People-Centered Economic Development

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Definition

Collated by Jeff Mowatt:


  • People-Centered Economic Development

"Economics, and indeed human civilization, can only be measured and calibrated in terms of human beings. Everything in economics has to be adjusted for people, first, and abandoning the illusory numerical analyses that inevitably put numbers ahead of people, capitalism ahead of democracy, and degradation ahead of compassion." (From the Manifesto for People-Centered Economics)

The white paper for People-Centered Economic Development was delivered to the Committee to re-elect the (US) President in 1996 following an invitation made to P-CED founder Terry Hallman, to serve as an honorary member of the steering committee. P-CED was first deployed in Russia in 1999 to source the Tomsk Regional Initiative for USAID." (http://people-centered.net/Capitalism.aspx)


Description

Terry Hallman:

"The P-CED concept is to create new businesses that do things differently from their inception, and perhaps modify existing businesses that want to do it. This business model entails doing exactly the same things by which any business is set up and conducted in the free-market system of economics. The only difference is this: that at least fifty percent of profits go to stimulate a given local economy, instead of going to private hands. In effect, the business would operate in much the same manner as a non-profit organization. The only restrictions are the normal terms and conditions of free-enterprise. If a corporation wants to donate a portion of profits to its local community, it can do so, be it one percent, five percent, or even fifty percent. There is no one to protest or dictate otherwise, except a board of directors and stockholders. This is not a small consideration, since most boards and stockholders would object. But, if an arrangement has been made with said stockholders and directors such that this direction of profits is entirely the point, then no one will object. The corporate charter can require that these monies be directed into community development funds, such as a permanent, irrevocable trust fund. The trust fund, in turn, would be under the oversight of a board of directors made up of employees and community leaders.

How can such a thing work? Where would the initial venture capital come from? This capital in each case can come from each community if available, or from sponsoring communities or funding organizations. In Chapel Hill, North Carolina, for example -- where P-CED was born in 1997 -- multi-millions of dollars are donated each year to charities, after which the money is typically given away, spent, and gone. Two churches adjacent to the university campus recently raised in excess of four million dollars to improve their buildings. (As a counterbalance, a third church chose to forego its own plans for a building and donated its entire building fund to a badly-needed support program for the elderly.) If twenty percent were set aside to fund a "P-CED enterprise", that money would never go away, but would instead grow as it should in business. Once the seed capital is available and the business plan implemented, everything after that goes the normal way of business. Employees are paid according to the local pay scales, receive benefits, and so on. They would also enjoy profit-sharing directly for themselves from a total pool of ten percent of profits. Forty percent of profits would be rolled back over into the company for growth. The remaining fifty percent would go to the trust fund. Thus, aside from the final direction of profits, everything is exactly the same as with any other business enterprise." (http://www.p-ced.com/about/history/)


Status Report

Jeff Mowatt, July 2008:

"It started as the result of pitching a white paper to the committee to re-elect the President in 1996 which explored the relationship between the emerging information age, poverty and terrorism, proposing a new model of business based on principles of social capitalism. It advocated a complete break with the nonprofit paradigm proposing instead a more inclusive form of capitalism which invested in community.

It was then published in 1997 in synopsis on the web without copyright to be usable by all.

Proof of concept came with the Tomsk Regional Initiative, where a P-CED strategy paper leveraged a microfinance bank and 35 associated social projects in the city of Tomsk, Siberia. It resulted in 10,000 new businesses. more than 80% started by women, and full cost recovery between 2000 and 2005. Finca managed the microfinance bank which appears as a 5 diamond rated entry on MixMarket.

In 2004 it was incorporated as a UK based software development business, deploying profit to advocate for poverty elimination and childcare reform in Ukraine and in October 2006 resulted in production of "Micro-economic Development and Social Enterprise, a 'Marshall Plan' for Ukraine"

More Information

  1. Background at http://www.p-ced.com/about/background/
  1. Example business at http://people-centered.net