Public interest demands strengthening of business responsibility
Basis for market forces policy too narrow.
In recent decades, the Dutch government has underestimated the problems of designing markets in such a way that public interests are protected. The large number of parties involved in a market system, and the length of the chains in which activities are organised, have given rise to extremely complex situations in the functioning of markets. Both the government itself and market players have had difficulty in finding their proper role in this process. The government has moreover taken too little account of the uncertainties that are inherent in a market economy. These are among the findings of the Netherlands Scientific Council for Government Policy (WRR) in its report Publieke zaken in de marktsamenleving (Public interests in a market society).
Policy aimed at safeguarding public interests will therefore need to be drafted more broadly than was the case with the policy on market forces. Society has undergone a radical transformation in the past few decades, giving rise to a market society which requires changes to the way in which responsibilities for the public interest are fulfilled. The WRR advises the government to recalibrate the role of the government, to encourage businesses to take real social responsibility and to increase the involvement of society at large. The WRR believes that the government cannot be expected to act alone in identifying, articulating, weighing and protecting public interests.
The policy on the market economy has generated a good deal of discussion in recent years, with many wondering whether it has not gone too far. The financial crisis clearly exposed the dangers of an excessive willingness to trust the self-regulatory capacity of the markets, of irresponsible behaviour by private players and of inadequate supervision.
The WRR believes that the ability to plan the operation of the markets and to safeguard public interests has been systematically overestimated in the past. In today's market society, the first question is no longer what the government should do, but rather what the government can do. The government will in the future need to approach the question of social order from the basis of a realisation that its powers are limited. Matters of public interest therefore demand input from other parties, within the frameworks set by the government. The government also needs to encourage and if necessary force market players and society at large to take explicit responsibility for the public interest.
In Public interests in a market society (Publieke zaken in de marktsamenleving), the WRR focuses attention particularly on the role of the business community. Among other things, the Council highlights the role that trade organisations and public sector business organisations can play. It also discusses the role of sectoral standards and quality marks, the reputation mechanism and corporate social responsibility. Where business activity and the markets operate outside the jurisdiction of the government, combinations of public and private-law mechanisms can under certain conditions offer a means of protecting public interests adequately and legitimately, the WRR believes. The report also argues that the demands set by the Dutch Corporate Governance Code are not broad enough in scope to anchor the social responsibility that should be assumed by businesses.
WRR Council member Professor G.H. de Vries presented the report Publieke zaken in de marktsamenleving (Public interests in a market society) to the government on 12 April 2012.