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Reshaping the Global Economy Through Constructive Engagement By Jeffrey A. Sheehan Associate Dean for International Relations The Wharton School University of Pennsylvania Delivered to the International Business School Shanghai Conference


  1. Reshaping the Global Economy Through Constructive Engagement By Jeffrey A. Sheehan Associate Dean for International Relations The Wharton School University of Pennsylvania Delivered to the International Business School Shanghai Conference November 4, 2008 1

  2. Good morning. Before I start, I would like to express my appreciation to the Antai College not only for inviting me to speak today, but also for organizing this conference. One of the reasons I am so happy to be here is that I consider Shanghai Jiao Tong University to be my home school in China. This is because I first visited SJTU twenty-four years ago, in 1984. This was at the time of the re-establishment of the School of Management, and the first dean was a distinguished professor named Yang Xi Shan. We should not forget that without Dean Yang, we would not be here today. Since 1984, I have returned to SJTU many times, and Wharton has cooperated on a variety of topics and with many different people. So that is why today, when I drink the water, I remember the source. It is a great honor to share the speaking duties this morning with such a distinguished group, including my old friend Santiago Iniguez from the Instituto de Empresa; Francis Estrada from AIM; and of course Wang Fang Hua, the dean of the Antai School. Many thanks also to Professor Lu Wei for his chairmanship of this session. Today my topic is “Reshaping the Global Economy Through Constructive Engagement”, and I would like to speak to you for a few minutes about some ideas that my colleagues and I have developed on the topic of the social responsibility of business schools. 2

  3. At the Wharton School, we are mindful of the unique forces that are reshaping the global economy in the early stages of the 21 st century, and fully aware of our responsibility to train future leaders who will help solve some of the new generation of problems that challenges humanity. In response this responsibility, we are creating an Institute for Social Impact. This Institute will involve our faculty, students and alumni in research, teaching and outreach. We will address questions ranging from economic inclusion and the alleviation of poverty to the business opportunities brought about by global climate change and the transformative potential of societal entrepreneurship. Under the leadership of a faculty overwhelmingly committed to positive change, the school will seek, through this Institute, to make fundamental changes in the relationship that Wharton has to the problems of leadership and management that plague humanity as well as threaten peace and prosperity. We understand and accept that as academic leaders, we have obligations to our fellow men and women in the United States and importantly, around the world. The Institute for Social Impact at the Wharton School takes as its premise that we can and will accept our responsibility for doing something about the problems. Some of the problems that will be addressed through the Institute are not new. Economic exclusion has been a fact of life since humans organized themselves into societies. What will be new in this Institute is the determination that Wharton, as a global school of management, can make a difference and can train students who will 3

  4. enter careers where they feel and act on a continuing obligation to make a difference in the world, regardless of their chosen occupations. Enlarging the global economy often begins at the lowest end of the economic pyramid, by enabling the most humble individual with an entrepreneurial dream to start the “virtuous cycle” of value and job creation, asset accumulation and realized aspirations. Business schools, we believe, can help make this happen. Other problems are new. The world has never faced natural resource stresses and shortages such as are occurring today. At the same time, the modern world inhabited by humans has never before faced the consequences of global climate change on a scale almost unimaginable. Once again, we are convinced that business schools can be forces for global good, and the mission of this Institute will be to translate this conviction into action. A third group of challenges involves timeless problems that seemingly have no solutions. Good government requires not only honest civil servants devoted to the public good; it also requires leaders who understand how to train and motivate their groups, whether consisting of dozens or hundreds of thousands of members, to succeed in their appointed tasks. Wharton, we believe, can help make this happen in locations as dissimilar as Philadelphia, Johannesburg and Shanghai. 4

  5. Once in a generation, a school and its faculty perceive and accept a new challenge to re-direct their energies and intellectual drive to change the fundamental approach they take to addressing their academic disciplines, their responsibilities to their students, and their obligations as compassionate change-agents of the world around them. For Wharton, this time is now, as we work to make the Institute for Social Impact a reality and begin to do our small part to bring about meaningful change in the world. Although I have spoken here of large and important themes, I do not want to exaggerate what we will accomplish. We are profoundly humbled by the scale and scope of the problems that the world confronts. However, we believe strongly that a new and better world is built one person at a time, engaged constructively. In our small way, we hope to start engaging as many people as we can in the processes that we understand best – research and education. While the concept of the Institute for Social Impact is new and under development, we already have identified some of the key themes that will guide the work of the people involved. The following three themes, which will undoubtedly be supplemented by many more in the coming months and years, give a flavor of the philosophy embodied in our aspirations. 5

  6. First of all, Economic Inclusion and the Alleviation of Poverty For millennia, the basic organizing principle of most economies was that a very small group of the wealthy and powerful controlled the society’s resources and relied on the inexpensive and submissive labor of a very large group of the poor and powerless. Periodically, social engineers and philosophers proposed alternatives that were based on the equitable redistribution of wealth or the pooling of all the means of production in the name of the “people”. History has shown that these proposals were challenged in achieving their goals. One reason for this complication was that they encountered difficulties in enlarging the economies they were designed to distribute equitably. On the level playing field of the 21 st century, we believe there must be a third way, an organizing principle that neither restricts the capital formation of the ambitious, energetic and successful, nor consigns the bottom of the pyramid to endless generations of hand-to-mouth existence. We believe this third way is definable, implementable and acceptable to all. This third way involves not pooling or redistribution, but the creation of new value, new capital, new possibilities, and – most importantly – an economics of inclusion, through which 6

  7. those who previously had little or nothing are brought into the cycle of wealth and value creation. Wharton’s Institute for Social Impact will address this question of economic inclusion from a variety of perspectives, including something we call “societal entrepreneurship”. Societal entrepreneurship, a concept pioneered at Wharton by Professor Ian MacMillan and his colleagues, takes as its fundamental proposition that many social problems, if looked at through an entrepreneurial lens, create opportunities for people to launch businesses that generate profits by alleviating these same social problems. The entrepreneurs then are motivated to generate more profits and in so doing, the more profits made, the more problems are alleviated. Through the societal entrepreneurship program, Wharton will engage in training potential entrepreneurs in the United States and around the world, especially in emerging economies. Second, Global Environmental Change The physical global environment in which we live today is fundamentally different from what it was a generation ago. Never before in the history of humans has the stress placed on the natural environment created such dangers for all of 7

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