I was trying to reply to bitbro's post here https://bitsharestalk.org/index.php?topic=4156.msg52230#msg52230
about the difference between Social Entrepreneurship and Marketing. It has gotten a little more general... Please feel free to challenge the remarks below!
Social Entrepreneurship is combining an idealistic goal (a positive contribution to society) with a profit motive. Marketing is marketing anything without any moral judgements about the effects of the product.
Shouldn't all goods and services that satisfy a market demand be "good" for society? You could definitely argue so but the social entrepreneurship term implies the opposite. Preliminary remarks: There has to be innovation in any market to make a profit, aside from profits that are due to network effects, corruption or non-transparency. The possibilities to make a profit are always temporary until the market has adjusted to the circumstances. An increased possibility for making profits for an industry does not equal overall economic growth. All assumptions and conclusions refer to humanity respectively our planet as a whole.
(1) Bad* markets:
1, a) "Bad demand": Markets where profits are driven by increased demand for goods that make the people that consume them unhappy/unhealthy/dumb over time (to much dumb TV, to much fast food, (ego uplifting) luxury goods (big cars, fashion etc.) etc.; most of the consumers market). If the demand is excessive, which is a good source for making profits, such demand is basically not that different from other addictions that are widely recognized as such. There is non-consumer market demand as well but in the end industrial products only satisfy consumer market demand (taken state provided goods out of the equation). So this can be summarized as profits made possible by an increased "bad" demand.
1, b) "Bad supply": Supply that is satisfying 1a) demands where profits are enabled through the discovery of new resource deposits and ways to deplete them more efficiently or enabled trough the discovery of cheaper employees and ways to make them work more efficiently or by general innovation of goods that are considered more useful than those that were available before
. This is always more profitable if costs for the prevention of the destruction of ecosystems, which humans depend on, can be reduced. Examples would be the oil industry: Shell catastrophe in the gulf of Mexico; reducing costs by leading toxic production by-products into the local river; lowering wages and working conditions for workers in a Bangladesh jeans factory to the point where workers would not be motivated to work anymore (note that this would not be a problem if there wouldn't be enough to replace them or if there would be a possibility to cultivate some own land (many don't have it). This can be summarized as making profits from in a competition for the lowest environmental and social standards when producing goods.
(2) Good* markets would be something like: (Basic) Education, Satisfying basic needs of those that can hardly afford it, ecologically sustainable planting of healthy food employing people under human conditions that would not have found a job otherwise, you know those stories...
Social entrepreneurs want to make a profit under those (2) markets conditions. Why is it such a challenge to make a profit under (2) conditions to even give it an own category? Because the (1) markets have great demand and cheap supply both of which is not given in (2) markets. We can also say that it is almost impossible to make a profit under (2) conditions because those making a profit under 1 b) conditions have a competitive edge at the expense of the ability of the system (our planet) to support that kind of cheap supply in the future, due to depletion of resources and the destruction of ecosystems. By ecosystems I don't mean your protected bird habitat across the street, I mean ecosystems like our oceans with their fragile interconnections to other equally fragile systems like our climate. Consider that ~ 50 % of the world's population are farmers or fishermen.
My personal opinion is that this division into good and bad markets is problematic, at least with respect to 1 a), because who defines what is good demand other than the market?
In my opinion, and that goes beyond making the implications of the term "social entrepreneurship" explicit, labelling creating supply under the conditions described in 1b) as undesirable and acting upon this with prohibitions that would have to be enforced on a global level is justified - at least with respect to the environmental/sustainability part. 1 b) conditions and consequences of them are: Profits made at the expense of a catastrophic collapse of the system's ability to sustain even our basic needs - it might not be that catastrophic for all but given a further growing world population AND a decline in natural resources AND growing demand/addiction
for material/luxury goods worldwide AND the destruction of ecological systems AND greater unemployment rates, continuing to operate with the given market demand and supply as described in (1) will most definitely be catastrophic for most of the world population.
Growth powered by enhanced consumption of resources is simply not sustainable. If we want to avoid to speak about those catastrophic scenarios for the 21 century, because we can not be certain about their extent, we can at least say that a society or humanity as a whole (and all individuals within this group) is better off when it avoids the destruction of the foundations of it's (economic) well-being.
So aside from that, what types of profits and what types of growth are possible?
(3) Profits and growth from satisfying basic needs of a growing world population. Those profits are minimal though because this market is served already by a market with little potential for innovation.
What is left is profits from innovation (4). There are two types of growth from innovation:
4 a) Profits from innovation enabled by huge capital investments in the automatisation of production. Examples are: Intel building an even bigger plant; a farmer out competing his competitors by investing in a big machine etc.). This type of innovation overall (worldwide; if it is not countered by economic growth) leads to more people being unemployed. There is no objective reason to call this unethical - "why employ people to dig and fill wholes if technology allows us to avoid the wholes?". Also such possibility for profit due to investments in the automatisation of production allows the rich to become richer because they have the capital to unlock those types of profits.
4 b) Innovation leading to overall better efficiency of human interaction. Examples are the Internet and services building on top of it. Take Youtube as an example, this reduced the costs for sharing information visually dramatically (compared to producing TV stuff). There again are two things going along with this type of innovation: A gain in efficiency of the production whereby the production becomes distributed/decentralized with a similar "unemployment" tendency as
described under 4 a). But there is another effect which has a lot of positive things to it, which is decentralization of the production and thus a lowering of barriers of entry. This has a lot of positive effects: possibly an employment enhancing effect
, mostly an increase of quality/price, surely an increase of perspectives and availability. There would be a lot more to discuss: Whether this distributes the profits better (yes because everyone can profit, no because it is even more a now worldwide "superstar market" (economies of scale with humans as the value proposition)) or whether its automatisation effect or its "lower barriers of entry" effect has a stronger effect on employment rates.
So one conclusion here could be that aside from promoting a state and an economy based on voluntary interaction, less consumption/lowering material needs, questioning our growth model and thinking about serious efforts to sustain our planets ability to support more than 10 billion lives in a few years should be equally promoted. Why?! In short: A further growing world population AND a decline in natural resources AND growing demand/addiction
for material goods worldwide AND the destruction of ecological systems AND greater unemployment rates worldwide - or even only three of there factors - will lead to war. In war (a hostile environment) no society can keep up a democracy and individual rights because a society in war needs unity and can not afford inner conflict. Also the wast majority will favour security and institutions that support it over individual freedoms/rights. "But noting justifies any party to touch my property or my life under no circumstances"
I mostly agree and even think that this practically possible but not for humans in an environment that is perceived as hostile. You can see today that the fear of terrorism in the US and the constant feeling of being surrounded by enemies (here is a nice example:
) is crippling the US constitution/democracy. Something similar btw is true for Germany although the fears and their effects are a little different. http://gertismedia.com/2014/02/24/its-the-whatsupapp-economy-stupid/
About Whatsapp as an example for 4 b)http://www.youtube.com/watch?v=F8ZJCtL6bPs
- Some easy to listen to interview about the impossibility to sustain our economic model whether we want to or not...It's not a proof but some nice illustrations. Skip the first 3 minutes (those arguments are not very solid).
* By saying "good/bad" markets I just replicated the moral implications the term "social entrepreneurship" has. The only normative statements in here are in the paragraph that begins with "My personal opinion", in the conclusion and in here: https://bitsharestalk.org/index.php?topic=4184.msg52578#msg52578 (paragraph 3)
EDIT: I underlined all edits.