Capitalism is probably the last thing people think about when they look for solution to the world's problems. People see pollution, corporate scandals, the financial crisis, and other problems caused by businesses, and they often feel government intervention is the solution. Unfortunately, government support often strengthens the corruption of private companies.
For example, the Clinton Administration pressured Fannie Mae to give loans to lower income families to buy houses. The inability to pay for these homes was a catalyst to start the financial crisis. Government foreign aid to poor countries keeps poor countries trapped in the cycle of poverty. The solution is to reform capitalism so that businesses look determine success based on how their actions affect society as well as looking at profits.
Green Capitalism
Most people look at capitalism and environmentalism as opposing concepts. However, perhaps pollution is a violation of property rights but is difficult to measure. If a construction company builds roads against the will of the people, this can be a violation of their property rights. Driver cars emits fumes that other people breathe against their will. Finally, capitalism does not have to be limited to humans. Destruction of the environment may kill other living creatures. Such damage is often called a negative externality. It is difficult to calculate, but the damage has a cost.
In England, there are congested roads in which people are charged a "congestion tax" for driving through them. It is similar to a toll booth, but the fees are higher in congested roads. Perhaps privately-owned parks or other nature centers can purchase roads from the government and charge "pollution fees" when drivers pass through roads. More fuel efficient cars would have a lower fee while gas-guzzling SUVs and other fuel inefficient vehicles would have to pay more. Pure electric vehicles would not have to pay any fee.
Although this system may lead to parks and nature centers encouraging pollution to raise revenue, this abuse can be prevented if those roads are located near the parks. That is, pollution that occurs close to the parks makes those parks less appealing, so the fee does not generate a profit but is a form of compensation for damages. People who bike or walk to the parks would not have to pay this fee. Such a fee may encourage carpooling as well as biking, walking, or even public transportation.
Some businesses are already taking actions to reduce their environmental footprint. Car companies such as Toyota and Honda plant trees to replace the trees they cut down to build factories. This not only benefits the planet, but in the long term, this maintains resources for continuing business. Walmart and many other companies are purchasing solar panels for to generate electricity.
Social Business
In addition to environmental conservation, businesses can also deal with other social problems. Mohammed Yunus started a bank called Grameen Bank that provides micro-loans to the poor. While the financial crisis involved providing large loans to buy houses for those who could not afford to pay, micro-loans involve giving small loans to help the poor to establish profit-generating businesses. Interestingly, recipients of Grameen Bank's loans have repayment rate of 95%. Grameen Bank generates a profit, but it also helps people escape out of poverty, just like a charity organization.
Linux: Combining Profit and Charity
Red Hat is an Linux-based company that combines profit motives and social welfare. Red Hat makes money off of the Red Hat Enterprise Linux operating system. Although they sell the desktop edition, Red Hat makes most of its revenue selling the server edition. Red Hat also provides a free version of their desktop operating system. The free version of Red Hat desktop edition is called Fedora. Fedora is also the operating system used in the laptops for the "One Laptop Per Child" program.
Canonical, a Linux-based company in South Africa, also provides a free operating system called Ubuntu. Similar to Red Hat, Canonical makes a profit by selling the server edition while providing the desktop edition for free. Inkululeko Technologies is a business in South Africa that provides computer technology to poor areas; they use Ubuntu in the computers they provide.
Investing in Charity
Although charity itself involves giving something away, it doesn't necessarily require that the provider to lose something. Some charity organizations provide economic relief to many poor countries. As people escape the cycle of poverty, they also benefit rich countries by purchasing their products. Business and charity can both lead to a win-win situation and not just a win-lose or lose-win situations. A good charity should eventually make itself not needed. In other words, a good charity organization's goal is to make sure that the people it helps eventually do not need charity anymore. Likewise, a good business provides a service to the community and the world.
CARE is an example of a charity organization that incorporates business. They have an amazing micro-loan program. They also teach farmers how to grow more food. Such principles help poor people escape poverty and even become successful. CARE's practices are beneficial to the world even if we wipe out poverty. Micro-loans can benefit small businesses, college students, etc. Farming is necessary to produce food whether people are rich or poor, so teaching people how to produce more food is always beneficial. CARE's website is www.careusa.org.
Business and charity may seem at odds with each other, but they both involve improving an economic situation, and they both involve providing a service. Businesses and charity can learn from each other. While businesses can learn to look after social welfare, charities can learn how to maximize revenue. They can also combine to create social businesses that generate profit and do charity work.
Sources:
Arrington, Michael (2008). "How the U.S. Government Engineered the Current Economic Crisis. Tech Crunch.
"Small Loans, Significant Impact." Grameen Bank.
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