Capitalism's Makeover Economist

Prabhjot Singh and Manmeet Kaur The Daily Beast May 17, 2010

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Olivier Morin, AFP / Getty Images No one has done more to revolutionize development around the world than Nobel Prize-winner Muhammad Yunus. His new book, Building Social Business, offers a clear blueprint for the kind of company that can help the poor AND make money.

Capitalism needs a makeover and Muhammad Yunus, as a Nobel Prize-winner, leader of the microcredit revolution, and the enormously successful founder of the Grameen family of businesses, has set out on a new quest to make business look—and do—good. He’s keyed into a pattern that we’ve seen repeating in the developing countries where we work: Nonprofit and private-sector organizations seem in danger of never realizing that their simultaneous growth isn’t a coincidence. To guide the growing sense of this disconnect among talented and ambitious young leaders and entrepreneurs, Muhammad Yunus has packaged his latest experiences in Building Social Businesses: The New Kind of Capitalism That Services Humanity’s Most Pressing Needs. Yunus writes with a voice that is part life coach, traffic cop, and preacher, exhorting the world to create an entirely new type of organization that is not a business, not a nonprofit, and also, not a replacement for either of the above. With the success of the Grameen family of companies behind him and the support of consultancies and academic programs to nurture his latest movement, we look forward to seeing how and where the social business idea finds traction and evolves.

“All it takes is $27 to start a multinational corporation”

Yunus, the co-recipient of the 2006 Nobel Peace Prize and the pioneer of the microcredit movement, is now pushing the world to re-imagine the boundaries between the goals of the businesses sector and those of donor-funded nonprofits by suggesting a new movement combining the two: “social business enterprises.” A social business is a “cause-driven” business devoted to helping vulnerable communities in which investors/owners may slowly recoup money invested, but do not earn any dividend. The goal is for the companies to run as efficiently as traditional, profit-oriented companies. However, unlike donor-funded social organizations, they generate sufficient revenue to be financially viable and reinvest surplus earnings into expanding the company’s core work to enhance quality of life, as opposed to shareholder pockets.

Inspired by Yunus’ call to action, a number of multinational corporations, social activists, and entrepreneurs have launched highly visible social businesses. Adidas has ventured to create the “one euro shoe,” the French corporation Veolia has partnered with the Grameen Foundation to figure out a way to deliver safe, clean drinking water to rural villages for one taka per liter, and Intel, BASF, and Danone have also joined the fray. For the rest of us who haven’t yet acquired the Yunus touch for turning competitive multinationals into social ambassadors, working in resource-poor settings still means pushing the traditional boundaries between nonprofits and the private sector to meet our collective goals. But Yunus isn’t about to leave us hanging—here are some points we thought were worth sharing:

Building Social Business: The New Kind of Capitalism that Serves Humanity’s Most Pressing Needs By Muhammad Yunus 256 pages. PublicAffairs. $25.99. Social businesses focus on reshaping the relationship between employees and owners

The social business model has the potential for changing employment relationships by using market forces to transform the way work is done. In the Social Business Type II model, as exemplified by the worker-owned textile company Grameen Otto, a venture can become a profitable venture if the entity is owned by the “poor and disadvantaged.” The model holds great potential for empowering workers to create better opportunities for themselves. In Manmeet Kaur’s work on labor in India’s informal economies, she worked with a membership-based organization called LabourNet that transitioned from a NGO to a private company where workers and employers saw the incentive of interacting in a fairer manner. However, as a business with a social agenda as its core, it struggled to adapt its goals to traditional for-profit company and NGO structures. Yunus suggests that this is exactly the sort of challenge that a social business is built to solve.

Social businesses search for financial models to value investments for social good

Yunus calls for a new class of investors that understand the complicated costs and investments involved in sustaining social businesses. In the future he envisions, cities can set up funds to support social businesses that contribute to the infrastructure and development of citizen needs. Community Lab, a business-driven nonprofit co-founded by Prabhjot Singh and colleagues, is working with developing country governments to build integrated management systems to improve the effectiveness of coordinated social development. In India, Manmeet Kaur worked with LabourNet and its sister social enterprise Maya Organic to guide investors through the importance of investing in training and outreach strategies that did not seem to yield immediate returns. Sometimes the business case unfolds on the tails of common social sense.

View as Single Page 12 Back to Top May 17, 2010 | 2:09am Facebook | Twitter | Digg | Share | Emails | print var OutbrainPermaLink=document.location.href.replace(document.location.search, '').replace(/\/\d+\/$/,'/').replace(document.location.host, 'thedailybeast.com'); var OB_Template = "The Daily Beast"; var OB_demoMode = false; var OBITm = "1255455386150"; var OB_langJS ='http://widgets.outbrain.com/lang_en.js'; if ( typeof(OB_Script)!='undefined' ) OutbrainStart(); else { var OB_Script = true; var str = ''; document.write(str); } Muhammad Yunus, Books, Philanthropy Capitalism, Social Business, Millenium Villages, Community Lab, Maya Organic, Labournet, Grameen, Building Social Business, Publicaffairs, Microcredit, Nobel Prize Winners (–) Show Replies Collapse Replies Sort Up Sort Down sort by date: gardengirl

he is a real-life, visionary genius for our time in history.

Flag It | Permalink | Reply 8:02 am, May 17, 2010 mcmchugh99

He is correct that there should be a larger cooperative and worker-owned sector of the economy, like the Mondragon cooperatives in Spain. As a democratic socialist, I have no problem with that at all.

Flag It | Permalink | Reply 1:38 pm, May 17, 2010 $('#c_total span').html('2'); $('#c_total').show(); Share this comment on Facebook

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