The economy is made up of three main sectors; private, public, and the social economy sector. The private sector comprises of businesses, while the public sector is mainly the government. The social economy sector is composed of non-governmental not for profit institutions and organizations, cooperatives, charitable organizations, and social enterprises (Neamtam 1). A social economy can be said to be a distinct financial system established with the aim of improving the wellbeing of the communities, both socially and economically.
The social economy has been in existence for a long time, although the first application of the cooperative principles to businesses can be traced back to as far as the 19th century. The role of the social economy is to serve and transform the social and economic lives of the people that the social economy serves, since their emphasis is not on making profits. Social economy has played a significant role in the improvement of the economic lives of the poor by bridging the gaps left by the private and the public sectors in meeting the economic and social needs of people.
The purpose of this paper is to discuss social economy, with a special focus on three movements; recuperated factory movement, radical mainstreaming (fairtrade), and the World social forum. In addition, the paper will compare and contrast Mondragon and Emilia Romagna as local economic development models. Finally, the paper will evaluate and compare Ecuador and Bolivia socio-economy development models. The exercise will facilitate better understanding of the aspects of social economy development.
Question 1: Significance of the Movements
The Recuperated Factory Movement
In the late 1990, Argentina suffered a tremendous economic turndown, which saw approximately 300 companies go bankrupt. The biggest losers of the closure of many companies were probably the workers, who had invested significant amount of time and energy into building these companies. With the threatening closure of many organizations and loss of income to many, workers took matters into their own hands while the lawyers pleaded their cases in court. The workers argued that since they hadn’t been paid for a long period, they had the right to the machinery and the factory site before they were repossessed by other creditors.
The fall of the major companies and the resistance of the workers gave birth to what is now known as the recuperated factory movement, also the recovered factory movement. The movement was characterized by self-management of the fallen companies by the workers, who took up the operational and administrative roles to keep the companies running. Most workers agree that it was not an easy task, but more than a decade later, they are slowly reaping the benefits of the movement. The term, ‘Recuperar’, is Spanish for recuperate, and it means to take back and bring back into a good condition. Therefore, the movement was also characterized by taking back the bankrupt companies, and bringing them back into a good condition.
The significance of this movement to the course is that it presents us with another type of a social economy. The movement is not only a new entrant into the social economy, but it provides an example on how self-management by workers can serve to improve the lives of workers. The economic turndown and the consequent closure of many companies were estimated to force more than 60% of Argentina’s households below the poverty line. However, with the self-management movement, workers not only salvaged their livelihoods, but they also managed to bring back the fallen companies.
All workers receive an equal pay, compared to when the companies were managed by the owners and the workers got salaries and wages. Similar to cooperatives, the economic theory doesn’t apply to the recovered factory movement, since the workers only want to make enough to take home, rather than accrue huge profits. Also, similar to cooperatives in social economy, the recovered factory movements are controlled by the workers, rather than the bosses, and this gives the workers the power to make important decisions. Therefore, this movement is significant to the course in providing a different and more current example of social economy.
Radical Mainstreaming (Fair Trade)
Fair trade is a social movement whose goal is to help producers of services and goods from developing countries or poor communities achieve better trading conditions, while at the same time promoting sustainability. Promoters of fair trade require that exporters pay higher prices for the goods and services, while ensuring maintenance of the environmental and social standards. Fair trade is a movement composed of small scale producers who are at the risk of being exploited. The members come together into umbrella organizations, which are not only engaged in selling the products at fair prices, but they also engage in political forums to develop best trading practices for the traders.
Fair trade has benefited growers and handicraftsmen and women in selling their products to people who require these products, without being exploited by middlemen. In addition, fair trade has significantly contributed to the improvement of the lives of the producers, by extending fair prices for the products from these producers. Fair trade continues to provide producers with practices that ensure fair prices, in addition to providing them with other benefits such as motivation for entrepreneurship and solidarity.
This movement is significant to this course in that it represents another example of a social movement. It is similar to other social economies such as cooperatives, whose main purpose is to improve the economic and social life of the members. The fair trade movement is also significant to this course in that it presents the learners with a different aspect for analyzing the roles of different social movements in the economy and the lives of people or members.
The World Social Forum
The world social forum is an annually held meeting whose aim is to extend self-conscious strategies for developing alternate future by promoting counter-superiority globalization. The first meeting of civil society organizations in a world social forum was held in Brazil. The World Social Forum brings together formal and informal social movements, non-profitable organizations, advocates, and other members of social economy with the sole aim of garnering international solidarity. The role of the world social forum in social development is nonpartisan, and the forum only offers a platform for discussions about important social development issues.
The world social forum is held by members of alter-globalization movement, which is a social movement that supports global cooperation and interaction in improving economic globalization. The members of the alter-globalization are not representatives of the participants of the forum, but rather, the forum provides the participants with an open-space to discuss negative political, social, economic, cultural, and ecological neoliberal globalization issues affecting the lives of people. The movement believes that neoliberal globalization doesn’t promote protection of the environment and economic justice, protection of indigenous cultures, and promotion of peace and civil liberties.
The significance of this movement in relevance to the course is that it is an example of a social development movement, which is the focus of the course. In addition, the World Social Forum is a movement that seeks to introduce alternate development strategies in an effort to counter superiority as it is experienced in contemporary organizations. The alternate development strategies that are discussed in the world social forums are meant to enhance sustainability in social, cultural, economic, political, environmental, and ecological aspects.
Question 2: Compare and Contrast Mondragon and Emilia Romagna as Local Economic Development Models
Mondragon
The Mondragon Corporation was established in 1956 in Basque, Spain by Jose Maria Arizmendiarrieta. It was the first industrial cooperative, whose actions can be traced back to 1946 when father JMA started creating schools, specifically, a technical school. The harsh economic times after the civil war were the most significant prompting factors to the establishment of the Mondragon economic development model. The model was founded on the principle that companies are best operated when the workers are allowed to participate in management operations.
The model was a success, which goes to prove that the hypothesis of JMA held to be true. His industrial cooperative now consists of 147 companies with more than 80000 employees. The Mondragon is described as the world’s largest workers’ cooperative, providing services and products in the areas of commerce, industry, finance, and services. The cooperative, unlike other companies in Spain, are owned by the workers, where each member owns a share of the company. The members of the cooperative are also responsible for electing their own managers, and are also required to fully participate in the decision-making process regarding the company.
The most significant feature of the Mondragon cooperative is that it has set a limit to the difference in remuneration between the executives and the lowest paid person. The aim of the limit is to reduce the disparity in earnings, as the cooperation views each member of the cooperative as a valuable component to the survival of the company. The highest paid individual in the cooperative shouldn’t receive 6.5 more than the lowest paid person. The Mondragon companies are much more efficient than companies whose highest paid person earns too much compared to the lowest paid person.
In the wake of collapse of one of its companies, Mondragon cooperative pumped money into the collapsing company, with the hope that the company would survive the financial turmoil. Unfortunately, the company didn’t survive. However, Mondragon adopted a rare strategy, one that wouldn’t have been adopted by non-cooperative companies. 600 workers belonging to the collapsed company were relocated to other business establishments belonging to Mondragon, and this made it easier for the workers to bear the collapse of their company. As a local economic development model, Mondragon has achieved, and model to growth, one which is rooted on community economic development.
Emilia Romagna
The Emilia Romagna model refers to an entrepreneurial structure distinct to Emilia Romagna in Italy. The economic systems in Emilia Romagna promote cooperative relations between small firms that produce goods that serve the global market. The Emilia Romagna model doesn’t specifically refer to a cooperative system, but rather to the system that has been adopted in the region to represent small firms trading on a global scale. Emilia Romagna recognizes and acknowledges the fact that these small firms are the backbone to the economy of this area, and that of Italy.
The model is based on the principle of mutual benefit, in addition to the principles of cooperatives and reciprocity. This principle of Emilia Romagna differs from those of Mondragon in that Mondragon emphasized on inclusivity of the staff members or workers as the owners of cooperation. Unlike the Mondragon which is a cooperative, the Emilia Romagna isn’t a physical cooperative, but an abstract framework under which the cooperatives in Emilia Romagna practice and operate. Emilia Romagna is predominated by cooperatives, with one person out of every three belonging to a cooperative or two. The two models of economic development do not operate in similar sectors.
While Mondragon’s stronghold is in finance, commerce, industry, and service, Emilia Romagna’s stronghold sectors are in agriculture, manufacturing, housing, construction, and retail. These sectors are predominated by cooperatives which are facilitated by the Emilia Romagna model of local economic development. This model has had tremendous achievements in reducing unemployment, as well as in improving the living standards of the people of Emilia Romagna. In fact, the area is ranked 10th out of 122 economic regions in the European Union.
Similar to the Mondragon model, the Emilia Romagna model of local economic development is also an example of an alternative model of growth. In the recent past, government and other economic stakeholders have sought for sustainable development approaches. Despite the many benefits that the available development approaches provide, these approaches are also haunted by sustainability challenges. Even cooperatives have failed, prompting a question of their sustainability in seeking economic development. However, the Mondragon and Emilia Romagna economic models have the potential to be the alternative development models that the stakeholders have been seeking, owing to their success.
Both models have not only managed to improve the life of the members of the cooperatives, but have also significantly contributed to the growth of the overall economy where these cooperatives operate. Although one is a physical representation of cooperatives, and the other a conceptual framework under which cooperatives operate, they are both guided by the principles of cooperatives in the operations. They are also driven by the need to improve the lives of the members, without emphasis on profit accumulation for a single entity, for example an organization or an individual.
Question 3: Compare and evaluate the following Socio-Economic Development Models
Ecuador
Ecuador is a petro-station, whose economy is highly volatile due to its dependence on petrol. Being a Latin American country, capitalism is considered the only way forward to economic development. During the 2008 economic meltdown, Ecuador suffered a significant loss, and only recovered after the government pumped a lot of money into real estate. In the recent past, the economic model of Ecuador has undergone extensive changes, which are a means of responding to neoliberal polices affecting the indigenous groups. The national development strategy was adopted to replace neoliberal policies in Ecuador. The national development plan was named Buen Vivir, which loosely translated to ‘a good life’.
The implementation of programs such as the Bono Desarollo Humano was aimed at reducing the poverty level of the citizens of Ecuador. In addition, the programs sought to enhance social and economic inclusion, which would consequently provide consumption and household protection. The policies also sought to transfer $35 as monthly income for the households, in addition to providing educational and healthcare benefits. This policy not only aimed at improving the life of people, but also at strengthening the solidarity economy. Policies that focused on improving the health and wellbeing of the citizens were emphasized, and so were the monthly pension policies for the elderly and the disabled.
Ecuador also adopted environmental protection strategies, in addition to the economic solidarity economy. There were policies that prohibited the development of oil fields near the Amazonian region, and Northern states even offered to pay 50% of the total of what Ecuador wouldn’t be extracting from these regions. International and local business organizations also provided sufficient support for territorial development, and this support enhanced the effectiveness of the business organizations. Most notably, Ecuador developed a policy that strengthened dairy cooperation in Uzuay province, and this eliminated the risk of exploitation by middle men, and ensured the success of the farmers who experienced the introduction of Nestle.
Bolivia
The change in Bolivia was driven by the need to react to the privatization of water, communication, and oil and gas resources. This is in contrast with the changes that occurred in Ecuador, which were prompted by Ecuador’s need to react to neoliberal policies. The change was also a reaction to the eradication program to drugs in the US, which targeted the indigenous people. The year 2003 marked the effective and successful development of a coalition by indigenous parties that saw the election of the first indigenous presidents.
This period was also marked by the nationalization of natural resources such as gas and oil, in addition to nationalization of social programs, specifically the pension programs. This was similar to the changes experienced in Ecuador, which saw pension programs become nationalized. The World’s People Summit was also created in 2010 with climate change as the main agenda. Bolivia also increased nationalization and regulation, with the aim of taking back profits from the corporations. This move was similar to that adopted by Ecuador in the dairy sector, which sought to empower the producers more by cutting back profits of the corporations. Bolivia experienced challenges with maintaining a coalition in a divided society, which affected democratic devolution process. Indigenous groups showed dissatisfaction which how they were being treated, especially when it came to leadership and decision-making.
Conclusion
Social economy is an important sector of the economy of any country. However, social economy has continued to be threatened by sustainability, since methods of social economic development have been criticized as unsustainable. This has called for the development and adoption of alternate development strategies. This paper sought to answer three major questions, with the aim of gaining a deeper understanding about social economy and alternate development. The exercise carried out an analysis of recuperated factory movement, fair trade, and world social forum, and identified the differences and similarities in these three movements. Also, the significance of the movements in relation to the course was identified.
The paper also sought to compare and contrast the Mondragon and Emilia Romagna as local economic development models, and found that the models have some similarities, and distinct differences. These differences and similarities further illuminated the role of these social movements in the economy of the respective areas. Finally, the paper compared and contrasted Bolivia and Ecuador as socio-economic development models and elucidated significant similarities, as well as distinctive differences. This exercise was sufficient in gaining more understanding about social economy and alternate development.
Works Cited
Neamtam, Nancy. "The Social Economy: Finding a way between the market and the state."
Policy 71 (2005).
