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The Neoliberal takeover of social enterprise

It would be difficult to deny an association between social enterprise and neoliberalism in the UK context. After all, it was introduced as government policy by Tony Blair and New Labour. The 2009 Social Enterprise Summit had been hosted by Lord Mandelson, who is no stranger to predatory oligarchs.

While I endorse what Jyoti Sharma has argued about this in Stanford Social Innovation Review, my standpoint is that of a self sustaining social business which argued against neoliberalism in favour of an economy where people come before profit maximisation. We called it people-centered economics.

In the core argument of the 1996 paper which described this model, our late founder argued 

"Profit rules, people are expendable commodities represented by numbers.  The solution, and only solution, is to modify that output, measuring profit in terms of real human beings instead of numbers."

"Isn't the purpose of business to serve people?", he reasoned

'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.'

More than a decade ago, it was Ruthie Gilmore of the Incite! organisation who spoke of the Non-profit Industrial Complex and how the proceeds of extractive capitalism go to foundations which preserve the interests of the wealthy.  They had failed to find an autonomous model and because of this, the revolution will not be funded.

 

By and large, the funding of social enterpreneurship had been through such foundations. For example Ashoka and Skoll.

Back in 2006, on Skoll World Forum, there was a discussion on Profit for a Purpose  which is how we described the People-Centered approach. We do business to create profit but distribute no dividends, using profit for social benefit.

This was described in the interview which marked our introduction to the UK

'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.'

It's been said, I remember not where, that the best way to prevent a revolution is to join it and change its direction. That would describe how "profit for purpose" was edged out by the similar sounding concept of "profit with purpose", "doing well by doing good" and other marketing taglines.

It is something of a paradox that the argument for a 'profit for purpose' approach should be so well endorsed by readers of McKinsey's Long Term Capitalism challenge, where I described The New Bottom Line and a Marshall Plan for Ukraine.    

'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. '

As it was reasoned later, in an interview with Axiom News , it was possible to raise investment capital from those expecting a return on investment without changing our own non dividend distribution strategy

“When we get into divvying up financial profits it’s too easy to get sidetracked by a myriad of possibilities along those lines,” Hallman tells Axiom News.

“In that case there is distraction from the primary objective of any given project, the social concerns for people at risk of exclusion, or already excluded, from the opportunity to have a decent, safe, secure life.”

Hallman adds that if “a lot of emphasis is placed on financial returns, the usual suspects can and will get in, figure out to how strip out the social aspects of social businesses and keep all profits to themselves.”

“Think of the corporate raiders on the loose in the U.S. in the 1980s. Same thing. That mindset is the driving force that has created such need for social businesses to begin with.”

It's not long before neoliberals are on the case. In late 2010, the harbinger is the arrival of the "pay for success" or social impact bond. It's rooted in New Labour and what they described as the social investment task force. It's no surprise that a venture capitalist heads it. Neoliberalism shifts from the Invisible Hand of self interest to an Invisible Heart. 

 

At the same time, from the spiritual heartland of Chicago school economics comes the concept of Creating Shared Value. Harvard's Michael Porter describes the urgency of the need for corporations to participate in social and economic development.   CSR had created little impact.

Applying the entire resources of business to address social issues, isn't a million miles away from the argument that profit can be applied to create social benefit as the 'Marshall Plan' had reasoned:      

The fundamental difference lay in the challenge to shareholder primacy described in the 1996 paper, with the assertion that a business could operate entirely for social benefit, if that was the will of directors and shareholder from inception. Law professor Lynne Stout later described this as the Shareholder Value Myth   

One of the most intractable problems from our work in Ukraine was that of corruption in institutional childcare. With his shocking insights of 'Death Camps, For Children' founder Terry Hallman had pointed to the root of the problems threatening social stability:    

'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..'

One of these insanely greedly oligarchs is a benefactor to both Tony Blair's Faith Foundation and the Clinton Foundation. He hosts the Philanthropic Roundtable att Davos and in 2104, as the social crisis in Ukraine turned toward violent conflict.  Tony Blair of all people, chaired a discussion on capitalism creating social benefit. as was argued in the 'Marshall Plan' for Ukraine 7 years earlier: 

 

Blair is the eclipsed by Lord Mandelson, who joins up with another oligarch in a bid to leverage 300 billion Euros for another 'Marshall Plan'. As Rada member and anti corruption blogger Sergeii Leschenenko puts it:

"In an attempt not to be branded as a money launderer and to save himself from being transported to America in handcuffs, Firtash has launched a multifaceted campaign to clean up his image, recruiting dozens of politicians, intellectuals, lobbyists and cultural figures in Europe and the US. "