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Trust in the social economy

It's been a while now since I wrote about the need for trust in a social stock exchange, pointing out the contradiction between the concept of inclusion and the practice which keeps others from participating.

The most recent example may be found in a new British Council initiative to support social enterprise overseas:

"The British Council will offer grants to as many as 9 selected UK based organisations to take part in the BIR programme in 2015-16.

"These will include travel grants to undertake scoping visits and meet with their foreign partner as well as delivery grants to undertake their joint project. The latter grants will only be awarded after the UK partner has submitted a detailed proposal which has been approved by a BiR selection committee."

This is what we'd been doing since 1999 when sourcing a development program in Russia. In 2010 we'd submitted such a proposal in our application to become partners with the British Council. We were already suppliers to their head office in Manchester, with the software product which funded our self-supporting business model and the costs of developing this proposal for social enterprise development. 

This is the crony social economy, where who know has a lot more weight than what you do.

It took a letter from my MP Mark Harper to extract an explanation for our exclusion. According to Martin Davidson, British Council partners are expected to make a financial contribution.

These then are the partners for 2015/16 who'll be making a financial contribution. With whose money? 

The UK Government's Cabinet Office

  • Social Enterprise UK
  • Social Value UK
  • Social Investment Business

What experience do these organisations have in this area and how transparently were they chosen?  

Sharing our proposal with USAID and The British Council as we did, might have seemed naive, It had in fact been published as a news article in August 2007 and my late colleague had explained why we made this decision.  

"As the 60th anniversary of the Marshall Plan came around in June 2007, noise was emerging within Ukraine of a certain political boss preparing a Marshall Plan for Ukraine.  This person was a reputed mob boss -- exactly the sort of entity that the original Marshall Plan meant to oppose.  It seemed most likely that whatever he came up with would be self-serving, hijacking the label 'Marshall Plan' and turning the whole notion on its head.  I reviewed the original Marshall Plan and realized that what I had written was, in fact, the definition and spirit of the original Marshall Plan.  Thus, in June 2007, I appended the original title with "A Marshall Plan for Ukraine."  After some discussion among trusted colleagues over timing, I published an abbreviated version of the paper in two parts in August 2007 in the 'analytics' section of the Ukrainian news journal "

'Help Ukraine stand up for Western values' was a Bloomberg article which revealed the Western connections of this particular oligarch:

"Akhmetov’s System Capital Management JSC is a partner of the Swiss-based World Economic Forum. It has used the services of, or attracted financing from, Germany’s Deutsche Bank AG, the U.K.’s Royal Bank of Scotland Plc and Austria’s Raiffeisen Bank International AG. Firtash has made generous donations to the University of Cambridge. This year he started financing the Days of Ukraine festival in the U.K., held at prestigious sites in London, such as the Saatchi Gallery.

The two men have also hired prominent Western consulting companies, including McKinsey & Co. Inc., to develop an economic plan for Ukraine, while bolstering Yanukovych, who is the biggest obstacle to any reasonable economic policy."

Paradoxically it is the McKinsey initiative on Long Term Capitalism where one of the most approved articles is based on what was ergued in the 'Marshall Plan' about applying business to resolve a wide range of social problem.  I describe this as 'The New Bottom LIne'. 

'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. '

Akhmetov and his DTEK organisation had been a partner of the joint USAID/British Council initiative

Firtash is behind yet another attempt to turn the 'Marshall Plan' on its head with one which has drawn in Lord Mandelson, an almost ubiquitous presence in the world of oligarchs. 

Influence on social enterprise

The P-CED model of autonomous business which distributes no dividend and applies profit for social benefit had been introduced to the UK in 2004, when our founder Terry Halman. had been interviewed by a Crinean Diaspora leader.about its impact in Russia:   

The social enterprise 'Marshall Plan', had put this approach into the context of national scale development and its argument for applying business directly to social problems would spin off many replicants. 

Among those who'd soon be paraphrasing what it argued, was one of our own oligarchs, Sir Richard Branson who stood up at Davos to tell his host, oligarch Viktot Pinchuk and an audience including Bill Gates, Bill Clinton, Tony Blair and Muhammad Yunus that capitalism didn't serve the purpose of creating opportunity for all; and that  business should focus more on solving social problems.  

Or as we'd argued very publicly before the 2008 crisis:  

'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.'

Writing to Virgin Unite to offer our help had demonstrated that we weren't 'all in this together' but within a few short years, their CEO would be dining out on preaching what we practice.

“Many prefer business to be about profit and charity about charity. What excites me the most is how you take the best of both the business sector and the social sector, and bring them together”, she says. “I believe that developing partnerships between equals, rather than just having the wealthy help the poor is a much more sustainable model.”

Collaboration between for-profit and nonprofit enterprise, had been part of the 'Marshall Plan' argument.     

Richard Branson liked the idea so much he even followed us into Ukraine and is now offering to help Ukrainians

Clearly, research isn't one of his strong points.



A Randian inversion

As you might expect what we'd argued was ideologically opposed to the reasoning of Ayn Rand and her influence on laissez-faire capitaism, yet there is an element of truthi in what she says about the men of unborrowed vision and their parasites. 



n 2009  in a discussion on Skoll Social Edge about the new marketplace Hallman asked:

“So, if we’re inventing projects that we know will be stolen, there are at least two problem areas.

First, if stolen, it’s stolen. It’s not unlike an architect having a building design stolen. The architect/designer is in best position to understand exactly how it works and how to assemble what they’ve designed.

If someone wants to use a project design, it’s the same as any other project design. The design comes after an in-depth research phase, which in my experience tends to be extremely difficult not least from danger involved in shining light under rocks where the core problems are to begin with. That is, corrupt bureaucrats and officials. When I finish the research part — which I always do so far (Russia/Crimea/Ukraine) — I know exactly what the problems are, what solutions are needed, and how to navigate. Possibly someone else could take over and manage things from there on — implementation. I have no problem with someone else implementing a project, and usually prefer that. Even if they do, it’s still a matter of stolen property in which we’ve invested unilaterally to produce. Almost always, however, there may remain critical components that the implementer just doesn’t want to bother with. Maybe it’s too dangerous. Maybe there are political considerations and conflicts. In that case, the designer is likely the only person(s) to know how to get those done. That’s when it’s time to consult with the architect.

Second, even if the project outcome, after theft, is what was envisioned by the designer(s), how does the venture qualify as a social enterprise? Sure, we can slowly design projects one by one as income from our funding side permits. We can do it a lot faster if we get paid for our R&D output, just like any designers.

Finally, is it acceptable to build projects with stolen property? What sort of results would that lead to? Can be build an ethical system based upon unethical behavior (such as violations of Intellectual Property Rights)?

If we invent such a system, is it anything new? Or is it just a twist on the old system?

One thing that can be collaborated openly is this: a Code of Ethics. But, whose ethics? What org(s) will enforce them, and how? Who decides who gets in, how, and why?”

Rand's Howard Roark had chosen to destroy his creation whereas the 'Marshall Plan had been delivered free to use with a single condition of social reform. Before his death, the author wrote:

"It will work, and it must be done if Ukraine wants to become a member of civilized nations.  US and Europe can and should help, but only after first conditions are met unilaterally by Ukraine -- the sole condition on which I released the 'Marshall Plan for Ukraine.'  Those conditions are simple: take care of your children, all of them, close the orphanages and gulags, open the truth of the matter, and never try to hide any of it again.  That is underway.  Ukraine's government took the initiative.  It is now appropriate and necessary for the US and Europe to provide interim assistance, guidance, and models to bring the core metric -- child care -- to modern, civilized standards from the barbarism that has heretofore prevailed."

Unlike Roark, the author had not lived for himself,as local civic activists would testify while the social enterprise community was silent:

The author of breakthru report “Death camps for children” Terry Hallman suddenly died of grave disease on Aug 18 2011. On his death bed he was speaking only of his mission – rescuing of these unlucky kids. His dream was to get them new homes filled with care and love. His quest would be continued as he wished.

So where was the support?

As one might imagine, raising the matter of childcare abuse hadn't made us a lot of friends. As the 'Death Camps, for Children' article itself reveals, we faced the resistance of NGOs who if they weren't at risk from organised crime, might well lose their donors, if locked out of the orphanages they visited.  It was also uncomfortable for charities like Business fights Poverty, who blocked me from online discussion because I wrote about corruption.

Cleary it wasn't popular with those who were making a profit from this human misery.  I'm not alone I know, in saying that social enterprise steers around the more intractable problems

We'd become members of the Social Enterprise Coalition (now SEUK) by 2006, when I introduced our work in Ukraine

'Our current work is focussed on Ukraine, where we’ve recently completed a 3 year research project to bring peer group lending and social purpose business in at a national level. We’re now being  supported in the non-monetary context by local resources who are helping with language assistance and channelling the plan through to national government.

We’re proposing a business mix of revenue positive and revenue neutral activities toward a major social objective, the funding of group care homes for all Ukraine’s economic orphans and street children. Our target for external seed funding will be the Millenium Challenge account for transitional democracy. Additionally we propose a new faculty for Social Enterprise in one of Ukraine’s state universities. 

All of this will be based on the successful social purpose model for which proof of concept was delivered in the Tomsk project.  I’d like to be able to talk to others in the UK about this.

You”ll find more about us on'

With a response to say our work was beyond their focus, they offered a list of those we'd already approached.

There was the opportunity to take the lead in international social enterprise development by supporting one of their members. 

Welcome to the war     

By the beginning of 2014, social unrest had finally erupted into violence. It was the children of Torez, the orphanage on which the 'Death Camps' article was based who witnessed the bodies falling from the sky when MH17 was downed by a ground-to-air missile.      

"At first, children thought that big black birds were flying at them, but when such "birds", a man, a women and a boy fell just in their garden of the orphanage, many children were shocked. Girls of 14-15 years told that they wanted to know the truth why these people died, why the boy who fell in their garden, was without a head."
These are the children referred to:

At the same time, many were now calling for EU assistance in the form of a 'Marshall Plan'.I shared an appeal from civic leaders with our MEPs, reminding them of earlier correspondence.

The need for integrity

From the beginning we'd been aware of the hazards of operating in a corrupt post-soviet culture, making this point in the interview about Crimea

"Living in a corrupt post-Soviet culture in Crimea has, I expect, made it difficult for Tatars to behave otherwise. People tend to do what everyone else around them is doing. In that case, where does corruption end and recovery begin? It has to start with inner decisions on the part of individuals, friends and neighbors to change things, to do better, to do simple things like making promises and commitments, and keeping them. "

We'd spelt it out in the 'Marshall Plan'

"We see a staggering array of social problems arising directly from poverty, including but not limited to tens of thousands of children in orphanages or other state care; crime; disrespect for civil government because government cannot be felt or seen as civil for anyone left to suffer in poverty; young people prostituting themselves on the street; drug abuse to alleviate the aches and pains of the suffering that arises from poverty and misery; HIV/AIDS spreading like a plague amidst prostitution, unprotected sex, and drug abuse; more children being born into this mix and ending up in state care at further cost to the state; criminals coming from poverty backgrounds, ending up as bandits, returning to communities after prison, with few options except further criminal activity. These are all part and parcel of the vicious negative cycle of poverty, and this threatens to destroy Ukraine, if Ukraine is defined in terms of people rather than mere geographic boundaries"

As i write today, it is timely that another blog on trust comes to my attention, it says:

The bigger the trust zone gets, the more vulnerable it becomes to the forces of discord. We’ve assumed because communications can now make value-based empires feel like we’re the ones in complete control, we can forge a united global kingdom which is immune from internal or external corruption, whilst increasing efficiencies everywhere.

But, if you lower the barriers to entry for the productive and constructive you also lower the barriers for the unproductive and destructive. Furthermore, if you make it easier for your kind to reach out to influence others, you also make it easier for other to influence you.

We’re so focused on how technologies are disrupting and democratising banks, taxis and hotels, we’ve overlooked they’re also “disrupting” the costs of running terror networks, scam networks and criminal networks too. It is now much cheaper for the bad guys to coordinate against us as well.

Hence, my point really is… technology based on trust zones, protocols and cooperation probably brings as much bad as it does good with it in the long run. Consequently, unless we start building systems. which do discriminate between good from bad, we won’t be getting very far at all."

Breaking down silos 

In February 2008, USAiD's Henrietta Fore had declared:

“We will devote more of our management, technical expertise and financing resources to coordinating international development    to avert duplication of effort, break down silos, and build partnerships that accelerate the pace of progress.”

The Genesis letter, calling for support with social enterprise development, was our response:

"There is increasing congruence and synchronicity in play now, to the point of attunement. What Ms. Fore is describing has been central to P-CED’s main message, advocacy and activity for a decade. That, and helping establish an alternative form of capitalism, where profits and/or aid money are put to use in investment vehicles with the singular purpose of helping the world’s poorest and most vulnerable people. The paper on which that is based is in Clinton’s library, dated September 16, 1996, author yours’ truly. That is reflected in P-CED’s home page and history section. In fact, you might notice a number of ideas and writings there that have now made their way into the mainstream of economics and aid thinking, how to make business and aid work smarter and more effectively in relieving poverty and the misery and risks that result. Bill Gates – as hard-edged a capitalist as has ever existed – reiterated the same things in Wall Street Journal a couple of weeks ago (ref below.) It sounds as though Ms. Fore’s remarks very much reflect this sort of thinking. Now it’s time to move forward and get it done.

"Thank you for your time and attention to this. I and others will look forward to hearing from you. I hope we continue to realize ever more fully that outside the box and inside the box have only a box in the way. We outside the box know quite a bit of what’s going on, many times in exquisite detail, perhaps in ways that those inside the box can’t quite as easily access if at all. We are grossly underfunded in favor of missiles, bombs, and ordnance, which is about 100% backwards. Now, with even the US Pentagon stating that they’ve learned their lesson in Iraq and realize (so says top US general in Iraq ten days or so ago) that winning hearts and minds is the best option, I and others shall continue to think positive and look for aid budgets and funding spigots to be opened much more for people and NGOs in silos, foxholes and trenches, insisting on better than ordnance, and who understand things and how to fix them. We can do that. We can even do it cost-effectively and with far better efficiency than the ordnance route. Welcome to our brave new world. Except it’s not so new: learn to love and respect each other first, especially the weakest, most defenseless, most voiceless among us, then figure out the rest. There aren’t other more important things to do first. This message has been around for at least two thousand years. How difficult is it for us to understand?"

Keep it in the family

In 2000 a group of nonprofit organisations got together in the UK to leverage a £100 milion endowment for social entrepreneurship under the banner of Unltd  

It focusses, like so many foundations on preserving itself rather than spending down its assets. 

From the beginning they'd been hostile to what we tried to share about autonomous non dividend distrbuting social enterprise. It seemed to be something of a threat , though interestingly one of them, Senscot, seems to have broken rank in favour of it

Interviewed by Axiom in 2010, Terry Hallman who pioneered this model, described the risk of profiteers stripping out the social component of any project. Almost as he spoke, the concept of a social impact bond was to be imposed upon us.  

"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."

Perversely this social enterprise support organisation wants our support for their Voluntary Code of Practice  Shouldn't it be the other way round?

At Glasgow Caledonian there's even a faculty for social business and healthcare, as the 'Marshall Plan' proposed, but their cosy academics won't engage with the like of us.

Closer to home they're more defensive. "There's a lot of criticism online about your work in Ukraine" sniped Nick Temple of SEUK, though we'd been told that this work was outside their focus. Nobody seems to have told him that pissing on another's shoes doesn't help you stand taller

The message for those who share new models, design programs, commit our own funds and risk all to make it happen, is very clear.  We are Lions led by Moral Jellyfish.. 

There will no doubt  be those  who coopt our work in their own proposals for social enterprise. It is defended by a Creative Commons licence and these are the benefiicaries. Who'll be first to build a reputation on their dead bodies?