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Wondrous vision of capitalism with a conscience

Wondrous vision of capitalism with a conscience

Peter Hartcher

Muhummad Yunus has already produced one great breakthrough. He transformed the concept of aid by pioneering micro-lending, tiny loans as small as $20 to poor villagers, and has lifted many millions out of poverty as a result. He won the 2006 Nobel Peace Prize in recognition.

Now he is pressing for a second. This time he's looking to transform nothing less than capitalism itself. Not in any destructive way: "I am not asking that we sacrifice part of capitalism," Yunus said during a visit to Australia last week. "I am asking that we add another part."

And that is? Its essence, I think. Yunus wants to give capitalism a soul.

That's not what he calls it. He talks about something he calls the "social business". It's a business in every sense, but with two differences - it's set up to address a social problem, and its investors get back their initial capital but no more. Earnings are reinvested in the business.

It's not a charity. It's not an NGO. Charities and NGOs spend half their time and energy raising funds just to keep running.

The social business starts with all the subscribed capital it should need. And it's not a Trojan horse for government subsidies. The social business must be self-sustaining. It's not just a concept. His Grameen group has launched four and he was in Australia to urge many more. So far, his social businesses have all been joint ventures with major corporations. Grameen joined with the French food multinational Danone to found Grameen-Danone in 2006, selling high-nutrition yoghurt to poor kids in Bangladesh for about 10¢ a serve.

Similarly, Grameen-Adidas sells shoes for $1 as a way of preventing all manner of foot disease in Bangladesh. Grameen-Veolia sells affordable drinking water, and BSF-Grameen sells cheap impregnated mosquito nets to prevent malaria.

"This is just the beginning," says Yunus. "Whatever the problem is, you can create a social business to solve it. You have a choice - if there is a problem, you can grumble about it, or you can complain to the government to do something about it, or you can start a social business and deal with it."

As Yunus wrote in his book Creating a World Without Poverty: "It is tempting to simply dump our world's social problems into the lap of government and say 'here, fix this.' But if this approach were effective, the problems would have been solved long ago."

Need to create jobs? Want to develop more renewable energy? You can design a social business to do something about it, says Yunus.

"I have just been in Japan where everyone is talking about the problem of suicides, 100 a day. Here everyone talks about the problem of the indigenous people's life expectancy. Well, you can create a social business to solve it."

But why would investors put money into a venture that promises to return no more money than they started with?

Because conventional corporations are an outgrowth of only one aspect of the human being, he argues: "The part they appeal to is selfishness. But humans also have a selfless part, and social business is an expression of that part. The two only make sense together.

"I can make my mark in the world, not just money. At the end of my life, has it been worth living? At the moment, you spend your life stacking up money and goodbye. And that's it?"

Yunus, dubbed the "banker to the poor" for his micro-lending breakthrough, believes the social business brings material help to the poor countries but also spiritual purpose to the rich.

At the global level, Yunus challenges the single-purpose corporation-led globalisation. There are entire sections of the global economy "that ignore the poor, writing off half the world's population'', he argues in his book. "Instead, businesses in these sectors focus on selling luxury items to people who don't need them, because that's where the biggest profits are.

"I believe in free markets as sources of inspiration and freedom for all, not as architects of decadence for a small elite."

But while Yunus encourages companies to discover their souls, he doesn't think that the future of the social business depends on corporate goodwill alone: "Anybody can start a social business. You don't need a mega corporation. Some retired people have lots of skill and experience and many of them can create a social business."

Dr Yunus demands to know how parents in the developed countries expect to inspire their children: "In the rich countries, young people wonder what the purpose is. Their parents have made money, the houses are there, the cars are there, all manner of gadgets are there - 'so what should I do with my life?'

"You might be a big CEO … But at the moment you sit down to breakfast with your 17-year-old daughter or your 21-year-old son and you have hardly anything to talk to each other about.

"But the moment you start to talk about starting a social business, the moment you ask what social problem you're going to solve - then, then you are talking about a new world, and you suddenly have something to talk to each other about. Young people are really inspired by this idea."

That's certainly true in Australia, according to Cheryl Kernot, the former Australian Democrats leader who these days teaches social entrepreneurship at four business schools across Australia. "All the courses are full, and it's the students who are driving it," she says.

Australia already has a nascent social business sector. Prominent is Social Ventures Australia, headed by Michael Traill. He cites the standout example of ABC Goodstart, the new company formed to take over part of the failed ABC Learning childcare business. It will have an annual turnover of $600 million from 678 centres, but it's designed not to make money but to provide affordable, quality childcare.

And there are others but, overall, Traill describes the size of the genuine social business sector in Australia as "bugger all'', with just a few tens of millions of dollars in funding. And vast potential.

Dr Yunus says that modern capitalism "has squeezed out the spiritual part of ourselves''. The social business is his mechanism to make room to bring it back.

Peter Hartcher is the international editor.

Wondrous vision of capitalism with a conscience