Is Mohammed Yunus the only economist to win the Nobel Peace Prize? I wondered this between unwrapping this book at Christmas and reading it at New Year. And having read it I’m still none the wiser as to how good an economist he is, but have no doubt that what he has achieved has been more significant than most economists, indeed most people.
Unfortunately this book feels incomplete. Perhaps this is inevitable as all of the projects he discusses are clearly work in progress. But it also feels like the theory is in some sense incomplete. He focusses on a single idea of what a social business is – a business which attempts to solve a social problem by commercial means, but without earning a return for its owners. He does allow for a type II variation, where the business is owned by the people that its designed to help and they can get a return. (Sounds awfully like a type of mutual to me!) Other sorts of businesses/charities are rejected for various reasons, some of which are more convincing than others. In reality, of course, many of the other options are viable or appropriate and perhaps could be the sort of social business that he imagines. This is important, as he discusses legal frameworks which currently have no structure which would allow exactly the sort of business he defines. While a change to that would be nice, he might have given more explanation as to how his idea might fit within the existing environment, or what Grameen currently does in Bangladesh.
His aim is for such businesses to be self sustaining without profiteering from those who can least afford to pay extra. However, the role of the initial investor(s) is multi faceted. In none of his examples is an investor purely a supplier of capital, which is his stated aim. Perhaps more difficult is the non-profit aim. His model does allow for return of principal to investors, and clearly social businesses will require a building up of reserves to sustain it through difficult times. The current projects are typically achieving this by effectively having two markets – a social market which is in need of the service which is to some extent cross subsidised by selling the same product commercially to those who can afford it. This seems to me to be a vital part of his model. The issue for most people in need of the products is not that the product doesn’t exist – it’s that they can’t afford it. So cross subsidy is one way of making that happen. It’s a principal that resurfaces in almost all the examples he gives, and recurs elsewhere (see, for example, much of the work of the Acumen Fund.) Indeed it seems to work better than the initial idea of zero profit meaning that the goods can be supplied at a lower cost than profit seeking companies.
A large part of the book is given over to urging the reader to start their own social business. While important, it somehow didn’t come across hugely well. I did wonder if the book might be better as two halves, rather than alternating chapters on examples and exhortations to the reader. Some of his visions are grand, perhaps too much so for an idea that is not yet established, yet it still gives much food for thought. I found myself wondering how these things might work in practice and am curious how the projects in Glasgow may work.
Despite its shortcomings, this may be an important book in some ways. It is clear that the single dimension of profit that existing capitalism is based on is not optimal for society as a whole. He is right that many people want to work for more than just greed. Whether this is the way forward only time will tell, but its good to know that there may be an alternative. It may not be perfect, but neither is the current system. I hope we get the chance to compare the two in the future.