Social enterprise at the crossroads of community, technocracy and democracy

Since their emergence, social enterprises have experienced spectacular growth not only in Europe but also on other continents. Numerous studies have identified typologies that highlight the variety of forms they take; however, beyond this great diversity, a historical perspective reveals two contrasting trajectories.

The first is transformative; it involves making the social enterprise a tool for achieving social, environmental or cultural objectives, what means acting for a socio-economic model different from the dominant one.

The second is restorative; it presents a version of social enterprise reduced to a functional complement to the dominant economic system, intended to re-legitimise it by claiming that it is capable of providing remedies for the problems it creates.

The first two sections show how these two trajectories have succeeded one another; the third section explores the possibilities for restoring a democratic perspective to the social enterprise.

An expression of the community and civil society

The original concept was based on meeting the needs of local communities that had been neglected by the private and public sectors.

At the beginning the social cooperatives in Italy clearly reflect this approach. One of the first social solidarity cooperatives was launched in 1966 to provide a service for orphaned children. Until 1976, there were only around ten such cooperatives in Italy. Their number began to rise in the years that followed, slowly until 1980, and then at an increasingly rapid pace. The aim of this type of cooperative is to meet the needs within the community and, in doing so, it becomes a means by which certain individuals can strengthen their sense of responsibility. The social solidarity co-operative sets itself two additional objectives: it seeks both to operate as a business and to maintain internal democracy. The contribution of the 1991 Act, which was debated for almost a decade before being passed, is to recognise the specific solidarity-based purpose of these organisations.

The aim is not to maximise the interests of its members, but rather ‘the general interest of the community through human development and the social integration of citizens’. The beneficiaries of its activities are, first and foremost, the members of the local community, its residents and, in particular, those in need. This Act thus establishes the principle – previously reserved for associations – of solidarity focused on its social environment, thereby institutionalising a return to the foundations of the co-operative movement.

This example has become emblematic because, as Carlo Borzaga pointed out, it links the pursuit of the general interest to the impetus provided by members of civil society and to the statutory recognition within the co-operative of the diversity of its membership categories. This multi-stakeholder nature is the prerequisite for pursuing the general interest.

This approach, which links the organisation’s objective with its internal functioning, characterises the European definition of a social enterprise.

Various different types of status have been enshrined in legislation. In 1991, the status of social cooperative was given legal foundation in Italy. Two types of social cooperative were identified: service cooperatives (whether social, health, or education cooperatives) and integration cooperatives (which sought to re-integrate disabled or disadvantaged workers). This Italian model has produced some spectacular results, generating 300,000 new jobs in the 1990s, and has been emulated by other countries. In Spain, three regional laws provide for social cooperatives: in 1983 Catalonia adopted a law on mixed social integration cooperatives, followed in 1985 by the Valencia region, and in 1993 the Basque Country. At national level, a 1999 law introduced social cooperatives that could manage public-interest services and public social services. In Portugal, social solidarity cooperatives were recognized by a law passed in 1996 and fleshed out in 1998. Their aim is to support “vulnerable” groups (children, the elderly and the disabled), families and disadvantaged communities. Full members who are beneficiaries of the services are distinguished from voluntary members who contribute unpaid goods or services. In 1999, a status of social cooperative with limited liability was developed; the status of multiservice cooperative was also created and deployed in local development. In France, a law on collective-interest cooperative societies was adopted in 2001.

Along with these additions to the cooperative status, the notion of social enterprise made an astonishing breakthrough on both sides of the Atlantic^[1]. To begin with, it had an entrepreneurial slant in the United States, since the intention among large universities (first of all the Harvard Business School, which launched the Social Enterprise Initiative in 1993, followed by Columbia and Yale), was to show that initiative and risk-taking are not the sole preserve of for-profit enterprises. It was then taken up in the United Kingdom, where the government launched a Coalition for Social Enterprise and a Social Enterprise Unit to support these companies, estimated to number 5,300^[2], before creating the status of community interest company in 2005.

The abduction of social enterprise by technocratic rhetoric

Contemporary capitalism is less dependent on the mediation of goods to accumulate capital and more sensitive to the capacity for permanent innovation unfolding within itself. The accumulation of capital deeply depends on the accumulation of knowledge. This new regime, which followed the so-called Fordist model of the post-war boom, was said to be patrimonial or shareholder based, and was linked to numerous innovations in work (just- in-time, reengineering, total quality management), financial products (derivatives, employee saving plans, pension funds) and trade (internet, online-retaining). In this context, Muhammad Yunus[3] - key proponent of micro-credit – argue that capitalism is a half-developed structure and can worthily be complemented by an ‘enterprise oriented to a cause rather than to profit’. A "flood of creativity ... able to change the world"[4] is expected from this innovating entrepreneurship, referred to as ‘social business’. The social entrepreneur is then considered as particular type of actor, playing a role of catalyst in social change – a change agent – putting forward innovating ideas to tackle social and environmental problems. Such philanthropic capitalism is also supported by donor investors concerned about the impacts of their donations; this is "venture philanthropy", a modernized philanthropy mindful of the evaluation of the social results of its financial contributions. This venture philanthropy is used as a way to relegitimate capitalism. It goes with the idea that innovation should be cultivated to create economic value and entrepreneurialism, and growth should be boosted to solve the related social and environmental problems. Coimbatore Prahalad[5] agreed with this when he put forward the bottom of the pyramid (or bop) approach, whereby the poorest populations – the four billion of people living with less than two dollars a day – are engaged either as producers and suppliers in value chains or consumers of products and services. This requires that the enterprise changes its perception of these people’s needs so as to meet these needs; this approach, according to its proponents, is a powerful lever, which can be observed in several success stories.

Following the line suggested by Yunus, the appropriation of social enterprise by technocracy is symbolically represented by the Social Business Initiative from the European Union in 2011.

As it is clearly stated in Giulia Galera and Gianfranco Marochi, it establishes the confusion between social enterprise, social innovation and social business.

It favours an enterprise oriented towards causes rather than towards profit but functioning according to the principles of management prevalent in a traditional enterprise[6]. The political questions inherent to cooperatives are forgotten, a social business is supposed to cover its costs entirely. The non-distribution of surpluses should therefore be linked to self-financing to introduce "the advantages of competitive markets in the field of social progress"[7]. The warmth mentioned above is perceivable in the enthusiastic phrase: "when the social-business concept becomes well known and begins to spread to all the free-market economies of the world, the flood of creativity that this new business channel will unleash has the potential to transform our world"[8].

The social business advocated by Yunus boasts a managerial approach aligned with capitalist enterprises, going as far as constituting a new capitalism with a social goal in partnership with large groups mindful of their social responsibility. Such social enterprise rhetoric harbours a mimetic and normative isomorphism. Objective and neutral on the surface, it turns out in fact to be motivated by a utilitarian rationalism, performance-oriented in the tools it prescribes, such as bottom-of-the-pyramid marketing, and impact metrics based on a double or triple bottom line. To this are added initiatives leading to the financialisation of social action through social impact bonds with extensions into culture and into international solidarity[9].

A social business approach opposes public bureaucracy and the independent private sector. Socially-oriented private initiatives are expected to work together and cohere, as the social-business, venture-philanthropy and bottom of the pyramid models propose. From this point of view, social business helps to reconcile capitalism and society, through corporate responsibility; i.e. the social business and the bottom of the pyramid make up a system congruent with corporate social responsibility. The new spirit of capitalism combines a humanist societal discourse with renewed competitiveness, both being correlated to a high level of social innovation. The aim is to claim the potential of self-regulation and self-correction contained in the market relationship and in entrepreneurial action.

This social enterprise rhetoric is eliminating the reference to multistakeholders and limits the social enterprise to an enterprise with a social goal arguing for a mobilization of market resources and a convergence with for-profit corporations.

It has some heavy consequences.

Targeting beneficiary groups, it re-introduces a form of paternalism towards them. With the millennium objective at the beginning of the 21st century, strategies to reduce poverty supersede structural adjustment programmes that had become popular in the wake of the Washington consensus. The rhetoric has indeed adopted inclusion, empowerment and economic security, but without going back on market deregulation and macro-economic austerity policies. In this model, market access provides the answer to what were considered individual problems[10]. The sole purpose of social enterprise is to generate apprenticeships and facilitate skills acquisition at the micro level, without considering the allocation of resources on the macro level.

The argument used is a plea for private initiative, combining responsiveness and proximity, as opposed to public initiative identified with bureaucracy. The consequence as noted by Defourny and Nyssens[11] can be "a process of hierarchisation and selection of social challenges depending on the extent to which they can be treated in an entrepreneurial and marketing mode".

This approach to social enterprise discourages any reflection on problems of power. It opts for empiricism and eschews any theory which is not management-oriented or outside the economic mainstream. It neglects sociological and anthropological data on the structure of societal relationships. It proves to what extent the social enterprise solution is contextualised and, in this case, fashioned by the most popular Anglo-Saxon modes of thinking. The focus on private actors coupled with micro-economic reasoning point up the cultural bias that views social enterprise only through its function. This vision of social enterprise is ultimately absorbed entirely into the new capitalism, of which it is simply the social component. In a period when people heavily impacted by globalisation voice profound uncertainties about the economic system, this version seeks to pacify society with a remake of philanthropy, thereby eluding political conflict. It substitutes managerial logic for actions in defence of human rights.

Considered in an international perspective, this rhetoric also have a bias due to the Anglo-Saxon framing of the discussion leading to a depoliticisation with other consequences summarized by Luciane Lucas dos Santos and Swati Banerjee[12].

There is an excessive concern about technical answers and performance. Solutions designed by the very collectivities, being likely to take more time, have been despised and replaced by quicker technical answers to achieve previously defined goals. This excessive concern about performance should be scrutinised more carefully since it brings to the scene universalised criteria towards what is a good result to be achieved, without taking into account the local contexts.

Subaltern people are underrepresented in decision processes, marginalised groups have different conditions of negotiating meanings and communicating points of view and disagreement. Their underrepresentation can only be solved through more participative processes, which take time and go against, for the most part, the funders’ timings.

There is also a lack of attention to gender issues. Despite women being a large number of workers in social enterprises, theoretical debates on this theme are not informed by a feminist perspective, which could provide a set of contributions: from different readings of what is economy to the recognition of the domestic domain in daily provisioning.

Acting for a social enterprise reembedded in society and democracy

The technocratic rhetoric is so powerful that it creates a strong market  isomorphism in social enterprise practices invaded by the logics of performance, efficiency and effectiveness. Becoming in a certain way functional to the dominant system and very many times dedicated to work integration, the danger is that social enterprise integrates a technocratic world producing anger among citizens and provoking a growth in demagogic populist reactions.

In a moment of renewed tension between capitalism and democracy, social enterprise has to avoid to be a second-class economy for the poor’s. Symmetrically the solution is not to become a low-cost sub-contractor for public authorities, without any capacity of negotiating conditions of these sub-contracts.

To be coherent with its own story, social enterprise is only relevant if it finds the way to contribute to an economy reembedded in democracy or even if it is a prefigurative figure of an inclusive socio-economic system necessary to eradicate poverty without waiting for a new growth, as it is developed in a report of the United Nations (2026)[13].

A list of conditions is necessary for reembedding social enterprise in democracy by reframing the collective action beyond technocratic rhetoric.

• It is important to emphasize the participative and deliberative process in social enterprises to reintroduce the civil society mobilisation as a key feature, not a constraint but a main advantage in relational services where the creative dimension of inter-subjectivity is crucial. In the technocratic rhetoric the social enterprise is driven by philanthropic solidarity in which benevolence and solicitude from the rich to the poor is the driving force. But the community roots of social enterprise deal with cooperation, mutual and self-help, collective action ; i.e democratic solidarity. The social enterprise stands apart from the philanthropic reference. Its designated place is part of the history of democratic solidarity, of collective actions led by free and equal citizens in the eyes of the law seeking a common good. The reconfiguration of the social dimension in these terms indeed assumes a political dimension, which is present in many social enterprises. They are not simply meant to embark on economic activities, they include a public dimension in the sense that they delineate public problems[14]. To see them only as private endeavours would be to deprive them of part their make-up. Therefore, "production spaces but also public spaces and socialisation venues", they combine to a greater or lesser degree an economic activity and political action"[15].
• In order to reinforce the movement of social enterprise the inter-cooperation linking diverse entities in a territory is also decisive and the social cooperatives in Italy have been pioneers in this direction by impulsing the consortia as intermediary bodies. By promoting deliberative action within each organization and between organisations, social enterprises authorize the shift from a formal definition of democracy, centred on mechanisms pf representation, to a substantive definition that takes citizen participation into account.
• Analyses of interdependences  calls for a broader definition of public action by co-creation between civil society and public policies. Some experiments exist in Italy of such a cooperation as well as in other countries like France, these experiments have to be carefully documented and studied because they explore the path to new alliances instead of competition. Instead of isolating civil society from public authorities, the key challenge for the future is to envisage a reciprocal democratization of civil society and public authorities[16]. The democratic state can only regain legitimacy if it integrates possibilities for increased participation by salaried workers and users and if it is supported by forms of associative activity influenced by democratic solidarity. This cross-fertilization of public action and civil society by a common reference to the democratic society has to be the main conduit for strengthening solidarity.
• The public dimension of social enterprise refers to a substantive definition of politics. In economics as well the formal approach is insufficient to support social enterprise.
• In the formal orthodox conception rareness occupies the central place in the analysis, with material interest as the motivation of individual choices.  The compatibility of the two is ensured by the dynamics of supply and demand.  The formula reveals an economic sophism, confusing economics and market mechanisms. However, there is another more substantive approach to economics based on principles of economic behaviour including redistribution, reciprocity and domestic administration. It was Polanyi[17] who brought out these differences between the two approaches and synthesised anthropological observations that comforted the unorthodox proposition of a substantive economy. Social enterprise potentially draws its resources from the three poles of the economy: a market economy, through the sale of goods and services that produces competition; a non-market economy in which it receives contributions in the form of public financing and private donations; a non-monetary economy based on the active support it receives through various forms of voluntary engagement, including mutual help networks and the involvement of the users. The economic equilibrium thus results from a hybridization of the three poles of the economy.

The 20st century left us with two extreme cases that we should avoid in the future: the subordination of economy to a political will whose egalitarianism was a mask for coercion, on the one hand, and a market society whose inequality was justified by an appeal for individual freedom, on the other hand. The contemporary challenge is to find new ways of guaranteeing a plural economy within a framework of democracy. In a period where democracy is in danger with the raise of authoritarianism and demagogic populism, the social enterprise role is not only to enlarge the socio-diversity of enterprises but also to reinvest a concrete political commitment for better life conditions. In the difficult times we live, a strong relationship between practitioners and academics through new forms of participatory research and a dialogue with elected democrats is probably necessary to continue exploring the perspective of a new social contract refusing the growth of violences and deepening and democracy.

^[1] On social enterprise, see J. Defourny, C. Borzaga (ed.), 2001; M. Nyssens (ed.), 2006; see also OECD, 1999.

^[2]ECOTEC, 2003

[3] Yunus, M., 2007, Creating a World without Poverty, Social Business and the Future of Capitalism. New York, Perseus Books, p. 48 - 74

[4] Yunus, M., 2010, Building Social Business. The New Kind of Capitalism that Serves Humanity’s most Pressing Needs, New-York, Public Affairs

[5] Prahalad, C.K., 2004, Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits. Upper Saddle River, New Jersey, Wharton School Publishing.

[6] Yunus, M., 2008, Vers un nouveau capitalisme. Paris, Editions Jean-Claude Lattès, pp. 52-53

[7] Ibid., p. 60

[8] Yunus, op.cit., p. 74

[9] Faber, E., Naidoo, J., 2014, Innover par la mobilisation des acteurs  une nouvelle approche de l’aide au développement, Paris, Rapport pour le Ministre délégué chargé du développement

[10] Brown, W., 2006, American nightmare: neoliberalism, neoconservatism and de-democratization. Political Theory, vol. 34, n°-, pp. 690 – 714, p. 690

[11] Defourny, J. and Nyssens, M., 2013, L'approche de l’entreprise sociale dans une perspective comparative. Working Paper n°13/02, EMES working paper series.

[12] Lucas dos Santos, L. 2019, “Social Enterprise : Is It Possible to Decolonize This Concept?”, in Eynaud, P., Laville, J-L., Lucas dos Santos, L., Banerjee, S., Avelino, F., Hulgard, L., Theory of Social Enterprise and Pluralism, New-York and London, Routledge

[13] Schutter, Olivier de; Díaz Galán, Elena C., Roadmap for Eradicating Poverty Beyond Growth, Report of the Special Rapporteur on Extreme Poverty and Human Rights, UN. Human Rights Council.

[14] Cefaï, D., 2007, Pourquoi se mobilise-t-on? Les théories de l'action collective. Paris, La Découverte, p. 411-466

[15] Guérin, I., Hersent, M., and Fraisse, L., 2011, Femmes, économie et développement, Toulouse, éditions Erès, p. 17-21

[16] Cohen, J.L., Arato, A., 1994, Civil Society and Political Theory. Cambridge, MIT Press

[17] Polanyi, K., 2008, Essais. Paris, Seuil ; 2011, La subsistance de l’homme. La place de l’économie dans l’histoire de la société, Paris, Flammarion