Profit-with-purpose, an open invitation for TTIP?

The Transatlantic Trade and Investment Partnership (TTIP) is an agreement between US government and the EU which is intended to remove barriers to transnational corporations through market deregulation. 

In our study guide for Economics in Transition which includes extracts from PBS Frontlline, you may read how market deregulation led to the economic crisis of 2008.   A story in which Harvard's Larry Summers has a prominent role.

"We didn't truly know the dangers of the market, because it was a dark market," says Brooksley Born, the head of an obscure federal regulatory agency -- the Commodity Futures Trading Commission [CFTC] -- who not only warned of the potential for economic meltdown in the late 1990s, but also tried to convince the country's key economic powerbrokers to take actions that could have helped avert the crisis. "They were totally opposed to it," Born says. "That puzzled me. What was it that was in this market that had to be hidden?"

In recent years we've witnessed the shift in the public sector toward market driven approaches, which have attracted the interest of profit maximising business presenting a social "face". 

It was a decade ago that our late founder introduced the profit-for-purpose model to the Uk social enterprise community with a business plan which argued:

"Capitalism is the most powerful economic engine ever devised, yet it came up short with its classical, inherent profit-motive as being presumed to be the driving force. Under that presumption, all is good in the name of profit became the prevailing winds of international economies — thereby giving carte blanche to the notion that greed is good because it is what has driven capitalism. The 1996 paper merely took exception with the assumption that personal profit, greed, and the desire to amass as much money and property on a personal level as possible are inherent and therefore necessary aspects of any capitalist endeavour. While it is in fact very normal for that to be the case, it simply does not follow that it must be the case."

“Traditional capitalism is an insufficient economic model allowing monetary outcomes as the bottom line with little regard to social needs. Bottom line must be taken one step further by at least some companies, past profit, to people. How profits are used is equally as important as creation of profits. Where profits can be brought to bear by willing individuals and companies to social benefit, so much the better. Moreover, this activity must be recognized and supported at government policy level as a badly needed, essential, and entirely legitimate enterprise activity.”

This derived from a seminal paper arguing that people came ahead of shareholder returns. It was published online in 1997, free to use after delivery to the US President in September 1996. .

"At first glance, it might seem redundant to emphasize people as the central focus of economics. After all, isn't the purpose of economics, as well as business, people? Aren't people automatically the central focus of business and economic activities? Yes and no.

People certainly gain and benefit, but the rub is: which people? More than a billion children, women, and men on this planet suffer from hunger. It is a travesty that this is the case, a blight upon us all as a global social group. Perhaps an even greater travesty is that it does not have to be this way; the problems of human suffering on such a massive scale are not unsolvable. If a few businesses were conducted only slightly differently, much of the misery and suffering as we now know it could be eliminated. This is where the concept of a "people-centered" economics system comes in."

"In that it is a fundamental predicate of "people-centered" economic development that no person is disposable, it follows that close attention be paid to those in the waning Industrial Age who are not equipped and prepared to take active and productive roles in an Information Age. Many, in fact, are scared, angry, and deeply resentful that they are being left out, ignored, effectively disenfranchised, discarded, thrown away as human flotsam in the name of human and social progress. We have only to ask ourselves individually whether or not this is the sort of progress we want, where we accept consciously and intentionally that human progress allows for disposing of other human beings."

In 1999 Noam Chomsky drew attention to the spread of neoliberalism with his book - Profit over People.

In 2006, "Profit for a Purpose" was a subject for discussion on Skoll's Social Edge:

"For years, many nonprofit directors, social activists, and academic theoreticians have looked askance at social enterprise. It appears that money – in particular the pursuit of money – is the object of their discontent. Some fear that “business” efforts will supersede social mission strategies. Others believe a focus on making money (especially worrisome when it is successful) will detract from creating social change. Still others are wary lest nonprofit revenue-generating activities cause a breach in public trust.

Each of these concerns is valid if one views social enterprise from the perspective that its only purpose is to generate revenue. "

There are sone interesting observations from Kim Alter, author of Social Enterprise Typology on the morphing definition of social enterprise.

The conversation preceded the arrival of B Corporations which reasoned business could operate for social beneift and still deliver shareholder returns, i.e. Profit-With-Purpose .

In 2011, Creating Shared Value argued that business could profit from solving social problems, i.e. Profit-from-purpose. My comment on this article  introducing the example of using profit to place institutionalised children in loving family homes was censored and I was blocked from making further comments..

It could be described as mission creep - from purpose to profit.

In a 2010 article for Axiom News, founder Terry Hallman reiterated the "people over profit" message

“When we get into divvying up financial profits it’s too easy to get sidetracked by a myriad of possibilities along those lines,” Hallman tells Axiom News.

“In that case there is distraction from the primary objective of any given project, the social concerns for people at risk of exclusion, or already excluded, from the opportunity to have a decent, safe, secure life.”

Hallman adds that if “a lot of emphasis is placed on financial returns, the usual suspects can and will get in, figure out to how strip out the social aspects of social businesses and keep all profits to themselves.”

“Think of the corporate raiders on the loose in the U.S. in the 1980s. Same thing. That mindset is the driving force that has created such need for social businesses to begin with.”

Hallman is currently investigating the setup of a multi-million dollar fund offering split financial ROI if needed, that is, a portion to investor(s) and the remainder to P-CED.

The funds will be directed to concluding a project in the Ukraine which involves funding the training of residents to develop social businesses. Included in this work is supporting children who have disabilities, many of whom have been left to die in secretive locations. P-CED is helping to move these children to safety and give them access to modern healthcare.

There was little said about profit and purpose in the UK until very recently with a report from the Social Investment Task Force took the profit-with-purpose line. The endorsement of Larry Summers should be a fair indication of where this is headed..

Profit-for-purpose was first deployed in Russia in 1999 to source an experimental poverty alleviation program in the wake of their own economic crisis of 1998. Larry Summers was implicated in the story of 'How Harvard Lost Russia'. In 1998 Russia defaulted on £40 billion of domestic debt triggering a crisis that would be felt all around the world. 

The report also quotes Pope Francis, who last year delivered this message   

"Just as the commandment 'Thou shalt not kill' sets a clear limit in order to safeguard the value of human life, today we also have to say 'thou shalt not' to an economy of exclusion and inequality. Such an economy kills," Pope Francis wrote in his apostolic exhortation Evangelii Gaudium

Here, the Holy Father teaches that living and sharing the joy of the Gospel necessarily demands that Christians have a deep and active concern for the plight of the poor who suffer so many injustices from an economy that puts profit above people.

Quote: "The Pope's given it his blessing, even"