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Social entrepreneurship is a distraction, corporate capitalism is the problem

Social entrepreneurship is a distraction, it's mainstream capitalism that needs to change, says Pamela Hartigan, director of the Skoll Centre on Social Entrepreneurship

Twenty years ago Pameia fell in love with the concept of social entrepreneurship. but has come to realise that it's the modern corporation where change needs to happen:

"There is no doubt that the modern corporation as we know it today has empowered individual genius and bestowed great social benefits.  Yet it has also done social harm. Many of the ills of modern life – non-sustainable levels of personal and institutional debt, toxic air and water, workplace injury, loss of livelihoods for communities, political bribery – can be traced to corporate lack of responsibility to one or more constituencies.  This is not intentional.  No one wants to cause poverty, pollution, disease, unemployment and corruption.  Rather, they want to make profits. But in that pursuit, they may find anti-social behaviour pays. To achieve profits in the short term, corporations exact a “social and environmental price” and that price is high and rising."

Social entrepreneurship is typically funded and cultivated by nonprofit foundations   

In 2004 Ruthie Gilmore of Incite! described how nonprofit foundations as a dimension of neoliberalism, will not fund the revolution.


Ten years later, .

it was twenty years ago that an activist took up an invitation to serve on the steering group of the Committee to Re-elect the President.  His contribution was a critique of what has been described as Chicago School of economics and the belief that the only responsibility of business was to deliver a return to stakeholders.

It happened a year before Blairite advisor Charles Leadbeater wrote of the Rise of the Social Entrepreneur.  In 2002 Tony Blair mase social entrepreneurship government policy.

His treatise reasoned that any business could operate entirely for community benefit, given the consent of shareholder and directors and a declaration of this intent in the corporate charter.  He began with a question -

Through Clinton's office he was able to source a project in Russia known as the Tomsk Regional Initiative and from there went on to Crimea, where his work focussed on repatriated Tatars. He was interviewed by a diaspora leader when we introduced the business to the UK in 2004:

"Essentially, P-CED challenges conventional capitalism as an insufficient economic paradigm, as evidenced by billions of people in the world living in poverty in capitalist countries and otherwise. Under the conventional scheme, capitalism - enterprise for profit - has certainly transformed much of the world and created a new breed of people in capitalist societies, the middle class. That is a good thing. But, capitalism seems to have developed as far as it can to produce this new class of fairly comfortable people between rich and poor, at least in the West where it has flourished for quite some time.

The problem is that profit and money still tend to accumulate in the hands of comparatively few people. Money, symbolically representing wealth and ownership of material assets, is not an infinite resource. When it accumulates in enormous quantities in the hands of a few people, that means other people are going to be denied. If everyone in the world has enough to live a decent life and not in poverty, then there is no great problem with some people having far more than they need. But, that's not the case, and there are no rules in the previous capitalist system to fix that. Profit and numbers have no conscience, and anything done in their name has been accepted as an unavoidable aspect of capitalism.

I disagree. In 1996, I simply set up a hypothetical 'what if' proposition. What if some businesses decided to change their practices, or institute themselves as new enterprises completely, for the sole purpose of generating profits as usual and then using those profits to help people who have little or nothing? That's the way to correct and improve classic capitalism for the broadest benefit worldwide. It's now called social capitalism, or, social enterprise. I still call it the same as I did in 1996: people-centered economic development, and that remains the name of my organization and my web site.

At first, the idea seemed heresy - but not for long, simply because it made sense and it didn't step on the toes of any existing enterprises that were in business to enrich relatively few people. None of them were asked to change anything, but it left open the possibility of more forward-thinking people to step in and do business differently. Even now, I am astonished that the idea struck such a deep and sympathetic chord in so many people so quickly - especially in our top business schools, where one might have thought that they were all in it for the money, for personal wealth, with little regard to social benefit or the poorest of the poor."

That same year, we shared a business plan to tackle poverty with the social enterprise community, saying:

"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 P-CED as a profit-for-purpose business and engaging on the Skoll forum over the next few years, there would be a conversation on this very subject - Profit With a Purpose.    

At this time, September 2006, we'd just completed our proposal for a 'Marshall Plan' for Ukraine as I described to McKinsey readers as The New Bottom LIne

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.'

As violence erupted in 2014 it's Tony Blair, who made social entrepreneurship UK government policy chairing the panel which asks if such a thing is possible. Can #capitalism deliver a financial and social return. Note the order in which that is expressed. Quite the inverse of "people first" as we had argued.   

Delivering the first of our papers to the international Economics for Ecology conference in April 2009, we concluded:

"At this point, the simple fact is that regarding economic theory, no one knows what to do next.  Possibly this has escaped immediate attention in Ukraine, but, economists in the US as of the end of 2008 openly confessed that they do not know what to do.  So, we invented three trillion dollars, lent it to ourselves, and are trying to salvage a broken system so far by reestablishing the broken system with imaginary money.

Now there are, honestly, no answers.  It is all just guesswork, and not more than that.  What is not guesswork is that the broken – again – capitalist system, be it traditional economics theories in the West or hybrid communism/capitalism in China, is sitting in a world where the existence of human beings is at grave risk, and it's no longer alarmist to say so.

The question at hand is what to do next, and how to do it.  We all get to invent whatever new economics system that comes next, because we must."

Two events followed almost immediately. QE for the UK and a conference at Skoll's Oxford Centre on 'a new form of capitalism' 

"The global focus of business is changing and a new economy is emerging. Indeed Wal-Mart's CEO Lee Scott claims that sustainability is 'the single biggest business opportunity of the twenty-first century'.

It is a unique opportunity to hear from the top names who are shaping this new economy under one roof."

Ever since, I've been learning that we don't "all get to invent" whatever comes next.

It beggars belief that Pamela Hartigan missed all of this but this pales into insignificance when compared with the hijack of our work in Ukraine by the same corporate interests we now both know to be the real problem. Before he died on mission, founder Terry Hallman left this view of social enterprise.

'The term “social enterprise” in the various but similar forms in which it is being used today — 2008 — refers to enterprises created specifically to help those people that traditional capitalism and for profit enterprise don’t address for the simple reason that poor or insufficiently affluent people haven’t enough money to be of concern or interest. Put another way, social enterprise aims specifically to help and assist people who fall through the cracks. Allowing that some people do not matter, as things are turning out, allows that other people do not matter and those cracks are widening to swallow up more and more people. Social enterprise is the first concerted effort in the Information Age to at least attempt to rectify that problem, if only because letting it get worse and worse threatens more and more of us. Growing numbers of people are coming to understand that “them” might equal “me.” Call it compassion, or call it enlightened and increasingly impassioned self-interest. Either way, we are all in this together, and we will each have to decide for ourselves what it means to ignore someone to death, or not.'

Denial and dismissal from the social enterprise community would compound the obstacles we faced when raising awareness of abused children who'd become a profit centre.  As Martin Luther King jr put it - Our lives begin to end the day we become silent about things that matter.  These children didn't matter, neither did we.