What is the social economy?

The social economy is based on the following principles.

“Voluntary and open membership is a fundamental principle in all social-economy organizations.  This excludes organizations where membership is compulsory (due, in particular, to legal requirements).  The voluntary element is obviously consistent with open membership, but it generally concerns voluntary work.  This principle is true for most social-economy organizations but not all.

Democracy is the second fundamental principle, which is widely expressed by the “one member, one vote” rule, even if it is not systematically mentioned.  A certain degree of flexibility is understood.  It seems clear, however, that throughout Europe, in any genuine voluntary organization, nonprofit organization, cooperative, mutual society or related organization, members can participate in decision-making.

The terms “open collective enterprise” and “open participatory enterprise” occasionally used in the late 1970s referred to these first two principles.

Individual nonprofit is the third fundamental principle, although the way this is applied can vary.  It is of course unequivocal in nonprofit organizations, voluntary organizations, charities, etc., as well as in mutual societies.  In the case of cooperatives, there is no automatic connection between the company’s capital and the distribution of profits (e.g., rules limiting the return on capital, rules prescribing the formation of indivisible reserves, etc.).  The British, for example, use the term “mutual benefit.”

Personal growth is a principle that is sometimes explicitly stated and often implied, but it comes through different approaches.  This is definitely a fourth fundamental principle.

Totally independent of state control is a fifth and obvious principle in every country […] although some ideologically-minded commentators claim that you cannot have a social economy or public-interest economy without systematic government intervention or some sort of handout (tax breaks, hidden subsidies, etc.).

[…] The social economy concept is more precise than the vague concept of the “third sector,” which is used elsewhere and encompasses other nonprofit organizations including, sometimes, local government agencies.  It also has to be stressed that the social economy has nothing to do with the grey or underground economy, which attempts to create parallel business and labor markets that circumvent labor laws, social security contributions, corporate taxes, accounting regulations, etc.  The social economy has no connection with this sector and, furthermore, flatly opposes it.

A social economy, an economy for society

The set of principles of the social economy mentioned above highlight the connection between the two terms “social” and “economy.”  The Belgians in the Walloon Region Social Economy Council use the following definition: “The social economy is composed of economic activities for mutual benefit based on solidarity, autonomy and democratic participation,” and one of its principles is a social objective.  The Spanish also clearly refer to this principle by stating that serving members and the community is more important than profit.  The Italians make the same point.  The Germans also emphasize public interest.  The term “sozialwirtschaft” usually refers to a type of economic policy, but this difference isn’t a contradiction.

In all of these examples, social-economy actors clearly have aims and objectives that transcend self-interest and are conceived in terms of a common interest.  Nonprofit organizations, mutual societies, cooperatives and related organizational forms aim to provide some benefit to society, including enterprises that operate in a market environment (if only by seeking better prices for better quality).  It should be remembered that the idea of a social economy was put forward around a decade ago.  Public-interest, social-economy enterprises combine different elements—economic and social but also cultural, educational, etc.—precisely because one of their characteristics is to mix them internally (through the way they are structured, managed and operate) and externally. [...]

The social economy is based on these principles and a dynamic approach for society.  It cannot be reduced to a narrow definition or even to a legal definition, even though the legal definition is of course the necessary application of its principles.  The idea of a social economy, an economy of common interests, thus appears to be fairly well established.”

(Excerpts from L’Economie Sociale européene ou la tentation de la démocratie en toute chose, Thierry Jeantet, CIEM, 2001.)

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