Can Business Save The World?

This week I am finally back in the office after the nastiest bout of flu I have had in years.

One advantage of having all that time was it allowed me to catch up on my reading. I have just finished Michael Edwards new book Small Change, Why Business Won’t Save the World. Edwards has had a prestigious career in the sector and was for many years a director of the Ford Foundation in New York.

As in his previous works, Edwards’ argument focuses on deconstructing what he calls “Philanthrocapitalism”, the trend in the non profit sector towards market forces and business discipline being harnessed to expediate greater social change. Grouping together a slightly amorphous group including social entrepreneurs, venture philanthropists, and social investors he picks apart the philanthrocapitalist ideology for its lack of evidence, its arrogance and crucially that it may undermine the more traditional non profit role of stimulating social change.

Edwards does not believe that more effective use of the market can be a means to solve many complex social problems because often it is the market which has caused those problems. Real social change can only come about from the grass roots advocacy role within civil society stimulated by a desire for social justice rather than income generation.

Citing Albert Cho, an academic who studies this field worldwide, he draws the distinction between “ the social entrepreneur asking, ‘how can I mobilize recourses to solve this issue,’ rather than, ‘why does this issue exist?’” Edwards challenges us: “Do we want to address the symptoms of social inequity, or do we want genuine social transformation?”

This is a fascinating challenge to our sector where the wind is most definitely in the sales of the social entrepreneurs and investors. I think Edwards is right to highlight the limitations of philanthrocapitalism, and the fact that the distinction between social enterprise and the more traditional non profit sector is often over stated, particularly by social entrepreneurs themselves. (I wrote a blog on this topic a few weeks ago.) As Edwards reports public charities in the states already receive over 70% of their income from the sale of goods or services. The danger for social enterprise is that as presenting itself as the panacea it can only disappoint. An interesting sub-text for Edwards is the fact that new philanthrocapitalists are often better at presenting themselves and explaining the changes they are trying to bring about than parts of the traditional sector, perhaps because of a corporate training in communications. But that doesn’t necessarily mean that they are better at bringing about real social change or have any firmer evidence for those changes.

For me though this challenge is slightly overstated. It would of course be a tragedy if what Edwards calls citizen philanthropy was lost at the expense of purely market based solutions to tacking social justice; but that isn’t really on the cards. Instead the two can and should exist side by side. Both have faults and both have merits. Some social problems can be tackled by using the market, others can’t. It is incumbent on us in the sector to try to fully understand the causes of those problems so we can develop the right solutions. As Edwards himself highlights “Its not that our old ideas about social transformation were perfect; it’s that our new ideas are imperfect, too, and almost certainly won’t turn out as planned”.

Also in the book there is a particularly good analysis of the difficulties of comparing different organisations and the perils of trying to develop simple tools to measure comparative performance, and a healthy challenge to both philanthrocapitalists and the foundation community to improve accountability. I’d recommend it to anyone interested in where the sector is headed.