudson River post fouling it with various impactful and carbon-based pollutants. Till date, the GE motors argues through legal proceedings about the allocation of liability along with avoiding taking up the responsibility to clean the river itself (Larson, 2019).

Effective Political Economy Models

Despite various criticisms made against the socially responsible view in global political economy, wider evidence suggests that socially responsible business can mean much more than a charitable, profitability or constraint-oriented deed. According to Camilleri (2017), one commercial responsibility of businesses in continuous development and sustainable growth by providing superior quality goods and services. Subsequently, they are expected to be honest and fair while making marketing communications to promote their latest offerings in front of stakeholders like customers and society. Ethical responsibility is another key feature of contemporary firms which reflects how the firm considers fulfilling obligations towards government, customers, suppliers, distributors and social institutions with whom they make regular dealings. Companies who adopt socially responsible practices usually safeguards norms and human right principles although they may or may not be defined in company law to succeed in their respective field while showing sensitivity towards social responsibilities. Therefore, Rangan, Chase, and Karim (2012) cites that socially responsible activities mirrors the human side of organizations and their management commitments while making contributions towards society and community which they are part of. Non-governmental and Civil society institutions can though sometimes compel force to push organizations to respond to the environmental and social impacts occurring due to their business operations, there is no doubt that motivation behind such initiative has increased organization's concern towards community development besides focusing upon profitability.

Conclusion  

The above essay evaluated socially responsible businesses from various CSR and theoretical perspective and finds that companies who are committed to socially responsible activities besides considering monetary goals will only prosper in current global political economy. The study made on global political system further reveals that it deals with the study related to interactions made between economic and political forces where the pivotal debate is always concerning human welfare and how businesses can respond to address issues related to it while operating in different parts of the world. Regardless of various views identified on how the socially responsible business performs, the dominant theme underling every successful business is grounded on the notion behind long-term sustainability and providing value to stakeholders as well as shareholders of the firm. This essay concludes on the notion that the role of today's business is acting responsibly for the sake of every stakeholder while extending towards larger society, thus resulting in a win-win condition for them.

References

Ahmadian, A. & Khosrowpour, S., 2017. Corporate Social Responsibility: Past, Present, And Success Strategy For The Future. Journal of Service Science, 10(1), pp. 1-12.

Amato, A. D., Henderson, S. & Florence, S., 2009. Corporate Social Responsibility and Sustainable Business. North Carolina: CCL Press.

BHP, 2019. BHP: Sustainability Report. [Online] Available at: https://www.bhp.com/-/media/documents/investors/annual-reports/2019/bhpsustainabilityreport2019.pdf[Accessed 19 10 2019].

BMW Group, 2018. Sustainable Value Report. [Online] Available at: https://www.bmwgroup.com/content/dam/grpw/websites/bmwgroup_com/responsibility/downloads/en/2019/2019-BMW-Group-SVR-2018-Englisch.pdf[Accessed 19 10 2019].

Camilleri, M. A., 2017. Corporate sustainability and responsibility: creating value for business, society and the environment. Asian Journal of Sustainability and Social Responsibility, Volume 2, p. 59–74.

Carroll, A. B., 2016. Carroll’s pyramid of CSR: taking another look. International Journal of Corporate Social Responsibility, 1(3).

Cohn, T. H., 2012. Global Political Economy. 6 ed. s.l.: Pearson Education, Inc.

Kanji, G. K. & Chopra, P. K., 2010. Corporate Social Responsibility in a Global Economy. Total Quality Management, 21(2), p. 119 –143.

Larson, E., 2019. GE’s Hudson River Cleanup Isn’t Done, N.Y. Says in Suing EPA. [Online] Available at: https://www.bloomberg.com/news/articles/2019-08-21/ge-s-pcb-cleanup-of-hudson-river-isn-t-done-n-y-claims-in-suit[Accessed 19 10 2019].

Ojasoo, M., 2016. CSR reporting, stakeholder engagement and preventing hypocrisy through ethics audit. Journal of Global Entrepreneurship Research, 6(14).

Omran, M. . A. & Ramdhony, D., 2015. Theoretical Perspectives on Corporate Social Responsibility Disclosure: A Critical Review. International Journal of Accounting and Financial Reporting, 5(2), pp. 38-55.

Phillips, N., 2017. Power and inequality in the global political economy. International Affairs, 93(2), p. 429–444.

Rangan, K., Chase, L. . A. & Karim, S., 2012. Why Every Company Needs a CSR Strategy and How to Build It. [Online] Available at: https://www.hbs.edu/faculty/Publication%20Files/12-088.pdf[Accessed 19 10 2019].

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