Social Business and Limits to Growth

Last night 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 US$27 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.

Guest contributor Donnie Maclurcan runs an Australian social business, is investigating nanotechnology and its consequences for global inequity and is working on a film about the limits to growth.

3 thoughts on “Social Business and Limits to Growth”

  1. Many interesting points but there’s lots of good news in the microloan sector – I’d like to draw your attention to the embryonic yet already highly successful MicroLoan Foundation Autralia.
    We are proud that our first office opened in Mulanje, southern Malawi in May 2009 and already is fully operational with 2 lending officers servicing over 500 individual loans to women living in the rural areas of the 10th poorest country of the world.
    These women look after more than 2,000 dependants including 250 orphans.
    They have set up a myriad little businesses from baking, to brewing, to chicken sales, to knitting, to selling potatoes, to making fritters to even running a hair salon. The average loan at our Mulanje office is just $80, but the average savings for each client is now up to $15.
    Profits made are used by the women to support their families be it to put more food on the table, send their kids to school, improve their basic medical care, or just stop the leaks in their mud huts when the rainy season starts. We only help those that want to help themselves, and we are proud that we offer a “hand up, not a hand out”
    And, if the poor could eradicate poverty for themselves, then we wouldn’t need to provide so much international aid, and our children might even benefit from the new demand from developing countries in much the way we are benefitting from China’s determination to raise its poor out of poverty.
    Oh… and by the way, 100% of all our loans to date in Mulanje have been repaid, so that money is available to the next borrower.
    Brian Keen
    Chairman & Founder
    MicroLoan Foundation Australia

    1. Brian,

      Thanks for your comment. I think the micro-loan idea can be a very sociall-minded, “free-market” based aid in eliminating poverty. However, I also hold to the belief that the free market alone will not solve poverty. In fact, a free market economy attached to a growth-driven economy will continue to increase poverty and the wealth gap. So, I applaud your work, but I do so with a caveat: it is one of many things we must do to work towards eliminating poverty, inequality, and striving for social justice.


  2. This is a critical point that Donnie makes – if we are not addressing overall limits as well as fairness in distribution, then we are going to short-change those who are already the most vulnerable. Scenario: who will (and in fact already does!) get hurt if the price of staple foods goes through the roof as a result of pressure on resources through diminishing supply (esp when you factor in climate change, which along with peak oil, is in fact our biggest FOOD SECURITY issue) and increasing demand? The case of those working on behalf of the world’s most disadvantaged (Sachs, Bono, Yunus et al) would be strengthen if they would accept/recognise and articulate the biophysical limits of the world. Without bringing limits into the equation, its ultimately false hope. One of my favourite quotes on this is from Herman Daly, intellectual father of ecological economics: ‘When an overloaded ship sinks all aboard drown — even if the overload is justly distributed and efficiently allocated!’

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