Editor's Choice, October 2016: A Neoliberal Takeover of Social Entrepreneurship?
You may have already read this month's provocative Editor's Choice, or at least caught sight of it on social media. You may not agree with it, but the blog and the comments it has provoked are a quick and stimulating read. The author lays two charges: firstly, that profit is presiding over social purpose in the growing narrative around social enterprise, and secondly that it is being over-hyped as a solution not a contribution. Implicit is the charge that the glossy narrative about profit with purpose is fanned by neoliberals but actually damages the more impact-focused hybrid-financed type of social enterprise that is often essential to address problems of the poor.
The article titled A Neoliberal Takeover of Social Entrepreneurship?, published in the Stanford Social Innovation Review (SSIR), has provoked plenty of reactions, as the author Jyoti Sharma describes in her blog response. It has rekindled the whole debate about 'impact first' or 'profit first' models, and whether one is better than the other.
Jyoti, herself a social entrepreneur and Ashoka Fellow, pulls no punches in describing the glamourous profit-seeking type of so-called social enterprise that secure venture finance, contrasting these with social enterprises that rely on part grant finance to sustain themselves in meeting needs of poor people. The target of her critique is the 'brand of social entrepreneurship [that] positions itself as the antithesis of the traditional non-profit, taking pride in its model of self-financing, competitive marketing, and profit. In fact, organizations like these position their ability to generate profit as their biggest strength—as a proof of their ability to sustain their activities and scale impact on their own without any external support.' This she terms 'neoliberal social enterprise'.
Second, she charges that these enterprises that pride themselves on delivering both profit and purpose, actually perform worse in delivering impact. They lack the beneficiary focus that a truly socially driven initiative has, and as they scale they lose flexibility and humanity: 'design should flow from, and be anchored to, the needs and capacities of the beneficiaries' not to the need for profit.
In contrast, she argues from experience that hybrid models that use grants and revenues to provide critical services - such as garbage collection - to low-income communities, can deliver huge impact through a blended model.
Thirdly, and probably most importantly, she argues that the neoliberal model that takes pride in profit undermines the hybrid models that are so needed. Her accusation is that the profit-focused model has garnered attention of donors, universities, ambitious millennials, and in general the neo-liberal establishment. And has led to insufficient recognition of the reality, which is the need for hybrid models to deliver on the ground. In the SSIR comment stream, she clarifies: It seems to me that the imagery is damaging the overall social change sector - 1) by glamorizing and building one component by reducing the importance of others 2) by creating cynicism in the larger publics who see the glamorized SE as the new ‘yuppie’ culture (an actual comment from a respected academic)'.
I find this blog and response fascinating for four reasons.
Firstly, whether business solutions mix with social impact has been debated from ideological positions for some time. But this is not a stone-throwing tirade from a distant critic who is suspicious of anything entrepreneurial. It seems to have caught a sense of 'unease' from some players who are inside the space, but not at the venture capital end of it. It echoes conversations in the impact investment space. I remember doing a set of interviews with impact investors last year, in which several argued that their high risk very low return approach was the key catalyst needed, but gets overlooked by those who play at the double-digit return end of the spectrum.
Secondly, her argument has implications for the debates on scale. The counter-argument to Jyoti is, of course, that profit with purpose is unique in delivering scale and sustainability of social impact, without continual reliance on grants. This for me is the strongest reason to invest in the space. Indeed, an equally vehement critique could easily have been written from the opposite perspective: many are saying that the softer type of social enterprise, is not viable, not bankable, thus not scalable and really not a solution. That said, I do see growing recognition that there are some trade-offs around scale and depth of impact on the poor, at least at the margin. And that we need to recognise that we don't well understand them yet. You don't have to agree with all of Jyoti's arguments about neoliberal hype, to be interested in the questions of how these trade-offs play out.
Thirdly, and this is where I find myself in greatest agreement, Joti outlines the prevalence and value of hybrid models: models that combine grant funding and revenue. My own view is that we need to distinguish more clearly between these 'low return' enterprises and 'slow return' enterprises, as I explain in my 'Good news and bad' blog.
Finally, by framing this in the context of neo-liberalism finding a 'new hunting ground' in the social sector, Jyoti reminds us all of the bigger picture narratives. Neoliberal social entrepreneurship, she points out, does not threaten power structures whereas charities try to redress inequities. I think it's quite contestable whether enterprises that put light, mobile data, credit, or quality teaching, into the hands of poor people do not redress inequities. But that said, awareness of some of the political reasons for the hype that begets this field, is always good to remember.
The comments section below the article is worth a read to see the divergent views on this topic.
This blog is part of the October 2016 series on Exploring the social enterprise landscape, in partnership with the World Bank Group and endeva. Read the whole series for insight and opinion on policy, business models and definitions from social entrepreneurs, policy makers and facilitators around the world.