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SOCIAL BUSINESS: ANTIDOTE TO THE GLOBAL CORPORATION PDF Print E-mail
Written by Jim Jordal   
Thursday, 04 December 2008

SOCIAL BUSINESS: ANTIDOTE TO THE GLOBAL CORPORATE COLOSSUS

By Jim Jordal

Creating a World Without Poverty: Social Business and the Future of Capitalism, by Muhammad Yunus, New York: Public Affairs Books, 2007.

In this paradigm-shattering book, Muhammad Yunus, Nobel prize-winning Pakistani economist, social visionary, and founder of the world-famed micro-credit movement applies the poverty-breaking philosophy and experiences of his renown Grameen Bank to the global corporate world in general.

Muhammad Yunus is a Western-trained professional economist who, upon returned to his native Pakistan after teaching in the West for several years, was struck by the then-apparent hopelessness of the 80 percent of Pakistanis living in abject poverty. He soon realized that the poverty he observed had nothing to do with any lack of skills or abilities of the people, but was due mainly to their inability to retain any significant amount of financial return from their labor. They worked for others who controlled the available capital, reserving for themselves most of the gains from production. What little capital was available to the poor came mostly from moneylenders charging exorbitant interest fees. Under this situation the poor were forced into an existence of permanent wage and debt bondage.

Yunus realized that the people--especially poor women--had great survival and custodial skills and needed only small amounts of capital to allow them to begin home businesses such as weaving, animal husbandry, and making and selling artifacts. He made the first loans using his own funds, but soon the demand for loans multiplied beyond his personal resources. Thus was born the micro-credit concept of pooling group funds in order to make small loans to worthy beginning entrepreneurs. Now the micro-credit movement has spread to most of the world’s poorest nations, and even into parts of the so-called developed world.

The social business concept follows logically from the micro-credit idea since money received through loans is generally used to start small family or community oriented businesses. Once they grow beyond the family stage they become candidates for the larger social business concept.

Social businesses are designed from the beginning to meet social needs. They hope to be profitable, but profit is not their only goal. Rather, profits form the basis for further research, development, and expansion. Founders may contribute money or buy shares if the new business is organized that way, and will receive back their initial investment, but no dividends. Generally social businesses operate on the local level, preferring to remain close to their workers and customers. Thus they minimize transportation costs and the management headaches normally associated with larger concerns. Indigenous women having talent for using money wisely to benefit their families and communities often own them.

Social businesses are aimed, not at destroying capitalism, but at remedying its major flaws. Modern corporations have a fiduciary responsibility to maximize profit for the benefit of their shareholders. Unfortunately, what too often happens, especially in the absence or weakness of government regulation, is that this single-minded requirement to maximize profit takes precedence over all other concerns.

By subordinating the requirement to maximize profits to the higher goal of serving people, social businesses eliminate one chief pitfall of the modern corporation—the need to make profit at all costs. Thus, they become free to pursue on a much wider scale the needs of the community in which they serve.

A second major problem of modern corporations is that in their struggle for efficiency and profits they tend to lose sight of the needs of people. The century-long labor union struggle to gain recognition and a living wage as well as the more current conflict over the exporting of jobs to low-wage countries are symptoms of the problem, as are the sufferings of indigenous people left behind by the new globalization.

Social businesses are able to combine the advantages of free competitive markets with the vast needs for social improvement. Since they work mainly in local markets using local productive resources, they can be small as well as efficient. They are able to profitably fill niches in local economies that are ignored by larger corporations in the belief that there are no profits to be made selling small amounts of goods to local people.

Social businesses offer great promise to finally conquer endemic world poverty by putting both money and organizational ability where the need is. The present system that places often-unneeded loans by the World Bank and International Monetary Fund at the mercy of corrupt dictators and charlatans has mostly failed—poverty is as great as ever. It remains for new concepts like micro-credit and social business to attempt what massive relief institutions have failed to accomplish—end or at least alleviate world poverty.

Last Updated ( Thursday, 04 December 2008 )