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Chinese migrant workers use a cell phone in Beijing


Karl Moore: This is Karl Moore of the Desautels Faculty of Management at McGill University, Talking Management for The Globe and Mail. Good morning [to Joseph Bower, Baker Foundation professor of business administration, Harvard Business School]

Joe, we've looked at market capitalism. It has come under fire during the recession to some degree, some of the excesses we've seen in some big companies, in Lehman Brothers, in Goldman Sachs, and so on. I know you're looking at and thinking about it. What's your view of market capitalism and its future?

Joseph Bower: It's a great question. Some colleagues of mine, two of them and I, began, as part of the run-up to the centennial of the Harvard Business School, we focused on that question. We went around the world, talking to leaders of big companies in Europe, Asia, Latin America and North America, and asked them what was on their minds, what was concerning them. We gave them a scenario, after 2030 how the economy would develop, that had been put together by the World Bank. What was really interesting, first of all, this was 2007 and early '08, was that they said there's tremendous financial instability and the financial markets have developed in a way that they are really detached from industrial and commercial enterprise.

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But, more important, they felt, was that the way the global system was working, we were seeing unbelievable economic progress, but, look out to 2030, 2040 and what you see is, even with all that success - the global middle class grows to about 400 million, by 400 million people, amazing - but average income in China and India is about one-third of what it is in the Western countries; big gaps developing within countries and then across countries. That is something that is really a source of great instability. To begin with, you've got just political instability in the individual countries and then you get migration.

Migration is actually important but we know, we look at the United States, you look at Europe, there are all these anti-immigrant things. So, the companies see this and are saying that we have to find a way that enterprise can develop so that it actually contributes to the solution of these problems: inequality, migration and the environment. It turns out that's hard and so companies are worried.

There are a number of companies that we've looked at and we're beginning to point to as models that have, in effect, said these aren't problems. This is unbelievable, there are a couple billion people out there that can join the market system and, if we help them become consumers and if we help them become vendors, if we help them become part of that system, we can do very well, thank you. They're doing that. Example, China Mobile has brought, or they're in the process of bringing, something like 700 million rural Chinese into the market system using cell phones that are, essentially, bringing agricultural information, bringing banking, bringing insurance to the local villages. Whereas the Chinese government system stops up at the county level, they've built a distribution system that goes all the way down to the villages. So, it's really remarkable.

KM: You see market capitalism as being quite healthy and alive in 2030, then?

JB: In the aggregate.

KM: This has been Karl Moore of the Desautels Faculty of Management at McGill University, Talking Management for The Globe and Mail.

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