Wednesday, May 21, 2008

Learning from the center - Muhammad Yunus' social business concept

An economist's practical ideas to help people out of poverty.

Yunus is using the same mild-mannered approach in his campaign to transform capitalism. On the one hand, as an economist and, now, a banker, Yunus embraces the discipline of the market. On the other hand, he believes that profit-maximizing companies turn complex human beings into one-dimensional creatures, devoted only to making as much money as possible. Pure-profit maximization is bad for people, for the environment and, ultimately, he argues, for capitalism, since it places unsustainable demands on the system.

But if unfettered capitalism has its shortcomings, so does out-and-out charity. Yunus sees charity as a bad bargain for both those who give it and those who get it. Rather than providing a path to self-improvement, charity relieves recipients of the responsibility for their own betterment. And those who give charity find themselves writing a check every year for the same problem, without any expectation that it will ever be solved.

Finally, Yunus takes a hard look at corporate social responsibility and finds little to love there, either. In fact, it is the worst of both worlds. It gives companies permission to operate as pure-profit maximization enterprises, then allows them to feel a little better about themselves by writing checks for charity. Nothing fundamental happens to improve the lives of billions of people who are doomed to living in poverty.

Which is not to say that there isn't a solution — a brilliant solution as proposed and already tested by Yunus. The answer to the profit maximization vs. charity dilemma is to create a new hybrid option: the social business. A social business must operate in the marketplace and earn the support of real customers who pay real money to buy a real product. At the same time, a social business has a social cause, not just a financial goal.

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