The Global Sociology Blog

Did I mention that Muhammad Yunus is my friend on Facebook (said in gigglish dumb teenager-in-love tone)? Those of you who read this blog know how much I admire Yunus and how much I value microlending (heck, I just made a new Kiva loan today) and the concept of social business.

Anyhoo:

Interview with Nobel Laureate Muhammad Yunus: ‘Capitalism Has Degenerated into a Casino’ – SPIEGEL ONLINE – News – International via kwout

As to what needs to be done, Yunus states

"There are huge holes in the current financial system that need to be plugged. The market is clearly not able to solve these problems itself, and now people are having to run to the governments to ask for emergency assistance. That is not a good sign because it shows that trust in the markets has evaporated. At the moment, there is unfortunately no other option than for government takeovers and government support. That is currently the method being used to combat the crisis — a method kicked off with the $700 billion bailout package passed in the US. In Germany, the government has likewise jumped into the fray."

However, Yunus thinks the goal should be to return to market mechanisms as soon as possible… contradiction?

"That is exactly what we need to work on. For a long time, the main priorities have been the maximization of profits and rapid growth — but that focus has led to the current situation. Each day, we have to look to see if there is potentially harmful growth somewhere. If we find there is, then we need to react immediately. If something grows unnaturally quickly, then we have to stop it. Why don’t companies all pay into a fund that buys up securities that have become too risky? I can even imagine a business model for such a program."

So, the problem, for Yunus, is the exclusive focus on profit-making. That is the only incentive that the market offers. There has to be another incentive: the incentive to provide social goods. That is his social business model:

"It is a company which is focused on the social good and which makes a profit, but it is not focused on maximizing its profits. I am not interested in turning all profit-oriented companies into socially conscious operations. They are two different categories of companies — there will always be businesses whose primary goal is that of earning as much money as possible. That is okay. But earning as much money as possible can only be a means to an end, not an end in itself. One has to invest money in something meaningful — and I would make a case for it being something that improves the quality of life for all people."

The point is then that money is invested in real economic activity, not just "creative" *cough* incomprehensible *cough* financial speculative instruments. This is money that circulates constantly into the productive economic cycle. For Yunus, this is the way to a more balanced and stable market. This is the strength of microlending: the loans operate in the real economy:

"The fundamental difference is that our business is very connected to the real economy. When we provide a loan of $200, that money will go to buy a cow somewhere. If we lend $100, someone will maybe buy some chickens. In other words, the money goes to something with concrete value. Finance and the real economy have to be connected. In the US, the financial system has completely split off from the real economy. Castles were built in the sky, and suddenly people realized that these castles don’t exist at all. That was the point at which the financial system collapsed."

So, who’s to blame for the current crisis?

"The market itself with its lack of adequate regulation. Today’s capitalism has degenerated into a casino. The financial markets are propelled by greed. Speculation has reached catastrophic proportions. These are all things that have to end."