I have been intrigued lately by the possibility that the “social enterprise” phenomenon and its sibling the “impact investing” community might have a positive impact on overcoming some of the Right and Left divide. It is an audacious hope, I know, but one that has real merit and legs to stand on.
I’m a patently flaming progressive with liberal commitments (with no apologies for who I am). But I worry too about the huge divide in our country between the views of those on the Left and the Right, and I see the chasm as deeply problematic for making progress on social matters. These political fissures have ground to a halt our government’s ability to do much that is meaningful to correct the serious social problems that face our country and the world. For this reason, many people have abandoned hope in government as a solution altogether.
For this among other reasons, many entrepreneurs and investors have turned to marrying their heart with their entrepreneurial spirit. They have started what are being called “social enterprises” or “social businesses” that both seek a profit and a social impact without sacrificing either one. They have rejected the position that to be in business you have to focus either on profits alone or on values alone (See my Would Milton Friedman Roll Over…). They take the position that the two can be both done well together.
The social enterprise sits between and shares the characteristic of the regular for-profit, which does not necessarily have a larger social concern beyond selling its products and making a profit, and the non-profits which focuses on addressing a particular social concern, but does not embrace a model of increasing profits. The social enterprise seeks to do both at the same time.
Why might the social enterprise end some of the Left-Right divide? Those on the Right are fiercely in favor of leaving the mechanisms of the market alone and see the encroachment by government on markets as curtailing freedom, creating inefficiencies and even immoral consequences. The Left, by contrast, argues that the market can have pernicious effects if left completely unregulated.
The social enterprise cuts through this dimension of the debate by showing, when they are successful, that leveraging market forces can lead to good. The Right can be happy because the social enterprise is a business driven by good old business principles. It is a for profit business. The Left can be happy because the end of the business is not just profits, but some result that has a lasting social impact. There is more going on than just making profits.
What will make the social enterprise successful of course is if there are enough people who care about its products or prefer its products because of the social purpose the company has. In other words, the products will differentiate themselves against competition in part because of the social purpose the company has.
When the social enterprise is successful, neither the Right nor the Left can complain. The Right can celebrate the power of markets at work. The Left can see social purposes being achieved and businesses focused on doing good, not just profits. Achieving profits and doing good can be accomplished together.
To be sure, we are still a long ways away from determining whether the social enterprise can transform our economies and solve difficult social issues. There are many challenges ahead for the social enterprise to prove itself. But there is enough success so far to give one hope that Right and Left can find some common ground in this new way of doing business. Count me in.