Can Europe Make It?

On the centrality of the social economy for European policy-making

A look at the concept of “social economy”, which has gained momentum in European policy making.

Mitja Stefancic
1 October 2014

The concept of “social economy” has gained momentum in European policy making. The focus on topics related to the social and cooperative economy, both at the European level and at the level of single member states, is the result of the financial crisis in Europe (initially triggered by the excessive risk-taking and speculation on the real estate market in the United States) and the subsequent recession.

It is possible that the unprecedented interest on social economy, both at the EU level and within the member states, has been significantly influenced by a changing social landscape and political climate, and by an increasing awareness on the role performed by the social enterprises for a more equitable market economy.

The use of the concept of social economy in the European public discourse is centred on a variety of entrepreneurial forms, ranging from cooperatives to mutual benefit societies and social enterprises, as well as the varied examples of solidarity economy that have taken shape in different countries. The social economy also includes the economic activities of community and voluntary organisations. According to the International Labour Office – the permanent secretariat of the International Labour Organisation –the social economy is a significant player not only in terms of jobs and GDP, but also in providing European citizens with numerous social benefits.

For the above-mentioned reasons, the Italian Government has decided to launch a public consultation on the occasion of its presidency of the EU by organizing a participatory and large scale event on the important role of the social economy for EU growth and development. The organisers and promoters of this event view such initiative as particularly pressing since it coincides with the start of the new legislature in the European Parliament, and with the settlement of the new European Commission.

The goal is to make a substantial contribution towards improving the EU policymaking agenda in the domain of the social and solidarity economy for the coming years. Nevertheless, the framework for such a crucial debate can be substantially improved as it appears to be currently based on a number of assumptions that need to be clarified or essentially reconsidered: the outcomes may be far from the optimal otherwise. 

To begin with, it is assumed that, since biodiversity in nature is a fact, a variety of organisational forms in terms of firms, associations and enterprises may be equally valuable as the latter could contribute both towards the development of a more diversified economic environment and, thus, towards a resilient social economy. Arguably, citizens that demand for services with a marked social value (rather than simply those defined by an economic value) can be better served by either cooperative or not-for-profit firms.

However, it is in practice difficult to set a list of defining characteristics of such firms, leading to some specific contributions that enterprises operating in a “social economy” environment are assumed to provide to the European markets. Stated otherwise, mutual and cooperative enterprises cannot be easily classified in terms of a unique (single) contribution due to the fact that they operate in diverse markets and market niches which are organisationally different and based on their own business requirements, norms and guidelines, and market principles.

The classification of social enterprises is itself a demanding task and not always as straightforward as it is often assumed. It appears that policy makers and cooperative legislators are currently more aware than in the past of the difficulties in understanding and defining what cooperatives and social enterprises are. In addition to that, cooperative enterprises – in principle jointly owned and democratically controlled enterprises – are often deeply rooted in local economic systems and rely heavily on them. This suggests that they are influenced by local institutional settings and are integrated into local entrepreneurial networks which are difficult to define and classify under a single policy framework. 

Furthermore, one should recognise the fact that the European economy is remarkably complex and diversified. It is therefore difficult to think in terms of some kind of “unique contributions” that social enterprises are possibly able to provide to Europe. Such complexity results, among other things, from a much neglected fact: namely, Europe’s history, as well as from the fact that, until recently (year 1989), Europe has been divided into two separate political and economic systems – the Eastern and the Western bloc.

This has paved the way to different (sometimes contrasting) interpretations of what the concept of “social economy” refers to. In addition to that, there have been persisting differences between the members of the two blocs themselves (often at the level of single countries belonging either to the Western or the Eastern bloc, not to say in socialist countries that have been “non-aligned” such as former Yugoslavia). As a result, a policy that is suitable, say, for Spain, may at present be ineffective if applied to, say, the Czech Republic; or vice-versa. Social policies and any type of endeavours to foster the social economy in Europe may be biased and far from the optimal unless history and the institutional specifics in countries are properly addressed and understood well enough. 

Another key point in the above-mentioned public consultations being subject to criticisms is the assumed contraposition between social enterprises, including mutual enterprises and those with an ownership based on cooperative participation, and, on the other hand, private firms. By contrast to what is being assumed in public debates, a positive social and economic impact can be achieved by any kind of enterprise irrespective of its ownership or organisational form – be it a mutual enterprise or a privately owned firm that is willing to make a substantial contribution to social development.

That said, there are nonetheless a number of social functions that mutual and cooperative enterprises are able to perform effectively indeed. For example, with regards to the management of different types of resources, it should be noted that in the same way as natural resources are being scarce, so other types of resources (financial, economic, cultural, social etc.) are not infinite either. Social enterprises can thus be particularly effective in mobilising and managing resources by looking for added values in terms of a cultural impact and by following the principle of “creativity”.

With regards to the quality in managing financial resources, social enterprises are expected to provide a substantial contribution in Europe for obvious reasons – for instance, due to the fact that they are able prompt ethical investments, limit financial and economic risks, and appear to be able to facilitate a more equitable distribution of the wealth.

Furthermore, new working positions and job opportunities are expected to develop through the establishment of new social and cooperative enterprises – an aspect that is crucial for Europe and for preventing it from falling apart in the coming years. 

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