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Advice for Social Entrepreneurs: Scale Your Concept, Not Your Organization

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[yt_dropcap type=”square” font=”” size=”14″ color=”#000″ background=”#fff” ] T [/yt_dropcap]he Schwab Foundation for Social Entrepreneurship and the Bertha Centre for Social Innovation & Entrepreneurship at the University of Cape Town Graduate School of Business are launching the report, Beyond Organizational Scale: How Social Entrepreneurs Create Systems Change, today at the World Economic Forum Solutions Summit, taking place in Durban, South Africa.

The objective of this report is to help practitioners understand what systems change means in the context of social entrepreneurship, how it is distinct from direct service or “business-in-a-box” models and, most importantly, what it looks like in practice – not as an abstract concept, but as a set of activities, processes and leadership lessons. The report was more than a year in the making, and made possible by the support of The Motsepe Foundation.

“For a sector that has long been obsessed with the holy grail of organizational scale, the social entrepreneurship sector is now coming to terms with the limits of incremental growth,” said Katherine Milligan, Head of the Schwab Foundation for Social Entrepreneurship. “The needs are just too large and urgent; the models for scaling we have developed thus far remain too narrow and simply take too long.”

Conventional scaling models borrowed from the private sector, such as branch replication, social franchising and open-source dissemination, are inadequate to create meaningful social change for entire populations. As a result, highly successful social entrepreneurs who have achieved significant scale, along with the intermediary organizations and funders that support them, are starting to coalesce around the concept of “systems change”. The Schwab Foundation defines systems change as “fundamentally, and on a large scale, changing the way a majority of relevant players solve a big social challenge such that a critical mass of people affected by that problem substantially benefit.”

The stories profiled in the report follow six for-profit and non-profit social entrepreneurs in the Schwab Foundation network, working in education, health, consumer rights, land rights, rural development and the informal economy, as their strategies evolved beyond organizational scale – extending the reach of a prescriptive, organizationally designed solution to a problem – to systemic scale, with the goal of shifting the rules, norms and values that make up social systems. Ultimately, this report and the accompanying in-depth case studies provide an opportunity for social entrepreneurs, funders and policy-makers to begin sharing a common language on systems change and generate momentum for more systems-change strategies and approaches.

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Economy

Trade in fake Italian goods costs economy billions of euros

MD Staff

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Global trade in fake Italian goods such as luxury handbags, watches, foodstuffs and car parts is taking a bite out of Italy’s economy equivalent to around 1-2% of GDP in terms of lost sales, according to a new OECD report.

Trade in counterfeit goods and the Italian economy estimates the total value of counterfeit and pirated Italian goods sold worldwide at over 35 billion euros for 2013, equivalent to 4.9% of global Italian manufacturing sales. This resulted in over 25 billion euros in lost sales by Italian companies in a year when Italy’s GDP was 1.6 trillion euros.

Past OECD analysis of data from nearly half a million customs seizures around the world over 2011-13 has shown that trade in counterfeit goods is worth nearly half a trillion dollars a year, or 2.5% of global imports. US, Italian and French brands are among the hardest hit, and with an economy that thrives on producing high-value products, protected by intellectual property rights and trademarks, Italy is especially vulnerable.

As well as examining the impact of trade in fake Italian products, the report also looks at the impact on Italy of imports of counterfeit goods. It finds that fake imports were worth over 10 billion euros, or 3% of imports, in 2013 and resulted in foregone domestic sales by Italian wholesalers and shops of around 7 billion euros. The fake items were imported mainly from China (50%) and Hong Kong (29%), followed by Greece (6%), Singapore (4%) and Turkey (2%).

The combination of trade in fake Italian products and imports of counterfeit goods resulted in a loss of public revenues in Italy equal to 10 billion euros, or 0.6% of Italian GDP. Counterfeiting and piracy also led to the loss of at least 87,000 jobs in Italy in 2013, equivalent to 2% of the country’s full-time equivalent employees.

The highest losses in sales, in euro terms, in the Italian wholesale and retail sectors due to counterfeit and pirated imports in 2013 were for high-tech electronic, electrical and optical products, followed by clothing, footwear, leather and related products. In terms of market share, the biggest losses were in the watch and jewellery sector, where the counterfeit market caused a 7.5% loss in sales.

The report shows that around half of the fake goods smuggled into Italy in 2013 were sold to consumers who were aware they were buying fake products, with the remaining share purchased unknowingly. The share of fakes bought knowingly in Italy ranges from 15% from food items to 60% for watches and IT and communications devices.

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Economy

A contemplation on Washington-Beijing trade war

Mohammad Ghaderi

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The decision of the Trump’s government to start its research on the devastating effects of China’s measures on the American economy has led to a sharp reaction by the new generation of Beijing Communists. It is clear to everyone that Donald Trump and his companions at the White House have challenged the “open doors” policy of Mao’s sons.

What attracts the attention more than anything else amid this conflict, is the insistence of the US president on protectionist policies on one side, and Beijing’s resistance to these policies on the other side. In other words, Washington and Beijing are going to enter a full-fledged trade war during the presidency of Donald Trump. What has happened so far has only provided the basis for such a controversy. Here are some point that need to be taken into consideration:

Firstly, the withdrawal of the United States from multilateral trade rules in the international system, and the insistence on unilateral economic protectionism, is the result of a special outlook which is dominant at the White House ruling. Economic unilateralism and the pursuit of protectionist policies are two main indicators of Trump’s economic approach in the field of global trade and international economics. Obviously, Trump will firmly stand against the Chinese charges of unilateral protectionism. Beyond that, Trump knows well that if he can institutionalize his unilateral protectionist policies within the eight years of his possible presence at the White House, next American governments will have a very difficult job to change this irregular (but smart) structure. Therefore, the charge of “protectionism” can’t force Trump to retreat from its economic policies towards Beijing and other powerful international players.

The second point is that Trump has entered a new economic confrontation with Beijing which relies on the possible violation of intellectual property rights and other issues related to technology.  Pursuing his goals, Trump didn’t resort to changing exchange rates, creating administrative and bureaucratic barriers, anti-dumping laws, direct subsidies to US domestic companies, import quotas, and most importantly, customs tariffs. Rather, on his economic confrontation with Beijing, he focused on the least costly way which was intellectual property rights. This equation is somewhat complicated: The fact is that the President of the United States intends to use terms such as intellectual property in the field of invention and trade as a cover for applying nationalist protectionist policies. In order to complete this process, Trump will further strengthen bureaucratic administrative law in the near future as opposed to importing Chinese goods. In short, Trump’s short-term goal is to create bureaucratic obstacles so that it would be difficult for China to import goods and products to the US .

The third point is about the introduction of customs tariffs against Chinese goods. The Trump government has also increased tariffs on some of the imported goods from China. Trump also subsidizes American producers. However, it is not yet clear that granting industrial subsidies to domestic factories and manufacturers in the United States could lead to lower commodity prices, and more importantly, to increase the productions’ quality.

Basically, this is the critique that comes with protectionism. Accordingly, making barriers to imported goods and the introduction of punitive tariffs can endanger consumers and even the government in the long run. Due to lack of competition with imported goods, the owners of such industries practically have no incentive for increasing the quality of their manufactured goods, and the competition formed in the domestic market is also not usually a dynamic one. This rule also applies to the imposition of punitive tariffs on Chinese goods.

China is buying the most Treasurys at the US government auctions since 2011. It wasn’t without a reason that politicians like Hillary Clinton, the Democrat candidate in the 2016 presidential election, have warned against economic opposition with China. In such a situation, the United States full-fledged trade war with Beijing can be interpreted as a major business and economic mistake.

Undoubtedly, the open-door policy is against the approach taken by trump based on protectionist economy. Since 1899, China has been pursuing an open door policy for its economic development. The open-door policy would allow for a system of trade in China  open to all countries equally, and no country has particular privilege over other countries. This approach is in contrast to the monopolistic economic thinking (based on unilateral protectionism). Unilateral protectionism is not only opposed to the open door policy, but also directly targets the principles of liberal economics.

Finally, the adoption of unilateral protectionist policy by the Trump’s government will be followed by the Chinese retaliatory measures, which will further lead to a devastating trade war between Beijing and Washington. Many American economists warn against this economic confrontation. Many American economists have argued that Trump has embarked on an economic war with China, without creating the necessary requirements inside the country. Hence, Trump’s protectionist policies can’t improve the US domestic industry. Alan Tennyson, a well-known American businessman who has been supporting Trump during the presidential competitions, is now firmly opposing the imposition of punitive tariffs on Chinese goods, and believes that it would be an unplanned intervention in the US economy.

Many American economists are criticizing of Donald Trump’s protectionist approach in this equation: all these economists are warning about a major economic war between the United States and China. The conflict between Washington and Beijing, based on Trump’s unilateralist policies, can redefine the economic ideas of both countries. “The emergence of modern protectionism” or “redefining open door policy” can be the objective outcome of this conflict. On the other hand, China and the United States will probably both use the tools and methods in the economic conflict, which contradicts their economic red lines in recent years.

In such a situation, we will witness a lot of changes in the economic and business structure of both countries. It should not be forgotten that in the field of economics and commerce, many revisions occurred during international disputes, and not in the stabilized international markets. It should be acknowledged that this conflict isn’t going to be limited to Washington and Beijing, and their trading partners, voluntarily or involuntarily, will enter this war.

First published in our partner MNA

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Economy

Deeper reforms in Korea will ensure more inclusive and sustainable growth

MD Staff

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Short-term prospects for the Korean economy are good, with an uptick in world trade and fiscal policy driving growth, but productivity remains relatively low and the country faces the most rapid population ageing in the OECD area, according to a new report from the OECD.

The latest OECD Economic Survey of Korea looks at recent economic developments, as well as the challenges to ensure that the benefits are shared by all. The Survey projects growth of about 3% for the 2018-19 period, and lays out an agenda for ensuring broader-based and more inclusive growth going forward.

The Survey, presented in Sejong by the head of the OECD Korea/Japan Desk, Randall Jones, highlights the need for new policies to help the government overhaul the traditional export-led growth model and to promote innovation led by SMEs and start-ups. It discusses reforms to the large business groups (chaebols), to achieve higher productivity and more inclusive growth, and proposes policies to enhance dynamism in SMEs and boost entrepreneurship. It also outlines the key challenges for reaching higher levels of well-being.

“Korea has rebounded after several years of sub-par growth, and the expansion is expected to continue,” Mr Jones said. “However, the traditional economic model of manufacturing and export-led growth is running out of steam. The challenge going forward will be to develop a new growth model that addresses today’s economic and social polarisation and leads to a more sustainable and inclusive economy for all Koreans.”

Despite the important role of the large business groups in Korea’s economic growth, the Survey says that a more balanced economy with larger roles for services and SMEs would promote inclusive and sustainable growth. The Survey suggests that strengthening product market competition, by relaxing barriers to imports and inward foreign direct investment and liberalising product market regulation, would reduce rent-seeking behaviour by large firms. Corporate governance reform is also necessary.

Beyond chaebol reform, the Survey identifies measures that would enhance dynamism and productivity growth in SMEs, including regulatory reforms, better access to credit, changes to the insolvency framework and improvements to the vocational education system.

The Survey proposes a range of potential reforms to boost well-being in Korea, including measures to expand female employment; labour market reforms to break down the segmentation between regular and non-regular workers; policies to reduce elderly poverty; and the use of economic instruments to reduce greenhouse gas emissions and air pollution.

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