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Social business and the limits to growth

Social business and the limits to growth

Earlier this year I attended a presentation by Dr Muhammad Yunus, Nobel Laureate for his pioneering work in micro-credit. Titled ‘Abolishing Poverty – The Human Rights Priority’, the central messages in Dr Yunus’ presentation, to an enthusiastic and highly receptive Sydney crowd of more than 500, were simple. He believes access to credit is a human right; that we can end poverty by channelling the market forces of capitalism; and that we can ‘solve’ all the world’s problems if only private enterprise would be more widely accompanied by ‘social business’ – a term he uses to describe commercial activity whereby businesses whose primary goal is to help ‘the poor’, reinvest their entire profits back into their work, rather than into shareholder pockets. Holistically speaking, I am not convinced.

Dr Yunus’ track record is as incredible as his ideals are worthy. His present-day work began in 1974 when he loaned $US27 to a Bangladeshi woman who made bamboo furniture. Viewed as a ‘repayment risk’, traditional banks were not interested in considering such individuals for the provision of small loans. This experience was to prove life-changing for Dr Yunus. Nine years later he established the Grameen Bank that has since disbursed US$6.6 billion in micro-loans averaging US$130 to ‘the poor’. Bypassing the traditional method of a customer needing to demonstrate collateral before a loan can be administered, the Grameen bank uses a customised approach to solidarity lending whereby each drawer must be in a five-person group that merely serves to encourage repayment. The results have been stunning. The bank boasts a repayment rate of 98.35 per cent and 97 per cent of its members are women. As Dr Yunus noted with a smile in his Sydney presentation, the global financial crisis showed who you can really bank on when it comes to repayments.

The Grameen model has now been replicated in over 100 countries, with proposals on the table for its extension to poverty-stricken cities in the ‘developed world’ such as Glasgow, in the U.K.

There is no doubting that Dr Yunus’ approach continues to challenge attitudes of business in both the ‘developed’ and ‘developing’ world. But does it challenge these views enough to ensure our longer-term sustainability as a species? Thinking ahead, perhaps Dr Yunus’ approach sets us up to hit a fundamental ceiling in which inequity-creating businesses continue to thrive, removing hope for ‘poverty alleviation’ and sustainable futures, because their image in the community is largely defined by publicly-embraced subsidiary social businesses.

Unfortunately, Dr Yunus’ presentation reinforced my frustration with what I see as ultimately atomistic arguments made by our ‘poverty champions’ (think Jeffrey Sachs, Bono, Hugh Evans). Thus, when the floor opened up to questions I asked:

In a world with serious biophysical limits, how can any growth-based financial system – including micro-credit – ever be truly sustainable?

Dr Yunus quickly replied that human creativity is an amazing thing and that I should not be so grim.

I sat down. Given the chance, I would have responded by saying that his answer is the kind men have been giving ever since anthropogenic global warming became accepted by mainstream audiences and the news on this front is not getting any better. At its heart, I believe Dr Yunus’ answer falls somewhat into the common habit of using the term ‘creativity’ as a pseudonym for ‘technological innovation’. In this sense, there is mounting evidence that such faith is misplaced; that the idea of de-coupling economic growth from environmental degradation at the speed required to avoid catastrophic effects from climate change is totally unrealistic. In addition to the problem that increased technological efficiency often equates to greater levels of associated consumption, as Professor Tim Jackson from the University of Surrey in the U.K. has recently shown:

In a world of 9 billion people, all aspiring to a level of income commensurate with 2% growth on the average European Union income today, carbon intensities (e.g.) would have to fall, on average, by more than 11% per year to stabilize the climate, 16 times faster than they have fallen since 1990. By 2050, the global carbon intensity would need to be only 6 grams per dollar of output, almost 130 times lower than it is today…

All said and done, I remain critically hopeful. I think Dr Yunus is inspiring and well-intentioned, and I like his concept of social business – similar to what we, in Australia, call not-for-profit social entrepreneurship. In fact, I like his concept so much that I propose we be brave enough to entertain the thought of a world in which every business is a social business. From large multinationals to small cafes, what could we create if the ‘developed world’ unhooked itself from its addiction to quantitative growth and the ‘developing world’ was free from ideological and physical coercion to adopt unsustainable ‘development models’? As Dr Yunus is quick to note, when you take the individual profit motive out of it, anything becomes truly possible.

Donnie Maclurcan runs an Australian social business and is working on a film about the limits to growth.

This article first appeared on Steady State Revolution on 8th March 2010 and in the National Times on 15th March

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Dr. Donnie Maclurcan is co-founder of the Post Growth Institute – an international group exploring and inspiring paths to global prosperity that don’t rely on economic growth. He is also the founder and ideas guy at Project Australia – a community organisation helping people start, scale or sustain Australian not-for-profit initiatives.

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5 thoughts on “Social business and the limits to growth

  1. Alex Jameson

    Interesting discussion, including Tim Jackson, on what decoupling from growth would mean for the economics and politics of democratic countries.

    "Politics becomes far harder in a zero or negative growth economy. In a growing economy, everyone can have a larger slice of pie; in a static economy your gain is someone else’s loss and distributive conflicts are bound to rise. Tim [Jackson} sees growth as necessary for political as well as economic stability under the current system. No wonder that politicians routinely dismiss any talk of limiting growth."
    http://www.oxfamblogs.org/fp2p/?p=2920

  2. janet

    Wow Donnie, thanks.
    I love your perspective! Looking forward to more of your writing and responses.
    Janet

  3. It is interesting to note that Mohammed Yunus' advisor at VAnderbilt University in Nashville, TN, Nicholas Georgescu-Roegen
    (for those in Australia, this is not a place that has a strong green reputation, in contrast to UC Santa Cruz, Oberlin, or Middlebury/University of Vermont, Burlington) http://en.wikipedia.org/wiki/Nicholas_Georgescu-R
    was also the advisor to Herman Daly. (Notice that the wikipedia article leaves out his mentorship of Yunus, which Yunus acknowledges).

    I first learned about Georgescu-Roegen in Jeremy Rifkin's book on climate change–one of the first way back in 1989,
    when he stressed the importance of his work. He was obscure then, and still is now, though less so. Rifkin has just published a
    book on the power of global compassion.

    BTW, the wikipedia article on this is a good brief intro: http://en.wikipedia.org/wiki/Ecological_economics

    *******************
    @wmyeoh I think there is a lag between events and people's ability to process them. After 65 years of affluence of TV-induced spending and consumer appliances, it is hard for people to comprehend that it might be over. There was a large wave of folks saying it was over during the seventies. In the short term, they were wrong. In retrospect, it looks like they just had their timing off. The averted Catastrophic Meltdown of October 2008 was only 21 months ago.

    And when and where have Americans ever had a chance to learn something real or intelligent about socialism? It may be good, may be bad; I don't think my fellow Americans have any idea what it is. They're against it because they've been told to be against it.

    Also, Yunus ideas are often hopelessly watered down and misrepresented. Did you know that in his implementation, each of the five co-loan recipients had to pledge to plant a garden? That simple thing right there helps increase the likelihood of successful loan repayment– esp. when the group becomes a co-learning group as the best gardener shares her knowledge with others.

  4. Great read, Donnie. If you feel sceptical about the sustainability of micro-finance, whereby the giving is at least reciprocated with the repayment of funds, what incentive do you think that businesses have to act as social businesses, whereby the giving is not necessarily reciprocated financially? Also, if a corporation's primary focus is the pursuit of profit, what hope do we have for them to take the profit motive out of the equation?

    I was reading an article the other day which mentioned, in light of the rough time that big business has had lately, 70% of people still prefer a capitalist system over a socialist one, despite the ups and downs (http://www.economist.com/node/16377429). If that is the case, I wonder if we will ever see a system whereby social giving is the norm.

    1. I’m not so sceptical about the sustainability of micro-finance as I am about the sustainability of a world in which financial systems are based on unending growth trajectories.

      Beyond altruism and corporate social responsibility spin, I’d imagine that a global shift towards social businesses would also be a shift towards employee-owned and localised businesses. In such circumstances, investors in social businesses might be expecting direct outcomes, in terms of service provision, for their families, friends and communities.

      If a corporation's current, primary focus is the pursuit of profit, the hopes I see for them to take the profit motive out of the equation include: a changing global consciousness; more gender equity in the world of ‘business’ (and a broadening of the mainstream understanding of the contribution of the ‘informal sector’); the slow but steady connection in the global North between the competitive profit-driven approach and mental illness (and the reciprocal freedom that comes from working in a collaborative, not-for-profit framework); and the ability to tap into alternative forms of ego gratification beyond financial wealth e.g. status/creating local heroes.

      Re: “the rough time that big business has had lately” – I want to question this. Does this mean the capitalist system in which a good deal of the world currently operates is highly non-resilient? If so, where was the foresight to create resilience over the last 30 years of profiteering?

      Re: the preference for capitalism over socialism – there are many different forms of each and a lot of baggage associated with each term (especially depending on your location)…

      I don’t actually envisage a world in which, as you say “social giving is the norm”. Rather, I envisage a pluralistic future grounded in an asset-based approach to community development and ‘localised’ autonomy.

      Donnie

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