Thursday, December 01, 2011

Market Communism

NPR's "All Things Considered" aired an inspiring story about and Indian medical charity and how they manage to fund eye surgery for patients without the means to pay (India Eye Care Center Finds Middle Way To Capitalism : NPR). Basically, they charge the market rate to the rich, which in turn subsidies the poor:

That high quality allows Aravind to attract patients who are willing to pay market rates. Then it takes the large profit made on those surgeries to fund free and subsidized surgeries for poor people — like K. Karuthagangachi....

it's only possible to provide free surgeries on the scale that Aravind does by running an operating surplus, like a profit-making company. That's what Aravind manages to do, even though it's legally a charitable trust.
On one hand, this is not all that surprising--American hospitals (and often lawyers) operate on a similar principle. My fear is that, like their American counterparts, these organizations may eventually turn into "profit-making" enterprises for their highly paid managers, while using their supposed "non-profit" status as a way of winning special privileges from the local community.

Anyway, this story shows the stereotypical Indian twist -- finding a way to radically reduce the cost of a service:

Fifteen years after it was founded, Aravind's ability to provide free and subsidized surgeries was being limited by the high cost and availability of the intraocular lenses needed for cataract surgery. That's not a problem most charitable organizations could overcome...

But Aravind attacked the problem with the help of an American social entrepreneur named David Green. Green had been helping Aravind collect donated lenses to be implanted in their cataract patients. But donations were averaging only about 25,000 a year. That wasn't nearly enough to meet Aravind's needs, and the lenses cost several hundred dollars to buy. So Green helped Aravind set up its own lens manufacturer on-site, a subsidiary named Aurolab.

"Now today Aurolab sells, I think this year it will be 1.8 million lenses," he says. "So you can see that when you have a business model, an economic model, it enables something to scale because it's not dependent upon charity, which is fickle."

And even more remarkable: By squeezing out profits made by middlemen in the production and distribution chain, Aurolab is now providing some lenses at the astoundingly low price of just $2.

This is a refreshing story showing how a "communist-minded" person can leverage "capitalist" processes to transform the lives of many who have been left out of the system. This isn't traditional philanthropy -- since the market service and the charitable service are intimately connected. We could even say that the charitable impulse came first, and the marketing impulse followed in its wake. The desire to help the poor inspired a business model that may not have occurred to a person who was only looking for profit. In contrast to the doctrinaire bickering that I always read on the web (touting the primacy of profit-driven capitalism or charity-driven communism), it is nice to see that in some situations, charity can drive advances in productivity and market savvy can help those who are incapable of helping themselves. Maybe there is hope for humanity.

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