This book review is reprinted with permission from GreenMoney Journal, where Ted Ketcham is editor.
I wondered as I began reading his book, Creating a World Without Poverty: Social Business and the Future of Capitalism, whether its author, Muhammad Yunus, believes that such a world could really happen? Or is his title figurative, encouraging readers to aspire to the impossible, thereby improving life for some portion of the world's poor, a shoot-for-the-stars-and-you'll-come-out-pretty-well approach?
The answer, for those unfamiliar with Yunus' unrestrained optimism, is yes, he means exactly what the title states. This 2006 Nobel Peace Prize-winning social visionary and banker to the poor enthusiastically posits a system of "social businesses," based on his experiences as a bank founder in one of the world's poorest countries, that can harness the powers of social investors, managers and the poor themselves to create not only a better world, but one in which poverty no longer exists, because virtually everyone will have food, shelter, and fair opportunity for a better life. He dedicates his book "to everyone who wants to create a world where not a single person is poor." Is this too tall an order?
Of course the key to all this, explains Yunus, is "social business." A well-meaning capitalist looks for a shared-benefits approach to distributing wealth, one in which opportunity and profit for the few eventually are supposed to become opportunity and profit for the many, if business is allowed to operate unfettered by government interference. (Indeed, capitalistic vision and productivity have created a world of social, technological and economic success stories, in spite of current economic disappointments and frustrations with local and world markets.)
However, considering the Bernie Madoff scam and the 75+ bank failures so far in 2009, and the criminally skewed distribution of global wealth (see U.N. reference below), this system is badly flawed. Writing in 2007, a year before current market realities exploded onto our financial laps, Yunus stated, "Business-the most financially innovative and efficient sector of all-has no direct mechanism to the goal of eliminating poverty." It may benefit the many or the few, but traditional global business actually relies in many cases on a steady supply of impoverished workers whose lives consist of substandard pay and working conditions in order to keep some other segment of the population supplied with cheap goods. (Fact: A study by the World Institute for Development Economics Research at United Nations University reports that the richest 1% of adults alone owned 40% of global assets in the year 2000, and that the richest 10% of adults accounted for 85% of the world total. The bottom half of the world adult population owned barely 1% of global wealth.)
Says Yunus, "Unfettered markets in their current form are not meant to solve social problems and instead may exacerbate poverty, disease, pollution, corruption, crime and inequality."
So what is a social business (SB) and how is it different from a profit-maximizing business (PMB)? A PMB exists to create profit for its owners. It may incorporate other goals as well, such as environmental and social outcomes, thus creating the "triple bottom line," but the three are never equal, says, Yunus. Profit will always trump the others. A social business, on the other hand, exists not to create profit and dividends, but to meet a social goal and to become self-sustaining.
It seems important to observe here that a social business is neither socialism nor charity. In Yunus' models profit is clearly one key to sustaining and enhancing a social business, and investors expect to be paid back. Furthermore, the social business may compete with PMBs and with other SBs. In fact, they may all benefit from this competition by honing their production and distribution to grow and change the market. Globalization, he says, may very well be supported by the participation of Social Business, but with "proper oversight." Says Yunus, "I believe in free markets as sources of inspiration and freedom for all, not as architects of decadence for a small elite."
It all began with Grameen Bank. GreenMoney readers are familiar with Yunus and the Grameen Bank story, for which he eventually won the Nobel Peace Prize in 2006. As a Vanderbilt University-trained economist attempting to help his fellow Bangladeshis in the 1970s and 80s, Yunus found that traditional banking models did nothing to address his country's considerable poverty. To borrow money, one needed to already HAVE money. The poor, who could least afford it, were charged usurious interest that all but ensured failure for their projects.
Having seen enough, Yunus opened the Grameen Bank (Village Bank) in 1983 to make loans to poor Bangladeshis.
It was a bank unlike any other. Grameen supported its borrowers with advice and training, while addressing such traditionally nonbanking concerns as education and healthy living for borrowers' families, creating relationships that benefited borrowers far in excess of the successful repayment rates of over 95%.
As of July 2007, Grameen Bank has issued US$6.38 billion to 7.4 million borrowers, more than 94% of whom are women. To ensure repayment, the bank uses a system of "solidarity groups." These small informal groups apply together for loans and its members act as co-guarantors of repayment and support one another's efforts at economic self-advancement. "Micro-credit," the granting of small loans to the poor and underprivileged, has spread throughout the planet, and can now be had in most countries including the U.S.
There are 25 additional Grameen companies in Bangladesh today. All Grameen companies have one common goal: the alleviation of poverty. They provide services for the poor from banking, health care, education and energy to telecommunication, ICT services and business solutions, and they each operate independently without contributions from Grameen Bank.
The lives of Grameen borrowers have been changed, one small loan at a time. It is through this transformational model that Yunus came to understand that other businesses, whose social goals are clearly stated and never subordinated to profit, could have profound impacts for the poor people of Bangladesh and beyond.
When Franck Riboud, chairman and CEO of France's Groupe Danone, approached Yunus in 2005 with an offer to participate in some way in his quest to help the world's poor, Yunus bravely challenged him to help create a social business that would achieve social benefit over profit. If Riboud was shocked by the directness of Yunus' challenge, Yunus was even more shocked by Riboud's willingness to accept. The story of this partnership between Grameen and Groupe Danone (which also has a strategic partnership with Stonyfield Farm in the U.S.) occupies a major portion of this book. Their unique business/social justice relationship based on mutual commitment helps the reader understand the process by which social business moves from theory to reality.
Two very busy years later the first factory was opened in Bogra district far from Dhaka, the capital city of Bangladesh. It was built on an area of 7,000 square feet and its daily production capacity was 3,000 kilograms (1 kilogram = about 35 ounces) of yogurt when launched in 2006. The factory in Bogra was designed to favor local workers rather than sophisticated machinery in order to create employment and avoid maintenance problems. When the factory reaches maximum production capacity it will employ approximately 50 people full time. Furthermore, Grameen Danone plans on creating 3,000 micro-farms, and the Grameen Ladies, former Grameen borrowers responsible for yogurt distribution, have increased their income. Thus through the development of local employment which does not compete with existing networks, Grameen Danone fights against rural exodus, which is at the root of many problems in developing countries. Furthermore, Grameen Danone hopes to attract local investment and promote local entrepreneurs who will also have ownership of the project.
A Hopeful Book
There's something compelling about listening to a visionary. In the movie My Dinner with André, the main characters do nothing more than talk for the film's duration. In fact, one character talks most, discussing a series of astonishing experiences and theories. It's not the sort of movie I would ordinarily like, but I've not forgotten it in almost 30 years.
Similarly, Muhammad Yunus' Creating a World Without Poverty invites the reader to "listen" in awe as the author imagines a better world.
Worried about health care? Yunus suggests that a social business with a goal of excellent health care for all might offer a multitiered plan in which patients pay according to ability, with profits used for insuring the poor and for keeping costs down. Freed from the need to impress a board of investors, such an enterprise might, in fact, accomplish more medical good than governments can achieve. And if the health-care social business saved the government major drains on time and money, it might even be tax-exempt.
Concerned over the global divide of information technology? You needn't be, says Yunus. The cell phone, laptop and Internet connectivity may very well enable the poor to leapfrog over some of their competitors, launching Internet entrepreneurial projects that place them on at least an equal footing with wealthier counterparts. A villager in Bangladesh might launch a small business based on his Web site catalog and a Mumbai shipper. A poor girl in Africa might, through Internet connectivity, study through a major university. A farmer in Uganda might consult with an animal expert in Chile. A patient in a small village may, without the expense of travel, consult a doctor in a big city.
Says Yunus, "If these two trends-the IT revolution and the advance of globalization-are guided into productive channels, a social revolution will take place on the heels of the current revolutions in technology and economics. There will be an unprecedented explosion in the personal and economic freedom enjoyed by humans around the globe."
Information technology offers fertile soil for social business. As it unfolds around us, there are daily opportunities for the poor to escape from poverty. Yunus proposes an umbrella organization to encourage the technology to emerge in such a way as to best help the poor. He would call it the Center for International Initiatives for IT Solutions to End Poverty-in brief, IT Solutions to End Poverty (ISEP).
Yunus writes, "the money to create ISEP certainly exists. What is needed is the focus on IT for the poor, the will to establish a worldwide network of people devoted to that focus, and the visionary leadership of a few strong individuals who will drive the process."
Yunus' network of devotees and visionaries assumes a set of shared and optimistic goals, which have nevertheless proven by the Grameen experience to be realistic and practical. In introducing a personal wish list that includes such items as eliminating poverty (i.e., putting it in museums), ending war, and curing disease, he declares: "If we hope to find and stay on the right course, we must agree on the basic features of the world we want to create. And we must think big, as big as we dare to imagine--lest we waste the unprecedented opportunities that the world is offering us. Let us dream the wildest possible dreams and then pursue them."