Other economic sectors—the volunteer, charitable, and nongovernmental sectors, for instance—devote a great deal of time and energy to dealing with poverty and its consequences. But business—the most financially innovative and efficient sector of all—has no direct mechanism to apply its practices to the goal of eliminating poverty.
The emergence of modern capitalism three hundred years ago made possible material progress of a kind never before seen. Today, however—almost a generation after the Soviet Union fell—a sense of disillusionment is setting in.
Global income distribution tells the story: Ninety-four percent of world income goes to 40 percent of the people, while the other 60 percent must live on only 6 percent of world income. Half of the world lives on two dollars a day or less, while almost a billion people live on less than one dollar a day.
What is wrong? In a world where the ideology of free enterprise has no real challenger, why have free markets failed so many people?
The reason is simple. Unfettered markets in their current form are not meant to solve social problems and instead may actually exacerbate poverty, disease, pollution, corruption, crime, and inequality. *
Above all, we see it in entire sectors of the economy that ignore the poor, writing off half the world’s population. Instead, businesses in these sectors focus on selling luxury items to people who don’t need them, because that is where the biggest profits are.
The developed world, governments usually perform their regulatory tasks reasonably well, although starting in the 1980s, conservative politicians have taken every opportunity to undermine government regulations. *
The fact that groups of people demand that government serve their interests and put pressure on their representatives to uphold those interests is an essential feature of democracy.
Government must do its part to help alleviate our worst problems, but government alone cannot solve them.
By their nature, corporations are not equipped to deal with social problems. It’s not because business executives are selfish, greedy, or bad. The problem lies with the very nature of business. Even more profoundly, it lies with the concept of business that is at the center of capitalism. *
Mainstream free-market theory postulates that you are contributing to the society and the world in the best possible manner if you just concentrate on getting the most for yourself.
They have trained their minds to believe that well-functioning markets simply cannot produce unpleasant results.
Over the past three centuries, since modern capitalism began its ascent to world dominance, many people around the world have recognized the shortcomings of the current, incomplete form of capitalism. *
Imagine if the global electronic communications system of the banking world suddenly collapsed and every financial institution in the world suddenly stopped functioning. Banks everywhere would shut their doors. ATM screens would go blank. Credit and debit cards would no longer work. And billions of families would be unable even to put groceries on the table. Well, this is exactly the situation that half of the world’s population lives with every day—a non-stop horror story.
Economic theory sketches a radically oversimplified image of human nature, assuming that all people are motivated purely by the desire to maximize profit. * And this is only one of the many blind spots of conventional economic theory.
Social business is the missing piece of the capitalist system. Introduction of it into the system may save the system by empowering it to address the overwhelming global concerns that now remain outside of mainstream business thinking.
I believe that social business has the potential to lift the struggle to eliminate poverty to a new level.
How can the idea of social business be effective in the struggle against poverty, in overcoming the digital divide, in solving the crisis of climate change? These questions form an important part of the context in which the idea of social business should be considered.
Because poverty denies people any semblance of control over their destiny, it is the ultimate denial of human rights.
Yet when poverty violates the human rights of half the world’s population, most of us turn our heads away and get on with our lives.
The truth is that there are many things that can be done, provided we are willing to entertain fresh thinking about poverty and its remedies.
People want meaning in their lives—the kind of meaning that comes only from knowing that you are doing your part to make our world a better place. Social business provides this meaning. That’s why people respond.
I am sure many people would like to create social-purpose companies if such entities were recognized by the economic system. It is a major failure of the current economic system that it cannot accommodate this basic human urge.
Who has given the ultimate verdict that people are motivated only by money—that the desire to do great things for the world can’t be just as powerful a driving force in human behavior?
I’m convinced that most people, particularly young people, will become enormously excited about social business and its potential to transform the world.
I’m convinced that most people, particularly young people, will become enormously excited about social business and its potential to transform other planes besides the economic. Perhaps the most important of these is the political realm.
Investing huge sums of money to buy government offices, manipulating the media to create false images of candidates, and dirty tricks designed to smear opponents and even steal elections have become all too common.
All too often, “people power” seems to have disappeared from politics, replaced by money power, muscle power, and even firepower.
As a result of the problems of democracy, people around the world are losing faith in the political process. Young people especially have been turning apolitical, rejecting a system they regard as hopelessly compromised.
In this climate, politicians feel driven to consolidate their power by stoking hatred between citizens, ethnic groups, religions, and nations. *
When the citizens are forced to confront their own governments in an antagonistic way or must struggle to surmount needless barriers built by the state just to live productive lives, then neither freedom nor free enterprise can flourish.
This is why governments that seek to rule the people rather than serve them are so eager to maintain their control over information. *
IT eliminates middlemen. As a result, both economic and political power brokers are equally threatened by IT.
In recent years, as a scientific consensus has developed about the growing threat of global warming, people around the world have begun to take this problem seriously. However, in many cases, although the concerns are genuine, people are not worried about the planet as a whole.
To understand what must be done to solve this crisis before it devastates the world, we must understand its roots in economics, social and political circumstances, and human nature.
Thus, in the form of capitalism under which most of the world is currently organized, there is an unhealthy connection between the environment and economic growth. The bigger the world economy, the bigger the threat to planet Earth—and, in the long run, to the survival of our species. *
In general, the higher the level of income in a country, the higher the contribution to the world’s environmental risks. Probably the most obvious result of this hyper-industrialization is global warming.
No one who cares about humanity is satisfied with a world in which a few hundred million people enjoy access to all the resources of the planet, while billions more struggle just to survive. Yet, of course, that is exactly the kind of world in which we live today.
Of course, climate change is not the only environmental problem caused by uncontrolled growth. The direct effects of pollution can be equally deadly.
We live in a world where economic inequality is causing enormous human suffering for the billions of have-nots. Yet the apparent solution to the inequality problem—rapid economic growth in the developing world—appears to bring with it catastrophic dangers of its own. *
What are the root causes of this painful dilemma in which we seem to be trapped? *
Here, in a nutshell, is the philosophy of capitalism that virtually every economist, corporate executive, policy expert, and business writer takes for granted:
• A better way of life for the people of the world—including a reduction in the suffering caused by inequality—can be produced only through robust economic growth.
• Economic growth can be fueled only by capital investments through the competitive free markets.
• Investment money can be attracted only by companies that are managed so as to maximize their return on capital. • Return on capital can be maximized only by companies that make profit maximization their only objective.
Obviously there is something wrong with the “irrefutable” logic of uncontrolled growth.
This system, under which plundering nations and companies are allowed to grab resources and use them to maximize their immediate profit, would probably continue unchecked were it not for the fact that life on earth is approaching a crisis point.
When we put profit first, we forget about the environment, we forget about public health, we forget about sustainability. The only question we consider legitimate is: How can we buy and sell more goods, at a higher rate of profit, than last year?
This makes the necessity of reforming the capitalist system and making room for the new kind of enterprise I call social business even more urgent.
Poverty exists because we’ve built our philosophical framework on assumptions that underestimate human capacities.
And we’ve developed institutions that are half-complete at best—like our banking and economic systems, which ignore half the world. Poverty exists because of these intellectual failures rather * than because of any lack of capability on the part of people.
It is possible to eliminate poverty from our world because it is not natural to human beings—it is artificially imposed on them. *