Mohammed Yunus Speech

Topics: Economics, Utility, Profit maximization Pages: 1 (320 words) Published: December 13, 2012
Mohammad Yunus in his Nobel speech came up with a solution to create a poverty-free world called “social business”. He defined the social business as “Profit would be ploughed back into the company to expand its outreach and improve the quality of its product or service. A social business will be a non-loss, non-dividend Company” The idea of social business sounds very good but seems to be very unrealistic at our present institutional framework. Firstly, in this capitalist world, we cannot expect business without profit maximization objective. This objective is the key to competition or dynamicity in the market. If it is a low profit or no-loss business, then what will attract the investors? Secondly, the decision of re-investment depends on whether it will be beneficial for the investors or not. On the other hand, a company has its optimum size depending on its business area, company culture, management quality etc. An investor must have right to take his dividend. An entrepreneur or investor must not keep all his money is one basket. Yunus also blamed our economic and social system and conceptual frame-work and asked for a change. Unfortunately, it is impossible to change our existing mindset. The conceptual framework of neo-classical economics is based on the assumption that economic agents are absolutely rational to maximize their utility with a given number of preference functions. At business level, the objective is translated as profit maximization in an ideal economic environment like perfect information, complete set of markets, homogeneous commodities, no economics of scale or production externalities etc.. Simply speaking, the income of an economy is segregated in to profit and wages, where the capitalists save all their profits and wage earners spend all their wages. Thus human interaction with the production factors results in distribution of their incomes and it has historical perspective because the capitalists are not created at once.
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