WHEN TONY BLAIR, David Cameron and the Department of Health all want a piece of the same action, cynics start to wonder. When the bigwigs in Davos jostle to get in there too, wondering turns to suspicion. Can ‘social entrepreneurship’ really be the white hope for British health, bringing water to Third World slums and alleviating world poverty?

For once, the cynics may be wrong. Olivier Kayser, the European head of Ashoka, an organisation whose founder Bill Drayton pioneered the idea of social entrepreneurship 25 years ago, believes that any indication that official thinking is catching up with reality is welcome. There is a ‘small risk’, he concedes, of governments promoting a tame or ‘lite’ version of the concept which would relieve the idea of its revolutionary ambition and reduce it to a purely economic remit. But ‘the train is rolling’, he says. ‘It doesn’t depend on governments or the public sector, and it’s not going to stop.’

What is social entrepreneurship? ‘Inspired pragmatism’ is one answer. Its is perhaps best captured by Ashoka’s version of economic history. In this narrative, business discovered entrepreneurship with the Industrial Revolution, triggering huge economic growth but also a growing gulf with the rest of society’s activities. The social sector remained untouched by entrepreneurship because it was sheltered by government as a monopoly tax gatherer and service provider. Hence the growing contrast between the dynamic the private sector and the sclerotic public.

In about 1980, the gulf between the two became too wide to bear. The logjam broke, entrepreneurs emerged who had learned the system-changing power of new product and delivery ideas combined with a variety of incentives, and a wave of entrepreneurship began to transform the competitiveness of the non-commercial parts of the economy.

The unsung story is that the not-for-profit, third, or social sector, as it is variously known, is rapidly catching up on corporations in productivity and sometimes surpassing them in creativity. It is seeing explosive growth. A John Hopkins University study of the economies of 26 countries in 2003 found that in the mid-1990s the non-profit sector accounted for $1.2 trillion in expenditures worldwide, employed 31 million full-time equivalent workers (nearly 7 per cent of the non-agricultural workforce) and was growing fast – throughout the 1990s non-profits were taking on staff at more than twice the rate of the economy as a whole.

Social entrepreneurship claims many of its greatest successes so far in poorer countries where social needs are greatest. The idea of micro-credit developed by the Grameen Bank and its founder Muhammad Yunus (who sits on Ashoka’s world council alongside the likes of Rajat Gupta, ex-managing director of McKinsey, and Sir Shridath Ramphal, formerly secretary-general of the British Commonwealth) is one such. So is Aravind Eye Hospital in India, which carries out 220,000 cataract operations a year, two thirds of them free. Aravind runs the largest and one of the highest-quality cataract operations in the world – and it comfortably covers its costs.

But the power of these ideas is such that their influence spreads much further than the locality where they were born. Thus Aravind’s innovative methods and processes are beginning to change healthcare economics in the richer world. A cataract sufferer in Britain could spend a leisurely week in India and have the operation for less than a private operation at home. David Green, the social entrepreneur who helped develop Aravind, is now engaged on a project that will similarly undercut the exorbitant price of hearing aids. Meanwhile, micro-lending has been adopted in the US and UK as well as in other parts of the developing world.

Now many people believe social entrepreneurship’s time has come in the rich nations, where fresh thinking is badly needed to find solutions for intractable social ills: the French suburbs, physical regeneration and environmental pressures are a few examples among many. New Labour has been quick to spot the political possibilities in the sector. While farming out provision of health and education services to the profit-making private sector is viewed with hostility by much of the population, not-for-profits are another matter. A sign of the times: NHS nurses in Surrey have been encouraged to form a non-profit company to sell services to the local primary care trust and the Department of Health recently set up a ‘social enterprise unit’ to help others do the same.

Kayser accepts that as the third sector expands, it will run up against competition from companies that will not necessarily welcome new entrants on their patch. ‘But we absolutely welcome it,’ he says. ‘We’re entrepreneurs, and entrepreneurs intuitively understand innovation, change and risk.’ Social entrepreneurship is about systems-changing ideas, wherever the repercussions may lead.

The Observer, 12 February 2006