Voting With Your Dollars: Social Enterprise

Karol Boudreaux just started blogging. I had the privilege of working with Karol as part of Enterprise Africa at the Mercatus Center during the first two years of my PhD program.

Here is Karol's first post. I look forward to reading many more.

The idea that private enterprise can promote useful social goals is in some ways new, but in other ways not at all new. Think about what any successful business does: it provides something that customers value in exchange for some other thing, normally currency, that a business values. Businesses provide what customers want/desire and customers find some satisfaction from acquiring what businesses offer. Most people would consider these good things -- increasing satisfaction on both ends of an exchange.

What's so interesting to me about social enterprise is that it provides a purely private way for customers to "vote with their dollars" to help improve lives and, hopefully, the business climate on the ground in developing (and other) nations.

For example, you buy a beautiful plateau basket (my favorite) from shop.indegoafrica.org. You could buy lots of other things but by purchasing this particular item you signal a) your good taste and b) your interest in supporting the development of private enterprise in Rwanda. By supporting these private enterprises you, in turn, directly support the Rwandan women who work in craft cooperatives. They earn an income from these transactions and use their profits to pay school fees, buy clothing, or fix their home. Some may buy a goat or a cow. But notice how different this is from traditional foreign aid: by being a customer, a consumer, you help specific, identifiable people, your money isn't lost in some bureaucratic shuffle. You give a particular set of women incentives to produce high-quality products and they learn a host of skills in the process. They gain, you gain.

Can social enterprise "solve" the problems of poverty? It can't solve all the problems (think about corrupt judges or abusive police, for example, common problems in developing countries) but it can do an awful lot of good. In case you're interested in learning more, here is a link to the Social Enterprise Initiative at Harvard's Business School (http://www.hbs.edu/socialenterprise/). You can find some research here as well as information about events they hold and courses they offer on the topic. More to follow.

(HT Tyler Cowen)