Yunus’ Social Business: Designed to redesign the world?

Dr. Kalam Azad
Published : 15 March 2015, 10:46 AM
Updated : 15 March 2015, 10:46 AM

Muhammad Yunus, founder of Grameen Bank, has explained his current advocacy for Social Business in an article entitled "Redesigning economics to redesign the world" published in The Daily Star and the Prothom Alo recently. In the article, he characterises his Grameen Bank's contributions to society as part of the success story of his Social Business that earned him and the Bank, the Nobel Peace Prize in 2006. However, his concept of Social Business is meant to breed some criticism as it reads in the article.

Yunus finds the present capitalist economic system "based on selfishness like an impersonal sucking machine" that does not have any "moral responsibility." Charities address different social problems, but their services are limited as their funds are not endless. Against this backdrop, Yunus has come up with the concept of Social Business that, he thinks, can have "endless" funds to address social issues like unemployment, illiteracy, housing, healthcare, sanitation and many more.

He says that the social business is "personal profit-forsaking business" where "the owner can take back his investment money, but nothing beyond that" and reinvest that money endlessly. After paying the investment money back, businesses can use all the profit money to grow. Also, for smooth running of Social Business, Yunus wants Social Business graduates equipped to become "job-creators" or "job-seekers."

The father of so-called scientific socialism Karl Marx challenged capitalism by placing arguments based on his theories like 'historical materialism,' 'surplus value,' and 'class struggle.' But Yunus has not come up with any scientific evidence to support his arguments. He challenges some core economic theories in his article, which apparently is not based on any research as there are no references used. He observes that the capitalist economic system is based on "selfishness" that runs the "sucking machine" to earn profit as much as possible, but has not investigated how practical the "selfishness" is.

If he randomly asks a number of persons some strategic questions anywhere in the world, he would find "selfishness" the most dominating element of human nature. This element has a control over what Yunus calls human "virtues." This fact constitutes core theories of social sciences including economics, which he unfortunately could not realise. Also he has not explained how the "sucking machine" operates.

He says, the "Theory of economics is based on the belief that (the) human being is basically a personal gain seeking being. Maximising personal profit is the core of economic rationality." Here he surprisingly could not wake up to the fact that core economic theories are general rules of 'what happens' and 'why.' Such rules characterise economics as a science. To the contrary, 'belief,' 'rationality,' et cetera are generally related to advocacy of 'what should happen' and 'why.' Such advocacies are characterised as idealism or dogma, not science.

Thus, Yunus' Social Business could be termed as an idealistic or dogmatic thought as it is based on morality, while capitalist economics remains termed as scientific. A capitalist economy is self-ruled by market forces of demand and supply. But an idealistic system has to be command-operated or regulated, such as the socialist economic system which is run by the government. (Capitalist economies also need regulation, but those are interventions aimed at prevention of market failure.) Since Social Business is idealistic, it has to be regulated, but Yunus has not even hinted at a regulatory framework for his Social Business.

Apparently, there is no meaningful competition in Social Business. Why would people want to be an entrepreneur without profit? Only two types of individuals could join Social Business: low calibre individuals who cannot compete for study and work under the capitalist system, and philanthropists. As a result, Social Business is not supposed to grow to a considerable level. So, I would say Yunus has attacked the free-market capitalist system harshly but failed to come up with something that can replace it.

It is not clear why Yunus has not said anything in the article about where the operating cost of Social Business will come from. It is assumed that owners will have to collect their operating costs from the businesses in the form interest or something else otherwise the Social Business will go bankrupt eventually. Here, it should be mentioned that his Grameen Bank charges the world's highest interest rate of up to roughly 20 percent.

Social Business is not completely new; many people in Bangladesh have long been practicing lending with interest and without collateral at the personal level. Some of them lend money without interest and even give unconditional donations. I have seen individuals teaming up, saving, and keeping a small part of their incomes in one place and the money being lent to members of the group when needed. Yunus has just been institutionalising it. That is why, I guess, the Nobel Committee has recognised the role of Yunus and his Grameen Bank in what Yunus calls Social Business by awarding the Nobel Peace Prize, but did not recognise Yunus as the inventor of Social Business as he did not win the Nobel Prize in Economics.

In fact, Social Businesses that started institutionalised operation with Grameen Bank about five decades ago, have already expanded from once just poor women to unemployed youths. Also, in the near future, some universities could produce Social Business graduates as a result of Yunus' ongoing advocacy. But it will probably only be able to hunt those students who fail to reach the "capitalistic" world of education and employment.

So is Yunus' Social Business really designed to redesign the world? I observe that his claims pinpointed in the title of his article, "Redesigning economics to redesign the world" are just of optimism.

Firstly, though he wished to give economics a "human face" by introducing his Social Business, it has become a social welfare or ethical concept. Can ethics redesign economics in this world of conflicts of interests?

Secondly, Yunus himself says that Social Business will exist parallel to the capitalist system, while standing between it and charity. I find it to be much nearer the category and impact of charity, but far below the entrepreneurial and free market capitalist system in terms of their respective influences on society.

Therefore, I would say his Social Business will neither redesign economics as a science nor redesign the world, in the short term at least.

Dr. Kalam Azad is an independent researcher based in Sydney, Australia. He is a contributor to the Asian Profile journal. He is the author of research papers: "Bangladesh: An Umpired Democracy" and "Updating Umpired Democracy: An Idea of a Key Political Fix for Bangladesh."