Insights into Editorial: Turn the Economic Ship Around

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Insights into Editorial: Turn the Economic Ship Around


 

Context:

Nobel Laureate Muhammad Yunus launched Grameen Bank in Bangladesh, which made capital available to the poor, especially women. 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.

The 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. It is argued that problems of poverty are failures of our economic system.

The persistence of poverty, unemployment, and environmental destruction 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

Critics argue that capitalism is associated with the unfair distribution of wealth and power and is mainly profit motive. 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 businesses are designed with these goals in mind. And that is where social business plays a crucial role.

What is the concept of Social Business?

According to Professor Muhammad Yunus, Social Business can be defined as A non-dividend company that is created to address and solve a social problem. It is a non-loss, Non-dividend Company, that means

  • It is financially self-sustainable and hence it is free from the need to constantly attract new streams of donor funding to stay afloat.
  • Profits realized by the business are reinvested in the business itself (or used to start other social businesses), with the aim of increasing social impact.
  • Unlike a profit-maximizing business, the prime aim of a social business is not to maximize profits. Even social businesses are allowed to make profit with the condition that profit stays with the company; the owners will not take profit beyond the amount equivalent to investment.
  • On the other hand, unlike a non-profit, a social business is not dependent on donations or on private or public grants to survive and to operate, because it is self-sustainable.
  • Unlike a non-profit, where funds are spent only once on the field, funds in a social business are invested to increase and improve the business’ operations on the field on an indefinite basis.

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 the rate of return on an investment is near zero, but where the social return is very high.

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.

The combined power of Social business and technology

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.

Social Business To Change the World By changing individuals, communities, villages, cities and countries

Social business introduces a totally revolutionary dimension to the free market economy. The satisfaction gained in achieving the stated social goals are the only motive behind the investment, and the business will be evaluated according to that standard.

Essentially it is a non-loss, non-dividend business aimed at social objectives education, health, environment, whatever is needed to address the problems faced by society. The profits here remain with the business and help it to grow further

Social business is about making complete sacrifice of financial reward from business. It is about total delinking from the old framework of business. It is not about accommodation of new objectives within the existing framework.

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 — which are referred by critics as 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 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 like Economic recession 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. The year 2008 was 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.

For instance, 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. 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.

Need for redesign of international framework

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.