Timothy Hagen

ENG 101 and 105

11 October, 2011
Poverty Essay
Social Businesses
A Good Idea, but Is It Really New?
The idea of putting the ownership of a company into the hands of poor people
to run for their own benefit has been popularized recently by Dr. Muhammad Yunus,
the founder of Grameen Bank. However, he is not the inventor of the idea. A similar
type of business, owned by and for the benefit of the users, was created in 1844 by
a group of people in northern England who struggled with the difficult economic
conditions of the time. This business was called a cooperative, or a co-operatively
owned business. Like Yunus idea of a social business, the cooperative business
model offers the benefits of working for the interests of the users, but with the
additional intent to promote equality and foster democracy.
According to the International Cooperative Alliance (ICA), the first real
operational cooperative was formed in 1844 by twenty-eight weavers working in the
cotton mills of northern England. This cooperative was designed to use the group
bargaining power and joined resources to purchase food in bulk and at a lower
price. They opened a small shop and sold the lower-priced items to the customers,
who were also the members of the cooperative. Now cooperatives are found in
many fields of business, from retail to agriculture to banking, insurance, housing,
and healthcare.
Cooperatives are primarily designed to work for the interests of the users.
Like Grameen Bank and the social businesses promoted by Dr. Yunus, cooperatives
are designed to serve a social function, not just to make a profit. Profits of a
cooperative are not given to the owners in their role as owners, but are reinvested
in the business and given back to the users of the business. For example, if a person
invests 10% of the money needed to start a cooperative, but only purchases 1% of
the value of items sold, he gets only 1% of the profits that are given as dividends to
members who use the business. While in most cases he must be a member to
benefit from the dividend, he gets these profits in accordance to how much he uses
the services, not according to how much he invested the business (ICA 2011). Thus,
like Grameen Bank and social businesses, the primary intent of a cooperative is to
benefit the ones who use the business.
Cooperatives also promote democracy and equality. While social businesses
may have a noble goal of alleviating poverty and providing low-cost goods and
services to the poor, a cooperative goes beyond this by also encouraging egalitarian

and democratic values. In a cooperative, each member gets one vote in the
decision-making process, primarily by electing a board of directors. The board of
directors then decides on the policies for the cooperative and appoints the
management of the cooperative. Cooperatives are egalitarian because each person
gets one vote, unlike traditional shareholder corporations, where each person gets
as many votes as shares owned. Furthermore, this cooperative model is more
explicitly egalitarian than the social business model, which does not specify
ownership and decision-making.
Participating in a cooperative may be a good way to foster democratic skills
and civil society. In a cooperative, members need to elect their own leaders,
whether through a board of directors or by directly appointing a manager. This
process demands that members learn the skills of democratic participation and
decision-making. Furthermore, by learning how to work together to solve problems
and make their lives better, members of a cooperative learn many of the skills
needed to build a successful civil society.
A wise man once said, There is nothing new under the sun (Ecclesiastes
1:9). To a certain extent this is true. It may seem that Dr. Yunus, in coming up with
the idea of microcredit and social businesses, has invented something new. Yet we
find that in cooperatives, the idea of creating a business not for profit, but to serve
the needs of its users was already implemented in other parts of the world over 150
years earlier. In fact, cooperatives do more to foster democracy and equality than
do the designs of social businesses. Perhaps the lesson is that while many things
remain the same in human historyhuman problems of poverty, injustice, and the
need to address theseeach generation is new to the planet. Each new person born
is someone new under the sun. And we, the new people, need to rediscover how to
address the problems that we and our ancestors have faced. These solutions may
present themselves as original ideas to the minds of such as Dr. Yunus. Or we my
look back in history and find that others have found similar, and sometimes even
better, solutions. Thus we should keep trying to come up with solutions to the
problems we face each day, and we should also look to the wisdom of those who
have gone before us, to see if they have lessons that may be helpful to us as well.

References
International Cooperative Alliance. 2011. Co-operative History. Author. 2005. Web.
11 October. http://www.ica.coop/coop/history.html.
Yunus, Muhammad. 2011. Dr. Muhammad Yunus at Athgo's Innovation Forum.
ATHGO. 1 Sept. http://www.youtube.com/watch?v=pdiNkloNG2E