Nobel Peace Prize-winning economist Muhammad Yunus outlines his vision for a new business model. Yunus, the founder and managing director of Grameen Bank, a pioneer of microcredit, an economic movement that has lifted millions of families out of poverty, analyzes the ability of business to tackle social problems from poverty and pollution to inadequate health care. An excerpt from Chapter 1 of "Creating a World Without Poverty," titled, "A New Kind of Business."

Since the fall of the Soviet Union in 1991, free markets have swept the globe. Free-market economics has taken root in China, Southeast

Asia, much of South America, Eastern Europe, and even the former

Soviet Union. There are many things that free markets do extraordinarily well. When we look at countries with long histories under capitalist systems—in Western Europe and North America— we see evidence of great wealth. We also see remarkable technological innovation, scientific discovery, and educational and social progress.

The emergence of modern capitalism three hundred years ago made possible material progress of a kind never before seen. Today, however—almost a generation after the Soviet Union fell—a sense of disillusionment is setting in.

To be sure, capitalism is thriving. Businesses continue to grow, global trade is booming, multinational corporations are spreading into markets in the developing world and the former Soviet bloc, and technological advancements continue to multiply. But not everyone is benefiting. Global income distribution tells the story: Ninety-four percent of world income goes to 40 percent of the people, while the other 60 percent must live on only 6 percent of world income. Half of the world lives on two dollars a day or less, while almost a billion people live on less than one dollar a day.

Poverty is not distributed evenly around the world; specific regions suffer its worst effects. In sub-Saharan Africa, South Asia, and Latin America, hundreds of millions of poor people struggle for survival.

Periodic disasters, such as the 2004 tsunami that devastated regions on the Indian Ocean, continue to kill hundreds of thousands of poor and vulnerable people. The divide between the global North and South— between the world’s richest and the rest—has widened.

Some of the countries that have enjoyed economic success over the past three decades have paid a heavy price, however. Since China introduced economic reforms in the late 1970s, it has experienced rapid economic growth, and, according to the World Bank, over 400 million Chinese have escaped poverty. (As a result, India has now become the nation with the largest population of poor people, even though China has a bigger overall population.)

But all of this progress has brought with it a worsening of social problems. In their rush to grow, Chinese officials have looked the other way when companies polluted the water and air. And despite the improved lot of many poor, the divide between the haves and have-nots is widening. As measured by technical indicators such as the Gini coefficient, income inequality is worse in China than in India. Even in the United States, with its reputation as the richest country on earth, social progress has been disappointing. After two decades of slow progress, the number of people living in poverty has increased in recent years.1 Some forty-seven million people, nearly a sixth of the population, have no health insurance and have trouble getting basic medical care. After the end of the Cold War, many hoped for a “peace dividend”—defense spending could decline, and social programs for education and medical care would increase. But especially since September 11, 2001, the U.S. government has focused on military action and security measures, ignoring the poor.

These global problems have not gone unnoticed. At the outset of the new millennium, the entire world mobilized to address them. In 2000, world leaders gathered at the United Nations and pledged, among other goals, to reduce poverty by half by 2015. But after half the time has elapsed, the results are disappointing, and most observers think the Millennium Goals will not be met. (My own country of Bangladesh, I’m happy to say, is an exception. It is moving steadily to meet the goals and is clearly on track to reduce poverty by half by 2015.)

What is wrong? In a world where the ideology of free enterprisehas no real challenger, why have free markets failed so many people? As some nations march toward ever greater prosperity, why has so much of the world been left behind?

The reason is simple. Unfettered markets in their current form are not meant to solve social problems and instead may actually exacerbate poverty, disease, pollution, corruption, crime, and inequality. I support the idea of globalization—that free markets should expand beyond national borders, allowing trade among nations and a continuing flow of capital, and with governments wooing international companies by offering them business facilities, operating conveniences, and tax and regulatory advantages. Globalization, as a general business principle, can bring more benefits to the poor than any alternative. But without proper oversight and guidelines, globalization has the potential to be highly destructive.

Global trade is like a hundred-lane highway criss-crossing the world. If it is a free-for-all highway, with no stoplights, speed limits, size restrictions, or even lane markers, its surface will be taken over by the giant trucks from the world’s most powerful economies. Small vehicles— a farmer’s pickup truck or Bangladesh’s bullock carts and human-powered rickshaws—will be forced off the highway.

In order to have win-win globalization, we must have fair traffic laws, traffic signals, and traffic police. The rule of “the strongest takes all” must be replaced by rules that ensure that the poorest have a place on the highway. Otherwise the global free market falls under the control of financial imperialism. In the same way, local, regional, and national markets need reasonable rules and controls to protect the interests of the poor. Without such controls, the rich can easily bend conditions to their own benefit. The negative impact of unlimited single-track capitalism is visible every day—in global corporations that locate factories in the world’s poorest countries, where cheap labor (including children) can be freely exploited to increase profits; in companies that pollute the air, water, and soil to save money on equipment and processes that protect the environment; in deceptive marketing and advertising campaigns that promote harmful or unnecessary products.

Above all, we see it in entire sectors of the economy that ignore the poor, writing off half the world’s population. Instead, businesses in these sectors focus on selling luxury items to people who don’t need them, because that is where the biggest profits are.

I believe in free markets as sources of inspiration and freedom for all, not as architects of decadence for a small elite. The world’s richest countries, in North America, Europe, and parts of Asia, have benefited enormously from the creative energies, efficiencies, and dynamism that free markets produce. I have devoted my life to bringing those same benefits to the world’s most neglected people—the very poor, who are not factored in when economists and business people speak about the market. My experience has shown me that the free market—powerful and useful as it is—could address problems like global poverty and environmental degradation, but not if it must cater solely and relentlessly to the financial goals of its richest shareholders.

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