Social Enterprise is already a reactionary force

"Now we're going to reward businesses that do not make a profit if someone approves of their social mission,” Rush bellowed, in reaction to the rise of so-called “L3Cs” or “Low Profit Limited Liability Corporations. “This is designed to pervert capitalism."

It was brought to our attention by the late Rick Cohen who asked "Is social enterprise becoming a reactionary force?"

Rush Limbaugh's outburst had reminded me of a far more measured comment made more than 50 years ago by John Spedan Lewis, who established the John Lewis employee partnership.  In his 1957 speech to the BBC, Lewis said:

"The present state of affairs is really a perversion of the proper working of capitalism. It is all wrong to have millionaires before you have ceased to have slums. Capitalism has done enormous good and suits human nature far too well to be given up as long as human nature remains the same. But the perversion has given us too unstable a society. Differences of reward must be large enough to induce people to do their best but the present differences are far too great.If we do not find some way of correcting that perversion of capitalism,our society will break down. We shall find ourselves back in some form of government without the consent of the governed, some form of police state."

I leave it for the reader to decide whether on not Americans live today in a democracy or a police state

Like John Lewis, our late founder Terry Hallman had been one of those who tried to correct the perversion of capitalism. With his invitation to serve on the steering group of the Committee to re-elect the (US) President. The core argument of his 1996 paper which warned of global uprisings,  had concluded:

19. We can choose to not reform capitalism, leave human beings to die from deprivation – where we are now – and understand that that puts people in self-defense mode.

20. When in self-defense mode, kill or be killed, there is no civilization at all.  It is the law of the jungle, where we started eons ago.  In that context, 'terrorism' will likely flourish because it is 'terrorism' only for the haves, not for the have-nots.  The have-nots already live in terror, as their existence is threatened by deprivation, and they have the right to fight back any way they can.

21. 'They' will fight back, and do.  

22. The Information Age can become the pinnacle of human civilization, the Golden Age.  Or, it can become the end of human civilization.  We get to decide which way to go, and act accordingly.

23. Dismissing people and consciously leaving them to die is probably not the way to go.

24. Economics, and indeed human civilization, can only be measured and calibrated in terms of human beings.  Everything in economics has to be adjusted for people, first, and abandoning the illusory numerical analyses that inevitably put numbers ahead of people, capitalism ahead of democracy, and degradation ahead of compassion.

25. Each of us who have a choice can choose what we want to do to help or not.  It is free-will, our choice, as human beings.

As you may have guessed from the above, among the influences was Peter Drucker's 'Post Capitalist Society.'

The paper went on to propose a business model which operates for the benefit of the community, rather than returning profit to shareholders:

"The P-CED concept is to create new businesses that do things differently from their inception, and perhaps modify existing businesses that want to do it. This business model entails doing exactly the same things by which any business is set up and conducted in the free-market system of economics. The only difference is this: that at least fifty percent of profits go to stimulate a given local economy, instead of going to private hands. In effect, the business would operate in much the same manner as a charitable, non-profit organization whose proceeds go to local, national, and international charities. Non-profits, however, are typically very restricted in the type of business they can conduct. In the United States, all non-profits must constantly pay heed that they are not violating those restrictions, lest they suffer the wrath of the Internal Revenue Service. For-profits, on the other hand, have a relatively free hand when it comes to doing business. The only restrictions are the normal terms and conditions of free-enterprise. If a corporation wants to donate to its local community, it can do so, be it one percent, five percent, fifty or even seventy percent. There is no one to protest or dictate otherwise, except a board of directors and stockholders. This is not a small consideration, since most boards and stockholders would object.  But, if an a priori arrangement has been made with said stockholders and directors such that this direction of profits is entirely the point, then no objection can emerge. Indeed, the corporate charter can require that these monies be directed into community development funds, such as a permanent, irrevocable trust fund. The trust fund, in turn, would be under the oversight of a board of directors made up of corporate employees and community leaders.”

P-CED was established in Chapel Hill, North Carolina where our founder had tutored Senator John Edwards for his Two Americas campaign. I would become involved in 2003 when Terry Hallman fasted for a living wage as defined by the International Covenant on Economic Social and Culural Rights and I would pass progress messages to the senator by fax.

Now listen to what Edwards has to say in his presidential campaign about living wages, payday lenders and the role of trade unions. 

 

It's no secret that North Carolna has lurched far right since John Edwards. I'm reminded of a comment once made to me by Terry hallman that "they'd need a massive extension on the White House  ro accommodate their opinions" and opinions without deeds are plentiful.

I wrote last year on how North Carolina had rejected Benefit Corporations, which seemed to bear a close resemblance to the P-CED model. Closer still after reading Rick Cohen's article.

As I noted recently the question of shareholder returns is now being chewed over by B Labs, who so far have not challenged perversion or commit to anything more than "doing well by doing good" and certainly not reforming capitalism. 

On April 1st 2015, Republican state representative Chuck McGrady introduced a new bill in the North Carolina Legislature to authorize socially conscious benefit corporations and override the legislature’s rejection of his own benefit corporation bill two years earlier. "It's a for-profit entity that can do nonprofit work," McGrady said, echoing the argument for a people centered business model some two decades earlier.

SO HOW IS SOCIAL ENTERPRISE REACTIONARY?

It is in application rather than the abstraction of business models where we find the reactionary, a neoliberal agenda. It's no coincidence that Tony Blair made social enterprise part of government policy and its now being so warmly embraced by conservatives and the asset strippers of national services, like our NHS.

It will be found in the example of our founder's death and a letter written in 2008 to US government about his efforts to place orphaned and disabled children in loving family homes when we called on their support for a 'Marshall Plan' including a centre for social enterprise development:

"It is almost impossible to overstate the need for social enterprise in Ukraine. The nation is plagued by widespread socioeconomic problems and deficiencies, with a host of disparate, haphazard, uncoordinated efforts aimed at solving them. In order to understand the overwhelming critical need for social enterprise and a formal national center to facilitate social enterprise, an operational definition for social enterprise is essential.

Enterprise is any organizational activity aimed at a specific output or outcome. Once the output or outcome – the primary objective – is clear, an organization operating to fulfill the objective is by definition an enterprise. Business is the most prominent example of enterprise. A business plan, or organizational map, provides a reference regarding how an organizational scheme will operate to produce a specific outcome: provision of products or services in a way to create profit. Profit in turn is measured numerically in terms of monetary gains, the “bottom line.”

This is the function of classic capitalism, which has proven to be the most powerful economic engine ever devised.

An inherent assumption about capitalism is that profit is defined only in terms of monetary gain. This assumption is virtually unquestioned in most of the world. However, it is not a valid assumption. Business enterprise, capitalism, must be measured in terms of monetary profit. That rule is not arguable. A business enterprise must make monetary profit, or it will merely cease to exist. That is an absolute requirement. But it does not follow that this must necessarily be the final bottom line and the sole aim of the enterprise. How this profit is used is another question. It is commonly assumed that profit will enrich enterprise owners and investors, which in turn gives them incentive to participate financially in the enterprise to start with. 

That, however, is not the only possible outcome for use of profits. Profits can be directly applied to help resolve a broad range of social problems: poverty relief, improving childcare, seeding scientific research for nationwide economic advancement, improving communications infrastructure and accessibility, for examples – the target objectives of this particular project plan. The same financial discipline required of any conventional for-profit business can be applied to projects with the primary aim of improving socioeconomic conditions. Profitability provides money needed to be self-sustaining for the purpose of achieving social and economic objectives such as benefit of a nation’s poorest, neediest people. In which case, the enterprise is a social enterprise.  "

The title of his tribute from Ukrainian civil right leaders spells it out -  "Whether these kids live or die, is of little if any, concern to Mafia"    

Taking on mafia id probably a lot further than most advocates of social enterprise woud want to go. It could explain why so many were reluctant to engage but the truth is less appealing;

As Rudyard Kipling wrote in "If"

"If you can bear to hear the truth you've spoken
Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to, broken,
And stoop and build 'em up with worn-out tools: "

it;s not just about "passing off"  social enterprise models as one's own. As well as USAID we'd taken our proposal to The Britidh Council and Erste Bank. In 2011 these 3 would be partners in their own social enterprise development project in which we were not welcome.  With some of Ukraine's oligarchs as their partners, they hoped to solve the problems with those had most to do with creating them, through greed.

We know that neoliberals like Tony Blair have been recipients of their philanthropy while their own children starve in 'Death Camps' The soft channels of our governments are going to do what they decide: 

"Excuses won't work, particularly in light of a handful of oligarchs in Ukraine having been allowed to loot Ukraine's economy for tens of billions of dollars. I point specifically to Akhmetov, Pinchuk, Poroshenko, and Kuchma, and this is certainly not an exhaustive list. These people can single-handedly finance 100% of all that will ever be needed to save Ukraine's orphans. None of them evidently bother to think past their bank accounts, and seem to have at least tacit blessings at this point from the new regime to keep their loot while no one wants to consider Ukraine's death camps, and the widespread poverty that produced them.."

Others we approached included B Labs and Virgin Unite, the charity run by Sir Richard Branson, 

From 2009, Branson seems to have followed our every word, even following us into Ukraine albeit when the social problems had already erupted into violent conflict as we warned.

Blog: Turning Sir Richard Branson from business leader to a follower

With blood now running on the streets, in the company of the same oligarch we have Blair and Branson at Davos debating capitalism with both financial return.

At 29 minutes you will hear Blair ask Branson of his concept of business being more than the narrow definition of profit is gaining traction;

 

THis is the reactionary force , you will call again and again for support from your government and collaboration with other organisations but you will aleays be outsite their remit, beyond their focus or incompatible with their mission. Sooner or later you'll hear what you argued being read back to you as their concept.

The gatheriing on Inclusive Capitalism was more of the same, with the arguments we made about social unrest being regurgitated by the City of London's Lord Mayor.

This gathering of plutocrats are going to do nothing that doesn't serve their own interests.

To think that what we did was published free to use all those years ago, is now being used to exclude us from participation.