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The social economy is generally taken to be a third sector of mixed capitalist economies distinct from the private and public sectors. The social economy is based on cooperative, not-for-profit, and voluntary rather than paid activities carried out within communities, across national economies, and internationally. It is variously referred to as the nonprofit sector, the economie sociale, and the Gemeinwirtschafi, and has a long history coincident with the rise of market economies (Nitsch 1990).
The social economy is defined by the collection of different social objectives of the various organizations that make it up. According to the European Commission, social economy organizations are classified as cooperatives, mutual societies, voluntary organizations, foundations, and social enterprises. All are based on voluntary participation and membership, and are guided by their social objectives rather than a need to make a return on capital. Many social economy organizations simply deliver services to their members or others they aim to serve without making use of the market. Other social economy organizations, known as social enterprises, engage in trade activities in order to benefit their members or those they serve. In this latter case, any surpluses or profits earned are reinvested in the enterprise, distributed to stakeholder groups, or used for the benefit of those served by the enterprise. Governance typically operates through the “one member, one vote” principle or through enterprise trustees.
A diverse range of examples of social economy organizations includes building and mortgage societies, credit unions, charities and philanthropic organizations, neighborhood organizations and community groups, trade unions, insurance mutuals, sports associations, hospitals, self-help groups, school organizations, religious groups, environmental groups, arts groups, clubs of many kinds, political organizations, producer cooperatives, trade and professional associations, and job-training organizations.
Recognition of the economic importance of social economy enterprises—treated as nonprofits in the economics literature—is relatively recent (e.g., Rose-Ackerman 1986; Weisbrod 1988; Ben-Ner and Gui 1993). But social economy enterprises, or nonprofits, are now seen to play significant economic roles in addressing needs unmet by the private and public sectors, competing with for-profit enterprises, enhancing economic productivity, improving delivery of public services, promoting economic and social development, and providing employment. In addition, because worldwide trends are toward both increasing services production and privatization of government services, social economy or nonprofit enterprises, many of which address these domains, are likely to play larger economic roles in the future. This is reflected in more explicit recognition of the social economy in the national economic policies of many countries, including the United Kingdom, Spain, France, Canada, and a number of Latin American countries.
Bibliography:
- Ben-Ner, Avner, and Benedetto Gui, eds. 1993. The Nonprofit Sector in the Mixed Economy. Ann Arbor: University of Michigan.
- Nitsch, Thomas. 1990. Social Economics: The First 200 Years. In Social Economics: Retrospect and Prospect, ed. Mark Lutz. Boston: Kluwer.
- Rose-Ackerman, Susan, ed. 1986. The Economics of Nonprofit Institutions: Studies in Structure and Policy. New York: Oxford University Press.
- Weisbrod, Burton A. 1988. The Nonprofit Economy. Cambridge, MA: Harvard University Press.
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