Turn the economic ship around: 

Turn the economic ship around: 

Brief Overview of the article

• The article talks about the problems faced by humanity in the form of poverty, unemployment and inequality and the failure of the current economic system to find a solution to them.
• The article puts forward the idea of a new economic system known as ‘social business’ to achieve a more just and equitable society. The idea is invented by Muhammad Yunus of Bangladesh, who won a Nobel Peace Prize in 2006.

The problems

• Low-income people in the world’s richest nations suffer from the same problems the poor faced in poorer nations:
• lack of institutional services
• health care
• inadequate education
• substandard housing, and so forth.

Failure of the current economic system to tackle these problems; Crisis of Capitalism

• The present period of unparalleled prosperity has failed to solve the crisis of billions who suffer from poverty, hunger and disease.
• The establishment of the MDGs led to significant progress on several fronts in the battle against poverty, however it fell short of achieving the desired goals.
• The year 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.
• The 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.
• The central problem with capitalism as it is now practised is that the system recognises only one goal — the selfish pursuit of individual profit.

What is social business?

• Social business was defined by Nobel Peace Prize Laureate Professor Muhammad Yunus.
• Social business is a cause-driven business.
• In a social business, the investors/owners can gradually recoup the money invested, but cannot take any dividend beyond that point.
• Purpose of the investment is purely to achieve one or more social objectives through the operation of the company, no personal gain is desired by the investors.
• The impact of the business on people or environment, rather the amount of profit made in a given period measures the success of social business.

Economics of Social business

• Millions of people around the world are eager to pursue social 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.
• 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.
• Thus, the economics of social business can be simple and sustainable.
• It’s time to apply the potential of social business to solving the problems of inequality, unemployment and environmental decay.

Conclusion

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.