Capitalism with a by sdsdfqw21


									   Profit with a purpose

                       Capitalism with a
conscience  Nobel Peace Prize winner
         MUHAMMAD YUNUS, the
          father of microfinance, has a
       new idea. It’s possible, he tells
            Chartered Banker, to solve
       today’s four crises – in finance,
                  food, energy and the
          environment – by building a
           new economic architecture
            that will finally fulfill Adam
                  Smith’s 250-year-old

26 Chartered Banker   The voice of financial professionalism
                                is in serious crisis. Even so, no one is calling for it to be
                                abandoned because everybody is convinced that, with all its
                                faults, capitalism is still the best economic system known to
                                humanity. Still, in light of the current crisis, there is strong
                                support for a major overhaul of the system.
                                    The crisis we are currently facing is a rude awakening. We
                                have lived through a time of unparalleled prosperity, fuelled
                                in part by revolutions in knowledge, science and technology,
                                particularly information technology. This prosperity has
                                changed the lives of many, yet billions of people still suffer
                                from poverty, hunger and disease.
                                    And now, several major crises have combined to bring
                                even greater misery and frustration to the world’s bottom
                                three billion people. Few people foresaw these crises: on
                                top of the food crisis, the oil price crisis, and the
                                environmental crisis, came the biggest crisis of all – the
                                crushing collapse of the US financial system.
                                    Over the past months, world leaders have focused
                                particularly on the emergency on the financial front. This is
                                quite understandable. But it should not be seen as a
                                problem of high finance only. This narrow view is likely to
                                create even more global social and political problems. The
                                human aspect of the financial crisis must be integrated into
                                all policy proposals.
                                    The appropriate thing would be to treat all four crises as
                                one crisis, since all are linked together. For this reason, I have
                                repeatedly urged that this mega-crisis be taken as a mega-
                                opportunity to redesign the existing economic and financial
                                    In my view, the theoretical framework of capitalism widely
                                accepted today is a half-built structure – one that prevents
“Poverty does not belong
                                Adam Smith’s “invisible hand” from operating as he believed
in civilized society. Poverty
                                it should. We have chosen to disregard half of the message
belongs only in a museum
                                he elaborated so brilliantly 250 years ago.
where our children and
                                    His ‘Wealth of Nations’ has drawn all the attention while
grandchildren will go to see
                                his ‘Theory of Moral Sentiments’ has been largely ignored.
what inhumanity people had
                                That book should have provided the foundation for the
to suffer.”
                                other, which missed half of the market – the half catering to

                                                June – July 09   27
  Profit with a purpose

                      “Imagine what we could achieve if talented
                      entrepreneurs and business executives around
                      the world devoted themselves to ending
                      malnutrition, providing shelter for the homeless
                      and eradicating disease.”

                      the social consciousness of the people.                          conscience tells us what is right and wrong: and that
                          The present theory of capitalism                             conscience is something innate, not something given us
                      holds that the marketplace is only for                           by lawmakers or by rational analysis.
                      those who are solely interested in                                    With these ideas in mind, we can see that his ‘Wealth
                      profit. This interpretation treats people                        of Nations’ has probably been misinterpreted. His thesis is
                      as one-dimensional beings. But, as           “The most           generally summarised as an argument that all will be well if
                      Adam Smith saw, people are multi-            important           people are allowed to follow "self-interest". The world has
                      dimensional. While they have their           feature of this     interpreted "self-interest" as equal to profit maximisation.
                      selfish dimension, at the same time,         new                 But, with human beings as they are, driven by conscience
                      they also have their selfless dimension.     architecture will   and sympathy as well as the desire for profit, we see that
                          The markets that have grown up           be to complete      "self-interest" can include both profit maximisation and
                      around the current theory of capitalism      the half-built      social contribution.
                      make no room for the selfless                theoretical              That’s what Adam Smith elaborated in his ‘Theory of
                      dimension of the people. If the altruistic   framework of        Moral Sentiments’. It attached great importance to justice
                      motivation that exists in people could       capitalism by       and other moral virtues, perhaps to clarify the boundaries
                      be brought into the business world,          integrating the     of “self-interest”. The present structure of economic theory
                      there would be very few problems that        social business     does not allow these other dimensions of people to play
                      we could not solve.                          into the            out in the market place.
                          Smith took the view that people are      marketplace.”            In the absence of such an opportunity, people will
                      born with a moral sense. Our                                     express their selflessness through charities. Charitable efforts
                                                                                       have always been with us, and they are noble, and they are
                                                                                       needed. But we have seen that business has a far greater
                                                                                       ability than charity to innovate, to expand, and to reach more
                                                                                       and more people through the power of the free market.
                                                                                       Imagine what we could achieve if talented entrepreneurs
                                                                                       and business executives around the world devoted
                                                                                       themselves to goals such as ending malnutrition, providing
                                                                                       shelter for the homeless, and eradicating disease.
                                                                                            With all this in mind, I am proposing a second type of
                                                                                       business to operate in the same market along with the
                                                                                       existing profit maximising businesses. I call this new type of
                                                                                       business “social business” because it exists for the collective
                                                                                       benefit of others. The purpose of a social business is to
                                                                                       address and solve social problems, not to make money for
                                                                                       its investors. It is a non-loss, non-dividend company. The
                                                                                       investor can recoup his investment capital, but, beyond that,
                                                                                       no profit is to be taken out as dividends by the investors.
                                                                                            These profits remain with the company and are used to

28 Chartered Banker   The voice of financial professionalism

To top