The Fifth Mission

The Fifth Mission

Tuesday, October 3, 2017

A World of Three Zeros

Muhammad Yunus has published a book titled A World of Three Zeros: The new economics of zero poverty, zero unemployment and zero net carbon emissions.

It sounds like a blueprint for establishing Zion.

Except he forgot about the other three pillars, without which Zion can never be established. The obstacle to Zion is human nature, not finding the "right" economic theory.

Still, I like Yunus' approach. It gets us thinking in the right direction.

The WSJ provided a useful review, which generated the following comments:

How to Solve Global Poverty

Social-entrepreneurship programs have lent a much-needed lifeline to the world’s poor. But are they a viable alternative to capitalism? William Easterly reviews ‘A World of Three Zeros’ by Muhammad Yunus.



Muhammad Yunus has big goals: zero world poverty, zero unemployment and zero net carbon emissions. But he believes he can get us there because “we live in an age unlike any other in history . . . Never before have representatives of the entire planet joined forces to address the problems facing the whole human species.” Claims of new “unprecedented” opportunities “unlike any other in history” actually do have many precedents. In 1919, Woodrow Wilson wrote: “For the first time in history the counsels of mankind are to be drawn together and concerted for the purpose of defending the rights and improving the conditions of working people—men, women, and children—all over the world.” Harry S. Truman, during his 1949 inaugural address, noted that “for the first time in history, humanity possesses the knowledge and the skill to relieve the suffering of these people.” More recently, Jeffrey Sachs has remarked: “For the first time in history . . . [due to] scientific technological progress . . . [we are] within reach of eliminating extreme poverty.” The disappointment that followed each “new” plan suggests caution on Mr. Yunus’s claim of new utopian opportunities.
To be fair to Mr. Yunus, perhaps such utopian rhetoric is meant to motivate support for the more feasible programs he has in mind. His favored solution to making global progress against poverty, unemployment and carbon emissions is social entrepreneurship, the creation of “self-sustaining” businesses that operate with “freedom from profit pressures and from the demands of profit-seeking investors,” making “social businesses viable even in circumstances where current capitalist markets fail.” It’s the same principle behind Grameen Bank, which Mr. Yunus founded to offer small loans to the poor, and for which he won the Nobel Peace Prize in 2006.
Mr. Yunus has long been a hero of mine for his innovative faith in the resourcefulness of low-income people. In the book he writes about St. George Valley Organic Farm, a social business near Tirana, Albania, that rents land to 60 local farmers and educates them on producing marketable herbal essences, “a much higher-margin business than most forms of agriculture.” It helps that “this business is environmentally friendly as well.” Other examples include the car company Renault’s sponsorship of several hundred auto-repair shops across France to offer repair services to the poor at a discount; a waste-recycling business in Japan that employs 26 people; Grameen America’s providing its 86,000 members with low-cost loans to start or upgrade their own small businesses.
If you want to motivate support for social enterprise, a utopian promise of “A World of Three Zeros” makes for a better book title than “Helping 60 Albanian Farmers Grow Herbs.” And Mr. Yunus’s paean to entrepreneurship does indeed deliver inspiration about the power of human creativity. But problematic arguments remain, especially his imprecise criticisms of the current economic system and the implausibility of replacing the whole system with social entrepreneurship.
PHOTO: WSJ

A WORLD OF THREE ZEROS

By Muhammad Yunus
PublicAffairs, 288 pages, $28
A major problem is one of scale. Mr. Yunus’s many social-enterprise examples are all on the same micro level as the 60 Albanian herb farmers. And while there’s nothing wrong with making a large number of small-scale efforts to help a great many people, it doesn’t qualify as a whole new system for the $76 trillion global economy. Mr. Yunus doesn’t confront the scaling problem. He could have noted, for instance, that successful social entrepreneurs, unlike successful private entrepreneurs, by definition don’t get the high profits to reinvest in scaling up successes.
Mr. Yunus prefers to criticize the market system—and mainstream economics—for its celebration of selfish greed as the basis of everything. This is a common misunderstanding of Adam Smith’s invisible hand, which privileges individual choice, not individual selfishness. If consumers choose to buy products with social benefits, or refuse to buy those that inflict social harms, nothing about the capitalist system prevents them from doing so. If investors want to accept lower returns in exchange for investing in socially conscious businesses, they are free to do that too. And both are already happening on a modest scale, fair-trade programs being one example.
Mr. Yunus also overlooks the benefits of markets in alleviating poverty. He attributes much of the progress so far to the efforts of foreign-aid donors and social enterprises such as the United Nations’ Millennium Development Goals, which supposedly helped concentrate the efforts of world nations toward eradicating poverty and improving health and education. Yet progress against poverty began long before the MDGs were established at the turn of the century, and it has happened most in regions that received little MDG aid. In East Asia, for example, poverty was reduced to 16% of the population in 2013 from 91% in 1981. For this region, the global market has been more of a cure than a disease.
Mr. Yunus does offer some criticisms of the market that are correct: The deceptive promotion of complex derivatives, for instance, did contribute to the 2008 financial crisis. But he doesn’t distinguish his criticisms from his more general condemnation of capitalism. Market failures happen when private and social returns diverge. Cheaters profit by causing harm to others. The answer isn’t to replace the market system with social enterprises, but to target the market failures and enforce laws or regulations against deception in financial markets. Mr. Yunus’s call to scrap a system that works, however imperfectly, for a vaguely defined and unproven system that relies mainly on social entrepreneurship, is a far too risky project.
Mr. Easterly, a professor at New York University and visiting professor at the University of California, Berkeley,
is the author of “The Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor.”
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Comment:

Mr. Yunus' problem is not with capitalism but with human nature. His vision for the future would be realized if only the wealthy had a change of heart and cared more for their less skillled/fortunate fellow human being than for their own aggrandizement.

Creating wealth is a noble cause; keeping it selfishly is not.

Response:

"Creating wealth is a noble cause; keeping it selfishly is not."

Do you think people stuff their mattresses with money? The fact is "selfish" behavior is what eliminates poverty - not charity. Wealthy people either spend, save, or invest their money. This creates jobs and "spreads the wealth around" in a positive way. Some may build yachts for their own "aggrandizement" but guess what, that creates jobs. 

Bill Gates helped far more people when he was in business than he ever will with his charity. His products massively increased global productivity enabling countless others to gain their own wealth. 

People get out of poverty by working or engaging in other productive activity such as starting a business, not from charity. That isn't to say there isn't a role for charity, but it only works as a temporary stop gap. Poverty will never end on charity. 

Response:

The condescending "creates jobs" excuse for personal aggrandizement is a last resort in the ongoing effort to justify selfishness.

Building a yacht contributes to overall wealth no more than digging and filling holes (which also "creates jobs"). Docks in wealthy harbors are full of rarely-used yachts. It would be far more productive--and unselfish--to spend the yacht money building homes for the homeless or educating people.

No doubt Gates enriched people around the world--except it was not Bill Gates alone who did it. It was thousands of employees at Microsoft and their partners worldwide. Gates seems to have recognized the fallacy (and shame) of personally retaining so much of the wealth his employees created, which is why he started the Giving Pledge.  

Besides, your thread shift to charity is a nonsequitur. No one is suggesting the money be "given away" as you claim. Yunus and others want people to have productive, sustainable jobs.