Sat 28 Jun 2008
1, Mustofi sounds a skeptical note on “Creative Capitalism”
2. Durreen’s original op-ed on “Creative Capitalism”
What is Creative Capitalism?
- Mustofi
Looks like this may be the phrase du jour. But beyond the buzzwords, I am puzzled as to what [Durreen Shahnaz] is actually proposing. On a concrete level, how will this make a sizable dent in the rolls of the unemployed? How will this help increase exports? How will this generate lots of jobs for young men and women? How will this take us higher up the value chain? How will this help improve our collapsing infrastructure?
It would be good to hear at least a few concrete answers. NGOs have been around a long long time. Apart from some success in improving levels of education and health (the socio part of socio-economic development), I can’t see that they have made a fundamental difference to our long-term prospects. Sometimes, you have to wonder whether foreign-funded NGO outfits actually thrive on keeping their ‘clients’ stuck in a low-level trap that gives emancipation but not too much of it. After all, NGOs need those ‘clients’ for future grant-winning projects too.
As for mobile firms, Grameen Phone and all that. There is every reason to believe that, while they reduce transaction costs and generally ‘bring people closer’, they are also at the same time repatriating huge amounts of profits abroad (more below), materially contributing to the negative external balance. Their primary motive is profit, as it should be, but we need not glorify their ‘transformative potential’ at every turn.
As a former student of DU, I am also utterly repelled by the crass commercialization of every aspect of our lives which is the ultimate goal of the mobile firms. A TSC-GrameenPhone alliance of beautification? It’s the creepiest thing I’ve ever heard. Anyone who cares two whits for the place, every brick of it heavy with history, cannot help but feel the same.
But coming back to the hard data, do check out the the government figures. Take a look at the tab that reads Services > Payments tab. This I’m told is the category under which repatriation of profits by foreign-owned service firms would come. What do we see? A 16% increase in the outflow of profits. These are your Grameens and Telenors and Warids, taking your DJuice money and taking it all the way back to Oslo. The only reason our current account balance has actually improved is through the strenuous efforts of workers abroad sending remittances. Goreeber polagula working their fingers to the bone. Cross-check the remittance tab. Sadly, if Hana’s recent SWM cover story is to be believed, we are on the verge of killing that golden goose stone dead as well.
So we need fewer Dr Yunus types, swanning around in foreign forums and spouting saccharine slogans about putting poverty in a museum etc, at the same time when ordinary people are getting positively crushed by high prices and the poverty rate is on the increase. ‘Sustainable social enterprises’ (a ghastly phrase, that) are all very well, but I’d sooner take a good dose of heavy industry and manufacturing like Tata and Toshiba instead. It’s way past time we started making and selling stuff to the outside world beyond the usual shirts and shoes. Aarong and Grameen-style Kumbayas might salve a few consciences, but they don’t feed many stomachs.
Creative Capitalism
-Durreen Shahnaz
I wrote a piece for this newspaper several months ago, the general theme of which was that we as a nation need a tag line or a ‘mantra’ around which we can unite the country. Given that in the last few months I have not heard any compelling suggestions, I will be presumptuous enough to give our country a tag line/vision/theme, which is, ‘In five years time, Bangladesh will be the world leader of creative capitalism’.
By ‘Creative Capitalism’ I do not mean that we have to be creative about our capitalistic ways (which, unfortunately, we have been with our rampant corrupt practices).
The term refers to a self-sustainable business, which has a social mission or a market-based solution to a social problem. Creative Capitalism was widely discussed at the Davos Economic Forum, which took place at the beginning of this year. Bill Gates coined the term in his speech and called for new ‘creative capitalism’ to help the poor.
The buzz now is about creating a system with twin missions, namely, making profits, and at the same time, improve the lives of those who do not fully benefit from the market forces. Gates is aiming to persuade companies to embrace his idea of socially beneficial ventures that make money.
Similar to Gates, our own Professor Yunus has also been talking about this in his speeches as he travels the world. His term for it is ’social business.’ In his book, Creating a World Without Poverty, Professor Yunus goes into details about his ideas of social business. The essence of Professor Yunus’s book is that ‘for-purpose’ organisations need to distinguish themselves from ‘for-profit’ and ‘non-profit’ enterprises.
Creative capitalism or social Business or socially conscious business or sustainable social enterprise - whatever the label one uses, the reality is that we have a few shining examples in Bangladesh. Aarong, Grameen Phone, Cell Bazaar, Drik, Prabartana are examples of such successful sustainable Bangladeshi businesses with strong social missions.
However, the number of these self-sufficient social businesses in our country is currently limited. The reason being, we are a nation of Non-Governmental Organisations (NGO). With over 20,000 registered NGOs, we have come to believe that every answer to social change will come from a NGO.
The truth of the matter is that the NGOs have played a big role in the growth and development of the nation. However, the world is changing fast and for us to effectively keep up with change and give our citizens the rights they deserve. We need to embrace capitalist practices, enhanced with a social mission.
Bangladesh needs the high returns of pure profit-driven businesses, tempered with good labor and operational practices. However, the business sector and the government are recognising the world over, that alongside businesses pursuing pure profit, it is desirable to encourage some businesses to focus on social returns as well. This means that Social Enterprises and Free enterprises (private sector good or bad) can complement one another and need not be mutually exclusive.
For us to encourage sustainable social enterprises in Bangladesh, we not only need the spirit for it, but we also need the capital to back it and of course the correct government regulations to encourage it. This is where the money that is pouring into the country can make a difference.
I have recently seen a lot written about the various funds (some by non-resident Bangladeshis) talking about great investment opportunities in Bangladesh. In much of this, I have seen Bangladesh being referred to as the ‘next Vietnam’. With Vietnam’s soaring inflation rates and the economy near collapse, perhaps, it is not a good comparison right now.
However, Bangladesh can become better than India, China or Vietnam, if the investors, business sector and the government, full-heartedly embrace the need and value of an economy supported by sustainable social enterprises. I would put my money on it.
So my request to the potential investors and entrepreneurs is that, while we are building this country, let us try to build it in our own unique way.
While you look to invest in the next garment factory, why not invest in a garment factory that treats its labour fairly and uses environment friendly dyes? Or, while we look to improve tourism, why not use the revenue generated by tourism to save our mangrove forests or preserve the cultures of our indigenous peoples?
I am in the process of pulling together a fund to do just that. I will play my part in making Bangladesh, in five years time, ‘the world leader of creative capitalism’. Will you?
June 28th, 2008 at 5:47 pm
Interested readers may want to check out the following site:
http://creativecapitalismblog.com/
June 29th, 2008 at 3:01 pm
I don’t think the writer is proposing that creative capitalism is the solution to all our problems.
She writes, ‘This means that Social Enterprises and Free enterprises (private sector good or bad) can complement one another and need not be mutually exclusive.’Which I think is a sound proposition. Profiteering in private sector is rampant. We need socially conscious businesses to encourage some socially responsible ventures.
When discussing ’social enterprises’ such as cellbazaar and probortona, one also needs to ask,– how are they making people better off? How is the middle-class growing because of this? How much is their contribution to our GDP?
However,I would second Mustofi’s argument about manufacturing industries. Plus, we also need to develop the service sector. The one issue that no one addresses is the growing unemployment (and also underemployment).
On top of that there is the issue of young students, with good degrees not being industry-savvy. We need to customize university education to suit the needs of the emerging jobs. For instance, we are churning out finance graduates, but not teaching them much about acturial sciences or private investment– whereas Bangladesh is now experiencing a ‘high’ in the stock market and hedge funds, mutual funds, venture capital and private equity firms are slowly setting up bases. Students with Master’s degrees are still employed by restaurants as waiters(some creatively call them customer relations officer)– this is nothing but a waste of their skills and potential.
Even if we did get a Tata or Toshiba, we will loose the more lucrative jobs to the foreigners (as seen in the cases of the telecoms) simply because we’re not ready to take on such tasks.
The private university graduates, the hordes of BBA and MBAs, the BUET engineers, and the programmers, they need more than just ’social enterprises’ to realize their dreams. It’s sad, that even today, you have to resort to blanket canvassing to get the desired job.
June 29th, 2008 at 10:38 pm
I think it is becoming increasingly popular for the urban elite in Bangladesh and the much touted NRBs to attach themselves to one “development” fad or the other. “Social entrepreneurship” seems to be the latest buzzword. I have noticed lately some “consultants” have sprung on consulting the NGOs spouting the usual buzzwords [ changement management, transformative change etc etc.] and powerpoints. All of them are presenting themselves as the next savior of the country. Remittances work because it takes advantage of a core advantage that we have as a nation , namely manpower. So we need to focus on that, on how to improve that industry, its global penitration and the working condition of these low wage workers abroad. Going up the skill ladder,better trained and thus better paid worker export is also another option. Both public and private sector including the so called “civil society” needs to focus on that. Industries that can generate mass employment are needed. Call centers, programmers etc. are fine but we will never have enough of them to solve our unemployment/underemployment situation. So we NEED manufacturing jobs but we have limited land and we have limited energy potential, both detrimental to large scale industrial development. But we have something….a large sea coast and inland water resource. We also have relatively fertile soil. So we need to explore what type of specialist industries can be developed that require low to medium skill level for the majority of the workers and just a few high skill workers at the top [for management and R&D] and then we can compete. As much as i’d like to, the reality is we will not have the next Intel plant in Bangladesh anytime soon. So be REAL. Do things we can do. Something like “pearl cultivation” or “Algae farming” in the sea etc. can be quite profitable “soft manufacturing”. We also have potential in biotech and pharma. We should not pass that up. Improving things like water purification technology, energy efficient/cost efficient desalination and distributed energy [ including clean coal, waste to energy, energy/water conservation tecnology and selective second generation biofuels] are key areas. We need to focus on these. The raw manpower and the army of degree holders need to be marshalled and channeled into those. Not on “saving marginal industries” like basket weaving as some have done. Garments industry will slowdown…that’s natural. We just need to ask the question what next and work to create it. Let’s not get enamoured by fantasies like creating a service economy when we don’t even have an industrial one. I know india is trying this strategy…it will not work. Others have tried before, it never works. There is a reason why economy progresses the way it does [Agriculture to industrial to service]. Lets learn from others’ failed experiments and not repeat them ourselves. This includes America’s. Some of our “intelligentsia’ is so attached to all things Western that they often forget the different social context of their development strategies and some of their blatant failures. We’re an intelligent creative nation.We have enough ingenuity and enterprise to build our nation. We must regain our self-confidence and unshackle the chains of mental colonialism. We can freely look at the world and learn from it without “ape-ing” their failures and follies. To be successful and great as a nation or provide proper leadership for our country we need no endorsement from either the Noble committee or any western leader or body. We need not be invited to Davos either. All we need is results, cold hard results. Let’s see some action and forget the talk. Talk [...including some book writing] is cheap.
What is needed is common sense. We need capitalism but for capitalism to succeed in our country it has to cater to the unique circumstances of our country. What are our economic advantages? What is our”economic” moat or comparative advatage as a nation? Remember that when devising our development paradigm.
June 30th, 2008 at 7:58 am
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The Bill Getes’ speech in Davos:
http://www.gatesfoundation.org/MediaCenter/Speeches/Co-ChairSpeeches/BillgSpeeches/BGSpeechWEF-080124.htm
“Creative Capitalism” as defined in that speech:
“The challenge is to design a system where market incentives, including profits and recognition, drive the change.
I like to call this new system creative capitalism—an approach where governments, businesses, and nonprofits work together to stretch the reach of market forces so that more people can make a profit, or gain recognition, doing work that eases the world’s inequities. ”
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mustofi - You say “I am puzzled as to what [Durreen Shahnaz] is actually proposing.”
I didn’t see Durreen proposing anything concrete and I assumed that was not the purpose of that article. I took it more as a call to all to think outside the box when thinking about developmental paradigms for Bangladesh.
http://www.equalexchange.com is one example of an entity (not BD related) that has modified the standard corporate structure in a creative way to align the for-profit goals more with “social” goals. Perhaps we can learn from them.
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mustofi - You say:
“This [Services > Payments] I’m told is the category under which repatriation of profits by foreign-owned service firms would come. ”
Could you please cite the reference? I highly doubt that that category indeed captures profit repatriation for at least two reasons:
* Bangladesh Bank itself, in its Monetary Policy Review (Vol III, #1, October 2007, p7, available on BB website) says:
“During FY07, the trade
deficit widened and service account deteriorated mainly due to rising cost of transportation and insurance
services in the international market.”
[I am assuming by "service account" they mean the Services line on BoP. Could not find an explicit link unfortunately, but seems reasonable assumption.]
* The Services->Payments account shows a net outflow of $2.7B for FY07. The *aggregate FDI* in Bangladesh from 1998-2007 was $5.5B [ref BB policy paper: http://www.bangladesh-bank.org/research/policynote/pn0805.pdf Now, I know the mobile companies have been profitable, but a repatriation of $2.7B in one year after an aggregate FDI (even assuming all of it was telecom) of $5.5B over 10 years? Really?
Mustofi - it is useful to post citations and references. Also, when dealing with numbers, it is useful to have a sense of proportion.
I will still grant you that I have not proven my point above beyond reasonable doubt (perhaps the mobile companies were indeed profitable enough to repatriate that amount; or perhaps only a small portion of the $2.7B was due to mobile companies - but that would reduce the validity of your argument too), but I have posited sufficient evidence to hopefully have you respond with data that you have that I was not able to find.
- hijibijbij
[rhetoric <> proof :-)]