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Capitalism: What is the purpose of business?

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 1996, it was with these words that an economic activist introduced his concept to US President Bill Clinton as a member of the steering group of the Committee to re-elect the President. It went on to challenge the assumption of shareholder primacy  :

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.

It drew attention to the risk of exclusion:

We are at the very beginning of a new type of society and civilization, the Information Age. Historically, this is only the third distinct age of civilization. We lived in an agricultural age for thousands of years, which gave way to the Industrial Revolution and Industrial Age during the last three hundred years. The Industrial Age is now giving way to the Information Revolution, which is giving rise to the Information Age. Understanding this, it is appropriate to be concerned with the impact this transition is having and will continue to have on the lives of all of us. 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.

Going on to describe how the information age would calalyse this new way of doing business for purpose, the paper concluded:

Clearly, profits can be used very effectively in ways other than traditional investment and profit outcomes. Moreover, this is not charity, it is business--good business. One P-CED firm could be expected to spin off dozens of new firms and businesses, all of which create new jobs and all of which operate under traditional free-enterprise practices. That is, if a spin-off business were to profit a million dollars a year, the owners can bank the money for themselves and their stockholders as is the normal practice. There is nothing wrong with individuals becoming wealthy. It is only when wealth begins to concentrate in the hands of a relative few at the expense of billions of others who are denied even a small share of finite wealth that trouble starts and physical, human suffering begins. It does not have to be this way. Massive greed and consequent massive human misery and suffering do not have to be accepted as a givens, unavoidable, intractable, irresolvable. Just changing the way business is done, if only by a few companies, can change the flow of wealth, ease and eliminate poverty, and leave us all with something better to worry about. Basic human needs such as food and shelter are fundamental human rights; there are more than enough resources available to go around--if we can just figure out how to share. It cannot be "Me first, mine first"; rather, "Me, too" is more the order of the day.

The paper was shared widely on the campus at UNC and then published in synopsis online free to use.

In 1999, the opportunity to deliver proof of concept came with the beginning of the global economic crisis in Russia, which led to the Tomsk Regonal Intiative. When this business was incorporated in the UK in 2004, founder Terry Hallman was interviewed by a disapora leader about this and his work in Crimea:

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.

In 2004, a call for support was made to UK government in a business plan to to tackle poverty:

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.

Profits can be set aside in part to address social needs, and often have been by way of small percentages of annual profits set aside for charitable and philanthropic causes by corporations. This need not necessarily be a small percentage. In fact, there is no reason why an enterprise cannot exist for the primary purpose of generating profit for social needs — i.e., a P-CED, or social, enterprise. This was seen to be the potential solution toward correcting the traditional model of capitalism, even if only in small-scale enterprises on an experimental basis.

“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.

The following year UK government introduced the Community Interest Company of which there are now more than 6000.

Today the same arguments support the case for B Corporations,  as this recent video illustrates: 

Soeaking of Conscious Capitalism and the Fully Human Organisation, Dr Raj Sisoda confirms that the purpose of business is people.

For P-CED primary focus became removing children from neglect in institutions. Every Child Desrves a Loving Family

For Muhammad Yunus social business is all about others, nothing about me The bottom line of Grameen Danone is the number of children removed from malnutrition.  Every child can afford their yoghurt

 

 

 

In 2009 Miguel D’Escoto Brockmann, the President of the United Nations General Assembly offered this in a speech:

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.

And finally Pope Francis saying No to An Economy of Exclusion

Human beings are themselves considered consumer goods to be used and then discarded. We have created a “throw away” culture which is now spreading. It is no longer simply about exploitation and oppression, but something new. Exclusion ultimately has to do with what it means to be a part of the society in which we live; those excluded are no longer society’s underside or its fringes or its disenfranchised – they are no longer even a part of it. The excluded are not the “exploited” but the outcast, the “leftovers”.

54. In this context, some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting. To sustain a lifestyle which excludes others, or to sustain enthusiasm for that selfish ideal, a globalization of indifference has developed. Almost without being aware of it, we end up being incapable of feeling compassion at the outcry of the poor, weeping for other people’s pain, and feeling a need to help them, as though all this were someone else’s responsibility and not our own. The culture of prosperity deadens us; we are thrilled if the market offers us something new to purchase. In the meantime all those lives stunted for lack of opportunity seem a mere spectacle; they fail to move us.

As we said, in a 'Marshall Plan' for Ukraine  where the 'leftovers' were institutionalised children.

'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. '

The new bottom line, is people

In his letter to US government of February 2008, Terry Hallman wrote:

Children are left in conditions of neglect and medical ignorance, without benefit of even the most basic modern medical interventions that could reduce their suffering and give them a life reflecting human compassion that the vast majority of Ukrainian citizens want for all of Ukraine’s children, in my experience. Whether these kids live or die is of little, if any, concern to mafia. Many kids die from sheer human neglect. Staffers cannot possibly provide the level of nurture needed, because there’s not enough staff. There’s not enough staff because taking care of kids isn’t even the point. The main function is extraction of money from state and regional budgets. Regardless of how and why this came about, whether or not this arrangement was intentional from the start or emerged out of Ukraine’s twisted, tragic modern history, that is what is going on.

In the end, he too died in poverty . Local human rights activists descibed his vision to place children in homes filled with love and care

Last year, speaking to a crown of 200,000 at the Vatican. Pope Francis said:

"It is heartbreaking that the world today is more concerned about the health of banks than homeless children dying of starvation and cold", and called on the Catholic Church to seek out those who need help the most."This is happening today. If investments in banks fall, it is a tragedy and people say 'what are we going to do?' but if people die of hunger, have nothing to eat or suffer from poor health, that's nothing. This is our crisis today,"