... About Capitalism

I have a new favorite book. It is "Creating a World Without Poverty", by Mohammed Yunus. Yunus describes his vision of a new kind of capitalism, "social business," working alongside traditional businesses (and the ways he and others have already put social business principles into practice.)

The "social business" model of nonprofit/non-loss business is a model whereby organizations take in enough money to cover operating expenses and are therefore self-perpetuating. One of the difficulties with "charity" organizations is that in hard economic times, the funding from charitable contributions tends to dry up (and this is just when it's needed most). At the same time, Social Businesses do not depend on donations and DO depend financially on the people they exist to serve. Because of their financial dependence on those they serve, these businesses are forced respond to the needs of those they serve; because they do not allow investors to take the profits they earn, these businesses have no incentive to sacrifice their social goals to create profit. A critical feature of "social businesses" is that they sell at least one type of good or service to their clients. In 2006 Mohammed Yunus and the Grameen Bank (a social business he founded) won the Nobel Peace Prize for working to combat poverty in Bangladesh. The Grameen Bank ("grameen" means "village" in Bengali) is one of a number of social businesses that Yunus helped create to combat the extreme poverty in rural Bangladesh - poor people in Bangladeshi villages were given the opportunity to start businesses, mostly serving other nearby poor people, on small loans from the Grameen Bank at very low interest (as opposed to loans by private moneylenders who tended to charge high interest and thereby keep poor women in a state of near-slavery). Since the Grameen Bank opened, there have been a number of other highly successful social businesses that have opened with such social goals as improving nutrition and improving access to electricity in the very poor areas of Bangladesh. While social businesses do not give profits to their investors, they do depend on investors to get started and then seek to quickly earn enough to repay their investors. So by investing in a social business, a person (or grant-making organization) can choose to reinvest in the social goal of the business or to take their funds back. In that sense, the social business has an interest in continuing to respond to the goals its investors have, but it can survive and even expand without funding from anyone except the poor people it serves.