Some Thoughts on Yunus’s Social Businesses

It is tragic, yet obvious, illustration of how our economic system fails it’s mission to serve the needs of all humanity. Millions of people around the world are suffering because a few speculators blindly grasp at profits. ~Muhammad Yunus, Building Social Business

I have to admit, I was ready to dismiss Yunus’s ideas around social business when I first heard about them, because for me, it appeared to be that he institutionalized a form of lending that has been present in many Black churches in the US and in Caribbean communities for eons. Folks saving and pooling their money together, allowing each member who contributed an opportunity to use to funds. Folks coming together to serve as their OWN bank.

However, I also know better than to dismiss something I haven’t read yet. o.0

Yunus states that there are four key features of a social business.

First,  it is distinct from social enterprises, social entrepreneurs and socially responsible businesses because the aforementioned organizations place earning a profit as a main priority and doing social good as a second or third.

I also know that according to corporate bylaws in the US corporations are legally required to make their shareholders the most money possible.

In social business, a dollar is a dollar, and this applies even for adjustments for inflation. So if you invest $500 in a social business, you get your $500 back, as an investor, #nointerest.

Second, social businesses treat their beneficiaries with more dignity and respect and autonomy than charity. Even a well meaning charities may take away from the initiative from folks who are toiling away to step back and think collectively about how to solve their problems. Sometimes charity is necessary, but there should be more tools in the toolbox.

Third, Yunus contends that “people create culture” AND that “culture creates people”. He goes on to say that “to experience progress, human society needs to move on, evolving and creating its own new culture, step by step.

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While the idea of folks coming together to solve their own problems through working collaboratively and leveraging capital from corporations who want to help there is something fundamentally flawed with Yunus’s thinking around the end of poverty. He states,

Social business has the potential to reverse this disparity because it addresses the poor directly and deliberately. By bring the poor into the economic mainstream, it helps their piece of the pie grow independently.

In some ways it is naive because it fails to take into consideration how the wealth of some nations is tied to the subordination of others. For example, there has been a lot of talk in mainstream media about the problems with Apple computer and global corporations, and the working conditions of Chinese folks who put together our beloved iphones, ipads etc. Apple employs (largely through subcontractors)  nearly a million people in China. Now, for me, it is clear that an economic system premised on innovation that normalizes paying people wages so low that they can’t afford to buy the objects that they put together for a living is problematic and unsustainable at minimum.

Henry Ford once paid his workers, many of whom were Black men and women living wages with the expectations that they would turn around and buy his products. #fordism.

They did.

Apple’s fourth 2011 fourth quarter revenue was $46.33B and their profits were $13.06B or $6.43 cents per undilluted share.

Which leads me to ask, how is this sustainable? What if Apple were employee owned?

So, to round this back out, the idea folks getting together to create social businesses in 2012 and beyond is awesome. However, I think it was important to be honest about how corporations make money, and by being honest about the fact that poverty is profitable for many corporations, 501 c 3’s included.

Thoughts?