BUSINESS WORLD Business as an Alternative to Capitalism and Poverty? Posted by Bakarr Turay on Apr 15, 2009, 01:43

Yes! There are a number of them. Technological progress, fuelled by capitalism, means that our basic human needs for food and shelter could be met with less effort than before, giving us a lot of time for one another. Altruism, working outside of the capitalist system for the benefit of others, is an increasingly feasible alternative, especially for those in materially prosperous nations. This is the kind of system that we proposed in our last article.

This is Social Business System. There can be two possible kinds of social businesses: Companies that generate social benefits by focusing on the provision of socially beneficial goods and services rather than maximizing profits for the owners; businesses owned by the poor or disadvantaged irrespective of whether they produce or deliver socially beneficial goods and services. Obviously, we need to recognize that exceptions to this exist.

For example, one may not consider tobacco or liquor business as social business even if the poor or disadvantaged own them. The social benefit of the latter type is derived from the fact that the dividends and equity growth produced by the business will benefit the poor. The second type of social business may pay dividends to the poor and low-income people who own the company, thereby providing them direct financial benefits.

Accordingly, a social business can also combine both forms of benefits to the poor. It can produce social benefits through the nature of the goods and services it produces and sells and be owned by the poor and the disadvantaged. If the second type of social business is to bring significant social benefits, logically a large number of poor people must have ownership in businesses or there must be a large number of social businesses owned by the poor. On the possible kinds of social businesses, the book raises an important question: Can there be a hybrid of profit-maximizing business (PMB) and social business? This is possible but operating such a business, it is argued, is difficult because of the possible conflicts between the profit-maximization goal and social benefits. CEOs of such businesses will gradually inch toward profit-maximization goal when points of conflicts between the two emerge.

This may be true in the real world. But the general conclusions that “none of the existing modes by which people have tried to adapt businesses to serve social goals has been very effective” and “only social business offers the full solution for which thousands of people have been searching” appear unrealistic. The latter seems to indicate an extreme position that cannot be supported firmly and unambiguously at this stage.

To me, this extreme position is a glaring weakness of the book. While PMB model has its limitations, which this book discusses, empirical evidence from a wide range of countries and types of PMB’s tend to indicate immense potential to address poverty and social problems through models that operates at points where desire for profit can intersect with social objectives. The fact that this potential has not been fully harnessed is insufficient ground to dismiss the potential. As it has been pointed out, it is more realistic to recognize the potential that the poor can be served profitably and in a socially beneficial manner. However, the recognition of this does not restrict the room for the social business concept outlined in this book. A more realistic view could be that social business will play an increasing role in addressing poverty and social issues, but it is unlikely to be the predominant model that would transform our world as envisaged in this book.

Poverty

Most of us, knowingly or unknowingly, build walls around ourselves that prevent us from seeing the wider world. What we see within the walls profoundly shapes our views about society. Moreover, we have values, which guide us in making choices everyday. These values also shape our views, judgments, and actions. The values determine the lenses we use to look at issues.

This article is not just about elimination of poverty; it is also about the need to dismantle walls around us and the need to change values such that we see multitude of ways to eliminate poverty and address social problems that are rampant in the world. Like most of us, one way or the other we have worked within thick walls around us for some time before getting deeply involved in poverty alleviation and micro-credit in the country. We all have to step out of the classroom where we teach elegant theories of economics because we feel the emptiness of those theories in the face of crushing hunger and poverty so visible in the country.