What if some businesses were to do things differently? Rather than accept that the responsibility of business was to return a profit to shareholders, what if it made other people the central focus and instead invested in the local community and social objectives?
This was the beginning of People-Centered Economic Development or P-CED
It was a bold suggestion to make to the US President in 1996. The opportunity had been presented to P-CED’s founder when in 1995, he’d been invited to serve on the steering group of the Committee to Re-elect the President and with no brief for his role, Terry Hallman set to work on a white paper which was to propose an alternate economic paradigm.
Capitalism as it was then, had served to create a flourishing middle class and yet as an ‘insufficient paradigm’ failed to reach the poorest – more than a billion suffering hunger worldwide. With increasing numbers being economically disenfranchised in the transition to the Information Age, there was reason to consider that they could and would respond with violence.
The opportunity to demonstrate proof of concept came in 1998, when an economic crisis in Russia led to currency and economic collapse. In some areas food shortages and weapons stockpiles presented an uneasy combination.
During 1999 Hallman spent several months researching the potential for an economic development project. That led to sourcing the Russia-U.S. Regional Initiative in Tomsk and leveraging $6 million for an experimental community microfinance bank. The experiment was a resounding success, replicated regionally and then nationally. During 2002-2003, he did similar research in Crimea, followed by a proposal and tentative agreement for $40 million in joint funding from Crimea/Ukraine and the US in 2003. This project focused on the poorest of the poor in Crimea, one of the poorest areas in Ukraine. The worst poverty was heavily concentrated amongst Crimean Tatars.
In 2004 he was interviewed on his work by the Washington-based International Committee for Crimea, a think-tank among the Crimean Tatar diaspora.
Asked why he thought P-CED would help, he said:
“Essentially, P-CED challenges conventional capitalism as an insufficient economic paradigm, as evidenced by billions of people in the world living in poverty in capitalist countries and otherwise. Under the conventional scheme, capitalism – enterprise for profit – has certainly transformed much of the world and created a new breed of people in capitalist societies, the middle class. That is a good thing. But, capitalism seems to have developed as far as it can to produce this new class of fairly comfortable people between rich and poor, at least in the West where it has flourished for quite some time.
“The problem is that profit and money still tend to accumulate in the hands of comparatively few people. Money, symbolically representing wealth and ownership of material assets, is not an infinite resource. When it accumulates in enormous quantities in the hands of a few people, that means other people are going to be denied. If everyone in the world has enough to live a decent life and not in poverty, then there is no great problem with some people having far more than they need. But, that’s not the case, and there are no rules in the previous capitalist system to fix that. Profit and numbers have no conscience, and anything done in their name has been accepted as an unavoidable aspect of capitalism.
“I disagree. 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 massive profits as usual and then using those profits to help people who have little or nothing?”
The P-CED model was adapted to an existing software development business in the UK and from 2004, began operating in the supply chain of several major corporations, government departments and NHS trusts. This is where we’ve always seen the role of social enterprise in healthcare, in providing a competitive commercial service which creates additional social value.
In setting out a proposal for a community re-investment approach to rural broadband we’d said “Traditional capitalism is an insufficient economic model allowing monetary outcomes as the bottom line with little regard to social needs. Bottom line must be taken one step further… by at least some companies, past profit, to people. How profits are used is equally as important as creation of profits. Where profits can be brought to bear by willing individuals and companies to social benefit, so much the better. Moreover, this activity must be recognized and supported at government policy level as a badly needed, essential, and entirely legitimate enterprise activity”
By the end of 2004, after a brief study of the potential for economic development in Serbia, Terry was in Ukraine researching and developing a plan for nationwide childcare reform, poverty relief, and social enterprise education. In 2006, following the Orange Revolution, he was able to research the shocking story of Ukraine’s ‘Death Camps, For Children’, the ‘psycho-neurological internats’ where those considered imperfect were abandoned to the state. In the article which described these conditions of almost unimaginable deprivation Terry began developing a strategy plan in full public view.
When completed in late 2006, the document entitled Microeconomic Development and Social Enterprise – A ‘Marshall Plan’ for Ukraine set out how with a mix of components including affordable broadband, microfinance assistance, childcare reform and social enterprise would make it possible for Ukraine to break the vicious cycle of poverty. It was here, more prominent than ever where the point that business could and should have a social as well as a financial return, was emphasized.
Calling for assistance from the US government, it was to point out how the same amount of money then being spent in Iraq each week, could be spread over 5 years to lift large numbers of people out of poverty, as Doonesbury also notes:
By the end of 2010 the childcare recommendations which were implemented by Ukraine’s government had led to an increase of 40% in domestic adoption. Overall progress in Ukraine is recorded in our 2011 social impact report for the RBS 100 Index. That represents a good start for the most critical aspect of the program, but just a start.
Hallman concludes that social business and social enterprise must be done by working backwards, from the problem: identify the worst social conditions in any given location, then analyze why the problem(s) exist. This method will always reveal all factors and barriers. Only then can the problem be understood, and then possibly fixed. But, he notes, barriers are often found in various organizations who are supposed to be trying to fix the problem, but have vested interests in direct conflict with achieving actual solutions.