2012-12-16
The trap of an "impossible" profit rate
Wolfram Elsner
“Financial Capitalism – at Odds With Democracy: The trap of an "impossible" profit rate”
real-world economics review, issue no. 62, 15 December 2012, pp. 132-159
You may post and read comments on this paper at WordpressForum
2012-11-16
Got the picture ?
A rather tall graphical approach to understanding economics. I get the feeling it would look pretty similar if the same thing would be done for England or France or Germany....
2012-09-12
Why Bangladesh's Grameen Bank is under threat
The Grameen Bank is a micro-credit lending institution located in Bangladesh, and the only business corporation in the world to have won a Nobel Prize for its work. However, two recent documentaries about the bank have stirred up trouble. In addition, the bank has come under attack by the government of Bangladesh (known for its extreme corruption), which has been able to push out its founder Muhammed Yunus from the bank’s leadership position.
The latest crisis facing the bank is that Bangladesh’s Prime Minister Sheikh Hasina Wazed has overturned a 29-year law governing the bank, allowing the government to choose Yunus’s successor without consulting Grameen’s Board of Directors, according to the New York Times. What makes this so unfortunate is that the bank’s ownership (97 percent) lies in the hands of poor women, who have their life savings wrapped up in the bank.
Grameen Bank and its working model
While the Grameen Bank has not been without controversy (notably the accusations of tax evasion by the Norwegian documentary “Caught in Micro Debt” and the Spanish documentary “Microcredit”), the basic principles on which the bank was founded are what has made the bank so powerful.
The bank’s origins go back to a study by the Fulbright Scholar Muhammed Yunus in 1976, when he did a study about lending credit to the poor of Bangladesh in rural communities. By 1983, the Grameen Bank Project (named for the Bengali word “gram” or “village“) became a real bank, extending micro-loans to the poor without requiring collateral.
Today, the bank serves 8.4 million villagers in Bangladesh, whose collective savings of $1.4 billion finances the bank, according to the “New York Times”. More than 95 percent of its members are women, as studies have demonstrated that women were better able to “fight” poverty, particularly when their destiny is in their own hands. The board of directors governing the bank contains 12 members. Nine of those seats are held by elected village women, and three by the government.
Recognition by the Nobel Prize Committee
In 1994 the bank was awarded the Independence Day Award in Bangladesh, its most prestigious in-country recognition. In 2006, the Nobel Peace Prize was awarded to the bank and its founder Mohammed Yunus for their work in social development. Of course, it was met with jubilation within Bangladesh, but not everyone was happy.
In 1993 Imam Maulana Ibrahim blasted the bank for its “un-Islamic ways”, which included women defying their husbands and taking a vow not to be poor. This criticism is leveled at the pledge bank members take to adopt the “16 decisions” to advance four basic principles: hard work, discipline, unity, and courage.
Government’s actions against Grameen Bank
It appears that the actions taken by the Prime Minister may be specifically targeted at Yunus, who has been critical of the government. In removing him from the bank’s leadership position, the government suggested that he was beyond the official retirement age. Now they are suggesting that the women who serve on the bank’s Board of Directors are not educated enough to hold these positions.
Yet the educated lawmakers who are likely to replace them are likely to be rife with corruption. In June 2012, the World Bank canceled a $1.2 billion project due to its lack of confidence in the country’s economic leadership.
And so, Grameen Bank and millions of impoverished Bengali families remain under threat from their own government. A loss of participation by the members who compose the bank, and who have built it up throughout the years with their own hard work and energy would truly be a tragedy of epic proportions.
The latest crisis facing the bank is that Bangladesh’s Prime Minister Sheikh Hasina Wazed has overturned a 29-year law governing the bank, allowing the government to choose Yunus’s successor without consulting Grameen’s Board of Directors, according to the New York Times. What makes this so unfortunate is that the bank’s ownership (97 percent) lies in the hands of poor women, who have their life savings wrapped up in the bank.
Grameen Bank and its working model
While the Grameen Bank has not been without controversy (notably the accusations of tax evasion by the Norwegian documentary “Caught in Micro Debt” and the Spanish documentary “Microcredit”), the basic principles on which the bank was founded are what has made the bank so powerful.
The bank’s origins go back to a study by the Fulbright Scholar Muhammed Yunus in 1976, when he did a study about lending credit to the poor of Bangladesh in rural communities. By 1983, the Grameen Bank Project (named for the Bengali word “gram” or “village“) became a real bank, extending micro-loans to the poor without requiring collateral.
Today, the bank serves 8.4 million villagers in Bangladesh, whose collective savings of $1.4 billion finances the bank, according to the “New York Times”. More than 95 percent of its members are women, as studies have demonstrated that women were better able to “fight” poverty, particularly when their destiny is in their own hands. The board of directors governing the bank contains 12 members. Nine of those seats are held by elected village women, and three by the government.
Recognition by the Nobel Prize Committee
In 1994 the bank was awarded the Independence Day Award in Bangladesh, its most prestigious in-country recognition. In 2006, the Nobel Peace Prize was awarded to the bank and its founder Mohammed Yunus for their work in social development. Of course, it was met with jubilation within Bangladesh, but not everyone was happy.
In 1993 Imam Maulana Ibrahim blasted the bank for its “un-Islamic ways”, which included women defying their husbands and taking a vow not to be poor. This criticism is leveled at the pledge bank members take to adopt the “16 decisions” to advance four basic principles: hard work, discipline, unity, and courage.
Government’s actions against Grameen Bank
It appears that the actions taken by the Prime Minister may be specifically targeted at Yunus, who has been critical of the government. In removing him from the bank’s leadership position, the government suggested that he was beyond the official retirement age. Now they are suggesting that the women who serve on the bank’s Board of Directors are not educated enough to hold these positions.
Yet the educated lawmakers who are likely to replace them are likely to be rife with corruption. In June 2012, the World Bank canceled a $1.2 billion project due to its lack of confidence in the country’s economic leadership.
And so, Grameen Bank and millions of impoverished Bengali families remain under threat from their own government. A loss of participation by the members who compose the bank, and who have built it up throughout the years with their own hard work and energy would truly be a tragedy of epic proportions.
2012-06-14
The Failure of Capitalism
We need limits to wealth an profit and a new monetary system which is not profit- or power driven, but helps to reach ecological and social aims.
2011-12-24
OccupyEconomics
We are the 99%. We need to develop postcapitalistic economics aiming at an economy bringing us justice, sustainability, true efficiency and true democracy. Most economists are mislead by the mainstream of this science, therefore we cannot leave it up to them.
To start this all up, we have to get some things straight around the dominant money theme...
This blog works closely togeather with "Ökonomie für Alle", a forum in german language. We would like to serve an international audience. We welcome everybody interested in joining our work.
To start this all up, we have to get some things straight around the dominant money theme...
This blog works closely togeather with "Ökonomie für Alle", a forum in german language. We would like to serve an international audience. We welcome everybody interested in joining our work.
2009-02-19
Social Business
Presently, the dominant business form is the profit-maximizing business (PMB). Yunus proposes an alternative, and its promotion is the main goal of the book: the social business. A social business is a business, it is not a charity, it is not a non-profit. It operates on business principles and aims to cover its own costs, rather than rely on other funding as charities do. The difference between a social business and PMB is that the explicit goal of a social business is to solve a social problem, meet a social need and provide a social benefit. The product or service offered by a social business is not free. It charges a fee (and it can be extremely low fees) in order to cover its costs in order to be self-sustaining and to potentially grow and expand (much as Grameen Bank has done).
The major difference here is that the principle of profit maximization is replaced with the principle of social benefit. The success of a social business will not be measured by the size of its profits or the dividends distributed to its investors but how much of a positive impact it has had in solving, or at least alleviating, the social problem it was created to solve.
Another major difference between a PMB and a social business is that investors in a social business are entitled to recover the amount of their investment but the social business does NOT distribute dividends. Money made gets reinvested in the business itself. As Yunus puts it, a social business is a "non-loss, non-dividend business". The point is to generate profits to better serve the poor of the planet. So, a social business is
- self-sustaining
- self-propelling
- self-perpetuating
- self-expanding
Investors get their money back or remain owners of the company. But no dividends. Otherwise, then, social businesses will compete on the same terms as PMBs, against PMBs. Social businesses will target socially minded investors who are not in it for the money. Ideally, Yunus wants to have a social stock market where people could invest based on the success of various social businesses.
Two Types of Social Businesses
Yunus distinguishes two types of social businesses:
Type I: Companies that focus on providing social benefits rather than making a profit. The nature of the goods and services they provide is geared toward social benefit (food, housing, health care, education, etc.). These benefits can be social or environmental and they would be provided while covering the business's costs through the sale of goods and services, with no dividends.
Type II: PMBs that are owned by the poor. Here, the social benefit comes from the generation of profit and dividends distributed to the poor who own the company. The main goal then is the reduction of poverty through profit maximizing. The goods and services provided are not necessarily social benefits. The social benefit is the very ownership of the company. Grameen Bank is a Type II business.
And it is possible to have social businesses combining I and II. What is not possible, and Yunus is adamant about this, is to have hybrids of PMBs and social businesses. Overtime the PMB side would always take over the social side.
SOCIAL BUSINESSES ARE THE FUTURE
Nobel Peace Prize winner Muhammad Yunus urged Stanford students to use their talents to develop "social businesses" to solve pressing problems such as global warming, unemployment and poverty.
Yunus is famous for thinking small, but in a big way. He is a pioneer "micro-credit entrepreneur" whose Grameen Bank has 7.5 million impoverished borrowers with loans averaging less than $200 and a payback rate of 98 percent. He also focuses on silver linings: The world's economic crisis offers "an enormous opportunity" to design a fairer financial system, he said in a talk Friday at Stanford.
Now it's a question: who's more creditworthy, the rich or the poor?" Yunus said, drawing laughs from the standing-room-only audience. "So why don't we create a financial system that's an inclusive system?"
Technology offers a powerful weapon against poverty, Yunus said. He urged technology-minded students to live among the people they seek to help before designing their "high-impact social ventures."
This year, Grameen Bank opened a branch in Queens, New York, where Yunus said there are now 380 borrowers, all women, with average loan amounts of $2,200 without collateral and a 99.5 percent repayment rate.
"We follow the same procedures as in Bangladesh and when other things are collapsing it's as strong as ever."
New York borrowers have created businesses in areas such as child care, elder care, housecleaning and flower arranging.
"Today we're small, but if we can enlarge it to, say, 10,000 borrowers costs will be covered with an interest rate of 15 percent," Yunus said.
Grameen also makes interest-free loans to beggars in poor countries, he said. With average loans of $15, the bank encourages the beggars going house to house to carry cookies, candies or toys to sell, giving people the option to give money or buy something.
"More than 7,000 have stopped begging completely and the remaining 90,000 or so are part-time beggars, mixing begging and selling at the same time.
"It's an amazing experience to be of some help to a beggar," he said. "They're very smart -- they know which houses are good for begging and which are good for selling. They don't have to go to business school; they already know about market segmentation."
Yunus outlined numerous other Grameen ventures, including a hospital and a partnership with the French company Groupe Danone to produce low-cost yogurt containing nutrients Bangladeshi children are missing in their diet. Grameen also has partnered with a French water company, Veolia, to offer clean water in Bangladeshi villages at a price of a penny for 10 liters.
"People can bring their own container, take 10 liters and that's it," Yunus said. "If it works and pays back, then we can repeat it.
"Once you develop a prototype you develop a seed. Now multiply the seed and it can be everywhere.
"That's the challenge to young people in a school like Stanford -- to develop a social business, because that's where the future lies," Yunus said.
"We see every day how human beings are packed with unlimited capacity, unlimited potential. They're not helpless people; they're as capable as anyone else. It's that society never gave them an opportunity to unwrap that gift. It's a matter of removing the barrier.
"We have not allowed the bulk of the population on this planet to unleash their creativity and talents, and that is our loss," he said.
(Writer Chris Kenrick, a former editor at the Weekly, can be e-mailed at christina_kenrick@yahoo.com.)
Yunus is famous for thinking small, but in a big way. He is a pioneer "micro-credit entrepreneur" whose Grameen Bank has 7.5 million impoverished borrowers with loans averaging less than $200 and a payback rate of 98 percent. He also focuses on silver linings: The world's economic crisis offers "an enormous opportunity" to design a fairer financial system, he said in a talk Friday at Stanford.
Now it's a question: who's more creditworthy, the rich or the poor?" Yunus said, drawing laughs from the standing-room-only audience. "So why don't we create a financial system that's an inclusive system?"
Technology offers a powerful weapon against poverty, Yunus said. He urged technology-minded students to live among the people they seek to help before designing their "high-impact social ventures."
This year, Grameen Bank opened a branch in Queens, New York, where Yunus said there are now 380 borrowers, all women, with average loan amounts of $2,200 without collateral and a 99.5 percent repayment rate.
"We follow the same procedures as in Bangladesh and when other things are collapsing it's as strong as ever."
New York borrowers have created businesses in areas such as child care, elder care, housecleaning and flower arranging.
"Today we're small, but if we can enlarge it to, say, 10,000 borrowers costs will be covered with an interest rate of 15 percent," Yunus said.
Grameen also makes interest-free loans to beggars in poor countries, he said. With average loans of $15, the bank encourages the beggars going house to house to carry cookies, candies or toys to sell, giving people the option to give money or buy something.
"More than 7,000 have stopped begging completely and the remaining 90,000 or so are part-time beggars, mixing begging and selling at the same time.
"It's an amazing experience to be of some help to a beggar," he said. "They're very smart -- they know which houses are good for begging and which are good for selling. They don't have to go to business school; they already know about market segmentation."
Yunus outlined numerous other Grameen ventures, including a hospital and a partnership with the French company Groupe Danone to produce low-cost yogurt containing nutrients Bangladeshi children are missing in their diet. Grameen also has partnered with a French water company, Veolia, to offer clean water in Bangladeshi villages at a price of a penny for 10 liters.
"People can bring their own container, take 10 liters and that's it," Yunus said. "If it works and pays back, then we can repeat it.
"Once you develop a prototype you develop a seed. Now multiply the seed and it can be everywhere.
"That's the challenge to young people in a school like Stanford -- to develop a social business, because that's where the future lies," Yunus said.
"We see every day how human beings are packed with unlimited capacity, unlimited potential. They're not helpless people; they're as capable as anyone else. It's that society never gave them an opportunity to unwrap that gift. It's a matter of removing the barrier.
"We have not allowed the bulk of the population on this planet to unleash their creativity and talents, and that is our loss," he said.
(Writer Chris Kenrick, a former editor at the Weekly, can be e-mailed at christina_kenrick@yahoo.com.)
Subscribe to:
Posts (Atom)
