Poverty and Community Benefit Societies

In 2004, People-Centered Economic Development (P-CED) introduced its social business model to the UK.

That same year founder Terry Hallman was inteviewed by a disapora leader about his impact in Russia in the wake of the 1998 economic crisis he relates how the community microfinance bank and peer group lending helped create around 10,000 microenterprises.

"The P-CED model is not a charity sort of operation. It is business. What we choose to do with profits is entirely up to us, and we choose before anything else happens to set most of our profits aside to assist poor people. In fact, our corporate charter requires us by law - UK law, where rule of law is very well established - to use our profits only for social benefit. We cannot do anything else with it."

As a business which distributes no dividends using profit for social benefit, our focus in the UK became the issues of poverty and human rights, a living wage in particular.  We made the case for the urgent need to deal with poverty as s strategic imperiative.  

In the UK business plan, we argued the strategic case for tackling poverty saying:

"Dealing with poverty is nothing new. The question became ‘how does poverty still exist in a world with sufficient resources for a decent quality of life for everyone?’ The answer was that we have yet to develop any economic system capable redistributing finite resources in a way that everyone has at minimum enough for a decent life: food, decent housing, transportation, clothing, health care, and education. The problem has not been lack of resources, but adequate distribution of resources. 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.”

We described how this business would distribute its surplus revenue:as a network of community benefit societies. A key point was the need to seed fund this bottom up approach to economic development.

” Fifty percent of annual surplus will remain in each local community where income is derived, by way of deposit into a local community development bank serving that location. In that locales are part of EU and therefore subject to well-developed rule of law, corruption issues should not present insurmountable barriers such as in Crimea.

Fifty percent of surplus will be retained by P-CED for growth and expansion. Along the way, all employees of P-CED are to be paid at minimum a wage sufficient to guarantee a decent standard of living in accordance with the International Covenant of Economic, Social and Cultural Rights.

The fundamental policy guide for P-CED is the International Bill of Human Rights. IBHR is comprised of Universal Declaration of Human Rights; International Covenant of Civil and Politial Rights, and International Covenant of Economic, Social and Cultural Rights. P-CED’s main focus falls within sphere the economic, social and cultural rights, ICESCR. In that the United States of America do not recognize those human rights and is the only industrialized country not to ratify ICESCR, P-CED operations are not yet compatible with underlying US policy and human rights commitments. In that sense, the US itself must be recommended as ‘not yet ready’, albeit for reasons quite dissimilar to those in Crimea. Thus the decision to first institute P-CED in Europe rather than the US. However, partnerships with US entities will be undertaken insofar as they advance the fulfilment of human rights where they are recognized across Europe under ICESCR. P-CED will also continue advocacy toward US ratification of ICESCR, and advocacy for economic rights in the US in particular. P-CED’s founder and first director is a member of the newly-formed US Human Rights Network.”

"Each community will then have its own Community Benefit Society (Industrial and Provident Society for the benefit of the community), such as P-CED Southwest Regional CBS, P-CED Midlands Regional CBS, and so on. P-CED will create each CBS as a UK legal entity under provisions of UK law. As the number of cells in each region increases and each regional CBS consequently becomes more complex, P-CED will utilize a portion of its 50% share of surplus to fund small offices for each regional CBS."

It would be something of an understatement to say that it fell on the deaf ears of the social enterprise community. It was 10 years ago that I wrote to Baroness Thornton, then heading the SEC  and APPG on social enterprise about the funding oversight. She never replied

The concept og business operating for community benefit was of course radical in 2004 but since it's become an expectation of business procurement with the Social Value Act and a recent report from Welsh Finance Minister Jane Hunt with a publication on Community Benefit.

The most prominent call had been in the 'Marshall Plan' delivered to Ukraine's government in 2007:

'This is a long-term permanently sustainable program, the basis for "people-centered" economic development. Core focus is always on people and their needs, with neediest people having first priority – as contrasted with the eternal chase for financial profit and numbers where people, social benefit, and human well-being are often and routinely overlooked or ignored altogether. This is in keeping with the fundamental objectives of Marshall Plan: policy aimed at hunger, poverty, desperation and chaos. This is a bottom-up approach, starting with Ukraine's poorest and most desperate citizens, rather than a "top-down" approach that might not ever benefit them. They cannot wait, particularly children. Impedance by anyone or any group of people constitutes precisely what the original Marshall Plan was dedicated to opposing. Those who suffer most, and those in greatest need, must be helped first -- not secondarily, along the way or by the way. '

With a speech In 2009, the President of the UN General Assembly said this about the global economy:

“The anti-values of greed, individualism and exclusion should be replaced by solidarity, common good and inclusion. The objective of our economic and social activity should not be the limitless, endless, mindless accumulation of wealth in a profit-centred economy but rather a people-centred economy that guarantees human needs, human rights, and human security, as well as conserves life on earth. These should be universal values that underpin our ethical and moral responsibility.”

Paradoxically, it was the European cooperative movement in 2013 who became champions of people-centered business:

Dirk J. Lehnhoff, President of Cooperatives Europe, said: “Cooperatives and Fair Trade are established development actors with long-term oriented business models. By putting people’s needs first, we have proven to be able to respond to sustainable, economic and social needs. We support the Commission initiative announced in the Agenda for Change to work with local private actors and we believe that member-owned businesses, which benefit local communities, should be key partners”.