Muhammad Yunus on Capitalism and Social Business (Part II)

Social Business Entrepreneurs Can Play a Big Role in the Market

Suppose we postulate a world with two kinds of people, both one-dimensional, but having different objectives. One type is the existing type, i.e. profit maximizing type. Second type is a new type, who are not interested in profit-maximization. They are totally committed to make a difference to the world. They are social-objective driven. They want to give better chance in life to other people. They want to achieve their objective through creating/supporting sustainable business enterprises. Their businesses may or may not earn profit, but like any other businesses they must not incur losses. They create a new class of business which we may describe as “non-loss” business.

Can we find second type of people in the real world ? Yes, we can. Aren’t we familiar with “do-gooders” ? Do-gooders are the same people who are referred to as “social entrepreneurs” in formal parlance. Social entrepreneurism is an integral part of human history. Most people take pleasure in helping others. All religions encourage this quality in human beings. Governments reward them by giving tax breaks. Special legal facilities are created for them so that they can create legal entities to pursue their objectives.

Some social entrepreneurs (SE) use money to achieve their objectives, some just give away their time, labour, talent, skill or such other contributions which are useful to others. Those who use money may or may not try to recover part or all of the money they put into their work by charging fee or price.

We may classify the SEs, who use money, into four types :

i) No cost recovery
ii) Some cost recovery
iii) Full cost recovery
iv) More than full cost-recovery

Once a SE operate at 100% or beyond the cost recovery point he has entered the business world with limitless possibilities. This is a moment worth celebrating. He has overcome the gravitational force of financial dependence and now is ready for space flight ! This is the critical moment of significant institutional transformation. He has moved from the world of philanthropy to the world of business. To distinguish him from the first two types of SEs listed above, we’ll call him “social business entrepreneur” (SBE).

With the introduction of SBEs, the market place becomes more interesting and competitive. Interesting because two different kinds of objectives are now at play creating two different sets of frameworks for price determination. Competitive because there are more players now than before. These new players can be equally aggressive and enterprising in achieving their goals as the other entrepreneurs.

SBEs can become very powerful players in the national and international economy. Today if we add up the assets of all the SBEs of the world, it would not add up to even an ultra-thin slice of the global economy. It is not because they basically lack growth potential, but because conceptually we neither recognised their existence, nor made any room for them in the market. They are considered freaks, and kept outside the mainstream economy. We do not pay any attention to them, because our eyes are blinded by the theories taught in our schools.

If SBEs exist in the real world, it makes no sense why we should not make room for them in our conceptual framework. Once we recognise them supportive institutions, policies, regulations, norms, and rules will come into being to help them become mainstream.

Market is always considered to be an utterly incapable institution to address social problems. To the contrary, market is recognised as an institution significantly contributing to creating social problems (environmental hazards, inequality, health, unemployment, ghettoes, crimes, etc.). Since market has no capacity to solve social problem, this responsibility is handed over to the State. This arrangement was considered as the only solution until command economies were created where State took over everything, abolishing market.

But this did not last long. With command economies gone we are back to the artificial division of work between the market and the State. In this arrangement market is turned into an exclusive playground of the personal gain seekers, overwhelmingly ignoring the common interest of communities and the world as a whole.

With the economy expanding at an unforeseen speed, personal wealth reaching unimaginable heights, technological innovations making this speed faster and faster, globalisation threatening to wipe out the weak economies and the poor people from the economic map, it is time to consider the case of SBEs more seriously than we did ever before. Not only is it not necessary to leave the market solely to the personal-gain seekers, it is extremely harmful to mankind as a whole to do that. It is time to move away from the narrow interpretation of capitalism and broaden the concept of market by giving full recognition to SBEs. Once this is done SBEs can flood the market and make the market work for social goals as efficiently as it does for personal goals.

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