Military activities within Ukrainian territory will eventually end. The question that must be answered is what to do about the aftermath.
Large, international private-sector corporations have to—and will—help Ukraine by investments, jobs creation, and the building of additional taxable base. However, a common requirement for all businesses now is the introduction of principles for development in Ukraine.
Max Weber, the father of sociology and political economy, suggested that there is a strong correlation between societal norms & values and economic development. For example, the Nordic countries and the United States, where such values as responsibility and the rejection of unnecessary luxury in favour of investments are dominant, are on average eight times more prosperous than the rest of the world.
Five principles and values will be useful for translating the opportunity in Ukraine into sustainable growth.
Transparency is the basis of economic development. Twenty-two of the thirty least-corrupted countries in the world, according to Transparency International, are also on the list of the 30 richest countries in terms of GDP per capita. International business has its own standards of transparency, reflected in financial statements, compulsory internal audit functions and controls, codes of conduct, and ethics.
A good corporate citizen is obliged to permanently extend the boundaries of responsibility. Responsibility is “clean” salaries for employees, positive control of offshore companies, and searching for new opportunities for growth that do not require the aid of the state. For example, during the dark days of the Asian economic crisis in 1997, Samsung Electronics management decided not to follow the easy path of layoffs. The company’s consciousness of its responsibility to its employees in South Korea is profound and well-known among all local financial and industrial groups. Therefore, while others were cutting down their expenses, Samsung decided to develop a new product line (flat-panel displays) to save jobs and fight for a greater market share.
In the dusk of nineteenth century, a small number of entrepreneurs triggered the growth of the American economy—Rockefeller, Vanderbilt, Morgan, and Henry Ford, just to name a few. Large enterprises tap the opportunity to increase profits through innovation and modernization. Rockefeller was among the first to use oil pipelines, Ford used conveyor lines, and Morgan invested in the development of the electrical industry. They did not just privatize factories; they built new ones, introducing brand-new technologies. The time of Ukrainian businesses operating under the “Take and run” mentality, which was very popular in the 1990s, is over. Now is the era of innovation.
There is a collective desire for a more uniform income distribution in a fashion that will facilitate the growth of the middle class. Measuring GDP per capita should not be the only yardstick; qualitative indicators should be of equal importance. A one-sided economy, skewed to a single sector such as the oil and gas industry (for Russia), metallurgy (for Ukraine), or banana production (for Ecuador), is weaker than a multi-dimensional economy focused on the production of high-value-added goods. A society split into two extremes of immense, fast wealth and devastating, long-lasting poverty cannot sustain itself, and its economy, in turn, cannot be stable
Model organizations of our times, such as Facebook and Google, were created by students and graduates of universities known for their quality education. The state–enterprise–school triangle allows the nurturing of experts, starting early in university, as well selecting new business projects using tools such as Entrepreneurial Financing.
CT 31.10.14 (Excerpt from Novoe Vremya, Oct 31)
Picture: Independence Day Flickr