Concept
The social economy is the sphere, between for-profit firms and the public sector, in which goods and services are produced and exchanged to meet the needs of people and communities. It puts social purpose before profit maximization and shares principles such as democratic decision-making (one member, one vote), reinvestment of surpluses in the community, and the primacy of people and labor over capital. It rests on trust and solidarity among members, or social capital.
Origins
- European tradition: it began with the cooperatives, mutual societies and associations that workers and farmers founded during 19th-century industrialization. The principles of the Rochdale Society of Equitable Pioneers (1844) underlie today's International Co-operative Alliance (ICA) principles.
- Polanyi's perspective: Polanyi (1944) warned that when the market is disembedded from society and turns everything into commodities, society disintegrates, and argued that the economy should be re-embedded through reciprocity and redistribution, a key foundation of social-economy theory.
- Crisis of the welfare state: from the 1970s and 1980s, rising unemployment and social exclusion and the limits of state provision gave rise across Europe to new social enterprises employing disadvantaged people and delivering social services (Borzaga & Defourny, 2001).
Main actors
- Cooperatives: businesses formed voluntarily by people with common needs, jointly owned and democratically run, including consumer, producer, worker and social cooperatives.
- Social enterprises: businesses that trade while pursuing a social mission, for example providing jobs or services to disadvantaged groups.
- Community enterprises: in Korea, "village enterprises" in which residents use local resources to solve local problems and create income and jobs.
- Self-sufficiency enterprises: firms jointly set up by low-income participants after public self-sufficiency programs, linked to the independence goals of public assistance.
The EMES criteria and the American view
The European EMES research network proposed indicators of social enterprise: economic dimensions such as continuous production of goods or services, significant economic risk and a minimum of paid work, and social and governance dimensions such as an explicit aim to benefit the community, decision-making not based on capital ownership, stakeholder participation and limited profit distribution. Defourny and Nyssens (2010) contrasted the U.S. focus on nonprofits' earned income and on individual social innovators with Europe's emphasis on collective ownership and democratic governance. Unlike CSR, in which profit-seeking firms take on social responsibilities, the social economy makes the organization's purpose and governance themselves social.
Korea's institutions and challenges
In Korea the social economy became a policy agenda after the 1997 financial crisis through unemployment measures and self-sufficiency programs. The Social Enterprise Promotion Act (2007) created a certification system, and the Framework Act on Cooperatives (2012) allowed any five or more people to found a cooperative. Local governments support village enterprises, and public procurement gives them priority.
- Achievements: jobs for disadvantaged groups, social services in care, environment and culture, and revitalized local communities
- Challenges: dependence on government wage subsidies and sustainability after they end, small scale and weak competitiveness, criticism that certification-centered policy undermines autonomy, and difficulty measuring social value
References
- Polanyi, K. (1944). The Great Transformation. New York: Farrar & Rinehart.
- Borzaga, C., & Defourny, J. (Eds.). (2001). The Emergence of Social Enterprise. London: Routledge.
- Defourny, J., & Nyssens, M. (2010). Conceptions of social enterprise and social entrepreneurship in Europe and the United States: Convergences and divergences. Journal of Social Entrepreneurship, 1(1), 32–53.
- 사회적기업 육성법 (법률 제8217호, 2007. 1. 3. 제정, 2007. 7. 1. 시행).
- 협동조합 기본법 (법률 제11211호, 2012. 1. 26. 제정, 2012. 12. 1. 시행).