OPINION

Turn the economic ship around

Two worlds:“Humankind is living in a time of unparalleled prosperity; yet billions still suffer from poverty, hunger and disease.” A chilly morning in Hyderabad.Mohammed Yousuf  

In 1976, Muhammad Yunus launched Grameen Bank in Bangladesh, which made capital available to the poor, especially women. As he writes in his new book, A World of Three Zeros: The New Economics of Zero Poverty, Zero Unemployment, and Zero Net Carbon Emissions , the impact of microcredit in enabling millions of people to lift themselves out of poverty helped to expose the shortcomings of a traditional banking system. As he travelled across the world, Yunus found that low-income people in the world's richest nations were suffering from the same problems the poor faced in poorer nations: lack of institutional services, health care, inadequate education, substandard housing, and so forth. Yunus, who won the Nobel Peace Prize in 2006, argues that problems of poverty are failures of our economic system. An excerpt:

For too long, we’ve tolerated the persistence of poverty, unemployment, and environmental destruction, as if these are natural calamities completely out of human control, or, at best, unavoidable costs of economic growth. They are not. They are failures of our economic system — and since the economic system was created by human beings, these failures can be corrected if human beings choose to replace that economic system with a new system that more accurately reflects human nature, human needs, and human desires.

Economics of social business

Remember, the central problem with capitalism as it is now practised is that the system recognises only one goal — the selfish pursuit of individual profit. As a result, only businesses designed around this goal are recognised and supported. Yet millions of people around the world are eager to pursue other goals, including the elimination of poverty, unemployment, and environmental degradation. All three can be dramatically reduced if we simply begin designing businesses with these goals in mind. And that is where social business plays a crucial role.

Social business offers advantages that are available neither to profit-maximising companies nor to traditional charities. The freedom from profit pressures and from the demands of profit-seeking investors helps make social businesses viable even in circumstances where current capitalist markets fail — where the rate of return on an investment is near zero, but where the social return is very high. And because a social business is designed to generate revenues and thereby become self-sustaining, it is free from the need to constantly attract new streams of donor funding to stay afloat, which drains the time and energy of so many people in the non-profit arena.

Thus, the economics of social business can be simple and sustainable, as illustrated by successful experiments that have already been launched in both the developing world and the wealthy nations.

We live in a particularly suitable time for these experiments with new forms of business, since electronic technologies for information and communication can play a huge role in amplifying the power of individual entrepreneurs. A social business owner who devises a product or service that helps the poor or benefits society in some other way may be able to attract a wide market by using social networking and other online tools to spread the word. Thanks to the Internet, good ideas can spread more rapidly, and proven business models can grow to scale more quickly and easily than ever. Health care, education, marketing, financial services, and many other economic arenas can be revolutionised through the combined power of social business and technology.

It’s exciting to observe how these new economic concepts have been spreading around the globe through the efforts of entrepreneurs, executives, academics, students, and political leaders. Now it’s time to apply the potential of social business to solving the problems of inequality, unemployment and environmental decay — all symptoms of the broken engine of capitalism.

We owe it to future generations to begin moving towards a world of three zeros: zero poverty, zero unemployment, and zero net carbon emissions. A new economic system in which social business plays an essential role can enable us to achieve this goal.

Crisis of capitalism

Humankind as a whole is living in a time of unparalleled prosperity, fuelled in part by revolutions in knowledge. This prosperity has changed the lives of many. Yet billions of people still suffer from poverty, hunger and disease. And in the last decade, several major crises have combined forces to bring even greater misery and frustration to the world’s bottom 4 billion people.

Few people foresaw these crises. The 21st century began with high hopes and idealistic dreams, encapsulated in the UN initiative known as the Millennium Development Goals (MDGs). Many of us were convinced that the coming decades would bring unprecedented wealth and prosperity, not just for a few but for all people on this planet.

The establishment of the MDGs led to significant progress on several fronts in the battle against poverty. Sadly, however, 2008 will go down in history as the year of a rude awakening about the gross weaknesses in our capitalist system. It was the year of the food price crisis, the oil price crisis, the financial crisis, and the ever-worsening environmental crisis. In combination, these crises caused a profound loss of faith among people who thought they had full understanding of and control over the global system.

Let’s start by considering the food crisis. Early in 2008, the United Nations World Food Programme (WFP) reported dreadful news: more than 73 million people in 78 countries were facing the reality of reduced food rations. We saw headlines reporting news of a sort that many people assumed we would never experience again: skyrocketing prices for staple foodstuffs like grains and vegetables (wheat alone having risen 200% since the year 2000), food shortages in many countries, rising rates of death from malnutrition, and even food riots threatening the stability of countries around the globe.

Since the June 2008 peak in global food prices, prices have continued to fluctuate, reaching another record high in 2011. As of 2016, they had fallen slightly, bringing a bit of short-term relief to millions. But continuing high food prices have created tremendous pressure in the lives of poor people, for whom basic food can consume as much as two-thirds of their income.

We need to consider how the evolution of the world economy and, in particular, of the system whereby food is produced and distributed has led us to today’s dilemma. Perhaps surprisingly, the economic, political, and business practices of the developed world have a profound impact on the availability of food in the poor nations of the world. Thus, solving the global food problem will require a redesign of the international framework, not merely a series of local or even regional reforms.

Extracted with permission from Hachette India