CHAPTER : 5 -
The Third Sector

By presenting social economy as a third sector between the private and public sectors, Jacques Defourny avoids lengthy debates around terminology when enumerating the traps and drifts of defining the social economy.

Social economy is a third sector next to the private sector which has a monetary objective and the public sector.  All over the world we realize that many social and economic realities no longer have their place within the private or public sectors.  In the USA they are referred to as non-profit organisations, in the UK as the voluntary sector and in Latin countries as the social economy.

Although these are not equivalent terms, they do all refer to one unique reality – the third sector.  This concept has brought to a consensus all researchers in the world.  Two years ago over 100 researchers in social economy founded an association for international research on the third sector and one of their reference manuals is called Social Economy – the Third Sector.

The third sector is therefore the only term at an international level which enables the sharing of concerns and sensitivities of all.

Two Approaches

What does the third sector really encompass?  Two approaches have progressively seen the light over the past 15 years.
The first approach can be qualified as historical/judicial or historical/institutional.  It sees the free-form associations of the mid-19^th century as being the precursors of this third sector.  Factory workers and peasants organized their own productive activities to meet requirements which neither the market nor the authorities had been able to satisfy.  These collective businesses developed over 150 years to shape what are known today as the three main components  of the social economy :
cooperatives bearing a true cooperation project unlike the ones in our countries which serve a completely different purpose; mutual insurances and their complementary services rather than the interface they represent with the centralized social security system; economically relevant associations such as the Red Cross, Doctors without Borders, protected workshops, on the job training businesses, NGOs dealing with cooperation, homework help schools,  charity restaurants, teleservices, cultural and sports associations…
The latter are all economically relevant  as they make use of work, infrastructure and equipment to produce goods and services which are in turn used to satisfy needs.  The social economy often better satisfies essential needs than products requiring the creation of a market to be sold.

 
The second approach, also dominating and in complement to the first, is more ethical and ideological.  It entails a research for the similarities between the third sector organizations and businesses, not so much in their historical heritage or their legal structure but more in their current practices and this research was subject to many varying opinions.  Since about 10 years, the similarities reaching consensus are the purpose and internal structure of the third sector organizations.

Definition
On the basis of these two approaches, the Wallon council for Social Economy has been able to propose a definition following lengthy discussions :  « Social economy regroups economic activities performed by companies, mainly cooperative companies, mutual insurance companies and associations with ethical standards that privilege the service to members or groups over profit, independent management, a democratic decision making process,  primacy of people and workload over capital contribution in the distribution of income.”  These principles do find their place along with the purpose and internal structure of these organizations.  Although this definition could be improved it is important to learn how to use it in its current form and avoid certain traps.

 
Five Traps
Trap No. 1: wanting clean cut boundaries for the social economy.  In addition to its own three components, the social economy also has interfaces with other economic sectors.  There are also mixed zones.  Mutual insurance companies are for example situated between the social and public economies.  Historically they were free citizen associations and since 50 years have been mandated by the authorities in order to operate within the centralized social security system.  In addition, certain traditional cooperatives subject to international competition were obliged to merge with private groups or give up some of their specificities to survive.  They are now situated between the social economy and the private capitalist economy.

Trap No. 2: confining the social economy to certain activity sectors that have been abandoned by the market in order to avoid the competition between the social economy and traditional small to medium-sized businesses.   The partisans of this line of thought come up with some very interesting niches which are often not solvent, such as environment protection or certain services to people.

This approach forgets that the social economy is firstly a question of purpose and organization mode rather than a type of activity.  Social economy can be realized in the construction, horticulture and movie areas….

Trap No. 3: considering the social economy to deal only with the integration of people otherwise excluded from the traditional job circuits.  It’s understandable that within the current crisis, the initiatives aiming such a target (on-the-job training companies, integration businesses) are on the front line.  Regardless of the fact they are interesting and fundamental, they only represent a fraction of the social economy.  Social economy tries to bring answers to many challenges, not only to unemployment.

 
Trap No. 4:   considering the social economy to be a replacement solution in the cases where the authorities have failed.   This enables liberals to be in favor of the social economy.  Although one of the historical callings of the social economy is to repair social damages (more often caused by the market’s brutality rather than by the disengagement of the authorities), its other vocation is to anticipate and to experiment solutions on a small scale so that the authorities can the use them on larger scales.   This is demonstrated by the story of the mutual relief funds which generated mutual insurance companies and then social security.

 
Trap No. 5: privileging the commercial side of social economy to the detriment of the non-commercial side, to avoid the solicitation of public finances.  And it’s not because you are less commercial that you are less economic or less “socially economic”.  What differentiates commercial from non-commercial?    Not the social economy criteria described above but rather the financing method. On the commercial side, each consumer pays as he buys.  On the non-commercial side, the community, via public financing, makes a type of group purchase.  This practice enables goods or services to be accessed by a large number of people rather than only those who can respond to market conditions.  There is certain nobility in the non-commercial:  you have to deserve to be chosen by the community for a group purchase.  Non-commercial production does not go via the market but it isn’t any less economic. In addition, the difference between commercial or non-commercial is no longer as cut and dried.  Although there are still some hard core merchants who self finance at 100%, public aid is quite frequent in traditional business.

 
Dynamics
The social economy is more importantly the story of men and women who take initiatives collectively, initiate activities to respond to the various challenges of their time, serve people rather than money and capital.  In this way, the social economy represents dynamics more than frozen reality.  It is therefore comparable to the construction of a democratic society:  never acquired for good, it must always evolve.  The social economy is basically one of the important construction sites for initiatives attempting to reconcile freedom – and in particular free enterprise – and solidarity.