While free markets have ushered in many benefits, these gains have bypassed too many of the world's people, especially the poor.
And yet, in recent decades, powerful tools have been developed that leverage capitalism's strengths to enrich the lives of those who get left behind.
Take microcredit. It has been a powerful tool in combating poverty, enabling the poorest of the poor to change their lives and provide for their families. Through these small, collateral-free loans with a nearly 100 percent return rate, borrowers – mostly women – have been able to harness entrepreneurial abilities inherent in them.
Microcredit is just one example of how a business approach can help alleviate poverty when we move beyond the idea that business by definition has to mean making financial profit for the owner.
We need social businesses to couple the human heart to the capitalist system. This is a sure way of meeting needs that either remain unmet or are met extremely inadequately through the efforts of philanthropy, charity, or welfare.
Traditional philanthropy and nonprofits generate a social gain, but they do not design their programs as self-sustaining business models. A charitable dollar can be used only once. A dollar invested in a self-sustaining social business is recycled endlessly.
A social business is designed to be both self-sustaining and to maximize social returns like patients treated, houses built, or health insurance extended to people who never had this coverage. An investor in a social business retains an ownership interest to hold management accountable and to get the investment back over time, but no dividends are expected, and any profits should be reinvested in the business or used to start new similar businesses.