You're reading Entrepreneur Middle East, an international franchise of Entrepreneur Media.
Why would entrepreneurs waste their money on social causes like treating Alzheimer’s disease, fighting the tsunami of hookah smoking, or supporting food security initiatives? Traditional policy solutions used to involve governments supplying welfare benefits through taxation. In an age of diminishing returns from fossil fuels and the never-ending, ineffective, welfare state, there are millions of Arabs who are in bad need of impact investments- as if they are crying out Sting’s Soul Cake: “An apple, a pear, a plum, or a cherry; any good thing to make us all merry… If you haven’t got a penny; a ha’penny will do… If you haven’t get a ha’penny; it’s God bless you.”
Russell Roberts, professor of economics, regards altruism, fellow feeling, and caring for others as an important element of the “human enterprise.” Although such motives do not pay a lot, they can be rewarding in other, nonmonetary ways: “the satisfaction and pleasure we get in return make the monetary sacrifice worthwhile.”
It could be legitimate to come up with an appropriate institutionalization of entrepreneurial voluntarism (philanthropy or charity), but the famous American philosopher Robert Nozick had warned us that “no one has an enforceable right,” that is, the legal claim to assistance from another. Wendy McElroy of the Independent Institute also regards caring for the needy as both proper and necessary, but “we should hold, on the rights-based grounds, that these decisions are ultimately private and must rest with each individual and his or her conscience.”
Economics has quite a bit to say about altruistic behavior and in settings that involve virtues. It reminds us that few virtues are absolute: when they get more expensive, harder to do, or less pleasant, people will do less of them. Across the Arab world, the global financial crisis has definitely made entrepreneurs reluctant to pursue social causes. However, we should not negate the fact that voluntarism is essentially “crowded out” by cultural attitudes and the overall attachment to the welfare state. There is also this dimension to restricting reciprocal private philanthropy: it is highly driven by religious institutions rather than mere social causes.
There should be at the very least new schemes to incentivize social entrepreneurs to adopting “new frontiers” in philanthropy. The Johns Hopkins University Professor Lester Salamon, for example, emphasizes on moving beyond “grant-making” into adopting impact investment orientation, focusing more heavily on measurable results, generating a blend of economic, as well as social, returns, and interacting explicitly with social ventures that serve the “bottom of the pyramid,” deploying a variety of new instruments (private equity, securitization, social impact bonds, specialized social purpose investment funds, and many more) which can have far more enormous social impact than the investment assets resident in banks, pension funds, insurance companies, mutual funds, or sovereign wealth funds.
Interest group theory tells us that the smaller the size of a group, the better the outcomes (impact) of its activities, whether in terms of empowering the youth, helping the poor, or supporting arts, museums, universities, medical research, and agribusiness. There should be a reformed path, now before then: moving away from state/religious support into a radical reordering of our human enterprise. As long as governments remain the dominant provider of aid to the poor, charity dollars in the Arab world will remain politically-guided, tax-driven.
It will be necessary for these new concepts to reach a wider spectrum of participants, communicators, and observers. As such, both academic and training institutions should widen their audience to include nonprofit managers, social entrepreneurs, business leaders, and public policy experts. The millions of Arabs in the underground chorus of Soul Cake are warning us: “We hope you will prove kind.” With a status-quo of hierarchical philanthropy and a rapidly changing political economy, the “lanes will remain very dirty… shoes very thin.”