Creating a World Without Poverty: Social Business and the Future of Capitalism

Muhammad Yunus stretches the boundaries of capitalism in his new book Creating a World Without Poverty, and along the way challenges foundations, corporate giving programs, and nonprofits to stretch as well.

His goal in doing so is to eliminate poverty — by 2030. And he's certain it can be done because of a confluence of social and economic factors — foremost among them the desire of people to have "meaning in their lives — the kind of meaning that comes only from knowing that you are doing your part to make our world a better place."

Humans are multidimensional beings, with material, social, emotional, spiritual and political needs, writes Yunus. Capitalism, in contrast, is all about maximizing profit and only satisfies our need for material well-being. Capitalism's step-child, the not-for-profit charity, is well-intentioned but is forever dependent on philanthropic whim and market performance and thus is limited in its ability to mitigate poverty. As extreme poverty increases around the globe, Yunus says, leaders will recognize that financial markets are vulnerable to poverty-related phenomena and that "poverty is perhaps the most serious threat to world peace."

Yunus offers a solution to this predicament: "social businesses," which he calls "the missing piece of the capitalist system." A social business begins with a goal such as better nutrition, affordable housing, access to education, or any other activity that contributes to poverty elimination. The social business secures start-up capital and attracts investors, but unlike a traditional business — as well as business-philanthropy ventures — does not pay dividends to its investors; instead, all profits are reinvested. The business is evaluated on the basis of its efficiency and effectiveness — the latter being the number of families lifted out of poverty. And it competes with other social businesses as well as traditional businesses to deliver a quality product and sustain itself.

In the book, Yunus discusses two kinds of social business. The first, owned by the investors, has a social goal. The second, owned by its customers, doesn't need to have such a goal — it could be any profitable business, because the "social" goal is the economic betterment of the poor.

In both, poor people are consulted in the design of the business and through it either secure a job or obtain credit, depending on the goals of the business. The innate entrepreneurial capacity of people is simultaneously respected and exploited; they're regarded as assets rather than liabilities. In Yunus' model, there is no need for elaborate training programs, which he identifies as the (misdirected) hallmark of multilateral approaches to poverty. Instead, people are encouraged to make the most of their existing skills through a long-term commitment to the business.

Yunus would be revered as a visionary even if he hadn't already proved his ideas could work: Grameen Bank, which he founded in 1983 (and for which he won the Nobel Peace Prize in 2006), revolutionized the concept of credit and reduced poverty in Bangladesh by making $6 billion in loans to poor people (97 percent of that amount to women). The majority of Grameen borrowers move out of poverty within five years, as measured by a standard that few if any other programs can match: in addition to earning more than $2 per day, the borrower's family typically eats three meals a day, her house is rainproof and has a sanitary toilet and clean water, her children are in school, and the family receives regular medical care. The Grameen family — which Yunus likens to a corporate conglomerate — now includes twenty-five organizations, all described in the book: some for-profit, some nonprofit, all community based and pursuing social goals.

It should come as no surprise that Yunus has already established four such businesses: an eye hospital, two microfinance firms, and Grameen Danone, which looms large in the book and is described in detail from idea to operation. Conceived, in the very spirit that Yunus extols, by a business executive driven to "help feed the poor," Grameen Danone represents the fullest realization of the social business model.

A joint venture of Grameen Trust and Groupe Danone, the French multinational, Grameen Danone was launched in January 2007 and produces fortified yogurt for malnourished Bangladeshi children. The yogurt is produced in a local plant that employs poor local people; dairy farmers who are Grameen clients provide the milk; and Grameen clients sell the eighty-gram cups on foot in neighboring communities; the five-cent purchase price is affordable to poor families and makes a profit for the vendors and the business.

Oddly, the Grameen Web site offers no updates on what has happened with the business since its launch (which is where the book ends), so the account remains somewhat speculative. It would be good, for example, to know its actual production and sales volumes, the impact it has had on child nutrition in Bangladesh, and Yunus' own assessment of the business after a year's operation.

And what of the social business model itself? How is it different from traditional philanthropy? And what is the role in the model for traditional nonprofits and NGOs?

It's true that the "socially responsible business" arena — everything from corporate foundations to self-styled social entrepreneurs — is energized right now. Business leaders have redefined social responsibility to include report cards on corporate behavior, especially regarding workplace conditions and environmental impact. Calls for a "triple bottom line" (i.e., profits, people, planet) and more "for benefit" companies are hotly debated. For Yunus, however, these models are all irrelevant to the challenge of eliminating poverty because in the end the actual bottom line — profit — always trumps social aims.

He similarly dismisses most charities as being ineffective, lacking rigorous performance standards, and drifting (more often than not) in a non-competitive environment. But by ignoring the complexity of the nonprofit sector, he misses its potential as an ally and advocate for social change. And, in this reviewer's opinion, he badly underestimates nonprofits' opportunistic side: focus them on poverty elimination and let's see what they come up with.

But these are all issues to be worked out in the refinement of his model. Yunus' central theme, in contrast, needs no refinement: "No one who cares about humanity is satisfied with a world in which a few hundred million people enjoy access to all the resources of the planet, while billions more struggle just to survive."

In Creating a World Without Poverty, Yunus defines the problem, offers a solution, and challenges the rest of us to make it work or come up with something better. But first, he says, we must imagine a world without poverty.