Yunus talks reforming capitalism

Muhammad Yunus is a Bangladeshi economist and founder of the Grameen Bank, a pioneering microfinance institution that gives loans largely to poor women to start up businesses. Loan recipients lack collateral to qualify for more traditional loans, but in Bangladesh, the 8.3 million borrowers have a repayment rate of about 97 percent. The model has been replicated all over the developing world.

"Whatever a conventional bank does, we do the opposite," Yunus says.

The Grameen Bank has loaned nearly $10 billion to poor Bangladeshis since its founding in 1983, and Yunus and the organization were awarded the Nobel Peace Prize in 2006. More recently, Grameen has grown to comprise 48 additional ventures including collaborations with mobile phone, food and water treatment companies. These serve as models for what Yunus calls "social businesses," private entities that are often partnerships with multinational corporations that don't pay out profits in the form of dividends but are self-sustaining and help draw millions of people into the global economy.

Yunus spoke to The Prague Post Jan. 30 on the sidelines of a talk he gave as part of the Thomas J. Bata Lecture Series on Responsible Capitalism. He was on a brief stop in Prague after attending the World Economic Forum in Davos, Switzerland.

The Prague Post: You just came from Davos, and to many on the outside, such a gathering seems like a big cocktail party for elites. Does anything productive actually come from an event like that?

Muhammad Yunus: You can call it a cocktail party. It is about getting together face to face. It is not about what people are saying at the podium. People sit together face-to-face and say, 'This is my problem, can you help me.' That is the real Davos. When people are sitting around in the green room, that is where the actual discussion occurs. If I wanted to meet all these people, I would have to spend a year to find them: go to Tokyo, go to Delhi, Moscow, whatever. In one day, you meet people it would take one year to meet, and they are in a mood to talk. That is the power of Davos.

TPP: This year, much of the Davos debate is focused on how to change capitalism or how to make capitalism more humane. Wasn't capitalism inhumane three years ago or the year before that? Why now?

MY: The press and the public are raising this question this year, so they need to come up with an answer. The public has lost confidence. Restoring confidence is a big issue. Now people are asking: What did we do wrong? How do we do right? This year is the year of Occupy Davos. There was never a demonstration in Davos before, right in the center. It was always on the outside previously. That is something they have to recognize. You may not agree with the math of the 1 percent and the 99 percent, but the fact is the majority are victims of the system.

TPP: Is, say, the CEO of Goldman Sachs really interested in changing capitalism, or is he interested in giving the impression of change so he can get back to business?   

MY: If the system collapses, whether you are Morgan Stanley or whatever you are, you collapse too. Your interest is to keep the system alive and functioning. So they have to be interested in listening to what will keep the system functioning. They are not immune to this. They would be victims of collapse as much as anybody else. My interest is to make them understand, to tell them, 'To keep it alive is not good enough, because it will be alive today, and tomorrow it will be sick again, and more sick then ever before. Let's make it so the system never gets sick again - redesign the whole system. Put all your energy now into making sure that for the next 30 years it will not have any sign of sickness.'

TPP: So what do they - or we - need to do to make that happen?

MY: One option is to create a social business. A social business is a parallel business to another business. The social business can focus on solving problems. It is not a replacement for other businesses, but an addition to it. If you can solve the problem of unemployment and make full employment, you can make the system healthy. Charity is a good thing, but a sustainable business can help many more people. You need to show that your medicine is working and that you are bringing the system back to full health.

TPP: So would this changed system you speak of, including social businesses, be capitalism or something different?

MY: The existing capitalism is halfway done. You need four walls. We have two walls, and people are saying this is the complete home. It is not. These changes would take you closer to a complete capitalism. Once you get four walls, you can add a roof.

TPP: Some of the partnerships you and Grameen have used in the past - with Telenor, Danone and so on - are seemingly the model for this social business idea. Is that same model you are using in Bangladesh transferable to say the United States or Norway?

MY: Suppose you are in New York City. What are the problems? Unemployment, poor health, crime, housing. Choose one. Social businesses are not paying out dividends, but they are self-sustaining, because they are a business. The problem of unemployment in Bangladesh and New York City is a question of job opportunities. Social businesses are problem-solving companies. If you identify a problem in Prague, say discrimination against the Roma community, that problem might be the same as those in other places; it may be different than other places. Roma are unique to this region, but this problem exists all over the world, with indigenous peoples of different names. You address a problem with a business, and that can be used as a model elsewhere. We partnered with Danone to make yogurt and address malnutrition in Bangladeshi children, for example.

TPP: What is a reasonable timeline for moving toward a capitalism that is more socially-conscious? Earlier, you mentioned 30 years; is that realistic?

MY: I am totally convinced that 30 years from now, the world will be so different that all this discussion will be totally irrelevant. In that world, there will be no money, people's desires will be different, and exchanges will be done in a completely different way. Thirty years is a long time, and things are speeding up. We don't notice this. If you are inside the train, you don't notice how fast it is going. If you are outside the train, it is already gone. It took human beings 1,000 years to come all this way, and now there is all this progress in 100 days. If we don't design and dream those days ahead, I bet the wrong things will happen. Imagination is very important.

Benjamin Cunningham can be reached at
bcunningham@praguepost.com