Business for Social Purpose: One Human Heart
Can social value be applied to tackle the problem of joblessness? An issue that has been with us since the Industrial Revolution and the Workhouse that William Wordsworth wrote of:
“Many, I believe, there are
Who live a life of virtuous decency,
Men who can hear the Decalogue and feel
No self-reproach; who of the moral law
Established in the land where they abide
Are strict observers; and not negligent
In acts of love to those with whom they dwell,
Their kindred, and the children of their blood.
Praise be to such, and to their slumbers peace!
— But of the poor man ask, the abject poor;
Go, and demand of him, if there be here
In this cold abstinence from evil deeds,
And these inevitable charities,
Wherewith to satisfy the human soul?
No — man is dear to man; the poorest poor
Long for some moments in a weary life
When they can know and feel that they have been,
Themselves, the fathers and the dealers-out
Of some small blessings; have been kind to such
As needed kindness, for this single cause,
That we have all of us one human heart.”
From ‘The Old Cumberland Beggar” by William Wordsworth
In 1996, social entrepreneurship was the domain of nonprofit foundations when one man argued that a business approach would be far more effective than charity. The business would in effect operate in the same way as a nonprofit, but rather than maximising shareholder returns, it would operate for the primary benefit of the community, using its profit to create social benefit.
‘In Chapel Hill, North Carolina, for example — where P-CED was born in 1997 — multi-millions of dollars are donated each year to charities, after which the money is typically given away, spent, and gone. Two churches adjacent to the university campus recently raised in excess of four million dollars to improve their buildings. (As a counterbalance, a third church chose to forego its own plans for a building and donated its entire building fund to a badly-needed support program for the elderly.) If twenty percent were set aside to fund a “P-CED enterprise”, that money would never go away, but would instead grow as it should in business.’
He argued that the purpose of business was to benefit people and over the next twenty years it would gradually gain acceptance among business leaders.
In the core argument of his paper for the Committee to Re-Elect the President, he warned of a future Information Age where large numbers of workers are disenfranchised, concluding:
“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.
“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.”
His life ended 15 years later on mission, when his body was discovered by local civil rights leaders, who wrote of his commitment to the vulnerable:
“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.”
We met first online, when he was working in Russia to source the Tomsk Regional Initiative and then in person on a visit to Crimea in 2002, where the repatriated Tatar community had been his focus.
In 2003, I discovered he was back in North Carolina fasting for economic rights and it led to me inviting him to stay in the UK when he was interviewed about his earlier work.
“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.”
As the name suggests, people-centered economic development had been influenced by the work of Carl R Rogers, who believed that given access to the necessary resources a person may resolve their own problems, flourish and grow.
In Tomsk this meant setting up a community microfinance back to give would be entrepreneurs access to loan funding and business training based on a ‘loan circle’ approach . The bank became self-sustaining in the second year of operation and over 5 years helped create nearly 10,000 startups, with over 96% surviving their first year.
Arriving in Britain in 2004, he repeated a warning of social unrest that had been made some years earlier in his 1996 position paper. It came in a business plan shared with the social enterprise community:
“The opportunity for poverty relief was identified not only as a moral but also as an increasingly pressing strategic imperative. People left to suffer and languish in poverty get one message very clearly: they are not important and do not matter. They are in effect told that they are disposable, expendable. Being left to suffer and die is, for the victim, little different than being done away with by more direct means. Poverty, especially where its harsher forms exist, puts people in self-defence mode, at which point the boundaries of civilization are crossed and we are back to the law of the jungle: kill or be killed. While the vast majority of people in poverty suffer quietly and with little protest, it is not safe to assume that everyone will react the same way. When in defence of family and friends, it is completely predictable that it should be only a matter of time until uprisings become sufficient to imperil an entire nation or region of the world. People with nothing have nothing to lose. Poverty was therefore deemed not only a moral catastrophe but also a time bomb waiting to explode. Poverty reduction and relief became the overriding principle and fundamental social objective in the emerging P-CED model.”
It was a prescient warning of what would come 7 years later with the Occupy Wall Street movement whic brought rioting to UK streets in 2011. In the wake of the riots, Eric Hobspawn spoke of how human being had become a surplus element of production:
The “Community Funding Enterprise” model would invest at least 50% of surplus into a community development fund, such as a local credit union which could then be applied to seed fund many more startup enterprises:
“Creating an enterprise for community funding will work for enriching a community just as well as it will work for enriching a few people. The profit motive remains intact. The enterprise is sustainable as long as it makes a profit, just as with any other business. The main limitation is the time it will take to grow enough to provide the money needed by the community. A credit union or bank, by comparison, can make sufficient money for a community available more quickly. These can be funded immediately with sufficient money to service entrepreneurs in a community. In turn, businesses and jobs are created quickly, reducing the overall financial needs of the community. The limitation of a bank or credit union is making enough money in the process of lending money to sustain itself. This money is made by charging interest rates, which must be high for micro loans. It requires much more time, work and therefore cost to lend one million dollars among a thousand different people than lending the same amount to one person, for example. As a result, the interest rates for micro loans need to be high in order to cover the operating costs of making these loans. Even with high interest rates — up to 35% in the present case — it remains difficult to earn sufficient profits to be able to make loans across a wide region such as Crimea where potential borrowers are spread out in remote areas across the region. The cost of outreach, training and multiple visits in that process can exceed 35% interest ultimately earned on micro-loans to remote areas.
“By combining a community-funding enterprise (CFE) with a micro-credit union, the limitations inherent in each one is greatly diminished. The CFE provides sufficient funding to ensure the operating costs of the credit union, reducing the risk that the credit union will have any need to use its capital to sustain itself. The credit union immediately makes available sufficient loan money to match the needs of the community, thereby eliminating the time needed for the CFE to generate the same amounts of money. Additionally, CFE profits over and above what is needed to help with the operating costs of the credit union can be put directly into the credit union. Over time, the amount of money used to originally fund the creation of the CFE is offset by CFE contributions to the credit union. The credit union is increased so that larger amounts of money become available either to make larger loans or to service more borrowers. Together, the CFE and credit union create an enterprise where the original funding not only remains but also increases with time. They complement and balance each other by addressing the economic goals both have in common and offsetting each other’s limitations.”
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