Creating a World Without Poverty

Muhammad Yunus

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Social Business and the Future of Capitalism

Muhammad Yunus
288 pages (PublicAffairs, 2008)

The title of Muhammad Yunus’ new book, Creating a World Without Poverty, gives a sense of his vision’s sweep, but only hints at his ambition. He wants not only to end global poverty and related problems such as gender discrimination, social exclusion, and lack of access to health care and education, but also to eliminate environmental degradation and extreme inequality. In short, Yunus wants to create a more just society for all.

Yunus presents his ideas for solving the world’s social problems as he outlines how Bangladesh can develop more successfully; updates the history of the Grameen Bank, for which most readers will know him; offers his thoughts on the potential of technology to help end poverty; and details his ideas on international norms and governance.

But his main tool for alleviating the world’s ills is social business, which he defines as financially sustainable but non-dividend- paying enterprises established to solve social and environmental problems. These enterprises are controlled by shareholders (either donors or the poor), and donors get their initial investment back, though any additional profits created by the enterprise are plowed back into the work. To illustrate his idea of a social business, Yunus weaves through the book the fascinating case study of Grameen Danone, a joint venture between Grameen and the French multinational food product company Danone.

Yunus sees many sources from which these new social businesses can originate: existing companies, foundations, the World Bank and other agencies, government development funds, successful entrepreneurs looking for a next activity, wealthy retirees, and recent college graduates. Indeed, all of these sources hold promise.

He also believes that social businesses would encourage more people to give back: Many would find establishing and working in a social business more attractive than working for a charity, given the prestige society accords business entrepreneurs above and beyond their financial success.

Yunus addresses the practical hurdles of creating social businesses by succinctly describing the steps that must be taken if social businesses are to become mainstream institutions. Advocates must develop a set of legal definitions of social business, along with taxation and regulatory rules. Social business standards must then be established and certified. Yunus believes that different types of independent accreditation and ratings agencies will spring up to meet the demands of potential investors and consumers. I would add that government, certifying agencies, and the boards of social business firms themselves will need to take great care to prevent social business managers from using these enterprises for their own benefit.

Yunus goes on to describe mechanisms that would help ensure that the poor would benefit from activities of social businesses. These include special packaging, locations of sales, and social pressure, which are analogous to the screens of some government welfare programs, including work requirements and means tests. These mechanisms overlap with hurdles that facilitate price discrimination in private markets—the coupons, rebates, time restrictions, and minor product imperfections that consumers must endure to get discounts.

One of Yunus’ most interesting proposals is his concept of a social stock market, where socially minded investors would buy and sell shares of social businesses. He thinks the price of the shares will rise when evidence of program cost effectiveness becomes available, and envisions a Social Dow Jones Index, which would reflect the share values of some of the world’s most broadly representative social businesses. (The Rockefeller Foundation recently funded an effort to investigate the feasibility of a social stock market in the United Kingdom.)

I suspect that readers will either love or hate the idea of a social stock market; those who think of social businesses as a charity may be uneasy if they see speculators profiting by buying low and selling high. On a more basic level, it wasn’t clear to me why investors would be willing to pay a higher price for a share of a social business simply because it was alleviating a social problem. Why, for example, would the share price of an antihomelessness social business rise if homelessness was disappearing?

Of course, everyone who reads a book of this ambition will find something to question, even if Yunus makes clear that social business won’t solve every social problem. But questioning or not, readers will finish Yunus’ latest book instilled with a vision not of an unrealistic utopia—a no place, as it translates from Greek—but with a quite plausible “agathotopia,” to borrow a term from his fellow Nobel laureate James Meade: a good place.

Stephen C. Smith is a professor of economics and international affairs at George Washington University. He is the author Of Ending Global Poverty: A Guide to What Works.