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Social enterprises and non-market capitals: a path to degrowth?
Q3 Nadia Johanisova a
, Tim Crabtree b,*, Eva Franková a
a
Faculty of Social Studies, Masaryk University, Jostova 10, Brno 61500, Czech Republic
b
Wessex Community Assets, 1 Watton Gardens, Bridport, Dorset DT6 3DG, United Kingdom
a r t i c l e i n f o
Article history:
Received 24 November 2010
Received in revised form
23 December 2011
Accepted 2 January 2012
Available online xxx
Keywords:
Social enterprise
Degrowth
Non-market capitals
Sectoral models
Sustainability
a b s t r a c t
The aim of this paper is to look at alternatives to the classic for-profit shareholding enterprise and to
suggest how such alternatives might be supported within the current economic system. Another aim
is to link the social enterprise and degrowth discourses. We first re-define the economy as including
non-monetised sectors (the core economy and the economy of nature) and discuss the liminal zone
of not-for-profit and not-only-for profit organisations. We then look at social enterprise definitions
from a degrowth perspective and explain why the dimensions of scale, place, environment and
provisioning patterns need more space in the social enterprise discourse. After that, we define nonmarket
capitals as capitals taken out of the market and placed under local/member/democratic
control and explain their importance in a degrowth economy. We give examples of non-market
capitals and suggest a model involving mutual support between primary and secondary social
enterprises. Finally, we suggest areas where more research is needed in this emerging field of
inquiry.
Ó 2012 Published by Elsevier Ltd.
1. Introduction
Sustainable degrowth, a key goal of the European degrowth/
décroissance movement, builds on a confluence of several
respected and robust streams of thinking (Schneider et al., 2010).1
It has been defined as “an equitable downscaling of production
and consumption that increases human well-being and enhances
ecological conditions at the local and global level” (Schneider
et al., 2010). An underlying assumption is that the current mainstream
economic paradigm, with its emphasis on economic
growth as a major policy goal, is outdated and destructive. Various
reasons have been given for this view (van den Bergh, 2009;
Fournier, 2008). A crucial one involves the fact that economic
growth correlates with growth of energy and material throughput
(Jackson, 2009), which are unsustainable in the long-term and are
reaching their limits today (e.g. global warming, peak oil). While
the term remains contested and ambiguous (van den Bergh, 2011;
Kallis, 2011), we tend to agree with Kallis that degrowth (or
“sustainable” degrowth, which in our perspective are synonyms)
should not be reduced to the vision of an economy with
a declining GDP. While degrowth approaches probably will result
in a GDP decline, the concept itself can be more usefully seen as an
“umbrella keyword, a multi-faceted framework that gives purpose
and connects different policies and citizens’ initiatives” (Kallis,
2011: 874).
Having said that, it is also important to acknowledge that the
institutions and mechanisms fuelling GDP growth itself are
deeply ingrained in the current economic system. Kennedy
(1995), Hoogendijk (1991), Douthwaite (1999: chapter 1),
Harvey (2007) and others have discussed its ramified consequences,
fuelled by a structural and deepening dependence on
debt, which include a pressure to grow regardless of the
consequences. This pressure is sometimes dubbed “the growth
imperative”.
The prevailing actor in the current economic system, the
shareholder-owned profit-led company, is induced to grow
by these external pressures, exacerbated by the neoliberal
* Corresponding author.
E-mail addresses: johaniso@fss.muni.cz (N. Johanisova), tim.crabtree@
phonecoop.coop (T. Crabtree), eva.slunicko@centrum.cz (E. Franková).
1
These include, according to Schneider et al. (2010): culturalist critiques of
development (e.g. Polanyi, Norberg-Hodge), the quest for democracy (e.g. Illich),
environmentalism and ecology (e.g. Odum), voluntary simplicity (e.g. Thoreau) and
bioeconomics/ecological economics (e.g. Georgescu-Roegen and many others).
With a grain of salt, we might add to this lineage the classical economists (Smith,
Ricardo, Malthus and J.S. Mill) who did not expect economic growth to go on
forever. Only one of them, however, J.S. Mill, believed that the ensuing steady-state
economy would improve the “art of living” and foster a fairer distribution of wealth
and income (Zweig, 1979).
Contents lists available at SciVerse ScienceDirect
Journal of Cleaner Production
journal homepage: www.elsevier.com/locate/jclepro
0959-6526/$ e see front matter Ó 2012 Published by Elsevier Ltd.
doi:10.1016/j.jclepro.2012.01.004
Journal of Cleaner Production xxx (2012) 1e10
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deregulation of the last decades. The system favours large and
ever-growing companies,2
which due to their economic strength
and influence are able to evade local standards and taxes and
externalise an ever-growing proportion of their costs onto other
players, such as their workers, nature and future generations
(Korten, 1995; Martinez-Alier, 2002: 10e15). By creating (via
advertising) “effective demand” for spurious products, they may
miss real and basic needs in communities, especially those
unbacked by purchasing power. While superficially such
a system is effective, in reality it is deeply ineffective due to its
many negative social and environmental externalities
(Douthwaite, 2000: 211). Growth thus continues while basic
needs go unmet and vulnerable groups are forced into the
money economy, fostering calls for more economic growth
(Korten, 1995: Chapter 3).
As discussed in Johanisova and Wolf (in press), the typical
company limited by shares, which forms the bulk of the larger
players in today’s economies, is in addition pressured to grow due
both to its explicit goal (maximising financial returns on production)
and to more subtle principles inherent in its inner structure.
These include factors such as a non-democratic management
structure (in the sense that shareholder votes depend on number of
shares, the so-called one-euro-one-vote principle), the absence of
a ceiling on investments, share transferability and lack of ownership
transparency which leads to a concentration of shareholder
power and to structural marginalisation of stakeholders (workers,
local community, the environment) other than the majority
shareholders. This in turn makes it easier for the company to
externalise its costs, become more efficient in narrow financial
terms and remain competitive on the market, while focussing on
profits from (potentially spurious) production and the growth of
the scale of this production.
An economy where such companies prevail is obviously not
conductive to sustainable degrowth. However, there are no simple
remedies because the for-profit share company is part of a system
which rewards and reinforces its problematic behaviour. A forprofit
company which would not comply with the prevailing
model of growth and cost-externalisation would be in danger of
being expunged from the system (Harvey, 2007; Parrish, 2007). An
economic organisation explicitly aiming for other goals than (only)
profit and growth, and thus producing positive externalities which
make it less efficient, would be in similar danger.
An important part of the degrowth research agenda is therefore
an analysis of both the available alternatives to only-for-profit
enterprises and of institutions and mechanisms enabling the
functioning of these alternative enterprises in the current economic
environment. In this paper we try to link the existing discourse on
social enterprise (which we see as a crucial alternative to the forprofit
share company) with the degrowth paradigm, and to look
at some approaches and support mechanisms which might make it
easier for social enterprises to survive economically in the current
economic system without compromising their ethical goals. As
social enterprises, embedded in support mechanisms which enable
their survival, slowly take root and thrive, they will hopefully start
changing the economic system itself from below and slowly build
a base for a degrowth economy.
In the following sections, to prepare the ground for this
discussion, we first take a closer look at what constitutes “the
economy” from a mainstream and then from a more holistic
perspective, broadening the concept to include “economies” hitherto
largely ignored by mainstream economic textbooks (section 2).
In section 3, we pay special attention to the concept of social
enterprise and try to look at it from a degrowth perspective. In
section 4, we discuss another economic concept, “capital” or
“capitals”, and introduce the concept of “non-market capitals” and
“primary” and “secondary” social enterprises. Some examples of
what we see as non-market capitals are then given, and we suggest
a tentative model of an alternative economy, more suited to
a degrowth world. Finally in section 5, we briefly look at some
ambiguities and dangers inherent in the model in a world where
mainstream economic structures predominate and pressure to
converge with mainstream business practices remains strong.
2. What is the economy?
“The economy” is an ambiguous term notoriously hard to define,
mirroring the equally ambiguous subject which mainstream
economic science purports to study. While orthodox economics at
first sight appears to describe paths to a material provisioning of
society, i.e. approaches to the fulfilment of its material needs, the
“markets” it postulates involve not only material goods, but also
living beings (Schumacher, 1993/1973), services (which can and
often do include e.g. healthcare, childcare, education and culture),
human work, finance and land (“land” being a shorthand for nature,
see also Daly and Cobb, 1990: 97e120). Drawing all these disparate
entities into “the market” means subjecting them to the mainstream
economic discourse, with its model of perfect market
competition and controversial central concepts such as “economic
efficiency” (or efficiency of production, defined as the relationship
of output and input in money terms, with no place for other less
visible inputs and impacts of a transaction). In this discourse, the
“economy” expands to include ever-greater portions of our lives
and of our world, subsuming them to a market logic and re-defining
them as commodities.
However, “the economy” need not be identical with “the
market”. Many heterodox economists have grappled with this issue
and have tried to define what “the economy” stands for. Karl
Polanyi (2001/1944: 49e56), basing his work on ethnological and
historical research on non-modern cultures, was one of the first to
ascertain that traditionally in human societies most material
human needs3
were met via reciprocity (i.e. mutual gifting),
redistribution (those who have share with those who have not) and
householding (non-monetised production for own use). The
market as we know it today played a marginal role. For Polanyi, the
2
It can be argued that, on the contrary, it is heavily regulated markets that
squeeze out small businesses, as these cannot afford compliance costs. Here
however we must specify what type of regulation we have in mind, as the term
“regulation” can hide vastly different approaches. The regulatory frameworks
which have been removed in the past, legitimated by the neoliberal paradigm, have
included restraints on corporate mergers and acquisitions, environmental and
labour legislation and international investment regulation (Korten, 1995: 64, Singh,
2007). This has led to the emergence of large players on the economic scene, and,
paradoxically, to pressure on a different type of regulation, e.g. to protect the large
corporations’ clients or to limit tax evasion. Examples from the Czech Republic and
United Kingdom (Johanisova, 2005: Chapter 3.5.) include the introduction of strict
hygiene rules which disproportionately affect small rural social enterprises, see also
note 22 on European banking regulations which disable the founding of new credit
unions and ethical banks. Singh (207: 46e48) discusses onerous transfer pricing
regulations in the United States.
3
Here we might discuss whether “the economy” is only about satisfying material
human needs. According to the human needs matrix of Manfred Max-Neef (1992),
we all have nine basic needs (subsistence, protection, affection, understanding,
participation, idleness, creation, identity and freedom), which can be satisfied in
various ways (e.g. in being and having modes, by material and non-material
means). Max-Neef’s list is thus non-hierarchical and there is no strict dichotomy
between “material” and “non-material”. However, other authors emphasise the
primacy and importance of making sure basic material needs (water, food, clothing
and energy) are met on a local level in a world faced by instability and declining
resource availability (e.g. Douthwaite, 1996: 47e51, de Rivero, 2001: 186e187).
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market continues to be subordinate to society (“embedded” is his
often quoted expression) even in modern times, and it is imperative
for our survival that it continue to do so. As Joseph Stiglitz makes
clear in a foreword to the 2001 edition of Polanyi’s The Great
Transformation (p.xv): “Polanyi saw the market as part of the
broader economy, and the broader economy as part of a still
broader society”.
In her model of the three-layer cake with icing (Fig. 1), Hazel
Henderson (1999) echoes Polanyi’s claim of embeddedness of the
market economy and makes the point that the private sector is
actually dependent on the public sector, and this in turn depends
on the sweat-equity or core4
economy. This sphere includes
childcare and care for the elderly in the family, housework, food
growing, volunteering, mutual aid among friends and neighbours
etc.5
We can see this layer, placed below and supporting the money
economy of the market and the state, as a sphere where Polanyi’s
reciprocity, redistribution and householding have been to a large
extent relegated: essential for the functioning of the system,
predominantly performed by women, and invisible from a mainstream
economic perspective. However, Henderson’s three-layer
cake with icing model makes the further point that all three: the
market, the public and the core economies, are dependent on the
economy (“products” and “services”) of nature (Mother Nature
Layer).6
Nature satisfies our needs directly (via the core economy)
and indirectly (via the state and market economy). This level has
become slightly more visible from a mainstream economic
perspective in recent decades, but efforts to quantify the economy
of nature (and thus to bring its “non-market products” into the
orthodox economics field of vision) are meeting with limited
success (see e.g. Kutácek, 2009). It is our contention that efforts at
defining the “shadow prices” of processes within the core and
natural economies will always be problematic and that orthodox
economics, rather than subsuming these areas under its “sphere of
influence” via quantification, must explicitly acknowledge their
existence, otherness and essential unquantifiability. This will
hopefully open the door to a dialogue between orthodox economics
and other research/knowledge systems.
Returning to the concept of “the economy”, we have now
expanded it to include, in addition to the private/market and the
public monetised spheres, also the non-monetised layers of the
economy of nature and the core economy, and have suggested that
the two latter essentially support the former. From this perspective,
“the economy” ceases to be identical both with the market and the
monetised sphere, and the non-monetised spheres, instead of
being aberrations or externalities which need to be internalised,
become entities important in their own right. This chimes in with
authors like Ivan Illich, who saw the process of commodification
(monetisation)7
of needs satisfaction as a process whereby scarcity,
far from being banished, is actually created (or “manufactured”) as
people lose the means and skills to provide for themselves outside
the monetised sphere (Illich, 1973). It also echoes the calls of
contemporary Third World authors like Ashish Kothari (2009), who
asks that “non-industrial lifestyles and non-human life forms” be
given respect and space to flourish.
Henderson’s cake model (Fig. 1) equates the monetised layer
principally with the private and public sectors, and leads clear
dividing lines between the monetised and non-monetised spheres.
However, the reality is not so simple and if we disregard nature’s
economy for a moment, looking only at the constellation of
Fig. 1. Hazel Henderson’s expanded model of the economy: Three-layer cake with icing (Henderson, 1999: 11).
4
In the sense of Cahn (2004).
5
A similar point has been made by Vandana Shiva (1989), Mary Mellor (1997), J.
K. Gibson-Graham (2003), and many others, especially those writing from a feminist
perspective.
6
See also the work of Herman Daly, who has linked the insight of the human
economy embedded in the ecosystem with the issue of optimum scale of material
and energy throughput (e.g. Daly, 1996: 49).
7
As an example of commodification creating scarcity, Illich (1973: 42e43) gives
the example of complex social, legal and economic pressures in Mexico and the USA
in the 1960s and 1970s which made self-building of houses by their owners/
occupiers much more difficult than previously. As the number of self-build houses
fell and dependency on the market sector deepened, scarcity of housing was artificially
created.
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institutions serving (or not serving, as the case may be) human
needs, we might come up, in very broad brush strokes, with the
following:
a. public sphere (state)
b. public sphere (village/municipality)
c. for-profit enterprises
d. household/family/self-provisioning
e. non-monetised reciprocity/work outside the family/
volunteering
f. not-only-for-profit or not-for-profit organisations (e.g. associations,
social enterprises, mutuals, co-operatives)
g. traditional commons regimes and contemporary land trust
structures.
Of the seven items listed above, mainstream economics has
tended to emphasise the role of for-profit enterprises, producing
goods and services for households.8
Researchers writing from feminist, Marxian, post-development
and radical ecological perspectives have in the past decades
attempted to make visible the core or sweat equity economy (see
Fig. 1.), which in the list above we have categorised as d/household/
family/self-provisioning and e/non-monetised reciprocity/work
outside the family/volunteering (The categories above are adapted
according to Williams, 2005: Chapters 3e5 and 12, Trainer, 1995:
96, Robertson, 1990: 35e36).
However, items f/not-only-for-profit or not-for-profit organisations
and g/traditional commons regimes and contemporary land
trust structures (see list above) have been accorded less attention
from these more radical streams of thought. For example, while
there is a large literature on the social economy, social enterprise
and third sector (see e.g. Borzaga and Defourny, 2001; Borzaga
et al., 2008) these are often seen from a mainstream economics
perspective as stop-gap measures fixing social problems created by
market failure rather than as alternatives to a prevailing unsustainable
economic system (see also Johanisova, 2007: 77e87 and
2008). Even texts which do acknowledge this tension (such as
Laville et al.,1999) fall short of envisioning a fuller role for not-onlyfor
profit enterprises in a new economy, more attuned to both
environmental and social equity concerns.
3. Focussing on the liminal zone: social enterprise in
a degrowth context
Returning to the Henderson cake model, we might contend that
there is a liminal sphere between her monetised and nonmonetised
zones, identifiable largely with items f/not-only-forprofit
or not-for-profit organisations from the list above, but to
some extent linked up with all seven. Some of these organisations
in a European context, for instance, may be close to the community/
voluntary sector (e.g. a village transport system or a local food
network based mainly on volunteer work), others may be linked to
a government or municipal institution (such as a workshop
providing work for people with mental health problems), and still
others may be close to the for-profit sector in the sense of being
fully professionally staffed and financially self-sustaining (e.g. an
ethical bank or large consumer co-operative).9
In the global South,
other liminal institutions such as commons regimes, village seed
banks, burial societies or ROSCAS (Rotating savings and credit
associations), continue to exist, even harder to place and still
unfortunately at the periphery of research interest.
In Europe and North America, efforts spearheaded by the EMES
European Research Network and by the John Hopkins University in
Maryland10
have brought some definitions of this liminal zone,
summarised e.g. in Borzaga and Defourny (2001: 1e28) and
Borzaga et al. (2008: 15e33). Essentially, they equate the terms
“social economy” (originating in Europe) and “third sector” (originating
in the U.S.A.) and see them as including both the non-profit
sector (which involves legal frameworks such as voluntary associations,
charities and associations, foundations and trusts) and the
not-only for profit sector (with legal frameworks such as cooperatives,
mutual aid societies, and non-profit organisations
with trading arms). The term “social enterprise” in this understanding
is narrower and is defined (Borzaga et al., 2008: 31e32) as
participating to some extent in the market, having a degree of
autonomy from public authorities, with a commitment toward job
creation, an explicit aim to benefit the community or a specific
group of people in its founding documents, decision-making power
not based on capital ownership (democratic ownership structure),
and exclusion of the profit-maximising principle (e.g. recycling part
or all of the surplus/profits back into the organisation rather than
paying dividends to members/shareholders). The Pestoff sectoral
model (Fig. 2), adapted by Huncová (2004) and used widely in the
European social enterprise literature (e.g. Borzaga et al., 2008: 20)
attempts to express in graphic form the liminal zone of not-forprofit
and not-only-for-profit enterprises.
While the European social enterprise discourse including the
Pestoff model has been successful in legitimising this important
sphere of the economy and bringing it to policy-makers’ attention,
we might discuss the artificiality of dividing the liminal zone into
sectors, and think about what has been left out. For example, there
exist liminal institutions without a formal legal structure (e.g. the
micro-social enterprises of MacGillivray et al. (2001), or many local
currency systems). In addition, the model leaves out links and
networks, umbrella groups and the secondary social enterprises as
discussed below, and, importantly, does not distinguish between
the public sector as state and the public sector as village councils/
municipalities.
Looking at the social enterprise definition in this section from
a degrowth perspective (see section 1), the de-emphasis on profit
maximisation (e.g. in the form of limits on investment returns) is
obviously valuable, since profit maximisation is intimately linked to
economic growth.11
In addition, since social enterprises explicitly
exist to benefit the community, and this community often enjoys
control over the organisation thanks to the democratic ownership
structure, they are more likely to satisfy real needs (and less likely
to externalise their costs), than for-profits. As also discussed in
Johanisova and Wolf (in press), when real needs are satisfied, the
call for growth is less. These authors go on to describe other aspects
which make social enterprises better candidates for a degrowth
economy, including the frequent use of equity shares which can be
redeemed (if at all) only at their face value, and which are as a rule
not tradable. Another important aspect is the democratic governance
structure of many social enterprises which may open the
8
This model of “the economy” is encapsulated in the “two-sector model”, found
in most economics textbooks (e.g. Samuelson and Nordhaus, 1991: Chapter 3, Figs.
3e1). It envisions households as obtaining goods and services from, and selling
their labour and other capitals to the enterprises. For a critique of the model from
a broader degrowth perspective, see Daly (1996: Chapter 2).
9
See Johanisova (2005, 2007) for further descriptions of various social enterprises
with different affinities in Great Britain and the Czech Republic.
10
Especially Lester Salamon and his colleagues, see e.g. Salamon and Anheier
(1997).
11
In a research of 71 social enterprises in the United Kingdom and the Czech
Republic, over one half of those interviewed explicitly stated that they had no wish
to grow beyond their current size (which was usually small), some however
expressed a wish to be replicated by others (Johanisova, 2005: 84, 2007: 151e152).
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decision-making arena to a wider spectrum of stakeholders. These
and other aspects (more fully discussed in Johanisova and Wolf, in
press) discourage a one-sided commitment to growth in social
enterprises.12
Thinking further about what a social enterprise in a “degrowth
world” might look like, we may also think about the dimensions of
scale, place, the environment, and provisioning patterns which
have been left out in the social enterprise definition discussed
above. As regards scale and place: there is a huge difference
between a small, locally rooted enterprise, albeit a for-profit one,
and a large corporation. A small, locally-rooted enterprise can be
seen as producing positive externalities,13
including stable and
long-term employment (Douthwaite, 1996: 35e37). If such a local
enterprise satisfies the real and basic needs of a community, and
uses - as much as possible - local resources and products, aspiring
to localised provisioning patterns, we can see it as being truly
efficient: not in the narrow financial sense mentioned in section 2,
but, instead, efficient in materials and energy use, an important
aspect in a degrowth society. Our emphasis on local basic needs
satisfaction in a degrowth economy is also fuelled by a concern that
communities provide for themselves in the face of possible energy
supply and financial system discontinuities or collapses, which may
well occur in the future (Douthwaite, 1996: 47e51). Last but not
least, we believe that the environmental dimension in the social
enterprise ethos is just as important as the social aspect. Besides
emphasis on local material and energy flows this may take many
forms (from organic farming to building insulation, depending on
the activities of the enterprise, see also Johanisova, 2008).
For the purposes of this paper, then, we define social enterprises
loosely as organisations involved at least to some extent in the
market, with a clear social, cultural and/or environmental purpose,
rooted in and serving primarily the local community and ideally
having a local and/or democratic ownership structure (onemember-one-vote
rather than one-euro-one-vote). Where a social
enterprise serves another social enterprise rather than serving the
needs of the public/customers/clients directly, we suggest the term
“secondary social enterprise”. We will return to this concept in the
following section.
4. Non-market capitals: beyond capitals as commodities
In section 2, we have tried to broaden the mainstream economic
concept of “the economy” to include the non-monetised (core)
sphere of human activity (which would comprise items d/, e/and in
part also items f/and g/) and the “economy of nature” which we
then abstracted from in section 3. However, in reality, as in the
Henderson cake model, nature satisfies our material needs directly
(via subsistence in the core economy) and indirectly (via the
monetised economy). Nature also satisfies many of our nonmaterial
needs. Therefore, it is important, from a degrowth
economics perspective, to keep all the three layers, the monetised,
core and nature economies, continually in mind.
The process called “economic development” in the South, (or
“progress” in the West, see Norberg-Hodge, 1991) is in practice
often identical with the process of commodification discussed by
Ivan Illich (1973), Williams (2005) and others. This process entails
the shift of needs satisfaction from the core economy to the
monetised/market layer of the cake, and is intimately linked to
economic growth (in terms of GDP). For example, when self-build
from local materials is made illegal or difficult, as the example in
note 8 (taken from Illich) describes, the scale of the core economy
dwindles (less houses are built manually by their prospective
owners) and the scale of the monetised economy (and thus the
GDP) expands (more houses are built in exchange for money by
professional builders: they have become commodities). A similar
commodification process happens when childcare is delegated to
paid childminders, home cooking makes way for professional
catering institutions, etc.
In the mainstream economic tradition, the commodification
process is taken for granted and linked to specialisation, efficiency,
wealth creation and usually viewed as unambiguously positive.14
Critics such as Illich (1973), Norberg-Hodge (1991) or Williams
(2005) are more concerned with its seamy side, involving deskilling,
social exclusion, loss of cultural diversity and the artificial
creation of scarcity. From the perspective of these critics and of the
Henderson cake model, we may see the commodification process as
expanding the monetised cake layer but diminishing the core
(reciprocity and subsistence) layer and often contributing to
a shrinking of the nature economy layer as well. We might contend
that the commodification process creates wealth (at least for some)
Fig. 2. Sectoral economic model according to Pestoff, adapted by Huncová (2004:
104e105), based on Pestoff (1995) and Laville et al. (1999: 7, Table 4), distinguishes
a core non-profit sector, indicated by the white circle, and surrounds this with a grey
area. The white circle (non-profit groups) and the grey area (“hybrid” groups, including
social enterprise) together form the social economy.
12
We are not against growth of social enterprises per se, when the growth
enables the enterprise to better fulfil its role. A problem from a degrowth
perspective is the systemic pressure to grow, inherent in the strictly for-profit
business organisational structure. However, we do feel that growth beyond
a certain limit is a risk factor for social enterprises and can lead to dilution of some
of its principles or even to reversion to a mainstream model, as discussed in section
5 (see also Johanisova, 2005: 52e53).
13
“Externality” is a mainstream economic term describing an impact (positive or
negative) of an economic transaction on a third party, which/who has not taken
part in the transaction. In the neoclassical economic model, “externalities” need to
be “internalised”, i.e. their financial value needs to be quantified and the parties to
the transaction need to pay (negative externalities) or receive (positive externalities)
compensation. This is the logic behind the effort to create “shadow prices” in
the spheres of core and natural economies discussed in section 2.
14
Mainstream economists can take their cue from Adam Smith in his Wealth of
nations, who thus dismisses the non-specialised work of “a country weaver, who
cultivates a small farm”: “.the habit of sauntering and of indolent careless
application, which is .acquired by every country workman who is obliged to
change his work and his tools every half an hour . renders him almost always
slothful and lazy, and incapable of any vigorous application even on the most
pressing occasions.” (Heilbroner, 1986: 165).
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in the monetised sector (top cake layers) while at the same time
fostering poverty in the non-monetised sectors (bottom cake
layers).15
A critical approach towards the commodification process
is espoused also by the degrowth movement (Fournier, 2008).
In an important contribution to the commodification discussion,
Karl Polanyi (2001/1944: Chapter 6) has criticised the commodification
of the factors of production in economic theory and practice:
the creation of markets for financial capital, human labour and
land. He calls these the fictitious commodities:
.“They could, of course, not really be transformed into
commodities, as actually they were not produced for sale on the
market. But the fiction of their being so produced became an
organising principle of society. Of the three, one stands out:
labour is the technical term used for human beings.All along
the line, human society has become an accessory of the
economic system”. (Polanyi, 2001: 79)
By “economic system” Polanyi obviously means the production
process postulated by economic theory and encapsulated in the
well-known production model (Fig. 3).
The production model, which has been with us since at least
Adam Smith, describes the process of commodity production. To
produce a commodity, the producer needs access to land and
natural resources, to human labour and to capital (usually
subsuming manufactured or fixed capital - machines, buildings, etc.
and financial capital: money). These have been called factors of
production and, more recently, they have been dubbed capitals.16
Polanyi’s point is that, while there is a certain logic in designating
a manufactured product as a commodity, the mainstream
economic discourse postulates markets not only for manufactured
products, but also for labour, finance and land.17
However, he
emphasises that labour cannot be divided from the human being,
and land from nature, and since we cannot manufacture either, it is
neither moral nor in practice possible to reduce them to
commodities tradable in a deregulated market. Similarly money
cannot be left to a deregulated market without grave dangers to
business enterprises and to society. Polanyi’s views on capitals not
being true commodities was shared in a sense by Gandhi (Parekh,
1991) who, drawing on the Hindu spiritual tradition, was essentially
against private ownership of capital assets and land, because
they had been handed down to us from the past, as a gift born of cooperation,
sharing, mutual concern and self-sacrifice.18
Conversely,
for Gandhi the principle of private property of capitals stressed
selfishness, exclusive ownership and narrow individualism
(Johanisova, 2007: 46). Thus, for Gandhi, it was more appropriate to
view land and other capital assets as being held in trust for future
generations and to develop their ownership structures accordingly.
Polanyi’s and Gandhi’s thinking forms a theoretical framework
for a useful concept, the non-market capital, which we would like
to introduce in this paper. The idea of non-market capitals has been
pioneered by Bruyn (1992), who was influenced by Polanyi’s
thinking. He sees them as “restoring the economic base of the
community and returning economic controls into the hands of the
local people” and defines them as capitals “taken out of the market
and placed under democratic control”. Rather than top-down state
control, however, the capitals (such as land, finance, workspace or
housing, physical equipment, knowledge, etc.) are to be controlled
democratically on a non-profit basis, ideally by the local community.
By “taken out of the market” Bruyn does not necessarily mean
Fig. 3. The “production diagram”, found in most mainstream economic textbooks, features land, labour and capital (manufactured and financial) as independent and interchangeable
“factors of production”: means towards the end of production of commodities, whose consumption is seen as the sole source of “utility” (another ambiguous term often
equated with satisfaction or happiness).
15
This would lead to a discussion on what is wealth and poverty, which is beyond
the scope of this article, but see Johanisova (2007): 178e184.
16
The term capital itself has different meanings in different disciplines and
discourses. In classical and neoclassical economics, as mentioned in the text, capital
has traditionally been equated with finance needed to start or expand an enterprise
and with the premises and tools needed to produce products and services. Ekins
(1992: 48e61) has reframed the traditional factors of production as ecological
capital, human capital, manufactured capital and social/organisational capital,
emphasised their intrinsic (as opposed to purely instrumental) value and the fact
that all of them need continuous (monetised and non-monetised) investment to
keep them viable. In our paper, we are in agreement with this approach but take
a more empirical, if restricted view of “capitals” as any resources needed for human
needs satisfaction in the monetised and liminal zones (see sections 2 and 3).
17
The existence of markets for factors of production is in fact one of the
assumptions of the perfect competition model in neoclassical economics.
18
This view of capitals as handed-down gifts rather than resources ties in with
the traditional economic relationship of reciprocity, or mutual gift-giving, identified
by Polanyi and mentioned in section 2. If we look at our economic relationship with
nature in this perspective, we might ask what we are giving back.
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that the capitals are accessible to enterprises (or to people) without
any cost. However, the costs are withdrawn from the dominance of
the market logic of profit maximisation and from an exclusive focus
on the monetised sphere. They are subjected instead to local needs
as defined by the local community and determined on the basis of
a holistic approach, i.e. taking into account social equity and environmental
sustainability as well as the whole economy as depicted
by the Henderson cake model (Fig. 1).
The concept of non-market capitals can be useful on both
a theoretical and practical level in the degrowth-social enterprise
discourse. On a theoretical level, it can serve as an umbrella term
conflating, illuminating and arguably legitimating many forms of
support which social enterprises access in practice and which, in
the mainstream economic perspective, can appear as subsidies
which give them an unfair advantage over other enterprises. All
producers, it is implied in the mainstream discourse, should
compete on a level playing field, otherwise deformations of the
market will result, leading to inefficiency and malfunctioning of the
market mechanism. However, the perfect competition model of the
economy which fuels this discourse, like the current emphasis on
economic growth, is problematic (Beinhocker, 2006). As mentioned
above, an “efficient” enterprise can in fact be very inefficient if we
take its externalities into account. Conversely, a social enterprise
may not be as “efficient” in this narrow financial sense, because it
produces positive externalities. Without some form of non-market
support it may not be able to survive economically. The concept of
non-market capitals legitimises this perspective on “the economy”
and operationalises it in the sense of acknowledging a “nonmarket”
sphere, thus drawing the non-monetised and liminal
zones of the economy into the picture.
On a more practical level, the concept of the non-market capital
is useful because it applies Polanyi’s and Gandhi’s assertion that
capitals cannot, with impunity, be conceptualised as commodities,
to the real world. It enables us to see that, both in the past and
today, many ingenious ways have been devised by local communities
to protect, safeguard and enhance capitals, and to make them
available for provisioning processes in the non-monetised and
liminal economic spheres, which escape the doubtful market logic
of financial efficiency. In the following paragraphs, we give several
examples of currently existing institutional structures which either
have been defined, or can be re-defined, as safeguarding and
distributing non-market capitals.
As Bruyn (1992) has pointed out, land (or premises) can become
a non-market capital via a type of institution pioneered in the
United States and called a community land trust.19
Essentially,
community land trusts (in the United Kingdom sometimes designated
as community property trusts or development trusts) are
democratically governed, locally owned non-profit institutions
which have in their ownership land to be used for public benefit.
Often this land is used to build affordable housing for local citi-
zens.20
In other cases, the land is affordably rented to an organic
farm to provide food security for the community, or the trust owns
workspace which it rents to a social enterprise.21
A similar
approach has been used in the village of Hostetin in Moravia in the
Czech Republic, where a foundation (the Veronica Foundation)
owns the land and premises of a small fruit-juice plant, built to
utilise genetically valuable landraces of fruit in the region
(Johanisova, 2005, 2008). In a wider sense, in countries like the
Czech Republic, where local authorities even in small villages retain
some ownership of land and buildings, such local authorities can
(and in some cases to a limited extent do) support local traders,
farms, renewable energy and food processing units, pubs, farmers’
markets, community groups etc. through renting workspace and
land on a non-market basis, e.g. at prices lower than market prices,
designated in some cases to cover maintenance only. From
a degrowth perspective, the land-and-assets as non-market capitals
can facilitate localised production and consumption, the existence
of small-scale enterprises and the satisfaction of real and
basic needs. It must be emphasised however that communal
ownership of assets for the common good, especially of land and
natural resources, is a very old approach which has been practiced
for millennia the world over (see e.g. The Ecologist, 1992; Neeson,
1993; Sarukhán and Larson, 2001; Ostrom, 1990). The nonmarket
capital approach can in this light also be seen as
a modern incarnation and extension of this traditional type of
communal ownership, known as the commons (Johanisova, 2004).
As regards money and finance, there are many institutions
which can be seen as based on the non-market capital approach.
These include ethical banks and communal currency systems.
Bruyn (1992) suggests a locally operating credit union (credit cooperative)
as the prototype non-market source of capital. Credit
unions eschew the mainstream economic credit model of a bank as
an enterprise “selling” money (which later however returns to its
“seller”, as in fact it was only lent) for profit to a client. Instead,
credit unions are built on the model of a group pooling their
resources with each having the possibility to borrow from this pool.
One benefit of localised credit unions (i.e. operating in a certain
region only) is the fact that local savings are re-invested locally (See
also Douthwaite, 1996). Another is democratic self-governance and
the fact that, with higher reserves and no investment in problematic
development projects, credit unions are less involved in the
“money must grow” pressure which is one of the principal drivers
of economic growth (Hoogendijk, 1991; Douthwaite, 2000).22
In addition to credit unions, a wide array of other ethical
banking institutions exist. One of the best-known examples of an
ethical bank was (we intentionally use the past tense as the Mondragon
system has grown in scale and drifted towards the mainstream
in recent decades) the Mondragon bank (Caja Laboral) in
Mondragon in the Basque country in Spain (see e.g. Douthwaite,
1996: 160e170, 338e341, Mathews, 1999). The bank was owned
by local producer co-operatives which together with their staff
banked with it. The bank in return supported its member cooperatives
in various ways, including extension of seed capital,
cheap credit and expert advice when the co-operative was in
trouble.
Knowledge as a non-market capital was also prominent within
the intricate system of umbrella groups in the Czechoslovakian
agricultural co-operative movement (which included thousands of
village credit unions) before the 1948 Communist takeover. The
umbrella groups, again owned by the member co-operatives,
provided access to agricultural expertise for their members and
19
The first community land trust in the United States was established in 1967 by
the civil rights movement (Conaty et al., 2005). In the United States there are in
addition land trusts which own land in order to protect its natural value and keep it
undeveloped.
20
While the occupier has a legal claim on the house (and may own it or part of it), the
land itself remains the property of the trust. When the occupier wishes to sell the
house, in some models he must do so to the community land trust at a below-market
price designed to balance the interests of the occupier and the trust (Conaty et al.,
2005). Thus the issue of rising land prices is avoided and the house remains affordable.
21
For more on the burgeoning community land trust movement in the United
Kingdom, see www.communitylandtrust.org.uk.
22
In the European Union today, thanks to onerous banking regulations, new credit
unions and ethical banks are very difficult if not impossible to set up. One of the
reasons is the very high capital needed at start-up. Countries like the United
Kingdom, Ireland and Poland are only able to maintain their small credit unions
because of an exemption from the Second EU Banking Directive (Johanisova, 2005).
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helped new co-operatives start up (Feierabend, 1952). The system
helped small farmers survive, countering the pressure towards land
ownership concentration inherent in the capitalist model of agricultural
production.
Finally, non-market capital repositories, often unmarked by the
mainstream, exist within the core economy in countries of the
global South. For instance, in the Bangladeshi Nyakrishi Andolon
organic agriculture movement, comprising tens of thousands of
households, sophisticated seed-saving knowledge is applied via
a three-tiered seed-saving system consisting of households,
community seed centres and regional seed-preservation centres.
Seeds as capitals very much in the sense of Gandhi (see section 4)
go mostly unmarked by mainstream economic thinking, yet their
preservation on a non-market basis is crucial for enhancing the
independence of traditional communities from the market system
(Anonymous, 2006).
We have attempted to introduce the concept of non-market
capitals, whereby institutions such as local communities, municipalities,
social enterprise umbrella groups, community land trusts
and ethical banks take out capitals (such as land, premises,
knowledge, seeds, financial capital23
) from the market and place
them under local/member/democratic control to serve the
common good and hopefully help satisfy basic needs in a socially
equitable and environmentally sustainable manner. While in some
cases these institutions serve individuals, households and families
(as with most credit unions), in other cases they function on
a second-tier level and help support other social enterprises, i.e.
those that provide goods and services directly. We might call the
latter “primary social enterprises” and the former “secondary social
enterprises”. Fig. 4 illustrates in simplified form this tentative
model of collaboration (as opposed to the mainstream emphasis on
competition) within an emerging degrowth economy.
In this model, primary (local, on-the-ground) social enterprises
providing basic goods and services which meet local needs are
owners of (or represented on the boards of) secondary social
enterprises. These secondary social enterprises provide secondary
business services as well as non-market capitals: land/premises/
natural resources, manufactured capital, financial capital and
knowledge/skills. An important principle here is subsidiarity and
democratic governance: the secondary social enterprise does not
try to usurp the autonomy of the primary social enterprises, but
remains their “servant”. It is also, in an ideal case, financially supported
by them: the services of the secondary social enterprise are
not free, but are carefully calculated to ensure the financial viability
of the secondary enterprise. The primary and secondary social
enterprises thus support each other. Essentially, this is a mutual aid
(or reciprocity) model, with organisations rather than individuals
as the main protagonists (Johanisova, 2007).
Of the examples of institutions providing non-market capitals
already discussed, many would qualify as secondary social enterprises.
The Mondragon bank supporting its member co-operatives
is an obvious example, as were the umbrella groups of the Czech
agricultural co-operative movement. A community land trust may
qualify as a secondary structure if it supports e.g. local farming
enterprises instead of householders. The regional seed preservation
centres of the Nyakrishi movement might also qualify as secondary
social enterprises, albeit in a predominantly non-monetised
setting.
As with the concept of non-market capitals, it should be quite
clear that the reciprocal social enterprise model is not meant to
introduce a new, previously unheard-of institutional structure. On
the contrary, it is meant to acknowledge and legitimate already
existing relationships of mutual collaboration which exist e.g.
within the co-operative movement and which have gone
unmarked by the mainstream economic discourse, and thus
hopefully enable their further self-reflection, development and
refinement. It is also meant to provide one tentative alternative to
mainstream economic models, focussed on growth and competition.
One weakness of our model is the absence of explicit links to
the non-monetised and natural environments (the core economy
and nature’s economy) which all the enterprises involved depend
on. This is partly compensated by our definition of a social enterprise,
which assumes an explicit focus on social and/or environmental
goals and localised provisioning patterns.
5. Some ambiguities and issues for further research
Although we have tried to present our model of a potential
degrowth economy in clear lines and bright colours, the reality has
its shadows and many ambiguities remain. For example, as Smith
and Stenning (2005) have pointed out in their research in postsocialist
economies, economic power can deform relationships in
informal and non-market economic systems and lead to exploitation,
black market, corruption and even mafia practices.
Another difficult issue which needs to be discussed in relation to
a potential social enterprise future is the tendency of successful
alternative economic structures to revert to a mainstream model.
Examples abound. We have mentioned the Mondragon cooperatives,
which have been criticised for gradually losing their
ethos in the face of international competition (Johanisova, 2007:
70e71). In the United Kingdom, the best known case is that of the
British building societies, which emerged in the 18th century as
small workers’ savings mutuals and ended up large, successful but
mainstream and demutualised in the late 20th century.24
Even
enterprises which retain their democratic structure in the face of
Fig. 4. Reciprocal social enterprise model according to Tim Crabtree. Inspired by the
work of Jules Pretty, the Institute of Community Economics (USA), and by the Mondragon
Co-operatives (Spain).
23
Labour is not mentioned here but we might argue that the staff of cooperatively
owned social enterprises would constitute non-market labour, as the
workers are at the same time owners of the enterprise. Similarly, we might see
volunteering as non-market labour, given as a gift.
24
Northern Rock, one of the financial institutions which went bankrupt during
the current financial crisis, was one such (demutualised) building society.
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success may still, with time, become profit-making institutions
with little regard for the products and services being produced and
for the sustainability of the production process. How do explicit
social and environmental objectives get written into the objects of
an enterprise, and take long-term precedence over simple profit
maximisation?Q1
Often the gradual usurpation of power by a secondary social
enterprise or umbrella group originally set up by the primary social
enterprises is part of the problem. Stampfer (2001) describes such
a situation in the German and Austrian credit union movement,
which has a history dating back to the nineteenth century. As
members have stopped identifying with their local credit union and
withdrawn from the decision-making process, the decision-making
power of the local entities was eroded and many have lost their
autonomy to the powerful federations.
Another issue is that the system of mutual support institutions
described in this paper may be accused of unfair economic
practice. In the mainstream economic discourse, nurtured by the
perfect competition model, there is a pressure to minimise all
subsidies (as well as taxes, transfer payments, etc.) in order to
mitigate alleged market deformations. Enterprises are expected to
compete on a level playing field with the best e i.e. most financially
efficient e and to win in this competition by delivering the
cheapest products and service to the consumer. From a degrowth
perspective, it should again be emphasised that efficiency, as
mentioned above, cannot be measured solely in money terms as
the relationship between inputs and outputs. Such an approach
misses the many positive externalities which a business appearing
less efficient may bring, such as stable and local employment,
social capital, or food security. Similarly, effective production in
financial terms may hide negative externalities, such as worker
exploitation, environmental pollution or food miles. In reality,
there never has been a level playing field because of varying
social and environmental conditions and different scales and aims
of the players. The perfect competition model is an abstraction
which may be useful but must remain one policy tool among
many.
Non-market capitals in the shape of cheaper rent for workspace,
a cheap loan, or access to business advice, may, however, be seen as
unfair competition not only by market purists, but by enterprises
who for some reason do not have access to or are barred from
accessing them. Who will benefit and who will not? Here it will be
important to explicitly discuss the issues of public interest vs.
private interest and develop clear guidelines and transparent
organisational structures to ensure that undue benefit is not being
gained by primary social enterprises with the ability to access nonmarket
capitals from a second (or third) tier organisation.
6. Conclusions
In this paper, we have first tried to provide a framework for
discussing the concept of “the economy” from a degrowth
perspective. In particular, we have tried to de-link the term from its
usual connotations of market and money economy and, building on
the previous work of various authors, have expanded it to include
the non-monetised layer of the economy of nature and the core
economy. Further, we have emphasised the existence of economic
sectors in the liminal zone between the monetised and nonmonetised
economies and have suggested that an analysis of this
zone is an important part of the degrowth research agenda. We
have focused especially on the concept of social enterprise which
has emerged in the last few decades and we contend that the
dimensions of scale, place, the environment and provisioning
patterns should be accorded more importance in the social enterprise
discourse from a degrowth perspective.
Based on the work of Polanyi, Gandhi, Bruyn and others, we
have then defined non-market capitals as capitals taken out of the
market and placed under democratic local control. These nonmarket
capitals (such as accessible small loans or lower-thanmarket
rent for premises) can be an important survival strategy
for both primary and secondary social enterprises, which, due to
their production of positive externalities, could not otherwise
compete in a globalised market. We suggest that community land
trusts, credit unions, co-operative umbrella groups and village seed
banks are all instances of institutions safeguarding non-market
capital. In a future degrowth economy, primary and secondary
social enterprises might mutually support each other, thus gradually
changing the economic institutional structure to one more
favourable to a degrowth scenario.
To move forward, we need more research on the reasons why
many social enterprises, especially secondary social enterprises,
have failed in the past, while others have flourished. We also need
to clearly define the line between public and private interest in
order to develop clear guidelines and transparent organisational
structures of future social enterprises.
Acknowledgement
This paper was supported by Grant No. MUNI/A/0913/2009 of
the Faculty of Social Studies of the Masaryk University, Brno, Czech
Republic.
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