Capitalism is Half-Done Structure
In the last 50 years, capitalism has reigned supreme. It has brought unprecedented wealth and prosperity to some countries and to some people. But billions are left out. The situation, in many cases, is getting worse and worse for those who are left out. Even if we can overcome the problem of financial crisis, we are still left with some fundamental questions about the effectiveness of capitalism in tackling many other unresolved problems. In my view the theoretical framework of capitalism that is in practice today is a half-done structure. The theory of capitalism holds that the marketplace is only for those who are interested in making money, for the people who are interested in profit only. This interpretation of human being in the theory treats people as one-dimensional beings.
But people are multi dimensional. They may have their selfish dimensions, but also they have their selfless dimensions. Capitalism, and the marketplace that has grown up around the theory, makes no room for the selfless dimensions of the people. If some of the self sacrificing drives and motivations that exist in people could be brought into the business world to make impact on the problems that face the world, there would be very few problems that we could not solve.The present structure of the economic theory does not allow these dimensions of people to play out in the market place.
I argue that given the opportunity, people will come into the market place to express their selfless urges by running special types of businesses to make a change in the world. In the absence of such opportunity in the market place people express their selflessness through charities. Charities have been with us since time immemorial, and they are noble, and they are needed. But we have seen that business is able, to innovate, to expand, to reach more and more people through the power of the free market. Corporate social responsibility was an important development in the business world but it still does not let business people to express the selfless urges I describe within the framework of the market. The concept that there could be another type of business, crystallized in my mind through my experience with Grameen companies. Over the years, Grameen created a series of companies to address different problems faced by the poor in Bangladesh. Whether it is a company to provide renewable energy or a company to provide healthcare or yet another company to provide information technology and cell-phones to the poor, we were always motivated by the need to address the social need.
We always designed them as profitable companies, but only to ensure its sustainability so that the product or service could reach more and more of the poor - and on an ongoing basis. In all these cases the social need was the only consideration, making personal money was no consideration at all. That is how I realized that businesses could be built that way, from the ground up, around the specific social need, without motive for personal gain.
I am proposing a different structure of the market itself. Along with the profit maximizing business, I propose a second type of business to operate in the same market along with the existing kind of profit maximizing business. I am not opposed to the existing type of business - although I call for many improvements in it like many others do. I propose a second type of business alongside the existing one.
This new type of business I am calling “social business,” because it if for the collective benefit of others. This is a business whose purpose is to address and solve social problems, not to make money for its investors. It is a non-loss non-dividend company. Investor can recoup his or her investment capital but beyond that, there are no profits to be taken out as dividends by the investors. These profits remain with the company and are used to expand its reach, improve the quality of the product or service it provides, and design methods to bring down the cost of the product or service.
The idea of social business got a boost when we launched a joint project with Danone. Grameen has collaborated with Danone to supply nutritious fortified yoghurt to the undernourished children of rural Bangladesh. The goal of this social business is to fill the nutritional gap in the diet of these children. Grameen Bank borrowers buy cows and sell the milk to Danone. Once the yogurts are prepared by Danone, Grameen Bank borrowers sell the yogurt door to door in the villages. The yogurt is sold at an affordable price, charging just enough to make the company self sustaining. Beyond the return of the original investment capital, neither Grameen nor Danone will make any money from this venture. The aim of the Grameen-Danone venture puts micronutrients in the yogurt that the kids are missing. They don't spend money on fancy marketing or on design of packaging. If children eat two cups of this yogurt a week regularly over a period of eight or nine months, they get all the micronutrients needed to be healthy. We have one yogurt plant already operating in Bangladesh, and in time we hope to have 50 such plants throughout the country.
We have created a joint-venture with Veolia of France to deliver safe drinking water in the villages of Bangladesh.This joint venture is building a small water treatment plant to bring clean water to 50,000 villagers, in an area of Bangladesh where the existing water supply is highly arsenic contaminated. It was launched just last month. We are selling the water at a very affordable price to the villagers to make the company sustainable, but no financial gain will come to Grameen or Veolia.
We also have built an eye care hospital on social business principles. A second one will open next month. We have also created a joint venture social business with German chemical giant BASF to produce treated mosquito nets to fight mosquito borne disease and also a nutritional sprinkle to combat nutritional deficiencies in women in children.
There is also great synergy between the rapid development of technologies and social business.Technology is the one most fast developing sectors in the world today. The various methods of communication and networking have made it possible to reach anyone in any part of the world. Being a witness to these wondrous improvements I have voiced again and again that technology is one very powerful tool which can be used to bridge the gap between the rich and the poor, in a manner other devices cannot possibly do so. If we could channel some of this intelligence and creativity into building IT solutions for the poor, we would make giant leaps in our race to end poverty. From e-healthcare to mobile phone banking to online supplying to products and services to the poor we are beginning to visualiase what the possibilities are. Grameen has created a social business with Intel to bring these technologies to benefit the poor.
More and more companies are coming forward to partner with us to set up new social businesses. We feel excited about creating a series of examples of social businesses, which, hopefully, will encourage others to join in.Some people are skeptical when I describe the concept of social business. Who will create these businesses? Who will run these businesses? Why would anyone devote time, energy, and money to projects with no hope of personal gain? I always say that, to begin with, there is no dearth of philanthropists in the world, no dearth of donor countries giving grants. People give away billions of dollars every year. So do donor countries. Imagine if those billions could be used by social businesses to help people. These billions would be recycled again and again, and the social impact could be all that much more powerful. In the same way, money allocated by companies to corporate social responsibility projects could easily go into social businesses. Each company would create its own range of social businesses. We can also create Social Business Funds to pool funds from many sources and invest them in social businesses.
The opportunities for launching social businesses are really limitless.We can also recognize a profit-maximizing company as a social business if it is owned by the poor. This constitutes a second type of social business. Grameen Bank falls under this category of social business. It is owned by its poor borrowers. The borrowers buy Grameen Bank shares with their own money, and these shares cannot be transferred to non-borrowers. A committed professional team does the day-to-day running of the bank. Every year, dividend checks are sent to the borrowers, representing their share of the bank’s profits.Bilateral and multi-lateral donors interested in supporting economic development could easily create social businesses of this type. When a donor wants to gives a loan or a grant to build a bridge in the recipient country, it could create instead a "bridge company" owned by the local poor. A committed management company could be given the responsibility of running the company.
Part of the profits earned by the company would go to the local poor as dividends, while a part would go towards building more bridges. Many infrastructure projects, like roads, highways, airports, seaports, and utility companies could be built in this manner. In additional to local projects, powerful multi-national social businesses can be created to capture a share of the benefits of globalization for poor people and poor countries. Social businesses will either bring ownership to poor people, or keep the profit within poor countries, since taking dividends will not be their objective. Direct foreign investment by foreign social businesses will be exciting news for recipient countries. Building strong economies in poor countries and protecting them from plundering companies will be a major area of interest for social businesses.
To connect investors with social businesses, we will need to create a social stock market where only the shares of social businesses will be traded. An investor will come to this stock-exchange in order to find a social business, which has a mission to his or her liking, just as someone who wants to make money goes to the existing stock-market. To enable a social stock-exchange to perform properly, we will need to create rating agencies, standardization of terminology, definitions, impact measurement tools, reporting formats, and new financial publications, such as The Social Wall Street Journal. Business schools will offer courses and business management degrees to train young managers how to manage social businesses in the most efficient manner, and, most of all, to inspire them to become social business entrepreneurs themselves.Making money in a profit-making business will be the "means". Using this money for social business will be the "end". Social business can work in tandem with profit-making ventures. Once the concept of social business is included in economic theory, thousands of people will come forward to invest in social businesses because of the social dreams they have in their hearts.
Poverty can be overcome
The thought that always energizes me is that the poverty is not created by the poor people. Poverty is an artificial imposition on the people. Poor people are endowed with the same unlimited potential of creativity and energy that any human being in any station of life, any where in the world. It is a question of removing the barriers faced by poor people to unleash their creativity to solve their problems. They can change their lives, only if we give them the same opportunity that we get.
Creatively designed social businesses in all sectors can make this unleashing happen.I always insist that poverty does not belong in civilized society. Poverty belongs only in the museum where our children and grandchildren can go to see what inhumanity people had to suffer, and where they will ask themselves how there ancestors allowed such a condition to persist for so long.We have to decide that poverty no more! We overcame slavery. We overcame apartheid. We have done other things that people once thought impossible. We have put persons on the moon, into space to explore far away worlds. We can overcome poverty, if only we decide that this does not belong to the world that you want to create. We can take advantage of the global financial crisis by working together to make the 21st-century to be the beginning of a world that will be a better place for all to live, and where poverty will be found is the poverty museum. The people of South Africa have an indomitable spirit. With this spirit and with its vast human and other resources, South Africa can be the first country to build a poverty museum.
Madiba, I look forward to coming to South Africa in the not too distant future for the opening of the first poverty museum.
Thank you again for inviting me here.
Happy birthday once again our beloved Madiba.
Thank you!
From a lecture by Pr. Yunus