Monday
January 2
2012

Jonathan Kalan

Best Ideas of 2011: The Reshaping of Capitalism

One hundred years ago, Nobel Prize winning, free market capitalism economist Milton Friedman was born into this world. Private enterprises, Friedman claimed, must be the foundation of economic prosperity.

Since then, the capitalist system Friedman so avidly endorsed and its profit-maximizing private enterprises have undoubtedly created enormous prosperity and wealth, improving living standards around the world. They have been the financial steam engine powering sweeping advancements and achievements in technology and medicine, transforming the way we live, work, imagine, and interact. Yet at the same time, when spliced opened and examined, capitalism has certainly had its pitfalls. These same capital-driven advancements have also served to accelerate the proverbial “global race to the bottom” – an endless and occasionally dangerous global search to cut costs and boost margins. Capitalism as we know it has vastly increased income inequalities, created a stark clash of classes, exploited labor, environments and resources, and permanently destroyed natural ecosystems.

Which brings me to the heart of this piece. Capitalism is slowly undergoing a massive transformation – and the Best Idea of 2011 was the Reshaping of Capitalism – a call launched by Occupy Wall Street, and answered by the Social Enterprise Movement.

As much as I can and often do criticize the Occupy movement for its lack of focus, direction, and tangible outcomes, and as much as I find some parts of it silly living in Kenya where the inequality, corruption, and greed (not from companies so much, but governments) is far beyond the scope of what you’ll find in America, there is something about it that makes me extremely hopeful.

Although I haven’t seen this anywhere in the media, and my meager economic background is rooted in just two undergraduate courses, I have a small hunch that I feel it worth exploring. Social enterprises are one answer to Occupy’s call. Hear me out on this one…

The root of the Occupy movement is a challenge against corporate greed. It is also, in my opinion, a fight against the idea of companies focusing solely on maximizing economic profits, while ignoring their social and environmental impacts. Sure, the movement isn’t targeted at all companies, and the fact that it was Occupy ’Wall Street’ and not say ’Bleeker Street’ is certainly a signal that some industries demonstrate practices may be perceived as “unequal” at best, and “unethical” at worst. Yet the movements rapid, if only brief, spread across the global represents something more powerful. It is a fight to change how the current private-enterprise model works, and whom it benefits. So is the social enterprise movement.

The social enterprise revolution, which has been slowly brewing for the past three decades, has been producing a new breed of capitalists, and a generation of young social entrepreneurs that are pioneering the reshaping of capitalism in developing and developed economies across the globe. They are using private-sector models and incentives to tackle some of the world’s greatest challenges in health, water, sanitation, energy and more. They have broadened their businesses models, using a more progressive definition of “profits,” which include social and environmental.

The success of the sector has been varied – the social enterprise space, in my humble opinion, certainly receives much more hype than criticism these days – but for the sake if this argument it doesn’t make a difference if every single social business succeeds. Not every startup succeeds. But the fact that so many are toying with these new models, and that there are many that are succeeding, shows a great deal of promise.

By carefully balancing social and economic profits, social enterprises and their unorthodox capitalistic founders, young and old, are simultaneously building economies and social impacts, while turning the narrative of “pity” toward the poor into vast economic, social and innovative potential.

Paul Hudnut, in his blog What’s BoPreneur?, recently posted something that is certainly worth sharing here:

I impressed by this open letter to Occupy Wall Street from the founder of Carrotmob, which asks:

“Would you rather punish businesses and get the same old results, or show love to businesses and gain unprecedented power and influence over how our economy works? Are you comfortable with this model?”

He is right – as is the founder of Carrotmob. Occupy Wall Street has done an incredible job of turning public attention to the faults of a global system that in its current form has become seemingly unsustainable for a prosperous society. Yet, now it is time to act. It is time to join business, not fight it, and leverage the powers of capitalism as social enterprises have, to create broader economic opportunities and social equality.

While, as Friedman predicted, private enterprises have been the foundation of economic prosperity for the past hundred years, by tweaking the capitalist model slightly, my hope is that social enterprises might actually turn private enterprise into the foundation of social prosperity for the next hundred.

Please like NextBillion on Facebook, follow us on Twitter and/or join our LinkedIn group.

Categories
Entrepreneurship, Impact Assessment
Tags
profits, social development, social enterprise