Lessons in politics from Starbucks: sign of the times or storm in a coffee cup?

Drip, latte, cappuccino, espresso, frappuccino; short, tall, grande, venti, trenta. Starbucks, the international coffee chain is great at giving choice in getting our daily dose of java. But what about campaign contributions or no contributions? Doesn't exactly roll off the tongue in the same way, but that is the stark choice that Starbucks CEO Howard Schultz is now offering US politicians in the face of the country's ongoing debt crisis. For the past few weeks Schultz has been seeking to build a coalition of US business leaders ready to join him in withholding campaign contributions from Washington until the main political parties start working together and agree a debt deal to turn around the beleaguered economy.

In the last few days Schultz has stepped up the campaign with full-page ads in the US press, including the New York Times, taking the form of an open letter on Starbucks headed paper to his "fellow citizens" to join him in "restoring hope in the American Dream" by sending "the message to today's elected officials in a civil, respectful voice they hear and understand, that the time to put citizenship ahead of partisanship is now".

It's quite a remarkable campaign. Schultz has the support of more than a hundred business leaders joining his pledge. Among those listed as "key supporters" on the campaign website are the CEOs of AOL, BBDO, NYSE, NASDAQ, Wholefoods Market and Zipcar. It is not such a significant coalition yet to cause the main political parties any real loss of sleep - compared with major contributors, most of these individuals and companies are not heavily involved in funding political parties. But for a business leader like Schultz to come out and so explicitly take a stand that effectively seeks to hold his domestic politicians to ransom until they do his bidding represents a fairly unique twist on the growing involvement of business in politics and the claim by corporations to be "good citizens".

In one sense, Schultz should be applauded for seeking to use his own and his company's economic muscle to try and achieve what he sees as a greater public good. Management guru, Rosabeth Moss Kanter, for instance has come out in favor of his "courage and leadership" in attempting to restore confidence. Even the more cynical corporate critics will find it difficult to see a clear-cut corporate self-interest at stake here. Sure it could help reinforce the famous Starbucks brand but at the same time its also going to annoy a lot of people too, especially those in Washington who are being labelled by Schultz and his CEO friends as having a "pervasive failure of leadership".

On the other hand, though, we might also question what's really going on here when we have a company CEO leveraging his company brand in such a way to make a political rather than an economic point, and at the same time claiming to be a "fellow citizen" with the rest of us (who can hardly afford to take out full page ads in the New York Times to present our own views on the current political logjam). This is not just Schultz the individual citizen speaking here but Schultz the corporate CEO and representative of Starbucks. But then, if (and it is a big "if") we accept corporations as political actors, then at least this example represents a fairly good case of building coalitions, providing an arena for free and fair deliberation, and moving beyond mere corporate self-interest.

To our mind the whole situation presents a really interesting insight into the emerging political role of the corporation and the difficult decisions that have to be made when business leaders start increasing their involvement in public debates. According to a McKinsey survey, "almost half of US executives believe they and their peers should play a leadership role in publicly shaping debate and in efforts to address sociopolitical issues such as education, health care, and foreign policy ... yet only one-seventh of survey respondents consider themselves to be playing that role now". Schultz's efforts to restore economic confidence by taking a step into politics gives us a taste of what might happen when these executives really start doing so. We still have a choice about whether and how those steps should be taken.

Photo by Nick Humphries. Reproduced under Creative Commons Licence.

CSR – It is still Greek to European Banks!

Yesterday, Greek Prime Minister George Papandreou narrowly won the support of the Greek parliament for his ongoing efforts to steer the country away from bankruptcy. Whether this has given him a second political life though is an open question. Greece’s financial troubles are far from over.

As a member the EU and the Eurozone the survival of Greece within these European institutions seems still anything but certain. Last week, the debate among European heads of state and Finance Ministers on further support for Greece was tough and controversial. Finally an agreement of another multi billion Euro cash injection from mostly France and Germany paved the way for keeping Greece floating for another month or so.

A thorny nettle of disagreement between the countries was the question, in how far private sector banks should be part of the solution. Germany, whose banks exposure of some €20bn is much lower than France’s was insisting on more involvement, while France opposed this approach in fear of a downgrading of their private banks by rating agencies. The compromise turned out to appeal to banks to ‘voluntarily’ become involved – but precious little is found in the news about whether banks have actually taken up this ‘invitation’.

If we watch the footage of protests and civil unrest in Greece it is conceivable that further ‘austerity’ measures (i.e. cutting public services) – let alone an outright bankruptcy – of the Greek government will pose a serious threat to the country’s democratic institutions. Much (admittedly not all) of Greece’s current troubles are following the global financial crisis. Greece is perhaps the most visible example of what many citizens in North America and Europe think: that Governments pile up huge debts to fix the irresponsible behaviour of wealthy bankers and investors while asking the common taxpayer and middle/working class people to put up with reduced public services or – as for instance in the case of UK university students – higher prices for those services.

It reflects a recent debate in the CSR literature which was initiated by Colin Crouch, a prominent sociologist and, more recently, CSR expert at Warwick University. He argues that capitalism has been able to coexist with democracy in most Western countries only because there were mechanisms to deal with two problems inherent in capitalist market economies: first, the cyclical ups and downs of the economy, which exposes particularly middle and lower income groups to economic hardship. Second, the harmonious coexistence of both systems is only possible if the inherent inequality of income distribution in capitalist systems can be addressed in a way that some income at the top end is redistributed to those at the bottom.

For decades after World War II the mechanism to address this problem was referred to as Keynesianism. Government spending during recession as well as progressive taxation and a welfare state helped addressing these two problems. This system was somewhat obliterated in the 1980s with policies most visibly linked to Reagan and Thatcher, often referred to as ‘neo-liberalism’. Crouch though argues that those changes in fact created a policy regime of ‘privatized Keynesianism’. By encouraging and extending home ownership, pension plans based on investments in capital markets and other models of making the saving middle class to small scale investors, the two inherent contradictions between capitalism and democracy were basically to turn lower income citizens in ‘mini capitalists’.

With the so-called ‘financial crisis’ in the late 2000s though this system has proven to be no longer effective. Many lower and middle income citizens in Western countries have lost their homes and pensions – or at least have suffered a severe reduction of their value. Currently, he suggests, we see this mechanism of ‘privatized Keynesianism’ weakened, if not absent, with no real alternatives in sight.

In this situation we face two stark options. The first possibility is that similar to the 1920s and early 1930s, this absence of a mediating policy regime may give rise to political extremism, anti-democratic movements or outright the re-invigoration of fascism or left wing authoritarianism. In this light, the developments in Greece, but also the ongoing rise of the political extreme right in many European countries and the United States actually get quite a daunting character. We are not quite there yet, but the signs of far reaching unrest and despair about the effects of a global, largely unregulated capitalist system are clearly there and by all accounts, are likely to rise.

The other option though, in Crouch’s argument, is that one group among the winners of global capitalism and arguably the most powerful players step into the role of addressing the two inherent tensions between capitalism and democracy. This is exactly the point where corporate social responsibility would kick in. And in fact, as we have argued elsewhere, much of what companies are doing under the label of CSR is in fact very similar to classic welfare state activities. CSR in this perspective would see private corporations as pivotal actors in addressing those two inherent tensions between capitalism and democracy.

The reaction of European banks to support the effort of saving Greece from bankruptcy so far however shows little sign of awareness of this broader context for corporate responsibility. The Greek bailout situation is probably a blatant example of a country at the brink of severe political unrest where direct involvement of the private sector might indeed prevent a country sliding into anarchy or political extremism. So far though there are no signs that any of the European banks have seriously thought about their broader role in society. Maybe it is because the business case for this kind of CSR is so hard to make...

Picture by PIAZZA del POPOLO. Reproduced under Creative Commons Licence.