Globalization and Social Entrepreneurship

Over the past quarter, we have covered a significant amount of information regarding social justice and its influence on business. During the closing weeks of the course, we went over globalization problems and solutions, and learned more about social entrepreneurship. The alignment of both of these topics has been my strongest take-away from this course, and I am excited to learn more about social entrepreneurial opportunities that exist in the world today.

The readings provided a good background into the effects of globalization, and whether we can summarize them as good or bad. Generally speaking, opening up the global market to third world communities has led to a stronger economic and infrastructure development, however it has come at a price. The movie Life and Debt, showed how Jamaica was negatively impacted by the cheap, mass-produced and subsidized commodities that became available to the Jamaican people. Unable to compete, many Jamiacan farmers had to look elsewhere for work. Instead of creating self-sufficiency, the large MNCs invested the capital to open up new foreign markets and drove local markets out of business. While globalization has spurred up commerce, education, and infrastructure in many areas, it has also taken away from the harmony and sustainability that exists with a community-based traditional market. In Alternatives to Globalization: A Better World is Possible, Helena Norberg-Hodge asks, “(In a community-based economy) The people were cared for and the environment was well sustained—which criteria for judging a society could be more important?”

How do we judge the success of a society? Should it be based on economic progress? What about human health or happiness? These philosophical questions are brought to attention in David Korten’s book Agenda for a New Economy. Korten compares the opinions of two economists who both agree that there is a need for action to reverse environmental damage and eliminate poverty—Jeffrey Sachs and James Gustave Speth. Korten proclaims that his perspective is aligned closer to Speth, and that is evident in his writing. While Sachs feels that these issues can be resolved through foreign aid and new technologies, Speth asserts that capitalism is flawed and wealth redistribution is required to eliminate poverty. This argument brings me back to our first intensive when Jill presented the quadrant map (an image is displayed on my first reflective post.) If I were to assign a quadrant for each of these gentlemen Sachs and Speth would be found under reform and replace, respectively.

We were graced with David Korten’s attendance on an Elluminate session one week, and I found his ideas quite interesting and unordinary. The biggest problem with radical ideas I have is the likelihood of implementation. How do we solve the world’s issues? By making easy incremental changes or ushering in an entirely different set of rules? I \ relate this question to the debate on healthcare reform that is alive today (and just passed! Woot!). There will always be a strong bloc of the population that is against any large shift from the status quo. Sachs and the rest of the “reform” quadrant work to find a solution within the boundaries of our current system. I still place myself in that section.

One proposed “reform” solution that I went over in depth was the base of the pyramid theory. The premise of this theory is that there are approximately 4 billion people in the world who are currently underserved in today’s economy. The income of that market is less than $2 per day, but despite this, there are opportunities for MNCs to create new markets and profit from this sector. The creation of new markets would spur the economic development of the poor, and reduce poverty. I had been introduced to the work of Stuart Hart (Capitalism at the Crossroads) and C.K. Pralahad (The Fortune at the Bottom of the Pyramid: Eradicating Proverty through Profits) during my senior year, who covered this topic. I was excited to learn more, and decided to make this the topic of my book report. One of our readings during Week 8 was Aneel Karnani’s article The Mirage of Marketing to the Bottom of the Pyramid: How the Private Sector Can Help Alleviate Poverty, and challenged the viewpoints of the theorists.

My excitement about this topic has had its ebb and flow, but ultimately I see how many of the case studies Pralahad uses for his argument can serve the social entrepreneur. Both Prahalad and Karnani proclaim that there is, in fact, a market open for business. However, it takes ingenuity, creativity, scalability, collaboration, and local learning to achieve an effective business model. “All elements of the business—capital intensity, work flow, volume, manufacturing and logistics, design of products, its maintenance, pricing, use of people, skill development, and building an ecosystem of specialized suppliers—must be challenged and examined without relaxing the self-imposed constraints.” (Prahalad) These opportunities can be claimed by the financial capital of an MNC, or the relentless pursuit of a social entrepreneur. My largest concern with MNC’s adopting Base of the Pyramid strategies is the exploitation of the poor. I think businesses need to tread very lightly and be regulated very heavily. Transparency of operations through CSR reporting should be a requisite to those who decide to open markets to the BOP. Also, there needs to be a strong understanding of the local economy and a willingness to work within those constraints.

I strongly believe that the social entrepreneur is better equipped and a more appropriate enterprise to handle these opportunities as opposed to large MNCs. Social entrepreneurs can adapt their business models to fit with cultural differences. Reaching the rural poor would be a difficult undertaking for an MNC whose business relies on scalability and large distribution centers. Most importantly, the social entrepreneur has a vested interest in the well being of their stakeholders and the community.

“As the number of leading pattern-changing social entrepreneurs has been increasing everywhere, and as the geographic reach of their ideas has been expanding ever more rapidly, the rate of plowing and seeding therefore has multiplied. As have the number of local changemakers. This whole process is enormously contagious. As the number of large-scale entrepreneurs and local changemakers multiplies, so does the number of support institutions, all of these make the next generation of entrepreneuring and changemaking easier.”

It was refreshing to read those words from Everyone a Changemaker: Social Entrepreneurship’s Ultimate Goal. Reflecting over the entire course, social entrepreneurship has been a resounding chord that has led me down trails of self-interested research. So is globalization good or bad? I think the jury is still out. Although many disparities have taken place in the past, I believe that globalization can increase the education, infrastructure and technology of the poor around the world. Most importantly, this exposure to the global market can pave the way for the social entrepreneur. My hope is that through continued transparency of institutions, and freedom of information, corporations will be too heavily regulated to commit the injustices that have been made in the past. I admit, however, that I feel like I have only scratched the surface of this global issue, and I am excited to learn more through both my education at BGI and my own discovery.

Understanding Privilege and Poverty

The past few weeks have continued to challenge my long-standing perception of myself and the world around me. Week Four began with a look into the community dynamics in local economies, with a powerful video on Cuba’s community during their “Special Period.” The intensive week followed with a look into community economic development and an exercise in understanding of social privileges. This past week, we were introduced to Social Entrepreneurship and the future of the social enterprise. Undoubtedly, the past few weeks have continued to deepen my understanding of social justice and how it relates to business.

During Week Four, I found reading entitled Building Communities from the Inside Out: A Path Toward Finding and Mobilizing a Community's Assets, to be exceptionally interesting. Kretzmann and McKnight made an honest evaluation of troubled neighborhoods and how to effectively develop them into functional communities. The authors discussed two main ways of handling these devastated neighborhoods: through traditional, needs-driven social welfare, or a more effective path of capacity-focused development. I found this particularly interesting because it deals with a core argument from many conservatives: Social programs (like welfare, for instance) are short-term solutions that ultimately won’t motivate the recipient to get out of poverty, and will continue the reliance on the working taxpayer for funding. This reading validated that sentiment, defining a “victim” mentality that constantly tries to find ways of exploiting the system rather than being a productive member of the community. Poverty is a real issue and although social programs at some level are necessary, I don’t believe they are a sustainable solution. Kretzmann and McKnight suggest that communities map their institutional, association, and individual assets to facilitate full contributors to the community-building process. Whether it is a team or community, I believe everyone wants to be part of something, and creating opportunities for individuals to work together can help reduce the “client dependency” mentality members of this community have lived by. This reading reminded me of the Biblical proverb:

“Give a man a fish; you have fed him for today. Teach a man to fish; and you have fed him for a lifetime.” - Author unknown

Our intensive week reminded me why there are certain topics that benefit from the large community we are a part of at IslandWood. In our small group classes, we did an exercise to recognize who in our community has grown up with privilege, and reversely who has struggled more to get ahead. In a group of MBA students, it is fair to say that we all had a certain amount of privilege just to get where we are. This is a very delicate subject, but it was reassuring to be discussing it in an open forum with peers that I trust. (For that reason, I am grateful to be a part of this insightful and diverse community.)

Acknowledging that I have had innate privilege has been fairly easy, but there are times that I forget just how easy I have it. I was discussing the country’s rising unemployment rate with my girlfriend, Christie, and pointing the majority of the blame at the unemployed workers. My argument was that there are plenty of job openings out there (I am constantly perusing the job ads) and people must consider career changes, such as moving into a different trade or making less money in order to get employed. While I still believe there is some truth to that, I realized that my conclusions were based on a faulty premise. Christie pointed out that many people lost their jobs in a specific manufacturing trade, and the jobs that they are most qualified for don’t exist anymore. Secondly, many people who are unemployed do not have the same opportunities as a young white male who is just starting a career. After seeing her point, I was a little embarrassed that I would make those assertions without fully realizing certain forces at play, especially since I was studying these issues. I have never been fired or turned down for a job. Gaining employment with ease has been a social privilege that I hadn’t fully realized until now.

This past week we took a look at social entrepreneurship. Prior to this week, I was unclear on precisely what constituted as a social enterprise. After reading The Meaning of Social Entrepreneurship, I learned that it is basically an entrepreneur who creates a business with some explicit and central social mission. The biggest challenge for the social enterprise to succeed is the contradicting focus of social gains in a market that rewards financial success. Social entrepreneurs are a rare breed that must learn how to balance these factors. One such individual is Robert Eggers, who was a CAIR at the second intensive. Robert started a restaurant that trained and employed the homeless in the culinary arts, and helped them transition into the workforce. While he has successfully graduated 700 cooks, I am curious how many of them were able to maintain that employment well after his intervention.

Robert spoke to that effect, stating that some employers felt that hiring homeless individuals was too risky, and it was unlikely they would be as capable and motivated as someone who hadn’t ever lived on the streets. As unfortunate as this sounds, labor capital is highly variable and employee attrition can drastically affect a company’s workflow. If the employer doesn’t have a strong social mission at his company, what is the incentive for hiring an individual who may not be the most qualified or dependable? For this reason, I believe that there should be a tax credit to hire these employees. As long as the blue-collar manufacturing jobs continue to get outsourced and the low-income individuals struggle for employment, it is necessary that the government take some action in an effort to reduce the drastic inevitable consequences. A small business tax credit for hiring new employees has passed through the legislature recently, but this just provides an incentive to hire anybody, not necessarily those that need it most. Theoretically, a government subsidy to hire the less fortunate will eradicate the neediness of the “clients” and will transform them into “producers,” as I discussed earlier.

I think the most challenging thing about Social Justice is its acknowledgment. As Americans, we value our individualism and the wealth of opportunities at our feet. We use words like motivation, hard work, and persistence to describe the characteristics it takes to succeed in life. The truth, however, is that the level of adversity one faces on the road to success is relative to their own experiences and their veiled privilege. Even though I feel I am well-versed on the fundamentals of social justice, I still make judgments largely based on my own experience. It isn’t something that can be learned, but practiced. My goal is to become more vigilant of the social injustices I am surrounded by, and bring them into the light—just as Christie did for me.

Reflective Essay #1: The Revival of Corporate Accountability

The past few weeks have been an inspiring journey in understanding and appreciating human life. Prior to the first intensive, the massive 7.0 earthquake in Haiti struck leaving 3 million people dead, injured, and/or displaced from their homes. The following week, we recognized Martin Luther King Day on Monday. Meanwhile, I am researching the importance of Social Justice in life and in business. It’s ironic how separate events coincidentally converge at the right time to fuel my reflection. I found the impact of the Haiti quake hit me harder than past natural disasters. Granted, this one is especially destructive, but the concern I had for Haiti people and the hopeless depression I felt was unusual and unexpected. On MLK Day, I reflected more on the ambition and achievements of Dr. King than I have in the past. Perhaps it is just a sign of maturing, but I can’t help to consider that my education is opening my eyes to the world around me.

I would bet that the first couple weeks of this course have provided me with more enlightenment than many of my classmates. Despite achieving a bachelor’s degree in Business, social justice is a topic that I have had little to no education in. Although I took required classes in international business and cultural diversity, there weren’t any courses that examined causes of poverty, child labor, unfair wages, or other major business issues that are detrimental to our fellow man. Perhaps there weren’t enough hours in the school day, or it was a controversial topic that was deemed “inappropriate” for the classroom, but it has excited my interest in the subject.

At the intensive, the second half of our course kicked off with an analysis of the “Great Place to Work” survey that was self-administered by the class. One strong takeaway that I got from that was great news for business: Work engagement and feeling valued were the most important characteristics employees felt towards their job! It wasn’t more free time, higher pay, or less stress, rather, they were qualities that were easily attainable and could only serve to increase employee morale, production, and retention. I forget the source, but I remember reading that employers have taken a similar survey and responded with higher pay and less stress as being bigger job motivators. The employer response only validates the average employee’s assertion that “feeling valued” is important, and likely not a concern of the average employer. This revelation proves the importance of a deep understanding of social justice and how it relates to business. Although, social justice has its obvious role in the triple bottom line, human resources play an invaluable role in the production and profitability of a company.

On the Friday of the intensive, Jill concluded her lecture by displaying a quadrant map displayed below:

She posed the question: Where do you feel that we need to be? Initially, I had some issues with this diagram and the limited options that were provided. Am I supposed to believe that the system we have in place is really a Win-Lose? This was a difficult thing for me to swallow, but continued research followed with classmate discussion helped me understand that our system is indeed flawed. The hope I have in our current capitalistic system puts my position on the left of the quadrant map, and naturally I am drawn northerly to a “Win-Win World.” The word “reform” felt a little strong at first, but I can see how that classification is suitable when describing the changes that are necessary to achieve a world with less poverty and social injustices. The good news is (I am always on the look out for positives amidst the negatives!), our system (in its relative infancy) is experiencing the natural reform that we are hoping for. Among the child-labor stories of Nike, the unfair wages of Walmart, and the dishonesty of Enron, there are many stories of ethical companies that achieve success largely based on their high regard for humanity and their moral character.

Imagine a world in which the excess energy from one business would be used to heat another. Where buildings need less and less energy and where “regenerative” commercial buildings—ones that create more energy than they use—are being designed. A world in which environmentally sound products and processes would be more cost-effective than wasteful ones. A world in which corporations such as Costco, Nike, BP, and countless others are forming partnerships with environmental and social justice organizations to ensure better stewardship of the earth and better livelihood in the developing world. Now, stop imagining—that world is already emerging.

-An excerpt from The Necessary Revolution by Peter Senge

I read Senge’s book last quarter, and was reassured that although the Industrial Revolution was flawed, we have the ability to learn from our missteps and get it right this time. The “take, make, waste” way of thinking that has dominated the developed world for the past couple hundred years is coming to an end! Environmental and social challenges such as climate change, the depletion of our natural resources, cradle-to-grave consumerism, and a widening economic divide is ushering in a large opportunity for change. Thanks to technologies like the internet, we have an unlimited resource to educate ourselves. Also, as our world becomes more interconnected, we become cognizant to the consequences of unethical corporate actions. I am optimistic that business will change for good, I just hope the “Necessary Revolution” happens sooner rather than later. J

Although I have my qualms with the movie, The Corporation (2003), there were a few topics that I found to be interesting, and stand in the way of the revolution. The biggest fear I have is that Corporate America’s talent at Perception Control slows down our progress to a solution. Growth-grabbing corporations have become experts in public purchasing persuasion. Although, this is mostly done through effective advertising, branding, and marketing campaigns, I believe that the perception Americans have on companies are inevitably defined by the corporation itself. If the corporations can control the public perception of them, then who holds them accountable for their actions? I created a causal loop diagram to help illustrate my thoughts.

Our democratic government operates through a system of checks and balances to ensure that none of the three branches of government can operate exclusively or despotically. For example, the President cannot declare war without the approval of the Congress (on second thought that may have been a poor example). However, the Circle of Control above illustrates how the only one keeping the corporation accountable is themselves. If you ask the CEO who holds them accountable, he would say the shareholders and board of directors do. We all know that profit dictates their decisions. The corporation’s profit is controlled by the public’s perceived need for the corporation’s products or services. This need is often created, inflated, or embellished by the corporation itself. As long as the corporation can control the public’s perception and shareholders are solely motivated by profit, this causes an inadequacy in corporate accountability. I also learned from watching The Corporation that according to the U.S. Court of Appeals, falsifying news is not against the law! After all, our news organizations are private corporations as well, and are often part of a large conglomerate that has a vested interest in preserving an inaccurate public perception. The film asks: “Who will preserve our ability to make our own decisions?”

To quote a favorite sci-fi show: The truth is out there! As the public continues to become interconnected through social media and the internet becomes a trusted source of the people and for the people, I am confident that many of these corporate abilities from the previous era will naturally become eradicated. I am a firm believer in a couple principles:

1. By nature, people are good.
2. Good always triumphs over evil.

Much like the Laws of Economics, these principles only ring true in a perfect world. In other words, in order for good to triumph, we must make the following assumptions:

1. The line between good and evil is clearly defined.
2. People have sufficient information to make an informed decision.

I believe the principles can offer us hope that humans will inevitably make the right decisions, but not until the assumptions listed above become fact.

Today, I feel that there are a few things working in our favor to achieve this. Following the recession and the financial bailout, there is a palpable disgust among the public for the Wall Street greed that not only got us into this mess, but continues to make self-interested decisions. Americans are quickly regarding big business as the enemy. Furthermore, reports such as the GRI, Corporate Social Responsibility Reports, ISO 14000, etc. are providing the consumers with helpful information to make informed purchasing decisions. Lastly, as social networking and information dissemination exponentially increases thanks to the internet, the public will have an unprecedented amount of information at their fingertips.