<html><head /> <body> <META http-equiv="Content-Type" content="text/html; charset=UTF-16"><title>Building the Social Economy</title><meta name="keywords" content="state,strickland,training,turnover,wealth,welfare,economy,social,bill,bristol,business,cities,education,enterprises,entrepeneurs,eu,government,health,henrietta,initiatives,investment,jobs,Local,market,moore,national,nhs,philanthropy,service,small,"><table style="font-family:Verdana; font-size:larger; " align="center" border="0" width="50%"><tbody><tr> <td style="background-color:silver; border-color:white; border-left-style:none; border-style:none; " width="730"><span style="font-family:Verdana; font-size:larger; ">Building the Social Economy</span></td> </tr> <tr> </tr> </tbody></table><br><table style="font-family:Verdana; font-size:medium; " align="center" bgcolor="white" border="0" width="50%"><tbody><tr> <td height="131" width="669"><span style="font-family:Verdana; font-size:x-small;"><strong>Editors Introduction</strong></span><IMG SRC="auth_Moore.JPG" WIDTH="100" HEIGHT="146" ALT="Moore" VSPACE="10" HSPACE="10" BORDER="0" ALIGN="right"> <span style="font-family:Verdana; font-size:x-small; "> "Social entrepreneurs" are rapidly taking on the job of local government. They run locally based enterprises--social enterprises that take on responsibilities traditionally belonging to government--from welfare to training. They straddle the boundary between the social objectives of government and the methods of private enterprise. In the UK and Europe, social entrepreneurs and social enterprises may be on the increase, but they can have very little impact in the absence of a social economy, an economic atmosphere that nurtures such initiatives.</span> <p> <span style="font-family:Verdana; font-size:x-small; ">Henrietta Moore (above) explores the possibility of scaling the local success of social entrepreneurs and enterprises up to the metropolitan, the regional and even the global level in order to build a social economy.</span><br><br><span style="font-size:x-small;"><strong>Small can be beautiful</strong></span><br> <span style="font-family:Verdana; font-size:x-small; ">Many social enterprises may just seem like drops in the ocean. How can they possibly make any impact on problems like unemployment, which, if anything, are global rather than local problems? Let us begin with the idea that these enterprises are in fact small.</span><br> <br> <span style="font-family:Verdana; font-size:x-small; ">In the UK, much has been made in the past 20 years of the importance of small firms for stimulating employment and growth. There are many small enterprises in the UK with moderately small turnovers. Social enterprises, then, are often small, and like other small businesses their benefits will be cumulative and locally based. A survey of 404 social enterprises in Bristol found that 56 percent had annual revenues of under &#163;250,000. Many modern social enterprises are amalgams of a community enterprise and a small commercial firm that receives public funding for providing contracted welfare services. So there are interesting questions about whether the size of such social enterprises are necessarily limited by the nature of their activities and their revenues as well as by their low asset and capital base. In Bristol, approximately half of the organisations surveyed indicated that further growth was constrained by difficulties in securing finance, and approximately 30 percent identified the problem as a lack of capital finance.</span><br><br><span style="font-family:Verdana; font-size:x-small; ">There are certainly examples of larger social enterprises that approximate small to medium-sized firms. One example in the US is the Manchester Craftsmen's Guild, run by Bill Strickland, and its associated social enterprises in Pittsburgh. The Manchester Craftsmen's Guild is a nonprofit social enterprise that rescues at-risk schoolchildren by using the arts to teach them skills. The organization promotes innovative partnerships with local businesses to train adults for jobs in local industry; a spin-off of this has been the management of a local food business. The guild also runs a jazz concert hall and has created, in the process, a Grammy Award-winning record label. The Manchester Craftsmen's Guild now employs 110 people and sees an annual turnover in excess of $10 million. It is also confident of securing state funding of more than $3.5 million per annum. On the back of this enterprise Strickland has franchised his social programme in San Francisco and is also securing funding for real-estate development.</span><br><br> <span style="font-family:Verdana; font-size:x-small; ">An annual turnover of approximately &#1636 million is not particularly big business, and it is true that in Europe and the US even the bigger social enterprises are far smaller than many of the larger charities and trust funds. However, the larger social enterprises tend to be those who utilise borrowing as part of their portfolio, and who have assets as well as robust future cash flows. What research shows is that donations of assets and funds for capital projects are usually essential for growth beyond a certain point.</span><br><br><span style="font-family:Verdana; font-size:x-small; ">The most successful social entrepreneurs are those who are best networked in terms of the state, local business and charities. In Pittsburgh, Bill Strickland managed to get his vocational training programme ensconced as a line item in the state budget. Networking across sectors is crucial to the success of social enterprises in the UK. The emphasis on regeneration and social exclusion in the UK government's current policies--plus the partnership-based approach to New Deals, Sure Starts and New Opportunities and to education and health action zones--and the new Learning and Enterprise councils means that a new space has opened up, one that is also heavily supported by EU funds, in which social entrepreneurs can network and stitch a portfolio of opportunities together. The resulting social enterprises are curious animals, because they both provide welfare services to the community through government contracts and deliver on government strategic objectives--welfare to work, training, employment, etc.</span><br><br><span style="font-family:Verdana; font-size:x-small; ">However, while social entrepreneurs and social enterprises know that they are delivering social services, there is little overt mention of the fact that in so doing they are delivering on government policy objectives. This means that while social entrepreneurs and social enterprises focus their motives and values on autonomy, on local service delivery, and on enhancement of opportunity and social solidarity at the local level, they are, in fact, crucially dependent for their existence on the state. The result is that the growth of individual social enterprises and the potential scalability of the social economy in general will be dependent upon continuing to carve out a space on the boundaries of the state, the market and philanthropy.</span><br><br><span style="font-size:x-small;"><strong>Can success be scaled up?</strong></span><br><span style="font-family:Verdana; font-size:x-small; ">One unanswered question is: How will the social economy work at the metropolitan or regional level? There may be new spaces for social enterprise, but what are the coordinating structures or objectives? This is where an emphasis on the social economy rather than simply on social entrepreneurs and social enterprises is essential, especially if we agree that the effect of social enterprise must needs be cumulative. In spite of all the rhetoric about the social economy, there is no coherent national or indeed EU framework for its development. There are also no established data sets which can be used to assess the regional impact of the social or third sector, and some would argue that it is really too early for any impact to be evident.</span><br><br><span style="font-family:Verdana; font-size:x-small; ">However, a small number of local authorities in the UK have begun to conduct social audits and to begin to plan and to outline strategic objectives from the enhancement of the social economy in their area. The city council of Bristol is one local authority that actively promotes the social economy as a means of meeting community needs and promoting regeneration, and in 1999 1,058 social enterprises were identified in the city. Bristol is the home of a number of national and international third-sector economy organisations. These include a wide range of co-ops and community businesses, nine development trusts and a range of community development agencies. Progressive local authority policy encourages the third sector provision of public services, which include child care, school meals, after-school clubs, residential care for the elderly, provision of low-cost work space, training, business advice and support, and environmental enterprises.</span><br><br><span style="font-family:Verdana; font-size:x-small; ">Such social enterprises in Bristol are actively supported by the local authority and are linked to the strategic aims and objectives of local government. The underlying impetus is to meet social needs and promote social cohesion, but there is little reliable information on the overall contribution of the third sector to the wealth or social cohesion of the city in terms of jobs, financial value or social capital. In Bristol, 404 social enterprises, with a combined annual turnover of &#163;78 million, were surveyed. They employed 4,729 people, of whom more than half worked full-time, and provided 7,706 volunteer positions. Social audits from other UK cities also suggest that the economic contribution of the social economy can be significant. An audit of the third sector in Leicester in 1995 revealed that its overall value was &#163;209 million, and that it was providing 4,000 jobs, more than half of which were full-time, equivalent to 8.6 percent of all service jobs in the city. Bristol has set itself a series of targets for the development of the third sector, ranging from the establishment of four new development trusts by 2003 to repackaging 50 percent of council external contracts into small initiatives for community businesses.</span><br><br><span style="font-family:Verdana; font-size:x-small; ">What such targets reveal is a commitment to finding local economic solutions to local problems. However, it is all too apparent that this commitment comes in advance--as it has to, in practice--of any aggregate evidence to indicate that the social economy is scalable, and that it can provide sustainable economic and social solutions, meet the unmet needs of the community and address social exclusion. This commitment also comes in advance, as the work in Bristol showed, of any popular or local understanding of the social economy as a coherent entity and/or as a mechanism for enhancing social solidarity. This does not mean that local people are not participating in and/or are not committed to social enterprises, but it does mean that they do not necessarily see their activities as part of a new sector called the social economy. Thus the revision of state, market and civil relations in which the social economy is said to rest may not be taking place at the cultural level, even if it is to a certain extent at the practical level.</span><br><br><span style="font-size:x-small;"><strong>The role of the state</strong></span><br><span style="font-family:Verdana; font-size:x-small; ">If the predictions of European research are borne out, and there are really large numbers of jobs to be created within the social economy that will meet community needs on the ground, and if the social sector itself really will grow faster than the rest of the economy, then there is a clear case for investment and support. Arguments about growth potential and future growth rates are extremely difficult to assess, but one key point of interest here is the increasing competition, evident in the US for some time and becoming increasingly evident in Europe, between the so-called not-for-profit organisations working in the social economy and commercial organisations who are interested in making inroads into certain areas.</span><br><br><span style="font-family:Verdana; font-size:x-small; ">There was quite a scandal in the US when a division of the defense giant Lockheed Martin teamed up with Andersen Consulting to bid for a $563 million contract for welfare operations in Texas. Although the bid broke down, Lockheed Martin has since won more than 20 welfare contracts and provides four states with mental-health care, drug and alcohol treatment, child care, skills training and job placement. Outsourcing has grown fast and is still expanding the scope of the social service marketplace. Maximus, a provider of welfare-to-work services in the US, informed investors in its prospectus that the administration of social programs is a $21 billion market.</span><br><br><span style="font-family:Verdana; font-size:x-small; ">The idea that substantial equity investment can be raised on the back of the social services market is somehow more shocking to European sensibilities than the fact that it is possible to make money from outsourcing. But one of the attractions of the social economy is that it is not the market and not the state. In a sense, it makes up for the failures of both. But what will the relationship between the state and the social economy in the UK look like in 30 years' time? It is a fairly certain bet that there will be more publicly paid for, but not publicly run, social and welfare services. In other words, outsourcing will continue and will develop further. These services will be run by a wide variety of enterprises and agencies with increasingly diversified portfolios, including trading, mutuality, borrowing, asset sales, donations, grants and volunteers. The major revenues will most probably come from the state. But what sort of a state are we talking about?</span><br> <br> <span style="font-family:Verdana; font-size:x-small; ">Under this model, the state will continue to become less of a provider and more of an enabler. The key issue for the enabling state is, of course, regulation: quality of service, production of specified outcomes, value for money. Such things require auditing, benchmarking and the development of additional mechanisms to achieve such processes, such as new outcome measures. These facets of regulation are already much in evidence; all the various European and national government-funded programmes have success criteria and outcome measures linked to impact assessment.</span><br> <br> <span style="font-family:Verdana; font-size:x-small; ">One key issue concerns the relationship between the state and civil society. If the social economy grows rapidly, then the quality of social services will very much depend on the abilities and capacities of local social entrepreneurs and social enterprises. The state may no longer be interested in equality, but even to maintain equity government will need to intervene through regulatory frameworks and practices. The social economy will thus remain dependent on the state both economically and socially.</span><br> <br> <span style="font-family:Verdana; font-size:x-small; ">Does it make sense to demand a further retreat of the state, as some commentators are now doing? Those who argue for local autonomy and control view further devolution and decentralisation as part of the solution to the state's inability to provide adequate social services. Social entrepreneurs often report that they are frustrated by the state, by bureaucracy, tendering rules and delays, by resistance to more innovative ways of working to support individuals and communities. Sometimes, resistance to these things may come from voluntary bodies, trade unions and businesses. If the space for social entrepreneurship and social innovation were to be enlarged, then the social economy would thrive, as would local communities. Successful social enterprises are impressive, and their innovative solutions to local social and economic problems are not ones that could ever be replicated by central government initiatives. But do we want a further retreat of the state? And what would the consequences be?</span><br> <br> <span style="font-family:Verdana; font-size:x-small; ">There is an argument that says that the creation of the welfare state was the death knell for a particular kind of mutual and associative life in the UK. In other words, amongst other things a culture evolved whereby people expected the state to provide certain things, notably education, health and support in old age. Care for the elderly was the first area to be outsourced to private providers, and some recipients are expected to make large personal contributions to the cost of their care. There has been much disquiet about the quality of provision, and lobbying continues around the area of personal contributions, but on the whole the situation has been quietly accepted. There has been some anecdotal evidence that voluntary or not-for-profit organisations provide a better quality of care than private commercial providers, but in general the quality of care seems more closely related to the price paid for it. It seems that the problem with care for the elderly is really that it has not been taken into the social economy at all; rather, it has just been opened up to the private sector, and quality will continue to be vulnerable to price.</span><br> <br> <span style="font-family:Verdana; font-size:x-small; ">Even if the public has accepted this situation for the elderly, would they be willing to accept it for education and health care? Current debates on education and the National Health Service in the UK suggest not. Popular opinion seems to strongly support government provision of education and health services. However, quasi markets have existed in health care for some time, and it would seem that most of the public has a limited understanding of the working of these markets and their possible impact on health care provision. More pertinently, new developments within health and education action zones are opening up the possibility of more direct outsourcing of services to private companies. For example, a number of schools may soon be publicly funded but run by private companies, and in the future whole education authorities might succumb.</span><br> <br> <span style="font-family:Verdana; font-size:x-small; ">These developments suggest that while public opinion favours state provision of education and health care, the practicalities surrounding that provision may be changing faster than people realise. Equally, public disquiet about the quality of provision in both areas suggests that opening up these sectors more directly to social entrepreneurs and drawing them into the social economy might in the end prove more beneficial than simply opening them up to the market per se. Why? The answer is that social enterprises, whether they have a portfolio of for-profit activities or not, are committed to performance measures based on enhanced well-being and the public good, as well as to the return of surplus to the community in some form or other.</span><br> <br> <span style="font-family:Verdana; font-size:x-small; ">Social entrepreneurs and social enterprises are willing to continue to operate in situations and contexts where markets do not function. Private companies will provide social and welfare services only as long as there is money in it; the moment there is not, they will move on. Social enterprises are able to withstand a degree of insolvency on the part of their clients, because they are committed to certain locales and because they have access to grants and donations. Social enterprises would be measured against social and economic outcomes relating to enhancement of the public good, and surpluses would be returned to communities rather than going into directors' bonuses or dividends.</span><br> <br> <span style="font-family:Verdana; font-size:x-small; ">But there are risks involved in taking this road. The UK government has strongly committed itself to the notion of partnership. This is evident not only in its commitment to work with individuals, families and civil society but also in its procedures to draw civil institutions, business and public institutions, and agencies together to implement regeneration. Such deals, opportunities and action zones have partnership criteria. However, these partnerships end up being run by bodies and committees that are not elected, and while local government is involved, it does not necessarily play a determining role. In many instances, the idea is that these bodies are accountable both to local people and to central government, but the government cannot adequately monitor the huge number of local initiatives. Although local people may be consulted about programmes, be involved in design and management and sit on boards and committees, the degree to which, and the means by which, any of these large partnerships are directly accountable to the communities they serve is a moot point.</span><br> <br> <span style="font-family:Verdana; font-size:x-small; ">Risk remains a sensitive issue. If the social economy is to develop and be promoted in the UK, it will transform relations between the market and the state, and between the state and civil society in line with the degree to which it incorporates and sustains new forms of risk management. Providing child care, education and health care, as well as other support and community development services within a local economy, is about redistributing risk for local people and providing them with new means to manage it. New forms of mutuality and community-based financial provision construct mechanisms for managing social risk and providing individuals and families with social insurance. If social and economic regeneration fails to deliver, and if social and welfare services are increasingly provided by private enterprises with no commitment to the community or to its sustainability, then the communities involved will simply be further exposed to the risks they are already confronting and losing the battle with.</span><br> <br> <span style="font-size:x-small;"><strong>Measuring success</strong></span><br> <span style="font-family:Verdana; font-size:x-small; ">The success of the social economy will depend on how well it delivers for individuals, families and communities on social and economic outcomes. Outcomes in particular need to be measured if they are to be judged in terms of impact (such as their impact on reducing risk exposure), and measurement depends on indicators. A number of researchers and commentators have worked and are working on developing new economic and social indicators of well-being, social inclusion, sustainability and the public good. These new indicators are based on ideas about wider models of wealth creation and new forms of capital, including social capital.</span><br> <br> <span style="font-family:Verdana; font-size:x-small; ">Capital in the social economy is no longer just about money, assets and equity in the conventional economic sense. It is also about the forms of currency that exist in social exchanges, such as time given in work to support the community; the social and economic assets developed in terms of social networks and resources, economic resources and environmental sustainability; the social capital invested in trust, cooperation and participation in civic life; the human capital developed in individuals and families through improved education and health care; and the equity held by all members of the community in their social and economic environments and the returns made on that equity now and in the future.</span><br> <br> <span style="font-family:Verdana; font-size:x-small; ">The UK government has taken the first step by publishing headline-worthy sustainable development indicators for major environmental and social issues, and it plans to publish an annual report on targets and attainments. For the first time in 2000, the British Household Panel Survey, the General Household Survey and the Health Survey for England will contain questions relating to social capital and civic participation. When these figures are available, they will allow us to measure the social and economic impact of certain kinds of policies, and to examine the degree to which social exclusion is being tackled. This will be the first step towards the measurement of the social economy, although much more work will need to be done to further develop innovative social and economic models of wealth creation, sustainability and risk management for communities.</span><br><br><span style="font-size:x-small;"><strong>Conclusion: creating a social space</strong></span><br> <span style="font-family:Verdana; font-size:x-small; ">My conclusion is that we might have social entrepreneurs and social enterprises, but we do not yet really have a social economy. This is in spite of all the rhetoric about third sectors and third economies. A social economy is a way of modeling the world, while social entrepreneurs and social enterprises are methods for achieving that remodeling in practice. If we truly want a social economy, we will have to create one.</span><br> <br> <span style="font-family:Verdana; font-size:x-small; ">In order to do so we will have to conceive of new ways of imagining the relationships between people and between people and nature. We will have to recognise ourselves differently within the world. A social economy involves rethinking the relationship between the state and the individual, between individual risk and collective risk, between individual choice and socially based altruism. It will involve refashioning not only our view of economics but also our view of the relationship between the economic and the social. It will require an answer to the question "What should a modern economy do for society?" In providing that answer it will be necessary to develop new notions of wealth and value. Asking what kind of an economy we would like to have means asking what kind of a society we would like to live in, and that means asking what kind of people we would like ourselves to be.</span><br> <br> <span style="font-family:Verdana; font-size:x-small; ">Social entrepreneurs and social enterprises are not self-evident categories or entities. Developing a space in which they can operate and specifying the kinds of institutions, intentions and outcomes that will underpin them will require measurement and assessment of impact, as well as a means for measuring enhancement of the public good. Of all these things, the public good is always the least evident and yet the most transparent. However, if we are to develop new ideas about the economy, reformulate the relationship between the economic and the social, rethink the relationship between the state and the individual, develop new ideas about wealth creation and sustainability, and then measure the benefits of all these things, as well as provide for the development of new institutions and mechanisms to oversee them, then we will need a committed social science. Social scientists, you see, do not believe that anything is transparent or self-evident, and they know that particular ways of recognising ourselves in the world underpin our intellects as well as our imaginations.</span><br><br><span style="font-family:Verdana; font-size:x-small; font-style:italic; ">Copyright The London School of Economics and Political Science.</span></td> </tr> </tbody></table> </body></html>