Business is social

There’s a lot of talk lately about social entrepreneurship and social business — the idea that business should be more focused on society and less on profit. Just this year, Nobel Prize winner and founder of the microcredit Grameen Bank, Muhammad Yunus, published a book arguing for a social business model to fight poverty in the developing world.

The idea of “social business” is fantastic marketing. What an inspiring concept: to use your business skills for the betterment of society. People are excited by the idea of imbuing their business life with social significance.

The problem is that business already has social significance. The term “social business” is redundant. Business, by definition, is social. Sound surprising? Think about it. What is a business? It is a group of individuals who work together to make goods and services that meet human needs and wants. Business must be social for it to succeed. If a business produces a fantastic product that no one wants, it won’t sell because it doesn’t have a social value. A business person must be “other directed.” The business person must be looking to the needs of individuals and families within society or he will not succeed.

John Paul II affirmed this idea in his encyclical Centesimus Annus where he stated that the purpose of a business “is to be found in its very existence as a community of persons who in various ways are endeavoring to satisfy their basic needs and who form a particular group at the service of the whole society” (#35).

Businesses do many things for society. In addition to producing goods and services, entrepreneurs invent new technologies that help grow the economy, create efficiencies so people can spend more time with their families and develop innovations that actually save lives. Business is also an important force in building a stable community where people can raise their families. Think of the disastrous effect on a community when one of its major companies goes out of business.

Working in business also helps people develop virtues that are important in social life. Think about the virtues necessary to be successful in business: perseverance, collaboration, patience, courage, charity and so on — and imagine social life without them. Perhaps the most important social contribution business makes is with regards to the family. As John Paul points out, there is a close connection between work and the family since, in one sense, work and one’s salary make family life possible.

These social benefits are not the result of some “corporate social responsibility” outreach or volunteer or charity program. This is just what happens when people do business. Business is social.

So, why are people talking about social business or social entrepreneurship? On one level, people just don’t realize the social value of their work and are looking somewhere else to find it. Now of course, some aspects of social entrepreneurship are quite good. An entrepreneurial culture that encourages innovation and addresses problems at the lowest level is a great improvement over bureaucratic approaches. However, there is an insidious element to looking outside of business for social value — a suspicion of the social import of the business enterprise that somehow sees business as fundamentally greedy.

When Muhammad Yunus advocates social business as the solution to poverty, he may be very well intentioned, but he does some damage as well. It is important to remember that business — especially within the context of a competitive market economy — is the world’s most powerful force for lifting people out of poverty. Government programs do not create prosperity, businessmen do. Yunus recognizes that foreign aid is not the answer. Billions of aid dollars are funneled into the developing world, yet poverty remains. Often, aid money makes poverty worse.

What helps a country get out of poverty is not aid; it is the institutions of the free economy: private property, rule of law and free exchange. These are not new ideas. You can find them in the thought of St. Thomas Aquinas and theologians like St. Bernadino of Sienna. Free exchange — a free market economy under rule of law — works because it allows people closest to the needs of others to meet those needs. Peruvian economist Hernando de Soto has pointed out that the developing world has no shortage of entrepreneurs; it lacks the institutional framework to enable those entrepreneurs to create wealth.

Business leaders need to be wary of asking the government for protection. Instead, they should use their economic, social and moral authority to help developing countries establish those building blocks of a free economy. This will enable the millions of men and women in the developing world to unleash their entrepreneurial talents and create value and high standards of living like we have done here.

Michael Miller is Director of Programs at the Acton Institute for the Study of Religion and Liberty in Grand Rapids, Mich. This article draws from Miller’s forthcoming book “Christian Theology and Market Economics” to be published by Edward Elgar Press in 2009.